Mrowka v Format Finishing Pty Ltd - [2009] WASCA 184

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: MROWKA -v- FORMAT FINISHING PTY LTD [2009] WASCA 184

CORAM: OWEN JA
PULLIN JA
BUSS JA

HEARD: 10 MARCH 2009

DELIVERED : 28 OCTOBER 2009

FILE NO/S: CACV 157 of 2007

BETWEEN: IRENEUSZ MROWKA
Appellant
AND
FORMAT FINISHING PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA
Coram  :SWEENEY DCJ
Citation  :MROWKA -v- FORMAT FINISHING PTY LTD [2007] WADC 201
File No  :CIV 2438 of 2006

Catchwords:

Family law - Property consent orders made by de facto partners in Family Court - Business conducted by a trust for benefit of partners - Consent orders covering sale of business by one partner to other - No express reference in consent orders to debt due by trustee to one partner - District Court action to recover that debt - Whether subject matter within the exclusive jurisdiction of Family Court

Legislation:

District Court of Western Australia Act 1969 (WA), s 76
Family Court Act 1997 (WA), pt 5A
Jurisdiction of Courts (Cross-vesting) Act 1987 (WA), s 4(6), s 5(4), s 8(1), s 8(2), s 9

Result:

Appeal allowed

Category: A

Representation:

Counsel:

Appellant: Dr A F Dickey QC
Respondent: Mr B W Ashdown

Solicitors:

Appellant: Chris Stokes & Associates
Respondent: Meredith Hunter & Associates

Case(s) referred to in judgment(s):

Bate v Priestley (1989) 97 FLR 310
Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460
Fountain v Alexander (1982) 150 CLR 615
Green v Schneller [2001] NSWSC 897; (2001) 164 FLR 82
Harris v Caladine (1991) 172 CLR 84
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) 30 Fam LR 35
In the Marriage of H T and N I Kowalski (1992) 16 Fam LR 235
James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53
Langford v Coleman [1992] FamCA 68; (1992) 16 Fam LR 228
Meriton Apartments Pty Ltd v Industrial Appeal Court of New South Wales [2008] FCAFC 172; (2008) 171 FCR 380
Perlman v Perlman (1984) 155 CLR 474
R v Ross‑Jones; Ex parte Green (1984) 156 CLR 185
Sutherland v Brien [1999] NSWSC 155; (1999) 149 FLR 321
Yunghanns v Yunghanns [1999] FamCA 64; (1999) 24 Fam LR 400

OWEN JA: This is an appeal from orders made by a District Court judge bringing an action to a summary conclusion on the basis that the subject matter of the writ was within the exclusive jurisdiction of the Family Court of Western Australia and therefore beyond the jurisdiction of the District Court. For economy of language, and although what occurred in the District Court was not a trial, I will nonetheless refer to the judicial officer concerned as 'the trial judge'.

Background

The appellant and another (VS) lived in a de facto relationship from 1987 until 2004. There were three children of or connected with the relationship. DD is a daughter of the appellant from a previous relationship. CB is a daughter of VS from a previous relationship. PS is the daughter of the appellant and VS born during the relationship.
In 1992 the appellant and VS, together with an associate, commenced a business as print finishers under the name Format Finishing. The business was conducted by the respondent as trustee for a unit trust called the Format Trust. The appellant and VS were the directors and equal shareholders of the trustee company and both worked in the business. There were 24 units issued in the Format Trust. The appellant and VS each held six units and the associate held 12 units. About two years after the business had commenced the associate transferred four units to each of DD, CB and PS. That was the position in relation to the holding of interests in the Format Trust in 2006, when this problem arose.
In these reasons, a reference to 'the parties' will be to the appellant and VS (unless I indicate to the contrary). In October 2004 the parties separated, but continued to work together in the business. However, the working relationship became untenable and in March 2006 a solicitor engaged by VS wrote to the appellant suggesting ways of sorting out the financial issues between the parties. The appellant appears not to have been legally represented, but was assisted by the associate who had initially been a unit holder in the Format Trust. Correspondence between VS's solicitor and the appellant continued through to June 2006.
On 10 April 2006 VS's solicitors sent a written offer to the appellant to settle the financial issues. The letter contained a list of the assets and liabilities of the parties with approximate values. In the list the business was valued at $450,000 (which equates to $18,750 for each of the 24 units on issue). The offer contemplated that VS would take over the business and would transfer her interest in some real estate to the appellant and would pay him $161,500. The offer was not accepted and there followed an (increasingly tense) series of exchanges.
By late June 2006 the parties had come to an agreement. On 23 June 2006 the appellant and VS signed a document called 'Application for Consent Orders, Form 11 Family Court Rules' (the Form 11) describing VS as the applicant and the appellant as the respondent (but references in these reasons to 'the respondent' will be to Format Finishing Pty Ltd). The document had annexed to it, or included with it, a Minute of Consent Orders. The document was filed at the Family Court of Western Australia on 27 June 2006 and on 28 June 2006 the court sealed and issued orders by consent in the terms of the minute (the Consent Orders).
The Consent Orders include a clause that the orders are made 'as and by way of property settlement and with the intent that the orders made herein shall, as far as is practicable … finally determine the financial relationship between the parties and avoid further proceedings between them'. The relevant parts of the Consent Orders are reproduced in the Schedule to these reasons. Briefly, they include provisions for:
(a)VS to acquire 4 units in the Format Trust from DD, and two units from each of CB and PS at a purchase price equating to $18,750 per unit;
(b)the appellant to transfer all his shares in the respondent and his six units in the Format Trust to VS and to resign as a director;
(c)VS to transfer her interest in some real estate to the appellant; and
(d)VS to pay $161,512 to the appellant; to ensure that the respondent pay him a salary of $800 per week pending finalisation; and to 'indemnify [the appellant] in relation to any loan account owing by [the respondent] or the [Format] Trust'.
The Form 11 is a relatively long document in which the parties were required to describe on oath, among other things, their respective financial situations. Both parties described their 'interest in any business' as being a 25% share of the respondent which they each estimated to be worth $112,500. This figure coincides with six units in the Format Trust each valued at $18,750. Neither VS nor the appellant listed as an asset any debt or interest in a debt owing by the respondent. Each party, asked to disclose an 'interest in any trust or other financial resources', stated 'only interest in a Trust is Format Trust as disclosed …', the value of which was 'nil'.
Asked to describe the effect of the property orders sought, VS indicated that, following the orders, she would have $225,000 (50%) interest in a business while the appellant would have no interest in the business but would receive $161,500 by way of 'other property'. For the purposes of this appeal I do not need to describe in any detail the real estate transactions that were also the subject of the Consent Orders. But what can be seen (as a matter of mathematics) is that the figure of $161,500 is not a direct reflection of the agreed value of the business. It is a balancing figure taking into account various aspects of the arrangements evidenced in the Consent Orders.
I am not sure how the statement that VS would end up with a 50% interest in the business is to be reconciled with the other provisions in the Consent Order by which she was to acquire 6 units from the appellant and eight units from the daughters. In any event it seems clear that, once the property settlement orders had been finalised, the appellant would have no interest in the business. I think it is common ground that the settlement of the various transactions contemplated in the Consent Orders occurred towards the end of September 2006.
The financial statements of the respondent for the year ending 30 June 2005 contain a balance sheet which lists, under current liabilities, a debt of $264,475 described as 'Loan ‑ [appellant] and [VS]'. Listed under current liabilities in the balance sheet as at 30 June 2006 is the sum of $209,625 described as 'Loan ‑ [appellant] and [VS]'. I note in passing that the net assets of the Format Trust set out in the balance sheets were said to be $16,847 (2005) and $220,443 (2006). It is clear, therefore, that the figure of $450,000 nominated as the value of the business in the 10 April 2006 letter and in the Form 11 is not taken from the balance sheet. In other words, it does not reflect the excess of assets over liabilities reflected in the balance sheet. Nor does the 10 April 2006 letter disclose the method by which that value was arrived at. It is common experience that when shares or units in an entity through which a business is conducted are being sold, the assets and liabilities are valued. The valuation figure might or might not be the same as book values in the financial statements. It is also common experience that the difference between the values attributed to assets and liabilities by this process will represent the underlying value of the business and that often, although not invariably, the purchase price will bear a relationship to that value. The evidence does not disclose whether that happened in this case.
In the proceedings in the District Court the appellant produced in evidence a document entitled 'The Format Trust 30/06/2006 Director's Loans' (which I will call 'the loan account reconciliation'). The provenance and date of preparation of the loan account reconciliation are not clear. Nor is it clear on whose instructions it was prepared. It seems to have come from the same firm of accountants as prepared the financial statements for the Format Trust. The loan account reconciliation purports to show that as at 1 July 2005 there were individual loan accounts of differing amounts, one in the name of the appellant and the other attributed to VS. As at 30 June 2006 those individual loan accounts stood at $98,745.34 (the appellant) and $110,879.18 (VS).
On 24 November 2006 solicitors acting on behalf of the appellant sent a letter to the respondent stating that notwithstanding the appellant's resignation from the business 'there is still the matter of [his] loan account in the sum of $98,745.43 to be paid to him' and demanding payment of that sum. The letter contained a threat to wind up the respondent unless the demand was met. On 30 November 2006 VS's solicitors responded and denied liability to pay. They said:
The payment of $161,500 from [VS] to [the appellant] was a figure negotiated between the parties and agreed to by them and was intended to compensate [the appellant] in full for [the appellant] transferring his interest in [the respondent] to [VS].
On 8 December 2006 the appellant issued a writ in the District Court claiming that amount. The statement of claim is delightfully brief. It recites the business and the Format Trust and says that from time to time the appellant advanced funds to the respondent for the operation of the business, which loans were recorded in journals of his loan account. He then pleads that as at 30 June 2006 the amount standing to the credit of his loan account was $98,745.43; that a demand had been made for the money; but that it remained outstanding. The respondent filed a defence in which each paragraph of the statement of claim was 'not admitted'.
On 19 December 2006 the respondent filed a chamber summons seeking orders that the proceedings be set aside or stayed 'on the grounds that it is beyond the jurisdiction of the District Court'. On 15 January 2007 the appellant filed a chamber summons seeking summary judgment. Also on 15 January 2007 VS filed applications in the Family Court (which I will call the January FC applications). In an affidavit sworn on 16 March 2007 she describes the substantive January FC application in these terms:
[The application is] for final orders in the Family Court … proceedings between [the appellant] and myself to amend and/or clarify the orders of the Family Court … made 28 June 2006. This application is currently pending before the Family Court … and at present has not been heard or determined.
I will have more to say about the January FC applications a little later. So far as I am aware, no further steps have been taken in relation to them. The District Court summonses came before a Registrar on 20 March 2007 and on 30 April 2007 the registrar decided that the appropriate jurisdiction in relation to the loan account was the Family Court. He said that it was therefore unnecessary to deal with the summary judgment application 'as this Court does not have jurisdiction to deal with the subject matter of the dispute'. The Registrar ordered the stay sought by the respondent.
The matter then went to a District Court judge by way of appeal. On 16 November 2007 her Honour delivered reasons in which she decided that the registrar was correct: the District Court lacked jurisdiction to determine the appellant's claim. However, her Honour varied the order for the stay and dismissed the action.
It should be noted that the respondent is not a party to the Family Court proceedings, either those commenced in June 2006 or the January FC applications. Equally, no attempt has been made to join VS as a party to the District Court proceedings.

