Mullins & Sawyer
[2025] FedCFamC2F 117
•6 February 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Mullins & Sawyer [2025] FedCFamC2F 117
File number: MLC 9416 of 2024 Judgment of: JUDGE SYMONS Date of judgment: 6 February 2025 Catchwords: FAMILY LAW – appointment and removal of litigation guardian – where proposed litigation guardian is a manager of the affairs of the husband pursuant to rule 3.16 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) – consideration of whether litigation guardian holds interests adverse to the husband – consideration of Thorn & Thorn [2017] FamCA 950 –where the litigation guardian is a director of and shareholder in various entities that form part of the asset pool – where litigation guardian may be called as a witness at the final hearing – finding that the litigation guardian unable to satisfy r 3.14(b) of the Rules – orders for transfer to Division 1 and the Brisbane registry by consent Legislation: Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), rr 3.12, 3.14, 3.15, 3.16, 9.01
Powers of Attorney Act 1998 (Qld), Schedule 2, Part 1
Cases cited: Genesalio & Genesalio (2019) FLC 93-901; [2019] FamCAFC 85
Grace & Grace (1990) FLC 92-170
Thorn & Thorn [2017] FamCA 950
Division: Division 2 Family Law Number of paragraphs: 77 Date of last submissions: 19 November 2024 Date of hearing: 19 November 2024 Place: Melbourne Counsel for the Applicant: Ms D Pendergast Solicitor for the Applicant: Barry Nilsson Counsel for the Respondent: Mr C Dunlop Solicitor for the Respondent: Taussig Cherie Fildes ORDERS
MLC 9416 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS MULLINS
Applicant
AND: MR SAWYER (by his litigation guardian)
Respondent
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
6 FEBRUARY 2025
THE COURT ORDERS THAT:
1.Pursuant to rule 3.15(2) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Rules) Ms C be removed as litigation guardian for the respondent.
2.The legal representatives for the applicant and the respondent confer as to the identity of a replacement litigation guardian, or the mechanism for the identification of a replacement litigation guardian, for the respondent.
3.In the absence of agreement on or before the expiration of twenty-one (21) days of these orders, the applicant and the respondent’s respective legal representatives send joint correspondence to the President of the Queensland Law Society (QLS) or its nominee seeking the nomination of an independent accredited family law specialist lawyer (Nominated Lawyer) to act as litigation guardian for the respondent on the basis that the respondent will be responsible for payment of the litigation guardian’s fees and disbursements and any administrative fees charged by the QLS.
4.Upon the person identified by reference to paragraph 2 of these orders or the Nominated Lawyer filing an affidavit of consent to their appointment pursuant to rule 3.15(3) of the Rules, they be appointed as litigation guardian for the respondent.
5.Costs be reserved.
BY CONSENT IT IS ORDERED THAT:
6.Pursuant to section 149 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), this proceeding is transferred to Division 1 of the Federal Circuit and Family Court of Australia, noting the value of the claim will be in the vicinity of several millions of dollars, and the complexity of the facts, legal issues, remedies and procedures involved in the proceeding.
7.Pursuant to rule 9.01 of the Rules, the proceeding be transferred from the Melbourne registry to the Brisbane registry.
AND THE COURT NOTES THAT:
A.The parties will be contacted directly by the National Assessment Team confirming the transfer of proceedings and the next listing date.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
This matter relates to property proceedings commenced by the applicant de facto wife (Ms Mullins) by way of initiating application filed on 31 July 2024 and amended on 6 August 2024.
On 30 September 2024, the respondent de facto husband (Mr Sawyer) filed the application in a proceeding which is before me. This application relates to the appointment of Ms C (Ms C) as the litigation guardian for Mr Sawyer either in recognition of her status as “manager of the affairs of a party” (see rule 3.16 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (Rules)) or through her appointment, on the application of Mr Sawyer, pursuant to rule 3.15(1) of the Rules. Mr Sawyer also seeks an order that the litigation guardian’s costs are to be paid from his own assets and that Ms Mullins pay Mr Sawyer’s costs of and incidental to this application in a proceeding. An issue related to the transfer of the matter to the Brisbane Registry of the Court has been resolved with Ms Mullins agreeing to this course. Indeed, both parties submit that on any transfer to the Brisbane Registry, the matter should also be uplifted to Division 1, for reasons that relate to the value of the property pool and relatedly, the complexity of the parties’ financial arrangements which are dispersed across multiple corporate entities and trusts.
The parties agree that Mr Sawyer does not have capacity to provide instructions to his solicitor, or to understand the nature and consequences of this litigation, which are the considerations that engage the Court’s power to appoint a litigation guardian under rule 3.12 of the Rules.
