Noll & Noll and Anor
[2013] FamCAFC 24
•28 February 2013
FAMILY COURT OF AUSTRALIA
| NOLL & NOLL AND ANOR | [2013] FamCAFC 24 |
FAMILY LAW – APPEAL – ACCRUED JURISDICTION – Where the trial Judge refused the husband’s application for the court to exercise accrued jurisdiction to determine the husband’s cross-claim for damages against the wife’s solicitors at the same time as it determined the wife’s claim against the husband relating to a financial agreement between the husband and the wife – Where the Full Court confirmed that in order to attract accrued jurisdiction a non-federal claim must arise out of the same substratum of facts as the federal claim and also form a single justiciable controversy – Where the Full Court confirmed that once accrued jurisdiction is attracted there is, as a general rule, no discretion not to exercise it - Where there was not enough material before the Full Court to determine whether the entire factual basis for the husband’s cross-claim for damages arose out of the same substratum of facts that gave rise to the proceedings between the husband and the wife – Where the Full Court found that, prima facie, the determination of the federal claim did not require the determination of the claim for damages sought to be attached – Where the claim for damages might not arise until the federal proceedings are concluded - leave to appeal granted – appeal dismissed - orders made for submissions as to costs.
| Fair Trading Act 1999 (Vic) Family Law Act 1975 (Cth) Family Law Amendment Act 2000 (Cth) |
| ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559 Bergman & Bergman (2009) FLC 93-395 Bishop & Bishop (2003) FLC 93-144; (2003) 30 Fam LR 108 Fencott v Muller (1983) 152 CLR 570 Houghton v Arms (2006) 225 CLR 553 Philip Morris Inc v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR 457 Ruane & Bachman-Ruane & Ors [2012] FamCA 369 Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 Wade-Ferrell & Wade-Ferrell (2001) FLC 93-069; (2001) 27 Fam LR 484 Re Wakim; Ex parte McNally (1999) 198 CLR 511 Warby & Warby (2001) FLC 93-091; (2001) 28 Fam LR 443 |
| APPELLANT: | Mr Noll |
| FIRST RESPONDENT: | Ms Noll |
| SECOND RESPONDENT | Law Firm A |
| FILE NUMBER: | MLC | 10264 | of | 2010 |
| APPEAL NUMBER: | SOA | 83 | of | 2011 |
| DATE DELIVERED: | 28 February 2013 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Bryant CJ, Finn and Strickland JJ |
| HEARING DATE: | 7 March 2012 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 11 November 2011 |
| LOWER COURT MNC: | [2011] FamCA 872 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Bartfeld QC Mr Dinelli Ms Vohra |
| SOLICITOR FOR THE APPELLANT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE RESPONDENT: | Mr Geddes QC Mr Strum |
| SOLICITOR FOR THE RESPONDENT: | Kenna Teasdale Lawyers |
| COUNSEL AND SOLICITOR FOR THE | |
| SECOND RESPONDENT: | Appearance Excused |
Orders
Leave to appeal the orders of the Honourable Justice Le Poer Trench made on 11 November 2011 be granted.
The appeal be dismissed.
(a) Within 28 days of the date hereof each party be at liberty to file and serve any written submissions in relation to any application for costs in relation to the appeal against the orders of the Honourable Justice Le Poer Trench of 11 November 2011.
(b) Each party have a further 28 days in which to file and serve any written submissions in answer to any submissions filed by the other party.
(c)Each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Noll & Noll has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SOA 83 of 2011
File Number: MLC 10264 of 2010
| Mr NOLL |
Appellant
And
| Ms NOLL |
First Respondent
And
| LAW FIRM A |
Second Respondent
REASONS FOR JUDGMENT
This is an application for leave to appeal and if leave be granted, an appeal by Mr Noll (“the husband”) against orders made by Le Poer Trench J on
11 November 2011. By those orders his Honour first refused an application by the husband “to have the court exercise accrued jurisdiction to determine” a claim which the husband sought to bring against a firm of solicitors, Law Firm A (“Law Firm A”) as part of proceedings between the husband and Ms Noll (“the wife”) relating to a financial agreement; and secondly, dismissed an application to have Law Firm A joined as parties to the proceedings, and to the extent that Law Firm A were already parties, discharged them as parties.
The respondent to the application for leave to appeal is the wife. Although
Law Firm A were named as a second respondent to the application, they were excused from appearance at the hearing before us.
Because of the important questions raised by this proposed appeal, we propose to grant the husband leave to appeal and proceed to determine the appeal. Although the wife vigorously opposed the appeal, little was put on her behalf in opposition to the grant of leave.
BACKGROUND TO THE PROCEEDINGS
In February 2007, approximately two years prior to their separation in February 2009, the husband and the wife entered into a financial agreement pursuant to
s 90C of the Family Law Act 1975 (Cth) (“the Act”). The agreement was entered into in the context of a proposed public float of a company of which the husband was a director and in which he was a shareholder. The purpose or effect of the agreement was to exclude the husband’s shareholding in that company from being the subject of any order in any future proceedings for property settlement between the husband and the wife under s 79 of the Act.