The trial judge's reasons

Having outlined the history of the dispute, the trial judge turned her attention to the evidence as to the existence of the debt claimed in the writ and to whom it was owed. Her Honour described the loan account reconciliation and noted the appellant's claim that there were two individual loans. She also outlined the respondent's position, as gleaned from an affidavit sworn by VS as a director. The respondent argued that if, which it denied, there was a debt to the appellant it arose from advances made by the appellant and VS from their joint financial resources that were pooled by them during the de facto relationship. As such, if it were established that a loan was due and payable by the respondent then she, too, would have a claim on it.
The trial judge then said there was no satisfactory evidence enabling her to determine whether the amount claimed represented some apportionment to the appellant derived by an accountant out of what was truly a joint loan to the respondent made by the parties from joint funds or whether the amounts came from the appellant's money. Rather, the evidence tended to prove that, at least from 1992 to 1 July 2004, the amounts loaned were from joint funds. She was unable to determine whether any amounts were jointly loaned after 1 July 2004 nor could she judge the accuracy of any apportionment, though the breakdown in the loan account reconciliation indicated that VS was owed a greater sum than the appellant.
The trial judge then considered the jurisdiction of the Family Court. She noted that it was invested with both federal and non-federal jurisdiction and referred to the fact that pt 5A of the Family Court Act 1997 (WA) governed proceedings arising from de facto relationships. Her Honour set out the terms of s 250ZA (declarations of interests in property), s 250ZG (alteration of property interests), s 250ZJ (duty of court to end financial relationship of de facto partners), s 250ZLA (objects of division) and s250ZLF (court may make an order under s 250ZG binding third parties). Her Honour also referred to the definition of 'property' in s 205. The trial judge noted that it was common ground that:
(a)the appellant and VS were people to whom pt 5A of the Act applied;
(b)any debt owing to the appellant by the respondent fell within the definition of 'property' in relation to de facto partners; and
(c)the Family Court had power and jurisdiction to make orders with respect to that property, declaring the title or rights that the appellant had in respect to the loan or altering his interests in that property.
The trial judge said there was no suggestion that the alleged loan was the subject of any binding or former financial agreement between the parties taking it outside the operation of pt 5A. The Family Court therefore had jurisdiction and power to declare the title or rights that the appellant and VS had in respect of property, to alter their interests in respect of that property and make consequential orders.
Her Honour then described the appellant's argument. Put simply, the argument was that his action to recover a debt owing to him by the respondent was not a proceeding between de facto partners. The Family Court does not have exclusive jurisdiction to determine such claims. If it did, then any time a de facto partner wished to take legal action against, for example, his own bankers or insurers, the Family Court would have exclusive jurisdiction over such matters, simply because the property was owned or claimed by a person once in a de facto relationship. This could not be the case and the appellant's action was merely to enforce a property right that he had against a third party. Her Honour rejected the argument and said:
33.This proposition, however, quite overlooks the reality of the financial position of the de‑facto parties at the time at which the consent orders were sought. Notwithstanding that the orders were sought by consent, the Family Court has obligations as discussed above in relation to the orders it makes, which obligations will be considered on the basis of the information provided to the Court by the parties in the Form 11 application which was intended to set out the financial position of the parties. Those consent orders specifically dealt with the business of the [respondent] and, by a series of orders, achieved the result that the [appellant] would no longer have any interest or involvement in the [respondent] and would be indemnified against any liability arising out of that business. Orders were made pursuant to s 205ZG altering the interests of the parties in the [respondent] including orders for the transfer of certain property, being shares in the unit trust and payment to the [appellant] of money in substitution for his interest. In making such orders the Court was obliged to consider the effect of the order upon the earning capacity of the de‑facto partners and be satisfied that the orders made were just and equitable.
The trial judge then turned to the Form 11 and the terms of the Consent Orders. Her Honour noted that no specific reference was made in the Consent Orders or the Form 11 to the alleged debt to the appellant nor to any debt from the respondent to VS. She said it was common ground that cl 8.4 of the Consent Orders, though it refers to loan accounts, did not support the appellant's claim. However, the appellant contended that cl 12.1 of the Consent Orders (providing that each party would be exclusively entitled to all property, including choses in action, in his or her possession as at the date of the orders) encompassed any debt owing to him by the respondent and confirmed his claim.
The respondent had argued that the Consent Orders extinguished any debt owing by achieving, for consideration, the removal of the appellant from any interest he formerly had in the business, including his interest as creditor. Further, any debt owed to the appellant prior to the Consent Orders fell within the definition of 'property' within the Act. Applications between de facto partners with respect to their property fell within the exclusive jurisdiction of the Family Court. Accordingly, the disposition of that property and the construction to be placed upon the consent orders was within the jurisdiction of the Family Court and, that jurisdiction being exclusive, such questions could not be determined by the District Court.