Despite not contesting the necessity for a litigation guardian, Ms Mullins resists the appointment of Ms C to this role. Her position now reflects the following agreed facts:
·Ms C is Mr Sawyer’s financial attorney, pursuant to an Enduring Power of Attorney signed by Mr Sawyer during 2005;[1]
·By reason of her holding an Enduring Power of Attorney, Ms C is authorised to deal with legal matters relating to Mr Sawyer’s financial or property matters (refer Schedule 2, Part 1, s 1(o) of the Powers of Attorney Act 1998 (Qld)) and satisfies the definition of “manager of the affairs of a party” in relation to Mr Sawyer for the purpose of rule 3.16(1) of the Rules;
·On 13 November 2024, Ms C filed a notice of address for service identifying herself as litigation guardian for Mr Sawyer and on 7 November 2024 Ms C affirmed an affidavit (filed on 8 November 2024) (Second Ms C affidavit) in which she provided her consent to act as the litigation guardian for Mr Sawyer for the purpose of this proceeding. By these actions, Ms C became the litigation guardian of Mr Sawyer on 13 November 2024: rule 3.16(5) of the Rules.
[1] Annexure MSC-01 to the affidavit of Ms C affirmed 7 November 2024 (Second Ms C affidavit).
The primary relief sought therefore by Ms Mullins is an order that Ms C be removed as litigation guardian for Mr Sawyer pursuant to rule 3.15(2) of the Rules which provision empowers the Court to remove, including at the request of a party, a litigation guardian. Ms Mullins also seeks an order that Mr Sawyer pay her costs in resisting his application in a proceeding.
The application was listed for hearing before me on 19 November 2024. On this date Mr Dunlop of counsel appeared on behalf of Ms Mullins and Ms Pendergast of counsel appeared, via Microsoft Teams, on behalf of Mr Sawyer. Counsel agreed that despite the focus turning now to whether Ms C should retain her appointment as litigation guardian, the considerations that applied to removal (rather than appointment) were the same and directed attention to the criteria for the appointment of a litigation guardian prescribed by the Rules.
It is convenient therefore to identify these at the outset.
Rule 3.14 states:
Who may be a litigation guardian
A person may be a litigation guardian in a proceeding if the person:
a) is an adult;
b) has no interest in the proceeding adverse to the interest of the person needing the litigation guardian; and
c) can fairly and competently conduct the proceeding for the person needing the litigation guardian.
The focus of Ms Mullins’ challenge to the appointment of Ms C was the concern that she was not able to satisfy sub-rule 3.14(b).
DOCUMENTS RELIED UPON
In support of her application to remove Ms C as litigation guardian, Ms Mullins relied upon:
·Her response to an application in a proceeding filed on 28 October 2024;
·Her affidavit filed on 30 October 2024 (Ms Mullins affidavit);
·The affidavit of Dr B filed by Mr Sawyer on 30 September 2024 (Dr B affidavit); and
·Outline of case document filed on 14 November 2024.
In support of his application to retain Ms C as his litigation guardian, Mr Sawyer relied upon:
·His amended application in a proceeding filed on 13 November 2024;
·The Dr B affidavit;
·The affidavit of Ms C filed on 30 September 2024 (First Ms C affidavit);
·The Second Ms C affidavit;
·The affidavit of lawyer Georgia Edwards filed on 18 November 2024 (Edwards affidavit); and
·Amended outline of case document filed on 18 November 2024.
BRIEF BACKGROUND
Ms Mullins was born in 1956 and is aged 68 years. Mr Sawyer was born in 1939 and is aged 85 years.
There are no children of the relationship. Ms Mullins has two adult sons of a previous relationship. Mr Sawyer has four adult daughters of a previous relationship.
The parties commenced their relationship in 2008. In early 2012, Ms Mullins relocated from Melbourne to City D and commenced cohabitation with Mr Sawyer.
The parties separated on 10 February 2024. Mr Sawyer moved out into another property he owned in Queensland, and Ms Mullins remained living at the marital home in Queensland.
Ms Mullins deposes in her affidavit that Mr Sawyer’s mental health began deteriorating in around 2021, when he experienced episodes of heightened anxiety and suffered hallucinations on two occasions.
In late 2022, Mr Sawyer was admitted to E Hospital where he underwent testing and was diagnosed with acute depression and anxiety as well as cognitive impairment. Since this time, he has been under the care of psychiatrist Dr B. Mr Sawyer returned to E Hospital for treatment on two further occasions (late 2022 and mid-2023).
On 28 August 2024, in response to a request from Mr Sawyer’s lawyers, Dr B prepared a report that contained her opinion in relation to Mr Sawyer’s capacity to provide instructions to his legal representatives. Dr B expressed the opinion that Mr Sawyer did not have decision making capacity to instruct his counsel in the matters of financial settlement pertaining to his relationship with Ms Mullins. This conclusion reflected, among other things, Dr B’s view that “I do not believe [Mr Sawyer] understands fully the reason behind involving a solicitor in settlement. For example he stated, “I did not require this at other times.” He also could not see why this appointment was needed today to discuss matters of capacity. [Mr Sawyer] lacked the capacity to detail his assets and what was at stake in his settlement. He was unsure what was requested in [Ms Mullins’] application”.[2]
[2] Annexure DRB-02 to the Dr B affidavit.
