Paxton & Paxton
[2016] FCCA 1689
•7 July 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PAXTON & PAXTON | [2016] FCCA 1689 |
| Catchwords: STANFORD v STANFORD – Principles discussed in detail – review of authorities – not just and equitable to divide assets. COSTS – Ordered against applicant – unrealistic for applicant to have brought this proceeding. PRECEDENT – Principle of stare decisis – single judges are bound by the High Court’s decision in Stanford v Stanford – single judges are not permitted to deviate from it. |
| Legislation: Family Law Act 1975 (Cth), ss.79, 106(A) Family Law Rules 2004 (Cth), r.6.15(3) |
| Cases cited: AGC Guarantee Corporation Ltd v De Jager & Anor [1984] VR 483 The Honourable Justice J D Heydon, ‘Judicial activism and the death of the rule of law’ (2003) 23 Aust Bar Rev 110 |
| Applicant: | MR PAXTON AS EXECUTOR OF THE ESTATE OF MR A PAXTON (DECEASED) |
| Respondent: | MS PAXTON |
| File Number: | MLC 7138 of 2014 |
| Judgment of: | Judge Wilson |
| Hearing date: | 24 February 2016 |
| Date of Last Submission: | 24 February 2016 |
| Delivered at: | Melbourne |
| Delivered on: | 7 July 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms J Swann |
| Solicitors for the Applicant: | Alpass and Associates |
| Counsel for the Respondent: | Mr E Hall |
| Solicitors for the Respondent: | Beaumont Lawyers |
ORDERS
The respondent Ms Paxton retain for her sole use and benefit the real property situate at and known as Property M being the whole of the land more particularly described in Certificate of Title Volume (omitted) Folio (omitted) (“the real property”).
Within 7 days of the date of this order, the applicant Mr Paxton as Executor of the Estate of Mr A Paxton (Deceased) withdraw, at his expense, the caveat lodged over the real property being caveat number (omitted) lodged by the applicant’s legal practitioners and provide to the respondent’s solicitors a copy of the Withdrawal of Caveat.
Each party shall do all such things and sign all such papers and documents that are necessary to give effect to the orders provided that in the event a party unreasonably fails or refuses to sign pursuant to these orders, then a Registrar of the Court pursuant to s.106(A) of the Family Law Act 1975 (Cth) is authorised to sign any such document on behalf of the defaulting party.
Unless otherwise specified in these orders and save for the purposes of enforcing monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other property (including choses in action) in the possession of such party as at the date of these orders including all motor vehicles;
(b)monies standing to the credit of the parties are to remain the property of that party;
(c)each party forego any claims they may have to any superannuation benefits belonging to or earned by the other party;
(d)insurance policies remain the sole property of the life insured named therein;
(e)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(f)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
The applicant pay the respondent’s costs.
All extant applications be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Paxton & Paxton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 7138 of 2014
| MR PAXTON AS EXECUTOR OF THE ESTATE OF MR A PAXTON (DECEASED) |
Applicant
And
| MS PAXTON |
Respondent
REASONS FOR JUDGMENT
Introduction
By initiating application filed on 13 August 2014, Mr A Paxton, who in these reasons I shall call “the husband”, sought orders for the division of assets between him and Ms Paxton, who in these reasons I shall call “the wife”.
The husband died on (omitted) 2015, that is to say, between the date on which this proceeding was commenced and the trial of the proceeding on 24 February 2016. On 12 May 2015, probate of the husband’s estate was granted to the husband’s brother, Mr Paxton.
Pursuant to orders made on 25 June 2015 by her Honour Judge Bender, Mr Paxton was substituted as applicant in this proceeding in his capacity of the husband’s legal personal representative. That order was made under r.6.15(3) of the Family Law Rules 2004 (Cth).
A parcel of land the unencumbered value of which was $380,000.00 fell for division in this proceeding.
The husband and wife married in 1983 and divorced in 2014, 31 years in total. They separated 10 years prior to their divorce. In 2004, the husband permanently left the marriage and commenced living with his de facto partner, Ms J, who predeceased him in February 2013. The wife remained in the matrimonial home situate at and known as Property M (“the former matrimonial home”) and has continued to do so from the date on which the husband and wife purchased it in August 1993 as joint tenants. By operation of the doctrine of the survivorship under property law, consequent upon the husband’s death the wife became the sole proprietor of the former matrimonial home. For the purposes of s.50 of the Transfer of Land Act 1958 (Vic), in order for the wife to be the sole registered proprietor of the former matrimonial home her status as surviving joint tenant must be registered. That has yet to be done.