Her Honour noted there was third possibility; namely, that in framing the Consent Orders the parties had overlooked the debt. The trial judge concluded as follows:
47.In this case either property which fell within the definition of property contained in s 205T of the Act was overlooked in the consent orders but remains within the exclusive jurisdiction of the Family Court to consider, or the property was addressed in the consent orders but the parties to those orders are diametrically opposed as to their interpretation of the orders they agreed upon.
48.This Court has no power whatsoever to make any orders inconsistent with the consent orders and does not enjoy the powers and obligations of that court in dealing between de‑facto partners in respect of property falling within the scope of the Family Court Act.
49.The matter is further complicated by the question of whether the funds allegedly advanced by the [appellant] to the [respondent] from time to time were joint funds advanced by the [appellant] and [VS], who is not a party to the [appellant's] claim. The material before me suggests that is so. If so, that is not cured by apportionment by an accountant. While this Court has power to grant equitable relief ancillary to an action in debt, it does not have jurisdiction to give equitable relief as the principal relief. The Family Court by contrast has power to make declarations altering the interests of the parties in property and to alter the liabilities of third parties. Its very broad powers serve to promote the ends of achieving what is just and equitable in the division of property between parties to marital and de facto relationships.
…
50.The [parties] having applied to the Family Court for orders with respect to their property and any debt owing to the [appellant] at that time falling within the definition of 'property' contained within the Family Court Act, the disposition of that property fell within the jurisdiction of the Family Court. It was to be taken account of in any division of property. This is not an action in which a former de‑facto partner simply seeks to recover a debt from a true third party unconnected to, or in simple fulfilment of orders made in the Family Court. I conclude that the learned Registrar was correct in finding that this Court lacks jurisdiction to determine this claim.

The grounds of appeal

The grounds of the appeal are succinct. In the first ground the appellant asserts that the trial judge erred in law in looking behind the express terms of the Consent Orders and considering the terms of the Form 11. Secondly, the trial judge erred in dismissing the appellant's claim in circumstances where she failed to determine whether or not the Consent Orders impliedly preserved or discharged the appellant's loan account with the respondent.
At the commencement of his oral submissions counsel for the appellant explained that the appeal involved three principal issues. First, can a court (in this case the District Court) look behind the terms of a Family Court order in order to interpret the order? Secondly, and assuming the answer to the first question is no, what is the proper interpretation of the Consent Orders? Thirdly, did the trial judge ever determine the question whether the Consent Orders preserved or discharged the appellant's loan account in the present case?
Of course, the overarching question is whether or not the fate of the debt alleged to be owed by the respondent to the appellant was within the exclusive jurisdiction of the Family Court.
The respondent filed a notice of contention in which it contended that the decision below should be affirmed on two grounds additional to those relied on by the trial judge. First, any debt which existed was owed to the appellant and VS jointly. Any action to enforce payment of, or to sever or apportion, the joint debt could only be effected by an action in equity, which was in any event beyond the jurisdiction of the District Court. Secondly, the appellant was estopped from bringing an action for enforcement, severance or apportionment of the joint debt because such claims could have, and should have, been the subject of the prior proceedings in the Family Court.

The statutory framework

In this appeal we are dealing with a dispute between parties to a failed de facto relationship. The primary court in which such disputes are heard is the Family Court of Western Australia (the Family Court). Both federal and non‑federal jurisdiction are conferred on the Family Court by the Family Court Act 1997 (WA). Part 5A of the Act (which includes s 205T to s 205ZZA) governs proceedings between people who are (or were) in a de facto relationship. The starting‑point is s 36(1) which provides that the Family Court has throughout the State the non‑federal jurisdictions conferred on it by or under Family Court Act or any other Act. There is no suggestion that any other legislation is germane to the issues raised in this appeal. Section 36 also includes these relevant provisions:
(4a)Without limiting subsection (1), the Court has jurisdiction under Part 5A to ‑
(a)make declarations and to revoke declarations that it has made;
(b)hear and decide all other matters under that Part,
and in particular the Court has jurisdiction to hear and decide the following ‑
(c)applications for orders with respect to property;
…
…
(8)Non‑federal jurisdiction conferred on the Court is exclusive of any other court except as provided under section 39 or where an appeal lies to the Supreme Court.
Section 39 refers to applications in the Federal Magistrates Court and, so far as concerns the Consent Orders, neither party has sought to invoke the appellate jurisdiction of the Supreme Court. Accordingly, neither of the exceptions referred to in s 36(8) apply. So far as concerns the matters raised in this appeal, the words 'the Court' and 'the court', when used in the Act, mean the Family Court: see s 8. It is common ground that the parties were in a de facto relationship to which pt 5A applies. It is also common ground that a debt is a species of property interest that comes within the definition of 'property' in s 205T.
Section 205ZA provides that in a proceeding between de facto partners with respect to existing title or rights in respect of property, a court may declare the title or rights, if any, that a partner has in respect of the property. But while a declaration made under the section affects the de facto partners it is not binding on anyone else. Section 205ZA is in identical terms to s 78 of the Family Law Act 1975 (Cth). This provision does not allow the court to alter existing rights; a declaration under this section is an order determining the existing title or rights of parties in respect of property: Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) 30 Fam LR 355.
Section 205ZG relates to alteration of property interests between parties to a de facto relationship. Section 205ZG(1) provides:
In proceedings with respect to the property of de facto partners, or either of them, the court may make such order as it considers appropriate altering the interests of the parties in the property, including an order for a settlement of property in substitution for any interest in the property and including an order requiring either or both of the partners to make, for the benefit of either or both of the partners or a child of the de facto relationship, such settlement or transfer of property as the court determines.
The Act confers on the Family Court power to set aside orders altering property interests in prescribed circumstances: see s 205ZH, which is in similar terms to s 79 of the Family Law Act 1975 (Cth) and which provides, relevantly, as follows:
(1)Where, on application by a person affected by an order made by a court under section 205ZG in proceedings with respect to the property of de facto partners, or either of them, the court is satisfied that ‑
(a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance;
…
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under s 205 ZG in substitution for the order so set aside.
In the January FC applications VS only mentions s 205ZH(1)(a) and I do not think any other sub‑clause of s 205ZH(1) could apply in the circumstances of this case. Section 205ZH(1)(a) means what it says: the court will only intervene if there has been a miscarriage of justice and that requires more than the establishment of the stated grounds (or one of them). The phrase 'or any other circumstance' is not a 'catch all'. The impugned conduct or event must still amount to a miscarriage of justice. Even then it is a matter of discretion whether the court will intervene. The court has recognised that property orders are characterised by a high degree of finality and the section should not be used to circumvent the basic principle that there can only be one property settlement between parties to a relationship: In the Marriage of H T and N I Kowalski (1992) 16 Fam LR 235, 239.
It should be borne in mind that the orders made on 28 June 2006 were made by consent. However, there is nothing is s 205ZH to suggest that the power to set aside orders altering property interests does not apply where the orders have been made by consent: see, generally, Harris v Caladine (1991) 172 CLR 84. But nor does anything in the Family Court Act render inapplicable the general principle that orders made by consent are no less effective than those made after argument: see, generally, James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53, 69, 97.
Section 205ZJ provides that in considering whether to make an order under div 2 (which includes both s 205ZG and s 205 ZH) the court should, so far as is possible, make orders that will finally determine the financial relationship between the parties and avoid further proceedings between them.
In pt 5A div 2A the Act confers specific powers on the Family Court to make orders that affect the position of third parties. A third party is defined as a person who is not one of the de facto partners (s 205ZLB). In s 205ZLA the object of div 2A is described as 'to allow the court, in relation to property of a de facto partner, to … make an order under s 205ZG … that is directed to, or alters the rights, liabilities or property interests of a third person'. Section 205ZLF provides, relevantly:
(1)In proceedings under section 205ZG, a court may make any of the following orders ‑
(a)an order directed to a creditor of the de facto partners in a de facto relationship to substitute one de facto partner for both partners in relation to the debt owed to the creditor;
(b)an order directed to a creditor of one de facto partner to substitute the other de facto partner, or both de facto partners for that de facto partner in relation to the debt owed to the creditor;
…..
(2)In proceedings under section 205ZG, a court may make any other order that ‑
(a)directs a third party to do a thing in relation to the property of a de facto partner; or
(b)alters the rights, liabilities or property interests of a third party in relation to a de facto relationship.
(3)The court may make an order under subsection (1) or (2) only if ‑
…
(c)the third party has been accorded procedural fairness in relation to the making of the order; and
(d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order;
The respondent was not a party to the Family Court proceedings in which the Consent Orders were made. The Consent Orders do not purport to bind the respondent: nor could they have done because, so far as the evidence discloses, the respondent was not given notice of the proceedings and a question would arise whether the requirements of s 205ZLF(3)(c) had been observed. But in the circumstances of this case it may not have been necessary to involve the respondent in those proceedings. If the appellant's loan account were a debt owed solely to him, the parties could have agreed and (or) the court could have ordered that he assign the debt to VS. Assuming the loan account was joint property, the court could have ordered that the appellant's interest in it be assigned to VS. As VS assumed sole control of the respondent, and of the business, under the Consent Orders that would have been sufficient to enable her to enjoy the benefit of the debt.
The Family Court has a specific statutory power in relation to injunctions. Section 235A provides that a person may institute proceedings in a court for an injunction in relation to a matter arising out of a de facto relationship. The court hearing the proceedings may make an order or grant an injunction as it considers proper with respect to the proceedings, including 'an injunction in relation to the property of a de facto partner'. By s 205ZLG, the court is authorised to grant an injunction binding third parties.