Before the wife signed the agreement, the husband caused arrangements to be made for her to consult a solicitor, Mr B of Law Firm A, who provided her with a letter of advice in relation to the agreement and whose fees were paid by the company.
THE WIFE’S CLAIM AGAINST THE HUSBAND
Following the separation of the parties in February 2009, but on a date which is not readily apparent from the material before us, the wife commenced proceedings in the Family Court against the husband. The relief sought in her initiating application is also not apparent to us.
However, relevantly for present purposes, on 1 September 2011, she filed an amended initiating application to which was attached a statement of claim in which the following relief was sought against the husband (in the exact words of the statement of claim):
A.A declaration that the s 90C Agreement dated 15 February 2007 is not binding for non-compliance with s 90G(1)(b).
B.An order that the s 90C Agreement be set aside for non-disclosure or unconscionable conduct pursuant to s 90K of the Family Law Act, pursuant to s 158 of the Fair Trading Act, under the common law of pre-contractual misrepresentation and/or in equity.
C.Damages, including damages pursuant to s 159 of the
Fair Trading Act.D.Equitable compensation.
E.A declaration that the Respondent is estopped from relying upon the s 90C Agreement.
F. Such further orders as the Court thinks fit.
G. Interest pursuant to statute.
In her amended initiating application the wife also sought that upon a declaration being made that the s 90C agreement was not binding, orders for division of the parties’ property be made (under s 79 of the Act).
THE HUSBAND’S DEFENCE TO THE WIFE’S CLAIM AND THE HUSBAND’S CROSS-CLAIM AGAINST LAW FIRM A
On 5 October 2011 the husband filed a further amended response annexing both a defence to the wife’s statement of claim and a cross-claim against Law Firm A.
It will assist an understanding of this case if we set out at this initial stage the following passages from the husband’s cross-claim in which the aspects of the wife’s claim relevant to the cross-claim and the basis of the cross-claim are set out:
Claims made against the [husband]
…
4. By her statement of claim, the [wife] alleged, amongst other things, that:
a.the [husband] made certain pre-contractual and implied misrepresentations to the [wife] in trade or commerce, such representations being false, in reliance upon which the [wife] entered into the s 90C agreement, such that the [husband] is estopped or otherwise [sic] relying on the s 90C agreement; (emphasis added)
b.the [husband] exerted undue influence upon the [wife] in order to procure her agreement to the s 90C agreement, without which she would not have entered into the s 90C agreement; (emphasis added)
c.the [husband] acted unconscionably, in the absence of such conduct [the wife] would not have entered into the s 90C agreement; and (emphasis added)
d.the [husband] failed to ensure that legal advice obtained from [Law Firm A] was independent, (emphasis added)
(collectively, the allegations).
Cross-claim against [Law Firm A]
5.In relation to paragraph 4 above, the [husband] refers to his defence dated 3 October 2011 (defence) by which he denies the allegations.
6.If (which is denied on the grounds referred to in paragraph 5 above), the allegations, or some of them, are true and the s 90C agreement is declared not to be binding, on the grounds set out below, the [husband] alleges that [Law Firm A] is liable to the [husband] for the loss and damage suffered by the [husband] as a result. (emphasis added)
7. At all material times, [Law Firm A] represented that:
a.[Law Firm A] acted solely for the [wife];
b.The [wife] had received independent legal advice from [Law Firm A];
c.[Law Firm A] had advised the [wife] as to the effect of the s 90C agreement on her rights to apply for an order under the provisions of the Act, the Family Law Amendment Act 2000 (Cth) and otherwise at law and in equity; and
d.[Law Firm A] had advised the [wife] as to the advantages and disadvantages, at the time that the advice was provided, of the [wife] making the s 90C agreement,
(collectively, the Representations).
PARTICULARS
Insofar as [Law Firm A] made the Representations in writing, the [husband] relies upon:
a.a letter dated 8 February 2007 from [Law Firm A] to [Law Firm B, the husband’s solicitors]; and
b.the certificate of independent legal advice signed by [Mr B] [of Law Firm A] on 15 February 2007 (the certificate).
Copies of the letter dated 8 February 2007 and the certificate are available to be inspected at the offices of the [husband’s] solicitor by appointment.
Insofar as [Law Firm A] made the Representations orally, the [husband] relies upon a telephone conversation on 12 February 2007 between [Mr B] and [Mr M] of [Law Firm B].
Insofar as the Representations are to be implied, it is be [sic] implied from:
a.the written and oral particulars set out above;
b.the failure of [Law Firm A] to advise the [husband], or any representative of the [husband], that it did not act independently or that it had not done the things the subject of the Representations;
The [husband] refers to an email dated 20 December 2010 from
[Mr B] to the [husband’s] solicitors (such email being annexure CWN-3 to the affidavit of the [husband] sworn 3 October 2011).Further particulars will be provided after discovery.
8.The Representations were made by [Law Firm A] in the course of trade or commerce.
9.In reliance on the Representations, the [husband]:
a.took no further steps to ensure that the [wife] received alternative independent legal advice; and
b.signed the s 90C agreement.
10.If the allegations are true (which is denied on the grounds referred to in paragraph 5 above), the Representations were inaccurate, incorrect or otherwise misleading.