As noted earlier, the question of whether Mr Sawyer has need for a litigation guardian is not in issue in this proceeding. However, for the avoidance of doubt, I record my finding, based on the report prepared by Dr B, that Mr Sawyer satisfies the requirements set out in rule 3.12(1) of the Rules such that the appointment of a litigation guardian for him is necessary in relation to this proceeding.
As far as the litigation guardian is concerned it is not in dispute that Ms C has worked with Mr Sawyer for over forty years in different capacities, including primarily providing financial services. Ms C is a member of a professional body.[3] In her affidavit, Ms C describes her involvement with Mr Sawyer in the following terms:[4]
[3] Second Ms C affidavit at [26].
[4] Second Ms C affidavit at [5]-[13].
5. I started [providing financial services to Mr Sawyer] in the early 1980s, when I was working for [F Firm] in [City G], which later became [H Firm]. After some years the partnership dissolved, and I practiced as [X Firm]. [Mr Sawyer] remained my client.
6. I have also [provided financial services] for the [J Group] for over 35 years. The [J Group] is a group of entities established by [Mr Sawyer] and his former wife, [Ms K] (“[Ms K]”), which includes (but is not limited to) the companies listed at paragraph 17, below.
7. In 2007, with [Mr Sawyer]’s business expanding, [Mr Sawyer] and I agreed that I would take a more active role in the [J Group] . I made the decision to sell [X Firm].
8. In 2009, I relocated to [City D] to work with, and for, the [J Group] and associated entities. At this time, I commenced working out of the same offices as [Mr Sawyer] – [providing financial services to Mr Sawyer and the J Group], and (later) with [Mr Sawyer] and others in some business activities […]. At that time, [Mr Sawyer] and [Ms K] made me a signatory of all bank accounts. I remain a signatory of all bank accounts held by [Mr Sawyer] and the [J Group] .
9. My current and primary role for the [J Group] of entities is as [a finance professional] and financial manager. I also have clients outside of the [J Group] (although those clients have decreased significantly, as I have stopped taking on new clients).
10. I am not [Mr Sawyer]’s employee, I work under contract for [Mr Sawyer] and the [J Group], and I am paid a retainer (with some additional fees) based on projects. My typical annual fee (gross of tax) is $170,000 per annum.
11. [Mr Sawyer]’s last permanent employee ceased employment in [mid] 2022. From this time, it has meant that my role has needed to expand.
12. I currently assist [Mr Sawyer] and the [J Group] with the following:
12.1The [J Group] businesses’ accounting, including the preparation and lodgement of business activity statements, income tax returns, and financial statements;
12.2All personal and business banking for the [J Group], including payment of invoices; and
12.3Managing properties and other investments for the [J Group], including issuing invoices, negotiating with tenants, and management of any requisite repairs.
13. In addition to my role as [finance professional] and finance manager, and since [Mr Sawyer] has no staff members, I also assisted [Mr Sawyer] in relation to some personal matters (which would have previously been undertaken by his Personal Assistant), such as renewals of registrations, passports, and licenses and as requested making personal appointments and bookings.
It is not in dispute that Mr Sawyer and Ms C were briefly romantically involved in the period between Mr Sawyer separating from his first wife and engaging in a relationship with Ms Mullins.
SUBMISSIONS OF MS MULLINS
Ms Mullins submitted that Ms C was disqualified from taking on the role of litigation guardian for Mr Sawyer because of her inability to satisfy the requirement that she “has no interest in the proceeding adverse to the interest of the person needing the litigation guardian”.
Ms Mullins submitted that as a person who had initially been proposed as the litigation guardian for Mr Sawyer, and more recently, had taken steps to give effect to this appointment, Ms C was, and had been for some time, subject to the same obligations of disclosure that apply to each party to a proceeding. This included the obligation recorded in rule 6.01(1) of the Rules to give full and frank disclosure of all information relevant to the proceeding, in a timely manner. I note that rule 6.01(3) specifically provides that the duty of disclosure applies to a litigation guardian appointed under Part 3.5.
Ms Mullins submitted that the manner in which Ms C had purported to give effect to this duty revealed the problem with her appointment as litigation guardian.
Ms Mullins noted that in the First Ms C affidavit, in which Ms C first provided her consent to acting as litigation guardian for Mr Sawyer, she gave evidence, including the statement (at [22]) that she had no interest in these proceedings adverse to those of Mr Sawyer, that painted a benign picture of her interest in Mr Sawyer’s financial affairs. As Mr Dunlop described it, a review of the First Ms C affidavit would lead one to conclude that Ms C provided financial services for the J Group, and nothing more. There was no reference to any shareholding, office holding or any financial matters related to Ms C’s appointment as litigation guardian.