The notice of contention

It is convenient to deal first with the matters raised in the respondent's notice of contention.
In his affidavit sworn 15 January 2007 the appellant simply annexed the loan account reconciliation without comment or explanation other than to say that it showed the amount of $98,745 owing to him.
In her affidavit sworn 5 February 2007 in opposition to the appellant's summary judgment application and in support of the respondent's application for a stay VS said (in a paragraph quoted by the trial judge):
The [appellant] claims, …, that he advanced the sums of money constituting the alleged loan at various times between 1992 and 2006. This was during the time of the de‑facto relationship. Therefore, I believe that part, if not all, of these funds constituting the alleged loan, originated from the joint financial resources that were pooled by the [appellant] and I during the de‑facto relationship. As such, I believe that if this loan is proven established in this Court to be both due and payable from the [respondent], then I too should also have a claim to part of this loan.
The appellant filed two further affidavits, both sworn on 13 March 2007. In the first of them he denied the allegation that his loan account with the respondent was held jointly with VS. He referred to conversations with a person called Joe Calabro (whom he describes as 'the [respondent's] accountant') about the loan accounts. He said that Calabro had 'always described them to me as separate loan accounts'. He annexed three documents. First, a note which he says was in the handwriting of Calabro and which he had found in March 2006 in VS's office. The note contains a breakdown of the loan accounts as at 30 June 2005 and treats the indebtedness to the appellant and VS separately. Secondly, the loan account reconciliation. He says it was faxed to him by Calabro on 8 November 2006. Thirdly, a schedule which he says was faxed to him by Calabro shortly after 6 March 2007 and which is 'a copy of the records showing details of transactions for the [respondent's] loan account from 1 July 2002 to 30 June 2006'. The schedule treats the loans to the appellant and VS separately. However, the balances as at 1 July 2002 and at the end of each of the 2002, 2003 and 2004 financial years are the same for the appellant and VS. It is only for the year 2005 and 2006 that the balances between the two accounts differ.
In the second of his 13 March 2007 affidavits the appellant says:
I further state that the whole loan account used to be solely in my name and 50% thereof was without my knowledge or my permission transferred to [VS] sometime between July and December 2004. That date coincided with my separation from [VS].
That affidavit annexes (but without any apparent reference to it in the body of the affidavit) a letter from Calabro to the appellant dated 2 February 2007 saying:
We refer to your recent query in regard to the loan accounts and confirm our verbal notification in that as soon as we became aware of the lack of personal communication between the directors, we requested [SS] the Office Manager/Bookkeeper to establish separate director's loan accounts. … [SS] has complied with our request and separate loan transactions have been processed since the 1st July 2004."
In her affidavit in response sworn 16 March 2007 VS annexed the financial statements for the Format Trust for 2005 and 2006 which, as I have already said, describe the indebtedness as 'Loan - [the appellant] & [VS]'.
As the trial judge remarked (and I agree), Calabro's letter of 2 February 2007 is ambiguous. It does not make clear whether separate loan transactions were first established on 1 July 2004 or whether, after the fact, separate loan transactions have been documented going back to 1 July 2004. Nor does it assist in determining whether the instructions to the accountant to separate the loans came from the appellant alone or whether VS gave similar instructions or consented to the establishment of separate directors' loan accounts. The confusion is not alleviated by the statement in the second of the appellant's 13 March 2007 affidavits that the whole of the loan account was once in his name but that in the second half of 2004 '50% or thereof' was transferred to VS without his knowledge or permission. That is a curious statement given that one of the documents relied on by the appellant shows an indebtedness by the respondent to VS as early as 1 July 2002.
Where does this lead? On the one hand, there is evidence that the loan account balances were equal at the balance dates in 2002, 2003 and 2004. This tends to suggest (but not to prove) that it was a single loan account that has been allocated to the individuals after the event. The description of the loan in the financial statements for 2005 and 2006 would have similar evidentiary effect. But the financial statements for all or any of the years before 2005 were not adduced in evidence. The three documents annexed to the first of the 13 March 2007 affidavits and the 2 February 2007 letter are there for what they are worth. But the circumstances in which they came into existence are left unexplained and in some respects they are equivocal.
The bland statements in the affidavits that the advances to the respondent were made either from the parties' joint financial resources or were solely owned are also there for what they are worth. There is little evidence (apart from the third of the documents annexed to the second of the 13 March 2007 affidavits) showing how the loan account (or accounts) was (or were) made up. For example, it is common experience that loan accounts, as well as reflecting cash advances, can be affected by journal entries for things such as shares of undistributed profits.
It has to be borne in mind that this problem arose in applications that came on for hearing together for summary judgment and for orders staying or setting aside the action. They are applications that are generally determined on affidavit evidence without cross‑examination. In my view, it would have been well nigh impossible to decide whether the loans were the separate property of the parties or joint property without a full investigation of the documentary record and cross‑examination of the protagonists. That did not happen and her Honour was correct not to make a final and binding determination of that question in the proceedings.
Both limbs of the notice of contention are premised on a finding that the debt (if any) owed by the respondent to the appellant was (or was part of) a debt owed to the appellant and VS jointly. This leads to claims made on the basis of cases such as Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 to the effect that at common law an action to recover a joint debt must be brought by both promisees. There is a fundamental problem with this argument in the context in which it is raised in this action. The respondent advances it as a reason for bringing a summary conclusion to an action between it and the appellant where it has not been pleaded and where the person who contends the account is jointly held is not a party.