11.By reason of the matters alleged in paragraphs 7-10 above, [Law Firm A] engaged in conduct in the course of trade or commerce which was misleading or deceptive or likely to mislead or deceive contrary to s 9 of the Fair Trading Act 1999 (Vic) (FTA).
12.Further, or alternatively, by reason of the matters alleged in paragraphs 7, 9 and 10 above:
a.[Law Firm A] warranted to the [husband] that it had authority to make the Representations; and
b.[Law Firm A] is liable for breach of warranty of authority.
13. Further or alternatively, at all material times:
a.the [husband] was an identifiable person who would be affected by the conduct of [Law Firm A] as the [wife’s] solicitors;
b.by failing to:
i.provide independent legal advice to the [wife];
ii.advise the [wife] as to the effect of the s 90C agreement on her rights to apply for an order under the provisions of the Act, the Family Law Amendment Act 2000 (Cth) and otherwise at law and in equity; and
iii.advise the [wife] as to the advantages and disadvantages, at the time that advice was provided, of the [wife] making the s 90C agreement,
the [husband] would suffer loss and damage in the event of marital breakdown in not being able to rely on the s 90C agreement;
c.there were no steps that the [husband] could reasonably take to ensure that [Law Firm A] provided independent advice to the [wife] on the matters the subject of the Representations; and
d.the [husband] was in a position of dependence on [Law Firm A] that it would properly discharge its duties to the [wife] to provide independent advice to the [wife] on matters the subject of the Representations;
14.[Law Firm A] knew, or ought reasonably to have known of the matters set out in sub-paragraphs 13(a)-(d) above.
15.By reason of the above matters, [Law Firm A] owed the [husband] a duty to exercise reasonable care and skill in acting for the [wife].
16.If the allegations are true (which is denied on the grounds referred to in paragraph 5 above), [Law Firm A] acted in breach of the said duty.
PARTICULARS
a.The failure to provide independent legal advice to the [wife].
b.The failure to advise the [wife] as to the effect of the s 90C agreement on her rights to apply for an order under the provisions of the Act, the Family Law Amendment Act 2000 (Cth) and otherwise at law and in equity.
c.The failure to advise the [wife] as to the advantages and disadvantages, at the time that that advice was provided, of the [wife] making the s 90C agreement
d.The making of the Representations to the [husband].
17. By reason of:
a.the contravention referred to at paragraph 11 above;
b.the breach of warranty referred to at paragraph 12 above; and
c.the breach of duty referred to at paragraph 16 above,
[Law Firm A] caused the [husband] loss and damage.
PARTICULARS
The loss and damage is the difference between:
a.any order made by the Court in Family Court proceeding no. MLC 10264/2010 for the division of the property of the [wife] and the [husband]; and
b.any order that would have been made by the Court in Family Court proceeding no. MLC 10264/2010, but for the declaration that the s 90C agreement is not binding.
AND THE [HUSBAND] CLAIMS AGAINST [LAW FIRM A]:
A.Damages pursuant to s 159 of the FTA.
B.Further or alternatively, damages.
C.Interest.
D.Costs.
E.Such further relief as the Court sees fit.
THE PROCEEDINGS BEFORE THE PRIMARY JUDGE AND HIS DECISION
On 28 October 2011. Le Poer Trench J heard what he later described in his reasons for judgment (delivered on 11 November 2011) as an application by the husband “for the Court to invoke its accrued jurisdiction” to “hear and determine his action for damages against [Law Firm A] at the same time as the Court hears and determines the wife’s application” to have the financial agreement entered into between herself and the husband on 15 February 2007 set aside. (Reasons at [1] and [4]).
As his Honour recorded in his reasons, Law Firm A did not oppose being joined as a party to the proceedings between the husband and the wife, but the wife did oppose the application for their joinder and for the exercise of the Court’s accrued jurisdiction. (Reasons at [3] and [4]).
In advance of the hearing on 28 October 2011, written submissions had been filed on behalf of both the husband and the wife in relation to the application, and were relied on at the short hearing that day.
The husband’s case before his Honour was that the husband’s cross-claim against Law Firm A and the proceedings between the husband and wife arose from the same substratum of facts and therefore were part of the same justiciable controversy or matter, thus attracting the Family Court’s accrued jurisdiction.
It was the wife’s case that her application against the husband and the husband’s cross-claim against Law Firm A involved three separate issues to be considered at different stages, being:
a)whether the financial agreement was binding between the husband and the wife;
b)a (potential) property settlement between the husband and the wife; and
c)a possible claim for damages by the husband against Law Firm A.
Thus, it was submitted for the wife, the claims between the husband and the wife, and the claims between the husband and Law Firm A were not part of a single justiciable controversy; they were not so related that the determination of one was essential to the determination of the other; and the Family Court could determine the federal claim between the husband and the wife without determining the non-federal claim between the husband and Law Firm A. Accordingly, accrued jurisdiction was not attracted.
In his reasons for judgment delivered on 11 November 2011, Le Poer Trench J accepted the wife’s submissions that the claims between the husband and the wife on the one part and between the husband and Law Firm A on the other, did not form part of a single justiciable controversy.