However, it was later revealed – through the Ms Mullins affidavit – that Ms C had the following interests:[5]
[Ms C] is a co-director and, in some instances, also a shareholder of various companies in which [Mr Sawyer] has an interest, including [L Pty Ltd]. The company’s liabilities at 30 June 2023 included a loan from [Mr Sawyer]’s business, [M Company]. [Ms C] is a director and shareholder of [N Pty Ltd] which holds 1 of 3 ordinary shares in [L Pty Ltd]. [Ms C] did not disclose her involvement as a director in and shareholder of [Mr Sawyer]’s companies in her affidavit, including [L Pty Ltd] in which she appears to have a one third interest and which had a significant liability owing to [Mr Sawyer] as at 30 June 2023.
[5] Ms Mullins affidavit at [26.3].
Ms Mullins acknowledged that in the Second Ms C affidavit (at [42)), Ms C had sought to deal with the matters identified by Ms Mullins. The response to the assertion that “I did not disclose my interest in [Mr Sawyer]’s companies, and that my involvement in these companies (as director and/or shareholder) amounts to a “conflict of interest” was:
42.1 My directorships and shareholdings are a matter of public record.
42.2I am not yet a party to these proceedings. Upon my appointment as litigation guardian, I would be pleased to provide disclosure in relation to the entities in which [Mr Sawyer] has an interest.
42.3My interest in these companies means that my interests align with [Mr Sawyer].
42.4Since approximately 2009, [Mr Sawyer] and I have been involved in various businesses together.
42.5In my capacity as director and/or shareholder, I have intimate knowledge of [Mr Sawyer]’s business dealings.
42.6 There are no loans owing from any of the entities to me personally.
Ms Mullins was critical of the objection taken by Ms C to the further disclosure of information, in circumstances where she must have (at least by the point in time when she made her affidavit) understood that her financial interest in entities in which Mr Sawyer also had an interest, was an issue in the proceeding. Ms Mullins also made the submission that the use of the word “personally” at [42.6] was deliberate and involved an attempt to conceal the loan owed to L Pty Ltd.
Ms Mullins referred the Court to the Edwards affidavit, which annexed a copy of a letter sent by Ms Edwards’ firm (acting for Mr Sawyer) to the law firm acting for Ms Mullins on 11 November 2024.[6] The letter, which it is unnecessary to reproduce in full, contained a table reflecting Ms C’s instructions about “directorships and/or shareholdings in the following entities, which [Mr Sawyer] has an interest in”. The table identified nine corporate entities. As far as Ms Mullins’ argument is concerned, the disclosure of five is said to be of particular significance.
[6] Annexure GDE-01 to the Edwards affidavit.
The first is the earlier mentioned L Pty Ltd in respect of which the following was recorded:
Company/ACN
Directors
Shareholding held by Ms C?
Instructions in relation to activity of the company
L Pty Ltd …
Mr Sawyer
Ms C
Mr O
This company’s shares are held by three trusts – each trust held beneficially by one of the three directors.
L Pty Ltd owes Mr Sawyer, personally, a sum of $537,359.65 as at 30 June 2023. We are instructed that the current amount owing to Mr Sawyer is less than $537,359.65.
L Pty Ltd is owed $790,541.50 by P Pty Ltd. This liability is secured by way of mortgage against a property owned by P Pty Ltd (Q Street, Town R).
Upon the sale of this Town R property, the $790,541.50 debt to L Pty Ltd will be repaid, and those funds can be utilised to repay Mr Sawyer any remaining loan owing.
We are therefore instructed that this entity is ‘zero risk’, in the sense that there will be sufficient funds available to discharge any liability of the company, including any amount owing to Mr Sawyer, and there is security for payment.
Ms Mullins submitted that the disclosure made in this table posed more questions than it answered. In particular, no explanation had been provided for how much less (of the $537,359.65) was owing to Mr Sawyer and no documents had been provided in order to substantiate any such amount. Furthermore, Ms C had not produced a constitution for L Pty Ltd and neither had any loan agreement between Mr Sawyer and L Pty Ltd been discovered. Ms Mullins was completely in the dark as to the repayment terms that governed the arrangement and the priority (if any) of the payment to Mr Sawyer. There was an unsecured amount potentially owing to Mr Sawyer by an entity that was being financially controlled by Ms C, the litigation guardian, and which amount should be in the property pool. It followed, that Ms C had an indirect financial interest (through her corporate holding) that would be impacted, or would have the potential to be impacted, in this proceeding. In these circumstances, the submission was made that the statement (made in the table at [30] above) that there was “zero risk” associated with the L Pty Ltd loan and that Ms C did not hold an interest that was (or had a real potential to be) adverse to Mr Sawyer, was nonsensical.