In any event, in my opinion, the evidence before the trial judge was insufficient to determine that issue one way or the other. All that can be said is that it may be, as the respondent (through VS) contends that, at least until 1 July 2004, the 'directors loans' were in reality a single loan that was joint property. But even if that is correct, it is not at all clear how and on whose authority the accounting entries came to be made that are reflected in, for example, the loan account reconciliation. That is how the evidence stands and it would be an inappropriate basis on which to bring a summary end to the action, either by dismissal or (for that matter) by summary judgment. For this reason, the notice of contention does not assist the respondent.
In the balance of these reasons I will refer to the directors' loan accounts in the plural. It should be clear from what I have said that in doing so I am not deciding whether, if an indebtedness by the respondent is extant, it is owed to the appellant and VS jointly or to the parties separately.

The nature of exclusive jurisdiction

I turn now to the grounds of appeal. But to understand the arguments it is necessary to spend a little time looking at the context in which the argument about the proper forum for the resolution of the dispute arises.
The loan accounts reflected in the financial statements of the Format Trust are part and parcel of the business known as Format Finishing. The business was an asset in which the parties to the de facto relationship had interests in common. There can be no doubt that the assets (and liabilities) of the business were amenable to orders made by the Family Court under the Act. To that extent, and in accordance with s 36(8), the jurisdiction of the Family Court to deal with those assets and liabilities was 'exclusive of any other court'. The parties approached the Family Court and orders were made by consent. The disposition of an asset that was not expressly dealt with in those consent orders then became the subject of later proceedings commenced in the District Court. This raises the question whether the fate of the asset remains within the jurisdiction of the Family Court to the exclusion of the determinative powers of any other court. To answer that question it is necessary to examine the nature of exclusive jurisdiction.
There is some case law on the nature of exclusive jurisdiction in bankruptcy law. Under s 27 of the Bankruptcy Act 1966 (Cth) the Federal Court and the Federal Magistrates Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than aspects of the jurisdiction of the High Court and the Family Court. It is to be remembered that the relevant jurisdiction of the Family Court is that 'conferred on it by or under this or any other Act': s 36(1). There is no suggestion that relevant jurisdiction has been conferred by any other legislation. Similarly, the 'jurisdiction in bankruptcy' referred to in s 27 of the Bankruptcy Act and 'bankruptcy', in relation to jurisdiction or proceedings, means any jurisdiction or proceedings under or by virtue of the Bankruptcy Act: s 5. In my view there is sufficient similarity of language to render the jurisprudence that has developed in the bankruptcy area of use in the context of the Family Court Act.
In Sutherland v Brien [1999] NSWSC 155; (1999) 149 FLR 321 Austin J decided that s 27(1) did not vest in the courts to which it refers exclusive jurisdiction in respect of every question turning upon the interpretation and application of the Bankruptcy Act. His Honour went on to hold that nothing in the Bankruptcy Act precludes the exercise of the well established jurisdiction of courts 'to determine and declare rights to property and make orders as to its destination': [8]. But that undoubted general jurisdiction will yield to any aspect of the jurisdiction for determination and declaration of such rights which the Bankruptcy Act itself places in the hands of the courts mentioned in s 27(1): Green v Schneller [2001] NSWSC 897; (2001) 164 FLR 82 [22].
Similar issues arose in Meriton Apartments Pty Ltd v Industrial Appeal Court of New South Wales [2008] FCAFC 172; (2008) 171 FCR 380. Greenwood J described the jurisdictional problem in these terms [88]:
The model adopted by the Bankruptcy Act 1966 upon its commencement provided for the investing of federal jurisdiction in bankruptcy (s 27(2) and s 5) in the eight courts identified in s 27(1) of that Act rather than an exclusive vesting of jurisdiction in a federal court. It would be an odd result if the subsequent conferral of exclusive jurisdiction in bankruptcy in the terms of the current s 27 of the Bankruptcy Act deprived the several courts of the States of a jurisdiction to determine whether a plaintiff has properly engaged that court’s jurisdiction having regard to his or her standing by reason of the operation of one or more provisions of the Bankruptcy Act. There is a distinction between the exercise of a court’s jurisdiction in a proceeding that calls into question a provision of the Bankruptcy Act on the one hand and the exercise by that court of a jurisdiction under or by virtue of the Bankruptcy Act, on the other.
This will inevitably raise a question as to the relationship between the various proceedings or sets of proceedings that have been commenced and those that have been decided and the precise nature of the orders made (or sought) in the proceedings. In Fountain v Alexander (1982) 150 CLR 615 there had been proceedings in relation to custody of a child of the marriage under the Family Law Act 1975 (Cth). Later, strangers to the marriage applied to the Supreme Court for orders that the child be made a ward of the Supreme Court and placed in the care and control of the strangers. The question in that case was whether the Supreme Court proceedings involved a 'matrimonial cause' as (then) defined in the Family Law Act. If they did, the Family Court was the only court in which the matter could be litigated. The provision under consideration was s 4(f), which defined 'matrimonial case' to include 'any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings [of a kind referred to elsewhere in s 4]'.
The High Court answered those questions in the affirmative. Gibbs CJ, with whom Aickin and Brennan JJ agreed, said (at 624 ‑ 625) that it was only necessary that the two sets of proceedings be 'related' in the sense of 'connected'. His Honour said that the connection in the instant case was that the Supreme Court proceedings would 'undo the effect of the order made in' the Family Court. The orders could not stand together and the Supreme Court orders, if granted, would 'necessarily defeat or diminish the rights given by an unqualified order' of the Family Court. See also Mason J, at 629 ‑ 630.
The connection or relationship between the proceedings must be material. This view is reinforced by reference to R v Ross‑Jones; Ex parte Green (1984) 156 CLR 185. The husband had borrowed money from a third party. He defaulted and the third party obtained a judgment against him and attempted to enforce it. The husband applied to the Supreme Court to set aside the judgment. He also applied to the Family Court for property settlement orders, including an order that the wife indemnify him against the liability under the Supreme Court judgment. A Family Court judge granted an interim injunction to restrain the third party from enforcing the Supreme Court judgment until the property settlement proceedings had been determined. The High Court held that there was no jurisdiction to do so and quashed the order granting the interim injunction. In commenting on paragraph (f) Gibbs CJ (with whom Mason J agreed) said, at 197, that it was not enough that what is done would indirectly affect the practical outcome of the other proceedings. Wilson and Dawson JJ said, at 210, that there must be more than a mere connection between the two sets of proceedings; there must be some relevant relationship.
The reach of the exclusive jurisdiction to entertain a 'matrimonial cause' under s 4 of the Family Law Act was explained in similar terms in Perlman v Perlman (1984) 155 CLR 474, 486 and Bate v Priestley (1989) 97 FLR 310, 327 - 328. Part 5A of the Family Court Act is, of course, in quite different terms from s 4 of the Family Law Act. Nonetheless the principles governing the relationship between proceedings or sets of proceedings in order to determine the proper forum remain the same. The dicta in Fountain may be read as suggesting that the question turns on a relationship between proceedings rather than on a relationship between orders. On the other hand, it is necessary to look to the way in which the orders interact. If the later proceedings would result in orders that would 'defeat or diminish rights' conferred by the earlier order or would 'displace or alter' the earlier order, the necessary connection has been demonstrated.