His Honour therefore made the orders dismissing the husband’s application for the Court to exercise its accrued jurisdiction and for the joinder of Law Firm A as parties to the proceedings between the husband and the wife. These are the orders that the husband now appeals.
As will shortly be seen, certain of the husband’s grounds of appeal contain express reference to certain paragraphs in his Honour’s reasons where he explained why he had reached his conclusion that the accrued jurisdiction could not be invoked in the circumstances of this case. Those paragraphs of his Honour’s reasons to which certain of the grounds of appeal are directed, are as follows:
35.The remedy available in that situation is one of damages. In oral submissions, the husband seemed to be suggesting that the damages he could be awarded in an action against [Law Firm A] was relevant to the s 79 property orders, and on this basis the issues were part of one justiciable controversy. I fail to see how this may be. Compensation and/or damages awards/payments may be regarded as property for the purpose of s 79 orders, however, in this instance, the husband’s claim would arise out of the s 79 orders. Any damages that may be awarded to the husband would be related to the loss suffered by the husband within the s 79 orders, in that the s 79 orders award the wife a greater share of the property than was set out in the financial agreement entered into between the parties. In that instance, the amount of any damages award would not be available to the court to divide between the parties, as its purpose would be the general purpose of damages, which is to put the party in the position they would have been, had not the loss occurred. Consequently, the action by the husband against [Law Firm A] can only be considered, for the purpose of assessment of damages, after the Court has made an order pursuant to section 79, or at least reached a conclusion as to what that order should be.
…
38.I would not be prepared to exercise the court’s powers to consider a damages claim as sought by the husband. I consider that the facts of this case do not fit within the guidelines provided by the Full Court in Warby. The most compelling argument against the Court hearing the claim sought to be mounted by the husband against [Law Firm A] is that no crystallisation of a damages figure could occur until the Court has exhausted the entirety of its jurisdiction under section 79. Lest that conclusion be not immediately obvious let me illuminate as follows.
39.The husband has, on the face of his claim, to prove negligence or some other cause against [Law Firm A] in order to have the Court consider the question of damages to be awarded to him. The assessment of damages requires the husband to demonstrate the specific damage he has suffered. The husband will only be able to demonstrate his damage after the court makes orders which require a distribution of property to the wife where those orders represent a greater benefit to her than she would have received as a maximum distribution pursuant to the Financial Agreement entered into between the parties. Once the Court has made a final property order that is the end of its jurisdiction under section 79. That will be the end of the current proceedings under the Family Law Act between the parties.
40.In my view the claim the husband wishes to bring against [Law Firm A] does not form part of a “single justiciable controversy”. It is not necessary to determine the action against [Law Firm A] in order to determine what property the parties have for distribution by court order pursuant to section 79 or otherwise. The fact is, as pointed out above, quite the reverse is the case, namely the damages the husband seeks against [Law Firm A] could not be assessed until the court has made orders for property division under section 79 or otherwise. The court does not require the presence of [Law Firm A] as a party in order to determine the wife’s application. Further the court does not have the power to grant the remedy sought against [Law Firm A] without using the “accrued jurisdiction” powers.
41.I accept the submission of the wife that the claims between the husband and the wife on the one part and the claims between the husband and [Law Firm A] of the other part “are not part of a single justiciable controversy and are not attached. Rather they are severable or disparate. They are not so related that determination of one is essential to determination of the other”.
42.Another matter for consideration is the impact upon the length of the hearing to be conducted within the stated statutory jurisdiction of the Court. There is no doubt the addition of the action against [Law Firm A] will lengthen the hearing. It is not possible to predict the extent of the additional time required. The case had been allocated three hearing days before the husband sought to attach his claim for damages against the third party. The additional length of the trial must be seen to carry with it the possibility at least of the trial not concluding in the allocated time. That may lead to a lengthy delay to conclude the case given the availability of the trial judge and the availability of all counsel involved.
THE ISSUES RAISED ON THE APPEAL
The grounds of appeal assert that the primary judge erred:
·…in refusing to hear and determine the proposed cross-claim against [Law Firm A] as part of its accrued jurisdiction in this proceeding;
[Ground 1]·…in holding that the accrued jurisdiction of the Court is not attracted because there is no crystallisation of damages until this Court has exhausted the entirety of its jurisdiction under s 79 of the Act (at [35], [38]-[39]) [Ground 2];
·…in holding that the proposed cross-claim against [Law Firm A] does not form part of a single justiciable controversy with the claim between the husband and the wife (at [40]-[41]) [Ground 3]; and
·…in having regard to the additional length of the trial and the delay in resolving the proceedings effected by the joinder of [Law Firm A], such matters being discretionary considerations upon which it is impermissible to decline to exercise the Court’s jurisdiction (at [42]) [Ground 4]
Ground 1 does not require discussion as it does no more than assert that his Honour erred in refusing to exercise the accrued jurisdiction to determine the cross-claim, and it thus becomes necessary to look to the other grounds to ascertain how or why it is said that his Honour erred.