Ms Mullins also submitted it to be significant that (as the table revealed), Ms C is:
(a)a co-director and equal shareholder of S Pty Ltd, together with Mr Sawyer and Mr O;
(b)a co-director of T Pty Ltd, together with Mr Sawyer and his former de facto wife, Ms K;
(c)a co-director and equal shareholder, together with Mr Sawyer and Ms K, of U Pty Ltd, the trustee of the two self-managed superannuation funds established by Mr Sawyer and Ms K, Superannuation Fund 1 and Superannuation Fund 2. Ms C is a member of each of the Super Funds for what she describes as “administrative purposes”.
(d)a co-director of W Pty Ltd, together with Mr Sawyer. Mr Sawyer holds 200 of 400 ordinary shares. Ms C holds 100 ordinary shares. A third party is the remaining shareholder.
Ms Mullins submitted that the Court should also have a sense of disquiet about the fact that while the table included in the letter of 11 November 2024 included nine corporate entities, a letter sent by Mr Sawyer’s lawyers on 12 July 2024 to the lawyer acting for Ms Mullins and which purported to enclose by way of disclosure an index of various accounts and corporate entities, did not make reference to five entities that made their first appearance in the 11 November 2024 correspondence.[7] The submission was made that the Court should be concerned about a lack of disclosure in this case, particularly as it related to Ms C, including in relation to S Pty Ltd, T Pty Ltd and W Pty Ltd and Ms C’s interest as an entitled member of the self-managed funds. Ms Mullins submitted that this last interest (and the failure to make comprehensive disclosure) was especially significant given Ms C’s evidence about the vesting of funds in the self-managed funds in the amount of tens of millions of dollars.[8]
[7] The letter was tendered and became Exhibit A1.
[8] First Ms C affidavit at [18].
Ms Mullins relied on the decision of Thorn& Thorn [2017] FamCA 950 as indicative of the cautious approach the Court should take to the appointment of a litigation guardian. The submission was made that the decision stood for the proposition that even the potential for a prospective litigation guardian to have an adverse interest to the party needing the litigation guardian, would offend the requirement in rule 3.14(b) and preclude their appointment.
Ms Mullins submitted that in Thorn, Johns J took into consideration that the husband’s brother, the proposed litigation guardian, was a director of a company in the parties’ asset pool. The debts of that company included monies owed to the husband’s brother for unpaid director’s fees as well as unsecured loans from the husband’s brother totalling $80,000. The wife disputed those liabilities.
Ms Mullins submitted that while the wishes of the person needing a litigation guardian are one factor that might inform the Court’s decision about the suitability of a person consenting to appointment, the evidence in this case on the point was equivocal. Although the report of Dr B suggested that there was a level of trust between Mr Sawyer and Ms C, clinical notes produced on subpoena by Dr B contained information that cast doubt on the correctness of this position and suggested instead that there was a power imbalance between the two, favouring Ms C.[9]
[9] Extracts from these notes were reproduced in the Ms Mullins affidavit at [32].
Finally, although it was not a matter emphasised in oral submissions, I understood Ms Mullins to contend that the Court should take account of the fact that Ms C has been a co-executor and beneficiary of Mr Sawyer’s will since at least late 2013, with Mr Sawyer’s first statement of intent and wishes dated mid-2022 recording his wish that Ms Mullins receive 10% of his estate and superannuation fund.[10] Ms Mullins submitted that it was therefore in Ms C’s interest to enlarge the value of Mr Sawyer’s potential estate and that this interest, in combination with her interest in L Pty Ltd, was a matter relevant to the Court’s consideration as to whether Ms C was an appropriate litigation guardian for Mr Sawyer.
[10] Ms Mullins affidavit at [47]-[48].
SUBMISSIONS OF MR SAWYER
Mr Sawyer, through his counsel, Ms Pendergast, did not cavil with the proposition that Ms C, as litigation guardian, has an ongoing duty to provide full and frank disclosure. However, he submitted that the duty was engaged only at the point in time that Ms C filed a notice of address for service, being late 2024. Ms Mullins had otherwise placed disproportionate weight on the asserted deficiencies in Ms C’s disclosure prior to this date, including because it was only on 24 August 2024, when Dr B produced her report, that it became clear that Mr Sawyer lacked capacity and required a litigation guardian.
Mr Sawyer submitted that the suggestion contained in the Ms Mullins affidavit (at [26.1]) that Ms C was not a suitable litigation guardian because she and Mr Sawyer had enjoyed a sexual relationship prior to the relationship between Ms Mullins and Mr Sawyer and that Ms C was “often hostile” to Ms Mullins during their relationship, while abandoned at hearing, nonetheless demonstrated the lack of merit generally in Ms Mullins’ opposition to the appointment of Ms C as litigation guardian.