The jurisdiction(s) engaged in these proceedings

In my view, the reasoning set out in the preceding section can be applied by analogy to the problem raised in this appeal. What is the true nature of the relationship between the proceedings commenced in the District Court and those in the Family Court? Was the District Court called upon to exercise jurisdiction conferred 'by or under the Family Court Act'? Alternatively, and notwithstanding that the parties had previously engaged the jurisdiction of the Family Court in relation to their affairs, did the appellant properly engage the jurisdiction (or power) of the District Court 'to determine and declare rights to property and make orders as to its destination'? Further, can the orders made by the Family Court and the relief sought in the District Court litigation stand together?
The Family Court litigation is between the appellant and VS and in it, according to Recital C of the Consent Orders, the parties sought orders for property settlement under pt 5A. The District Court proceedings are between the appellant (a party to the Family Court proceedings) and the respondent (a stranger to the Family Court litigation). VS is a stranger to the District Court proceedings although she is intimately involved in her capacity as a director of the respondent. In the District Court action the appellant seeks recovery of a simple debt that he claims is owed to him by the respondent. The defence is comprised entirely of non‑admissions and the respondent does not raise a positive case that the debt has been discharged by the Consent Orders or that it is owed jointly to the appellant and VS, although that seems to be the tenor of the affidavit sworn in opposition to the summary judgment application.
Later in these reasons I will return to the question whether the Consent Orders, on their proper construction, dealt with the loan account. But for present purposes I will assume that, for whatever reason, the Consent Orders do not deal with debt.
As I have already said, the debt the subject of the District Court litigation was 'property' as that term is defined in the Family Court Act. It could, therefore, properly have been the subject of an order under pt 5A, but that is not what happened. It seems to me that the District Court action, at the time when it was commenced (8 December 2006), was regular and unaffected by any jurisdictional impediments of the type now raised by the respondent and (or) VS. The parties had engaged the jurisdiction of the Family Court and that jurisdiction had been exercised. The District Court action was a proceeding of an entirely different nature from that commenced in the Family Court. It dealt with an asset (albeit 'property' as defined in the Family Court Act) that was not the subject of the Consent Orders. The relief claimed in the District Court proceedings did not seek to impugn the integrity of the Consent Orders. They were not proceedings to enforce the Consent Orders; or to vary, revoke or replace those orders; or to modify rights conferred by them. Relief granted in the District Court would not 'undo the effect of the order made in' the Family Court. The end result of the two sets of proceedings (that is, relief granted in the District Court and the Consent Orders) could stand together.
The same situation pertained at the time (19 December 2006) when the respondent issued the chamber summons in the District Court for a stay or setting aside of the action. But what of 15 January 2007, when the appellant filed his chamber summons for summary judgment and VS filed the January FC applications? I need to describe, in more detail, what is contained in the latter applications.
There are two applications. They are not reproduced in the appeal book but they were attached to the affidavit of VS sworn 5 February 2007. For some reason, only attachment 'E' to that affidavit (the 'evidence' lodged as part of the January FC applications) was included in the appeal book.
The first of the two applications is an 'Application for Final Orders'. In it VS seeks an injunction restraining the appellant from proceeding with the District Court action or 'pursuing [VS] and/or [the respondent] for any further monies, by any means' and from attempting or threatening to wind up the respondent. VS also seeks orders that cl 8.4 of the Consent Orders be discharged and that, pursuant to s 205ZH(1)(a), the Consent Orders be set aside. The second application is an 'Application in a Case', which seems to be the family law equivalent of a summons for interim or interlocutory relief. In it VS seeks the same injunctive relief as described in the second sentence of this paragraph.
The evidence lodged in support of the January FC applications (which takes the form of an affidavit or witness statement of VS) discloses the bitterness that, sadly, seems so often to accompany (and endure after) the breakdown of human relationships, be they personal or commercial. In essence, VS says that the Consent Orders were intended finally to determine the financial relationship and that they resulted in the appellant getting 62% and her taking 38% 'of the net assets of the relationship'. She had agreed to 'this low percentage' to get the appellant out of her life and had been forced to borrow funds to achieve that end. She also says the appellant had required her to agree to some conditions restricting her right to deal with the business and had refused her request for a restraint of trade clause. VS says she now believes he did so with the intention of claiming the debt in order to run her out of business. Shortly after the settlement the appellant had purchased another business in direct competition with Format Finishing. In relation to the loan account, VS says:
(a)there had been no discussion during the negotiations for the Consent Orders or at any time before October 2006 about the loan account, although the appellant had been aware of it since at least March 2006;
(b)at no time before October 2006 had the appellant requested that he be paid out his loan account;
(c)had she known the appellant would claim nearly $100,000 for the loan account she would never have agreed to the Consent Orders: it would have meant that the appellant's share of the net assets of the relationship would have risen to 73%;
(d)in the District Court proceedings she would argue that that court had no jurisdiction because the writ purported to deal with matrimonial property over which the Family Court had already made orders and further proceedings were on foot; and
(e)unless she was successful in stopping the District Court action she would need to have the Consent Orders set aside.
I presume the reference to 'further proceedings' (item (d)) is to the January FC applications. Once again, the evidence is silent as to the manner in which the value of the business ($450,000) came to be agreed for the purposes of the Consent Orders. I am not suggesting that this Court could or should resolve any of the issues raised by VS in that statement. I have set them out here because they are a necessary part of the factual context in which the District Court chamber summonses came to be determined during 2007.
This is a complex set of circumstances and requires close analysis. The primary purpose of the January FC applications was to obtain injunctions restraining the appellant permanently from pursuing the District Court application and from taking any other steps to claim the debt or to wind up the respondent. It was not a primary purpose to have the Consent Orders set aside or varied. As VS said in her evidence, it would only be if she failed in her attempt to obtain an injunction that she would need to have the Consent Orders set aside.
The juridical basis on which the Family Court could or should make an order restraining the continuation of proceedings in a court of (otherwise) competent jurisdiction is not entirely clear. Unless and until the Consent Orders are set aside they are valid and effectual. Under the assumption I have made for this aspect of the reasons they do not purport to deal with the loan account. The applications for an injunction cannot, therefore, be explained as (in reality) an attempt to enforce the Consent Orders. Resorting to the vernacular, what VS is saying is this: 'I thought the loan account was included in the finalisation of our financial affairs in the settlement. I could have and should have had it dealt with then. If I did not I want to do so now'. That is perfectly understandable given that VS was prepared to ascribe a value of $450,000 to a business the net book value of which (according to the 30 June 2006 financial statements) was some $220,000. But it does not necessarily follow that VS (and the respondent) are entitled to have all matters touching the fate of the loan account dealt with by the Family Court and the Family Court alone. The appellant's position can be summarised as follows: 'We agreed to everything and the loan account is mine - just look at cl 12.1'. The fundamental question now is whether exclusive jurisdiction in relation to the loan account remains with the Family Court after the Consent Orders had been made and while they remain extant.
In my view, the answer to the question posed in the preceding sentence is no. The situation remains (at least in relation to the nature of exclusive jurisdiction) as I have described it as at the commencement of the District Court proceedings. This is not a case where the later litigation is an attempt to enforce the Consent Orders. Nor, again on the assumption I have made, would an order in favour of the plaintiff in the District Court defeat or diminish rights conferred by, or undo the effect of, the Consent Orders. A District Court judgment and the Consent Orders could stand together.
VS has a right to go back to the Family Court and to seek to have the Consent Orders set aside. She has the right to argue that the loan account was part of the joint financial resources and, in the circumstances, a miscarriage of justice has occurred that will enliven the jurisdiction of the Family Court to reopen the property settlement. But in the meantime the Consent Orders remain on foot and, as they do not purport to deal with the loan account, the appellant can pursue whatever rights he claims to have in relation to them.
It may be that one or other of the Family Court or the District Court might decide that, in the exercise of a discretion whether or not to entertain the suit, there is a more appropriate forum in which the dispute should be aired. But that is quite a different thing from saying that it is beyond the jurisdiction of the District Court to entertain the claim by the appellant against the respondent at all.

I turn now more directly to the appellant's grounds of appeal and to the three propositions raised by his counsel in oral submissions.