Ground 4 and the question it raises as to whether there is a discretion to exercise the accrued jurisdiction once attracted, can also be disposed of quite shortly, in that it can now be accepted that if accrued jurisdiction is attracted, there is, as a general rule, no discretion not to exercise it. This is clear from the following statement by Gleeson CJ, Gaudron and Gummow JJ in ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559, 585:
Moreover, in Re Wakim … Gummow and Hayne JJ (with whom Gleeson CJ and Gaudron J agreed generally) expressed doubts as to what was meant by statements in some of the cases that the “accrued jurisdiction” was “discretionary” rather than “mandatory”. Ordinarily, questions of abuse of process, forum non conveniens and the like aside, jurisdiction conferred upon a court is to be exercised. (footnotes omitted)
This statement was later approved by Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ in Houghton v Arms (2006) 225 CLR 553, 564 at [27]. (See also the decision of the Full Court of this Court in Bergman & Bergman (2009) FLC 93-395 at [27]).
Thus it must be accepted that if, in the present case, the primary judge’s reasons can be read as suggesting that if the accrued jurisdiction was attracted, he would not as a matter of discretion exercise it because of considerations of time and delay, his Honour would have been in error. However, we consider that the better reading of the paragraphs from his Honour’s reasons earlier set out, is that he had already determined that the accrued jurisdiction was not attracted in this case, and that his observations in [42] about considerations of time and delay had no real impact on his decision.
We turn then to Grounds 2 and 3 which are both directed to the question at the heart of this appeal, being whether the proceedings between the husband and the wife in relation to their financial agreement and in relation to property settlement (should the agreement be declared not to be binding or should it be set aside) and the husband’s cross-claim against Law Firm A both arise from a common substratum of facts and give rise to one justiciable controversy, thereby attracting the accrued jurisdiction.
It is important to emphasise at this point that there was no challenge before us to the proposition that in an appropriate case the Family Court does have the accrued jurisdiction (and it is difficult to see how there can be such a challenge having regard to what was said by Gummow and Hayne JJ in
Re Wakim; Ex parte McNally(1999) 198 CLR 511 in a passage which we later set out). Rather the issue before us was, as it was before Le Poer Trench J, and as he described it at [32] of his reasons, “whether the facts of the case attract the Court’s accrued jurisdiction.”
THE HUSBAND’S SUBMISSIONS IN SUPPORT OF THE ACCRUED JURISDICTION AND HIS RELIANCE ON “WAKIM”
In his submissions in support of the appeal senior counsel for the husband placed particular reliance on certain passages from the reasons for judgment of Gummow and Hayne JJ in Wakim. Senior counsel did so not only because of the statements of principle made in those passages, but also because of the similarity, which he submitted existed, between the facts of that case and those of the present.
It will provide a useful background to our summary of the submissions on behalf of the husband, and also to the submissions of the wife, if we refer at this point to the passages in the joint judgment in Wakim on which senior counsel relied, as well as to certain other passages in that judgment which have present relevance (with footnotes omitted):
132... Wakim [a creditor of a bankrupt estate] commenced proceedings in the Federal Court against the Official Trustee [in bankruptcy] seeking various orders pursuant to ss 176, 178 and 179 of the Bankruptcy Act. Of most significance for present purposes are the claims made under s 176 of the Bankruptcy Act.
…
Mr Wakim also puts his claims against the Official Trustee in negligence.
133After these proceedings had been commenced against the Official Trustee Mr Wakim brought two further, and separate, proceedings in the Federal Court against, first, [counsel] and later against the solicitors [who had advised the Trustee in relation to the settling of a claim against a Mrs Nader which arose in the course of the administration of the bankrupt estate]. Each of those proceedings is an action for negligence. What duty each was alleged to owe to Mr Wakim is a question that was not agitated in this Court.
…
135It must now be regarded as established that the jurisdiction of a federal court having jurisdiction in a matter arising under a law made by the Parliament is not “restricted to the determination of the federal claim or cause of action in the proceeding, but extend[s] beyond that to the litigious or justiciable controversy between parties of which the federal claim or cause of action forms part”.
…
136… In the present case there are three separate proceedings - against the Official Trustee, against the solicitors and against [counsel]. The pleadings in the three proceedings do not allege that any of the claims is dependent on another, at least not in the sense of any being a claim in which success is alleged to depend upon the result in another of the claims. (In this respect, the claims differ from the common case of a party to a proceeding making a third party claim for damages, contribution or indemnity against a person not a party to the principal proceeding where that claim is predicated on the claimant being held to be liable in the principal proceeding.) It is said, however, that the claims all arise out of a single set of transactions …. Is there, in these circumstances, a single justiciable controversy? If there is, then the Federal Court has jurisdiction in the whole matter.
137The bringing of three separate proceedings and the joining of different parties in each of those proceedings would ordinarily suggest (and perhaps suggest very strongly) that there is more than one matter. If that were so, it would follow that the question of jurisdiction would have to be resolved separately in each proceeding and without regard to the existence of the other proceedings. Jurisdiction for each proceeding would then depend upon it being shown to be in a matter arising under a law made by the Parliament.