Mr Sawyer submitted that, to the contrary, the fact that Ms C has held an Enduring Power of Attorney since 2005, was testament to the trusting and close relationship between Ms C and Mr Sawyer which had existed for a period of more than four decades.
Mr Sawyer submitted that the suggestion that there was a power imbalance between Ms C and Mr Sawyer was misplaced and the inference sought to be drawn by Mr Dunlop from the clinical notes produced at hearing, was not available. Any power imbalance or struggle was confined to that which appeared to exist between Ms Mullins and Ms C.
Instead, according to Mr Sawyer, the best evidence of the nature of the relationship between himself and Ms C was that contained in the report prepared by Dr B on 29 August 2024 in which Dr B stated (in the context of having met with Mr Sawyer on 28 August 2024) that: “[Ms C] has been his financial and legal Power of Attorney for a number of years and he has consistently expressed his trust in her to perform this role and repeats this clearly today wanting to defer to her to make decisions even in this interview”.
Mr Sawyer submitted that the decision in Thorn did not provide an analogy to the present case. This was because in Thorn, the proceeding had been well advanced. Here instead, the proceeding had not even got to the stage where a response to final orders had been filed. Furthermore, there was no evidence before the Court that an adverse interest had or ever would arise. Any conflict was potential at best and involved an ascertainable amount of debt that was secured by a mortgage and. in the context of an asset pool worth approximately $30 million, was not significant. It was also the case, a feature missing from Thorn, that Ms C is a person subject to ethical obligations in her profession as a finance professional.
Mr Sawyer submitted that the Court and Ms Mullins could not assume that Ms C was not prepared to comply with her disclosure obligations. Instead, the level of disclosure provided by her, to date, had been appropriate to the prevailing circumstances and provided information sufficient to enable an understanding of the different entities and their interrelationship. There was no suggestion that this disclosure process had been exhausted.
CONSIDERATION
Guidance from earlier decisions
Thorn & Thorn
Each case will turn on its own facts. However, guidance can be taken from earlier decisions and in particular those identified as analogues to the present case. Both parties made submissions that engaged with the decision of Thorn.
In Thorn, the applicant wife objected to the maintenance of the respondent husband’s brother as his case guardian, on two principal bases. The first was the alleged failure of the brother to ensure the husband’s compliance with orders made for discovery. The second was the potential for the interests of the husband’s brother to be in conflict with those of the husband, thereby giving rise to the possibility that his interests would be adverse to those of the husband.
The Family Court (Justice Johns) accepted that there was a basis in the evidence to sustain the first objection; the husband’s brother had attended court to assist the husband at the case assessment conference and was present when orders were made with respect to the exchange of documents by the parties. An obligation was said to also co-exist with and arise from the fact that the husband’s brother had been acting since prior to the start of litigation as the husband’s attorney pursuant to an Enduring Power of Attorney (Financial).
The adverse interest objection relied on the husband’s evidence that his brother was appointed a director of G Pty Ltd, this being an entity which formed part of the parties’ asset pool, and the company was indebted to him (the brother) for work that he had performed. The husband’s affidavit also disclosed that the brother was owed an amount of $80,000 as an unsecured loan to the business.
The submission was made by the wife that there was a significant risk that the husband’s interests would conflict with those of his brother to whom money was allegedly owed. It was submitted that there was potential that the husband’s brother may become a third party in the proceedings as a result of the role he had undertaken as director and debtor of G Pty Ltd. The husband disagreed with this submission on the basis that no current conflict had been identified.
Her Honour accepted the submission of the wife. At [46]-[47] Justice Johns said:
46. …The issues in this case are similar to those contemplated by Ross-Jones J in the decision of Grace & Grace (1990) FLC 92-170. In that matter his Honour had to determine whether the proposed next friend, as it then was, who held directorship and shares in the parties’ entities was an appropriate person to act as next friend for the husband in the proceedings. At page 78,165 of the judgment his Honour concluded that the proposed next friend should have no interest in the proceedings adverse to the husband. In determining that issue his Honour found that the next friend should have nothing to gain personally from the litigation and that the proposed next friend may possibly breach that requirement due to her involvement in at least two of the entities relevant to the property proceedings, in her capacity as director and shareholder. I respectfully agree with his Honour.
47. I am satisfied that the husband’s brother has a potential interest in the proceedings due to his role as director of an entity the subject of the proceedings and further in his position as alleged debtor of that entity. There is conflict between the husband and the wife as to the existence of debts allegedly owing to the husband’s brother; clearly the husband’s brother has an interest in the outcome of that dispute. In the circumstances, I am satisfied that the interests of the husband’s brother may be adverse to the husband.