Construction of the Consent Orders - resort to the Form 11

It is necessary to construe or interpret the Consent Orders. For either the District Court or this Court to do so in no way infringes the integrity of the jurisdiction of the Family Court. It is part of the power residing in a court to determine and declare rights to property in matters that come before it.
In the first ground of appeal the appellant contends that the District Court judge erred in looking behind the express terms of the Consent Orders and considering the terms of the Form 11. Counsel referred to two cases in which the Family Court has looked at the relevant principles.
In Langford v Coleman [1992] FamCA 68; (1992) 16 Fam LR 228 the Full Court said, [24]:
… there is clear authority for the proposition that at least in matrimonial causes once any financial agreement reached between the parties is embodied in consent orders, it is to these orders alone that the Court must look. The Court cannot take into account whatever agreement might or might not have been reached between the parties which led to the making of the consent orders, and the authority for that proposition is found in the opinion of the Privy Council on appeal from Hong Kong in de Lasala v. de Lasala (1980) AC 546 at 560 ….
In Yunghanns v Yunghanns [1999] FamCA 64; (1999) 24 Fam LR 400, the Full Court put it this way, [143]:
In the absence of any allegation of fraud or mistake or other vitiating circumstances in the formation, drafting or recording of the orders, extrinsic evidence is not admissible to contradict the plain words of the order, or to seek to establish the agreement between the parties which lay behind it: [citing Langford v Coleman]
The point at issue in Langford was whether evidence could be led of the subjective intention of one of the parties to contradict what was, on the surface, the plain meaning of the words used in the court orders. That seems to me to be a different point to the one raised in this case. Here, the question is whether regard can be had to a document that is part of the court record, which was required by the rules of court to be filed and which had annexed to it a minute of the orders the parties were (by consent) seeking. The Form 11 and the Consent Orders are intimately related as part of the court record. If there is ambiguity in the Consent Orders it would seem to me to be legitimate to have regard to a document that has those characteristics to assist in the construction of those orders. To do so would not involve an enquiry into the subjective intention of the parties.
I also note that in Yunghanns, at [142], the Full Court pointed out that any particular order would fall to be construed in the context of the other orders contained in the consent orders 'and in the light of the proceedings of which they were the culmination'. This seems to me to support the view that resort could be had to other relevant parts of the court record.
It follows, in my view, that ground 1 has not been made out. But this does not dispose of the matter. As I read the reasons for decision the trial judge thought the Form 11 was significant in two related areas. First, neither party made any mention of the loan accounts owing by the respondent. Secondly, the Form 11 dealt with the value of the business conducted by the respondent. It did so without reference to the loan accounts and in a way that reflected an outcome where the appellant would no longer have any interest or involvement in the business and would be indemnified against liabilities of the business.
However, in my view the absence of any reference in the Form 11 to the loan accounts is equivocal and not a sound basis on which to bring a summary end to litigation. It could, for example (and as the trial judge recognised), have been the case that the loan accounts were overlooked. But that might work either way. It may have been a mistake on the part of VS not to include them because they were wrapped up in the overall settlement. Equally, it may have been a mistake by the appellant in failing to register his loan account as an asset he was retaining.
Difficult questions might arise as to how the elements of actionable mistake (common or unilateral) and the restrictions on taking note of subjective intention might interact. Be that as it may, I do not think the Form 11 was a sufficient evidentiary base on which to construe the Consent Orders in a way that was summarily determinative of the District Court proceedings.

The proper construction of the Consent Orders

This brings me squarely to the second ground of appeal and to the question whether the Consent Orders, properly construed, dealt with the loan accounts by impliedly preserving or discharging them.
It is common ground that the Consent Orders (like the Form 11) do not deal expressly with the loan accounts. The trial judge apparently thought it was also common ground that cl 8.4 (the indemnity) did not do so. As the argument on appeal developed I am not sure that this was the case and I will return to cl 8.4 shortly. In any event, the critical question is whether the import of the orders (transferring sole effective control of the business and the entity through which it was operated to VS) necessarily involves a discharge of the loan accounts. The operative provision is cl 12 and in particular cl 12.1: 'unless specified in these Orders … each party [is] solely entitled to the exclusion of the other party to all property (including choses in action) in the possession of such party as at the date of these Orders'.
A simple debt is a chose in action. As a matter of principle, a chose in action is not capable of being possessed. However, it seems to me that by referring expressly to 'choses in action' the parties intended to extend the ordinary meaning of the main import of cl 12.1; namely, its application to property in the possession of a party and, therefore, property capable of being possessed. There would be little point in referring expressly to choses in action if the intention were to restrict the operation of cl 12.1 to species of property capable of being possessed. In other words, cl 12.1 applies to property not otherwise dealt with in the Consent Orders and which is either:
(a)property capable of being possessed and in the possession of a party; or
(b)a chose in action.
Looked at in this way, cl 12.1 and cl 8.4 sit (relatively) comfortably together and cl 8.4 lends some support to the appellant's argument that the loan accounts were preserved (not discharged) by the Consent Orders. Clause 8.4 requires VS to indemnify the appellant 'in relation to any loan account owing by the company or the Trust'. It should be noted that this is an express reference to a 'loan account'. The appellant is similarly and expressly protected against other business related liabilities of the Trust. Clause 8.3 requires VS to indemnify the appellant 'in relation to any liabilities, claims, debts, demands or actions against the [appellant], in his capacity as Director, Shareholder and/or beneficiary in the Company and the Trust to outside creditors'. It is a somewhat curious use of the concept of indemnity but it would seem to operate if the appellant suffers loss 'in relation to' a loan account (cl 8.4) or other business liabilities (cl 8.3), presumably by reason of the failure of the debtor (the respondent) to repay them in accordance with their terms. If the loan accounts had been

discharged it is difficult to see where cl 8.4 would operate given the broad application of cl 8.3.

It seems to me, therefore, that the Consent Orders did not deal with the loan accounts and they were preserved. It follows that, as between the appellant and the respondent, the appellant was entitled to enforce whatever rights he claimed to have had in relation to the loan accounts. Again as between the appellant and the respondent, the former was at liberty to bring enforcement proceedings in the District Court and was not precluded from doing so by reason of exclusive jurisdiction residing in the Family Court.
I acknowledge that this result is not without its complications. As the appellant conceded in his written submissions, the District Court would have no jurisdiction to make an order dealing with a chose in action that was in dispute between de facto partners. If at some time in the future VS were to be joined in the District Court action and were to plead that the debt was joint property jurisdictional problems may well arise. It would be difficult, for example, for the appellant then to amend his claim to seek severance of the debt. Similarly, if VS were to pursue the January FC applications and have the property settlement reflected in the Consent Orders re‑opened the disputes concerning the loan accounts (or loan account) would fall within the exclusive jurisdiction of the Family Court.
The result does not sit well with s 205ZJ of the Family Court Act. Be that as it may, looking at the District Court action as it stood in 2007(and as it presently stands) ground 2 has been made out.

Conclusion

The appeal should be allowed and I would hear counsel as to the orders that ought to be made, particularly in relation to the costs of the District Court applications. I have read the reasons to be published by Pullin and Buss JJA. I agree with the concerns expressed in those reasons and with the indications of potential solutions to the procedural difficulties with which the litigation is beset.
PULLIN JA: For the reasons given by Owen JA, I agree that ground 1 of the appellant's appeal should be dismissed, along with the points raised in the respondent's notice of contention.
As to ground 2 of the appellant's appeal, I note, as does Owen JA, that the consent orders do not deal expressly with the loan account in issue. I agree with Owen JA for the reasons he gives, that the District

Court had jurisdiction to deal with the action between the appellant and the respondent, that ground 2 should be upheld and the appeal allowed. The order of Sweeney DCJ should be set aside and there should in lieu be an order setting aside Registrar Kingsley's order of 30 April 2007 which stayed the proceedings in the District Court. In lieu of that order, there should be an order dismissing the respondent's application for the stay, with costs to be paid by the respondent.