138It must be taken to follow from the Court's decisions in Philip Morris, Fencott and Stack, however, that the identification of the justiciable controversy between parties is not determined only by the considerations of there being separate proceedings and different parties in the one court. And in some circumstances a single matter can proceed through more than one court. …
139The central task is to identify the justiciable controversy. In civil proceedings that will ordinarily require close attention to the pleadings (if any) and to the factual basis of each claim.
140In Fencott it was said that “in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter.” The references to “impression” and “practical judgment” cannot be understood, however, as stating a test that is to be applied. Considerations of impression and practical judgment are relevant because the question of jurisdiction usually arises before evidence is adduced and often before the pleadings are complete. Necessarily, then, the question will have to be decided on limited information. But the question is not at large. What is a single controversy “depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships”. There is but a single matter if different claims arise out of “common transactions and facts” or “a common substratum of facts”, notwithstanding that the facts upon which the claims depend “do not wholly coincide”. So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are “completely disparate”, "completely separate and distinct" or "distinct and unrelated" are not part of the same matter.
141Often, the conclusion that, if proceedings were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter. By contrast, if the several proceedings could not have been joined in one proceeding, it is difficult to see that they could be said to constitute a single matter.
142Here, the three proceedings could have been joined in one. The fact that those advising Mr Wakim chose to issue separate proceedings at different times does not mean that the scope of the controversy is limited to the matters raised in the first proceeding. Had the Official Trustee brought a cross-claim against both the solicitors and [counsel] immediately after Mr Wakim commenced his proceeding against it and if Mr Wakim had then joined the cross-respondents as respondents to his principal claim, the existence of a single controversy involving several parties would be more apparent than it may be in the present circumstances. But neither the differences in the present procedural history nor the absence of any claim by the Official Trustee against the solicitors and [counsel] determines the question whether there is a single controversy.
143The applicants submitted that the test should be qualified by restricting cases of accrued jurisdiction to those in which no party was added in reliance upon accrued jurisdiction. That is, the applicants contended that there must be some federal claim against every respondent in the proceedings.
…
145As we have said, the bringing of separate proceedings and the joining of different parties will often be important facts in deciding whether there is a single justiciable controversy for the purposes of Ch III of the Australian Constitution. But there is no basis in principle for concluding that there can never be accrued jurisdiction where a new party is joined. To adopt such a rule would mean that third party proceedings could never be brought in a federal court unless those third party proceedings were founded in some federal claim. And that points to the underlying difficulty in principle. If the "matter" is to be identified from what the parties allege and how they conduct the proceeding (as Fencott and Stack hold) and if the "justiciable controversy" refers (in part, at least) to the factual dispute between them, there is no warrant for holding that federal jurisdiction ends as soon as a new party (against whom no federal claim is made) is added.
146Each of these proceedings brought by Mr Wakim centres upon the making of claims and bringing of action against Mrs Nader and the prosecution and settlement of those claims and that action. Mr Wakim alleges against the Official Trustee that it was negligent and guilty of breach of duty in not continuing the action against Mrs Nader; he alleges against the solicitors that they negligently failed to advise the Official Trustee of its rights against her; he alleges against [counsel] that he negligently failed to advise the Official Trustee of its rights against her. It may be noted that nowhere in the Official Trustee's defence to Mr Wakim's claim does it allege that it acted in reliance on the advice of the solicitors or counsel and it makes no cross-claims against them. Indeed, the pleadings in the proceeding between Mr Wakim and the Official Trustee say nothing whatever about the role of the solicitors or counsel in the matter.
147The cases arise out of one set of events. Of most significance is the fact that the damage which Mr Wakim alleges he has suffered as a result of what he says are the various breaches of duty by the Official Trustee, the solicitors and [counsel] is, in each case, the loss of what he might have recovered in the bankruptcy had the claims against Mrs Nader been prosecuted differently. There is, then, but a single claim for damages that he seeks to pursue against each of the parties he has sued. And judgment and recovery against one will diminish the amount that may be recovered from the others. There is, in these circumstances, that common substratum of facts in each proceeding of which Mason J spoke in Philip Morris. And it is the existence of that common substratum that leads to the conclusion that the three proceedings raise a single justiciable controversy. Accordingly, the proceedings against the solicitors and [counsel] are within the jurisdiction of the Federal Court.
In support of the submission that there was a common substratum of facts giving rise to the proceedings between the husband and the wife and to the husband’s claim against Law Firm A, senior counsel for the husband relied on the fact that the wife sought to challenge the financial agreement on the basis that she did not receive independent legal advice and on the fact that the basis of the husband’s claim against Law Firm A is that they represented to the husband that such independent legal advice was given to the wife. It was submitted by senior counsel for the husband that the receipt of legal advice was also relevant to the determination of whether any conduct of the husband was misleading or deceptive, and whether the wife had been the subject of undue influence or unconscionability at the hands of the husband.
It was conceded on behalf of the husband, that the wife’s claim against the husband in relation to the financial agreement might succeed on a basis that would not result in Law Firm A being held liable to the husband. But relying on paragraph [140] of Wakim, it was submitted that the fact that the claims do not wholly coincide does not mean that there is not the same justiciable controversy.