Justice Johns acknowledged that the husband had deposed to seeking orders that his brother act as his case guardian but, in the face of evidence from the husband’s treating doctor that raised concerns as to the ability of the husband to completely understand the ramifications of the brother’s interest in G Pty Ltd, her Honour treated the husband’s wishes as to the appointment with caution. Accordingly, the deemed appointment of the brother was not recognised, and orders were made instead for the appointment of a different individual as case guardian.
Grace & Grace (1990) FLC 92-170
The decision of Grace & Grace was referred to by Ms Mullins in her written submissions (as well as in Thorn). It concerned the proposed appointment of the husband respondent’s mother as his “next friend”.
The wife objected to the appointment of the mother for reasons including that she (the mother) was the director of at least two companies relevant to the proceedings and might therefore make decisions adverse to the husband’s interests.
The Family Court (Ross-Jones J) found that the mother was not able to satisfy the requirements imposed on a person proposing to act as “next friend”. Relevantly, his Honour adopted the view that the next friend should have nothing to gain personally from the litigation and that the mother “may possibly” breach this requirement because she was involved in at least two of the relevant companies as director and director/shareholder. His Honour arrived at this view despite having earlier acknowledged and accepted as involving her genuine belief the mother’s statement that she would never make any decision adverse to the interests of her son.
Genesalio & Genesalio (2019) FLC 93-901
This decision, which Mr Sawyer referred to in his case outline, concerned an application for the appointment of a case guardian for the husband in the context of appeal proceedings brought from interim property and costs orders. It was acknowledged by the Family Court (Strickland J), that for this reason, any order made could necessarily be for the purpose of the appeal and not the extant first instance proceeding. This was described by the Court as a matter “highly relevant to the fate of the application”.[11]
[11] Genesalio & Genesalio (2019) FLC 93-901 at [6]
The wife challenged the appointment (or maintenance of the appointment) of the husband’s brother as case guardian on a number of grounds, including that which is now comprehended by rule 3.14(b) of the Rules. The wife submitted that the husband’s brother had an adverse interest to the husband because of their respective interests in certain trusts and pieces of real estate and that depending on what position each took in relation to those interests, the husband’s brother might become a party to the property settlement proceedings currently before the (then) Federal Circuit Court.
Justice Strickland rejected this submission and confirmed the brother’s appointment. His Honour reasoned as follows at [25]-[26]:
25. It is plain that if the husband his brother take a united position in relation to the above trusts and/or properties, it is unlikely that in the property settlement proceedings the husband’s brother will have an adverse interest to the husband’s interest, but otherwise if they part company. However, that is not yet known, and it may also depend on whether the husband’s brother is made a party to those proceedings.
26. Clearly, that can only be determined as the property settlement proceedings unfold, and those issues have no relevance to the appeal proceedings. Indeed, nothing was put before this Court to suggest that in the appeal proceedings the husband’s brother has an adverse interest to the interest of the husband. Thus, for the purposes of those proceedings r 6.09(b) is satisfied.
Decision
It is striking that in both Thorn and Grace, the court found that the person proposed as the equivalent of a litigation guardian, was unable to satisfy the equivalent requirement of r 3.14(b) of the Rules, based on the prospect or potential for an interest held by that person in a corporate entity that formed part of the property proceeding to crystallise in an interest adverse to the person in need of the litigation guardian. It appears that their interest in an asset of the property proceeding was a consideration, without more, that precluded their appointment.
In Thorn, that interest was a directorship of a corporate entity and an alleged debt owed by the entity to the proposed litigation guardian. In Grace, the interest was a directorship and directorship and shareholding. There was no evidence of a debtor/creditor relationship.
In Genesalio instead, the court was not required to do anything more than speculate as to whether the proposed case guardian would have an adverse interest that would preclude his appointment. It is clear from the judgment of Strickland J that his appointment in the context of an appeal, which would operate within different parameters to the trial, did not require his Honour to finally resolve the question.
Applying the approach adopted in both Thorn and Grace, the irresistible conclusion is that Ms C is unable to satisfy r 3.14(b) of the Rules and her deemed appointment as litigation guardian must be revoked.
In saying this, I recognise that Ms C has a sophisticated understanding of Mr Sawyer’s financial affairs and that absent her interests in the various corporate entities that will be the subject of disputation, her knowledge could have been deployed in the role of litigation guardian, to good effect. However, there is nothing to prevent her from providing assistance to Mr Sawyer (and those who act for him) in a different capacity.
The interests that Ms C holds have been identified earlier in this judgment. However, to summarise, they extend to her directorship of and/or shareholding in S Pty Ltd, T Pty Ltd, U Pty Ltd, W Pty Ltd and her membership of Superannuation Funds 1 and 2. I consider the fact of these interests alone prevent Ms C from satisfying r 3.14(b) of the Rules. They, and the financial structure of which they form part, appear immeasurably more complex than the entities that were involved in either Thorn or Grace.