If it is possible, it would clearly be sensible to have the dispute resolved in the Family Court in proceedings between VS and the appellant with the respondent participating in accordance with the statutory provisions.
BUSS JA: Subject to the observations which follow, I agree with Owen JA, for the reasons he gives, that the appeal should be allowed.
I have some observations in relation to the statutory framework which may enable the pending District Court proceedings, if appropriate, to be transferred indirectly to the Family Court of Western Australia, to be heard and determined with the pending Family Court proceedings.
Section 8(1) of the Jurisdiction of Courts (Cross‑vesting) Act 1987 (WA) (State Cross-vesting Act) provides:
(1)Where ‑
(a)a proceeding (in this subsection referred to as the relevant proceeding) is pending in ‑
(i)a court, other than the Supreme Court, of the State; or
(ii)a tribunal established by or under an Act;
and
(b)it appears to the Supreme Court that ‑
(i)the relevant proceeding arises out of, or is related to, another proceeding pending in the Federal Court, the Family Court or the Supreme Court of another State or of a Territory and, if an order is made under this subsection in relation to the relevant proceeding, there would be grounds on which that other proceeding could be transferred to the Supreme Court; or

(ii)an order should be made under this subsection in relation to the relevant proceeding so that consideration can be given to whether the relevant proceeding should be transferred to another court,

the Supreme Court may, on the application of a party to the relevant proceeding or of its own motion, make an order removing the relevant proceeding to the Supreme Court.

See also s 76 of the District Court of Western Australia Act 1969 (WA).

The reference in s 8(1)(a)(i) to 'a court, other than the Supreme Court, of the State' includes the District Court. The State Cross-vesting Act does not enable a pending proceeding to be transferred directly from the District Court to the Family Court of Western Australia. A pending proceeding in the District Court may, however, be transferred to the Supreme Court of Western Australia pursuant to s 8(1).
By s 8(2) of the State Cross‑vesting Act, where an order is made under s 8(1) in relation to, relevantly, a District Court proceeding, the Act applies in relation to the proceeding as if it were a proceeding pending in the Supreme Court of Western Australia.
Section 5(4) of the State Cross‑vesting Act provides:
Where ‑
(a)a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court or the State Family Court (in this subsection referred to as the first court); and
(b)it appears to the first court that ‑
(i)the relevant proceeding arises out of, or is related to, another proceeding pending in the other of the courts referred to in paragraph (a) and it is more appropriate that the relevant proceeding be determined by that other court;
(ii)having regard to ‑
(A)whether, in the opinion of the first court, apart from this Act and any law of the Commonwealth or another State relating to cross‑vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in that other court; and
(B)the interests of justice,
it is more appropriate that the relevant proceeding be determined by that other court; or
(iii)it is otherwise in the interests of justice that the relevant proceeding be determined by that other court,
the first court shall transfer the relevant proceeding to that other court.
Accordingly, if the pending District Court proceedings in the present case were to be transferred to the Supreme Court of Western Australia under s 8(1), those proceedings would become a 'relevant proceeding' pending in the Supreme Court within s 5(4)(a). An application could then be made to the Supreme Court under s 5(4) to transfer the proceeding to the Family Court of Western Australia (which is defined in s 3(1) as the 'State Family Court'). If the requirements of s 5(4)(b) were satisfied, the Supreme Court would be bound to transfer the proceeding to the Family Court.
By s 4(6) of the State Cross‑vesting Act, if a proceeding is transferred from the Supreme Court of Western Australia to the Family Court of Western Australia, the Family Court has, by virtue of s 4(6), jurisdiction with respect to so many of the matters for determination in the proceeding as that court would not have apart from s 4(6). See also s 9 which provides, relevantly, that the Family Court of Western Australia may exercise jurisdiction conferred on that court by a provision of the State Cross‑vesting Act, and may hear and determine a proceeding transferred to that court under such a provision.
I emphasise that I have not formed any opinion as to whether it would necessarily be open or appropriate for the pending District Court proceedings in the present case to be transferred to the Supreme Court of Western Australia pursuant to s 8(1) or, in that event, from the Supreme Court to the Family Court of Western Australia under s 5(4). I have merely sought to set out the statutory framework which may enable that process to be carried out, if appropriate.

SCHEDULE
[Relevant Provisions of Consent Orders (28 June 2006)]
WHEREAS
………
D.And the parties agree that:
(a)on or about 30 June 2006 [DD] will transfer her right, title and interest in 4 units in the Format Trust ('the Trust') to [VS] for a consideration to be paid by [VS] of $75,000;
(b)on or about 30 June 2007 [CB] will transfer her right, title and interest in 2 units in the Trust to [VS] for a consideration to be paid by [VS] of $37,500; and
(c)on or about 30 June 2007 [PS] will transfer her right, title and interest in 2 units in the Trust to [VS] for a consideration to be paid by [VS] of $37,500;
Property Settlement
………..
2.Within 30 days of these Orders being made, the [appellant] do all acts and things and sign all documents necessary in order to:
2.1transfer to [VS] all of his right, title and interest in 12 shares in Format Finishing Pty Ltd as trustee for the Format Trust, trading as Format Finishing ('the Company') for the consideration of $12.00;
2.2resign from the position as Director of the Company;
2.3transfer to [VS] all of his right, title and interest in 6 units in the Format Trust ('the Trust');
2.4cancel his American express Card that is currently connected to the Company; and
2.5cancel the signature authority held with Westpac Bank on behalf of the Company.

[3. 4. and 5. concern a real estate transaction]
6.Forthwith upon signing this Minute the [appellant] be restrained by injunction from doing the following in relation to the Company and the Trust:
6.1entering into any financial commitments on behalf of the Company;
6.2incurring liabilities; and
6.3deducting monies.

7.Upon signing this Minute, [VS] be restrained from doing the following in relation to the Company and the Trust:
7.1selling any of the units in the Trust to third parties, for a period of 12 months from the date of the transfer of the right, title and interest in the Company and Trust to [VS]; and
7.2appointing other Directors in the Company for a period of not less than 12 months from the date of transfer of the right, title and interest in the Company and Trust to [VS].

8.Contemporaneously with Orders 2, 3 and 4 above, [VS] do all acts and things and sign all documents so as to:
8.1pay the [appellant] the sum of $161,512, upon the transfer of the [appellant's] 6 Units in the Trust, and 12 shares in the Company to [VS].
8.2ensure that the [appellant] is paid a salary by the Company of $800.00 gross per week until the transfers pursuant to Orders 2 and 3 hereof, with the [appellant] to leave the business premises upon the filing date of this Application;
8.3indemnify the [appellant] in relation to any liabilities, claims, debts, demands or actions against the [appellant], in his capacity as Director, Shareholder and/or beneficiary in the Company and the Trust;
8.4indemnify the [appellant] in relation to any loan account owing by the company or the Trust; and
8.5refinance all current business mortgage payouts on equipment purchases and amend leases so as to discharge the [appellant] from liability as a guarantor.

…………
12.That unless specified in these Orders:
12.1each party be solely entitled to the exclusion of the other party to all property (including choses in action) in the possession of such party as at the date of these Orders;
12.2the monies standing to the credit of the parties in any bank, building society, credit union or other financial institution account remains the property of the deposit holder;
12.3insurance policies remain the sole property of the beneficiary named therein;
12.4each party shall forego any claims that they may have to any superannuation benefits belonging to or earned by the other;
12.5each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled to pursuant to these Orders;

12.6each party be solely liable for any credit card debts or other loans in their name.

13.Each party sign all such documents and join in doing any such act or thing as may be necessary to give effect to the terms of these Orders.