A further submission made on behalf of the husband was that if it was found that the Court does not have accrued jurisdiction in relation to the cross-claim with the result that that claim had to be determined in a State Court, there would be the risk of inconsistent judgments on the same issue.
The primary judge’s statement in [38] of his reasons that “no crystallization of a damages figure could occur until the Court has exhausted the entirety of its jurisdiction under section 79” (which is of course the specific subject of Ground 2) was also challenged on behalf of the husband on the basis that that was “the essence of a third party claim” and such a claim had been recognised by Gummow and Hayne JJ in Wakim as being capable of attracting the accrued jurisdiction.
THE WIFE’S SUBMISSIONS IN OPPOSITION TO THE EXERCISE OF THE ACCRUED JURISDICTION
In opposition to the exercise of the accrued jurisdiction, senior counsel for the wife relied on the submission which he had made below and which we have recorded at [15] and [16] of these reasons, being essentially that because the wife’s claim against the husband and the husband’s cross-claim against
Law Firm A involved three separate issues which required consideration at different stages, the claim and the cross-claim were not part of a single justiciable controversy, but are severable and not so related that one is essential to the determination of the other.
It was further submitted for the wife that the wife’s claim and the husband’s cross-claim do not arise out of the same substratum of facts and her senior counsel endeavoured to demonstrate this in his oral submissions.
In response to the submission made on behalf of the husband, that there would be a risk of inconsistent findings if the wife’s claim and the husband’s
cross-claim were to proceed in different courts, it was submitted for the wife that this risk, which was submitted to be more hypothetical than real could be avoided by the availability of transcript of the Family Court proceedings to the Court which would hear the husband’s claim against the solicitors.
DISCUSSION
One of the difficulties with a case such as this, as was recognised in Wakim at [140], is that the question of the availability of the accrued jurisdiction has to be “decided on limited information”. This is particularly so in the present case where we do not have available to us any affidavits. We have only the claims made in the wife’s statement of claim, the husband’s defence, and his cross-claim (set out in [10] of these reasons). Those documents reveal only that the wife claims that she entered the financial agreement on the basis of misrepresentations from the husband, and/or as a result of undue influence or unconscionable conduct on his part, and/or that the husband failed to ensure that the legal advice which the wife received was independent, and that if the wife succeeds in her challenge to the financial agreement, the husband will claim damages against the solicitors for breach of provisions of the Fair Trading Act 1999 (Vic), breach of warranty and breach of duty, with such damages being the difference between any order that would have been made had the financial agreement been binding and that which would be made if the agreement had not been binding.
There would certainly be some facts relating to the entry by the husband and wife into the financial agreement and the dealings which each had with
Law Firm A which would form some common substratum of fact, both for the wife’s claim against the husband in relation to the financial agreement and for the husband’s cross-claim against Law Firm A. But we cannot be certain on the material before us that the entire factual basis for the husband’s claim against
Law Firm A would coincide with the factual basis for the wife’s claim against the husband.
Nevertheless, even if the facts upon which the claims depend “do not wholly coincide”, there can still be a sufficiently common substratum of facts existing between the wife’s claim and the husband’s cross-claim, as was made clear in Wakim (at [140]). But even if a common substratum of facts exists in this case, there remains the need to identify one justiciable controversy, or matter, in order to attract the accrued jurisdiction, and that identification, as Gummow and Hayne JJ emphasised at [139] of Wakim, is “[t]he central task.”
Some support for the husband’s claim that there is in this case one matter, or a single justiciable controversy, can be found in references in [136], [140] and [145] of the joint judgment in Wakim to “third party proceedings”. Those references apparently suggest that the existence of such proceedings provides an indicia of the accrued jurisdiction.
Similarly, some support for the husband’s claim that there is one matter can be found in the first sentence of [141] of the joint judgment where it was said:
Often, the conclusion that, if proceedings were tried in different courts, there could be conflicting findings made on one or more issues common to the two proceedings will indicate that there is a single matter.
However, the sentence which then follows in [141] would seem to defeat the argument for attracting the accrued jurisdiction in the present case:
By contrast, if the several proceedings could not have been joined in one proceeding, it is difficult to see that they could be said to constitute a single matter.
Immediately following this sentence, and apparently by way of explanation of it, Gummow and Hayne JJ pointed out in [142] that in Wakim “the three proceedings could have been joined as one”, and later in [146] and [147], their Honours further explained that all the claims in that case were for damages for negligence arising out of one set of events.
In the present case the claim by the wife for a declaration that the financial agreement is not binding, or that it should be set aside, is an entirely different claim to the potential claim that the husband may have against the solicitors for damages if the wife’s claim in relation to the financial agreement is successful and then only if subsequent property settlement orders leave the husband in a worse position than had the agreement been found to be binding. In the language used at the end of [140] of Wakim, the husband’s cross-claim could well be described as “completely disparate” or “completely separate and distinct”, although perhaps not necessarily “unrelated”.