However, there is also the issue of Ms C’s interest in L Pty Ltd. While the entity might ultimately prove to be “zero risk”, the point is that on the information before the Court, Ms C (through her corporate shareholding in L Pty Ltd) has an interest that has the prospect or potential to crystallise as one that is adverse to the interests of Mr Sawyer or which embroils Ms C in a contest about the repayment of the debt and/or requires her (or her company, N Pty Ltd) to be joined as a party to the proceeding.
It is further relevant in my opinion that the very matters that mean Ms C is a fount of knowledge about Mr Sawyer’s financial and business arrangements have the potential to involve her in the proceeding in a manner that would be antithetical to her appointment as litigation guardian. Ms C, on her own evidence, has been the finance professional for the J Group of companies for over thirty-five years. Her role extends to the management of the group’s rental properties and other investments. It is conceivable that decisions made by her in respect of the group and its various assets might be subject to scrutiny in the proceeding which in turn might compromise the ability of Ms C to dispassionately discharge her obligations as litigation guardian. Equally, Ms C may be required to give evidence in the proceeding given her close connection to the J Group of companies.
In all of these circumstances, I do not consider that it would be appropriate to maintain Ms C’s appointment as litigation guardian and rely simply on the availability of the removal power contained in r 3.15(2) of the Rules in the event that projections about a conflict are realised. Ms C is not presently able to satisfy r 3.14(b). This is not simply an abstraction.
I am also not persuaded that the various provisions contained in the Rules and the Family Law Act 1975 (Cth) that regulate the conduct of proceedings, or the fact that Ms C owes professional obligations as a finance professional, would operate to ameliorate the risk I have identified. These various provisions and obligations seem better directed at the requirement that a litigation guardian fairly and competently conduct the proceeding for the person needing the litigation guardian, being the requirement identified in r 3.14(c).
I have not made any findings about the ability of Ms C to satisfy this requirement given my finding on r 3.14(b) and because it was not the focus of the parties’ submissions at hearing. However, I consider that while strictly Ms C was not subject to disclosure obligations until she filed a notice of address for service, the “issue” of her suitability as litigation guardian, which necessarily engaged the question of whether she could satisfy r 3.14(b), was live from a much earlier stage of the proceeding and there were opportunities for Ms C to expose her relationship to the various entities (beyond occupying the role of finance professional) that were plainly missed.
What orders should be made?
In circumstances where the parties accept and for the avoidance of doubt, I find, that Ms C was deemed litigation guardian for Mr Sawyer on and from 13 November 2024, the consequence of my finding that she is unable to satisfy r 3.14(b) means that an order for her removal should be made pursuant to r 3.15(2).
The question then becomes, who should be appointed in her stead?
At hearing, a discussion between counsel and the bench occurred by which it was understood that the parties would provide to chambers a form of order that would deal with the contingency that Ms C was removed as litigation guardian and there was a need to appoint a different person to this role.
On 29 November 2024, lawyers for Ms Mullins provided a form of order that contained a mechanism for the identification of a suitable person to occur by way of agreement and in default of agreement, an approach would be made to the Queensland Law Society (QLS) seeking the nomination of an independent accredited family law specialist lawyer. On the provision of a consent from either the agreed person or the person appointed by the QLS, the individual would become Mr Sawyer’s litigation guardian.
In correspondence sent to chambers on 4 December 2024, the lawyers for Mr Sawyer indicated that they had not understood there to be any requirement for a form of order dealing with the identity and appointment of a replacement litigation guardian. They otherwise did not address the proposal of Ms Mullins.
I propose to make the orders sought by Ms Mullins, subject to two qualifications. The identification of a replacement litigation guardian is a matter that demands prompt resolution. Mr Sawyer is prevented by r 3.13(1) of the Rules from continuing or responding to the proceeding without a litigation guardian. The mechanism proposed by Ms Mullins affords the parties an opportunity to agree on the identification of the individual. I will give the parties a further week in which to reach agreement, acknowledging that the identification of an appropriate individual is not a straightforward task, although I would have expected the parties to have given the question some earlier consideration. I also propose to give the parties the opportunity to agree instead on a mechanism for the appointment of a litigation guardian and within the same period. In the event of disagreement, I consider that the default mechanism for identification and appointment proposed by Ms Mullins is sensible and appropriate.
There are numerous instances in which this Court has endorsed the appointment of a family lawyer to the role of litigation guardian. This reflects an acknowledgement that a person with these qualifications and professional obligations can be expected to fairly and competently conduct the proceeding for the person needing the litigation guardian.
I will make orders by consent that the proceeding be transferred to Division 1 of this Court and to the Brisbane registry. I am satisfied that both orders are appropriate given the connection that both parties have to Brisbane and the obvious complexity of the proceeding and the value of the asset pool.
I will reserve the question of costs.
I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 6 February 2025
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