We therefore turn to the issue of whether the claims in this case are, in the words of Gummow and Hayne JJ in Wakim at [140], “so related that the determination of one is essential to the determination of the other”. In support of this particular indicia of the accrued jurisdiction, Gummow and Hayne JJ relied on a statement by Mason J in Philip Morris Inc v Adam P. Brown Male Fashions Pty Ltd (1981) 148 CLR 457. It is instructive for present purposes to consider precisely what was said in this regard by Mason J in Philip Morris at 512:
The classification of a claim as “non-severable” does not necessarily mean that it is, or must be, united to the federal claim by a single claim for relief, though this is a common illustration of a non-severable claim. The non-severable character of the attached claim may emerge from other aspects of the relationship between the federal and the attached claim. For example, it may appear that the resolution of the attached claim is essential to a determination of the federal question. Likewise, it may appear that the attached claim and the federal claim so depend on common transactions and facts that they arise out of a common substratum of facts. In instances of this kind a court which exercises federal jurisdiction will have jurisdiction to determine the attached claim as an element in the exercise of its federal jurisdiction. (emphasis added)
It will thus be seen that Mason J identified that the issue for determination was whether it was the “attached” claim that was essential to the determination of the “federal” claim.
It is instructive to note that in those cases in which, to date, the Full Court has upheld, or sanctioned, the use of the accrued jurisdiction such as Wade-Ferrell & Wade-Ferrell (2001) FLC 93-069, Warby & Warby (2001) FLC 93-091and Bishop & Bishop (2003) FLC 93-144, it has been the determination under state law of what is the property of the parties that has been essential for the purposes of the Family Court’s jurisdiction under s 79 of the Act and thus has been the subject of the accrued jurisdiction.
Applying what was said by Mason J in Philip Morris to the present case, the “federal” matter is of course constituted by the wife’s claim in relation to the financial agreement and would include the property settlement proceedings which would follow if the agreement is held to be non-binding or set aside, while the matter sought to be “attached” is the husband’s claim against the solicitors.
It appears, at least prima facie, that in this case the determination of the federal claim does not require the determination of the claim sought to be attached. Indeed it might well be said that the attached claim will not even arise until the proceedings relating to the financial agreement are determined, and are determined adversely to the husband, and on a basis which could provide him with a claim against Law Firm A. Furthermore, the measure of damages that could be sought in the attached claim would only be known if and when an order was made for property settlement under s 79 of the Act.
There was some discussion before us as to whether the husband’s potential claim for damages might constitute an item of property on the part of the husband which would need to be taken into account in any s 79 property proceedings between the husband and the wife, and therefore require resolution before the property settlement proceedings. But this was not a matter strongly pressed before us. In any event it is not unknown in property settlement proceedings for the Court to take into account the outcome of a damages claim by one of the parties that is pending in another court.
As to the issue of the risk of conflicting findings if the claims in question are heard in different courts, we agree with senior counsel for the wife that this risk is more hypothetical than real, and could be overcome by access to the transcript of proceedings heard in the other court. In our opinion, it is certainly not a consideration which would, of itself, attract the accrued jurisdiction in this case.
Returning to Grounds 2 and 3, we acknowledge in relation to Ground 2 that the primary judge’s statement that “[t]he most compelling argument against the Court hearing the claim sought to be mounted by the husband against [Law Firm A] is that no crystallisation of a damages figure could occur until the Court has exhausted the entirety of its jurisdiction under section 79” could be said to be in the nature of an over-simplification of the relevant issues as we have discussed them. However, it is certainly not a matter that would cause us to interfere with his Honour’s decision.
Ground 3 is directed to his Honour’s conclusion in [40] of his reasons, that there was no single justiciable controversy in this case. His Honour gave as his reasons for this conclusion the following:
[40]…It is not necessary to determine the action against [Law Firm A] in order to determine what property the parties have for distribution by court order pursuant to section 79 or otherwise.
We have undertaken a fuller analysis than his Honour of the indicia for the existence of the accrued jurisdiction as explained by Gummow and Hayne JJ in Wakim, and also of the issue or indicia of the necessary essential relationship between a federal claim and a state claim which is sought to be attached to the federal claim, as was explained by Mason J in Philip Morris. On the basis of that analysis, and particularly of the last mentioned issue or indicia, we too have concluded that there is no single justiciable controversy in this case that would attract the accrued jurisdiction. Thus Ground 3 has not been established.
CONCLUSION
Accordingly, we would dismiss the appeal.
Following the hearing of the appeal the appellant’s solicitor forwarded to the Court and to the respondent’s solicitors a copy of Murphy J’s judgment in Ruane & Bachman-Ruane & Ors [2012] FamCA 369, in which his Honour permitted a claim for negligence against solicitors to be joined with proceedings for property settlement between a husband and wife. The factual difference between that case and the present is that in that case a financial agreement between the parties had already been declared to be non-binding. We make no comment as to the correctness or otherwise of his Honour’s decision, other than to observe that whether or not accrued jurisdiction is attracted in a particular case, will very much depend on the facts of that case.
COSTS OF THE APPEAL
It was agreed at the conclusion of the hearing before us that the costs of the appeal should the subject of written submissions following the delivery of this judgment. We will make the necessary directions for such submissions.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Finn and Strickland JJ) delivered on 28 February 2013.
Associate:
Date: 28 February 2013
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