Both parties agreed that the former matrimonial home would have to be sold if any division of property in favour of the husband were to be ordered. As I have canvassed in the passages that follow, the wife is in very poor health, she is financially destitute, she has no apparent prospects of employment and the adult son of the marriage, himself mentally infirm, lives with the wife and she cares for him. Any sale of the former matrimonial home will occasion very considerable hardship to the wife. Conversely, the husband is dead.
Synopsis
For the reasons that follow, in my judgment, under ss.79(2) and 79(8) of the Family Law Act 1975 (Cth) (“the Act”) and in accordance with the observations of the High Court of Australia in Stanford vStanford (“Stanford”)[1] it is not now just and equitable that the former matrimonial home be sold. When the husband died, it was not just and equitable that the former matrimonial home was sold. In the passages below I have explained my reasoning for that conclusion.
[1] (2012) 247 CLR 108.
Factual background
Very little of the factual material underpinning this dispute was contested.
The husband was born (omitted) 1955. The wife was born (omitted) 1956. They married (omitted) 1983. Two children were born of the marriage, a daughter (aged 29 at the trial of this proceeding) and a son (aged 22 at the trial this proceeding). The children of the marriage presently suffer from significant health issues.
In September 1993 the husband and the wife became registered proprietors of the former matrimonial home. No dispute arose about the valuation of the parcel of real estate that is the subject of this litigation, given in evidence at $380,000.00 as at January 2016.
So far as the purchase of the former matrimonial home was concerned, it was common ground that the husband and wife purchased their first home for $86,000.00 which they funded in part by mortgage loan. They sold their first home, discharged the mortgage on it and purchased their second home in July 1988. The wife contributed the proceeds of a redundancy payment of $40,000.00 towards the purchase of their second home. In 1992, the husband settled a worker’s compensation claim upon receiving payment of the sum of $60,000.00. In 1993 the husband and wife purchased the home that became their matrimonial home (that I have called in these reasons the “former matrimonial home”) for the sum of $115,000.00 funded wholly from the sale of their second home. They purchased the former matrimonial home as joint tenants and did not obtain mortgage finance for that purchase.
From the late 1990s the husband and the wife lived separately and apart in the former matrimonial home. Their marriage broke down in early 2000. In the same year or thereabouts the husband commenced a de facto relationship with Ms J and in 2004 moved into a rented property with her.
It was also common ground that following the breakdown of the marriage and prior to his death, the husband spent small intermittent periods of time visiting his children at the former matrimonial home. However, at no stage during that period did the husband and wife resume marital cohabitation.
The wife’s health was extremely poor over a sustained period. In 2002 the wife was diagnosed with type II diabetes for which she now requires insulin injections three times each day. According to the wife’s general medical practitioner, as at the date of the trial of this proceeding the wife was under the care of an endocrinologist with respect to her diabetes. The wife’s general medical practitioner swore that the wife suffered from stage 3 chronic kidney disease, secondary to her diabetes and was under the care of a specialist nephrologist with respect to the wife’s kidney disease. The wife’s medical practitioner also swore that the wife had chronic hearing problems and suffered from significant hearing loss. The wife’s general practitioner swore that the wife had been subjected to numerous surgical procedures on her left ear for cholesteatoma and that the wife had a long history of chronic ear infections. The wife’s general practitioner swore that the wife previously suffered from surgery for the removal of her gall bladder in 1988, right eye cataract surgery in 2012, arterial fibrillation, lymphocyctic colitis, left retinal detachment, hiatus hernia, hyperlipidaemia, hypertension, gastritis, diverticular disease and left macular degeneration. The wife’s medical practitioner swore that the wife’s diabetes, renal disease and hearing problems were chronic requiring ongoing review and treatment.[2]
[2] Affidavit of Mr C sworn 19 February 2016 at paras.4-8.
On behalf of the wife, Dr K, a consultant nephrologist swore that the wife had stage 3 chronic kidney disease secondary to type 2 diabetic nephropathy and hypertension. Dr K swore that the wife’s stage 3 kidney disease was stable as at February 2016 but was likely to progress to stage 5 diabetes thereby representing complete renal failure calling for ongoing dialysis. Dr K swore that stage 5 renal failure was ordinarily reached in 20 years or thereabouts following diagnosis of type 2 diabetes and that the wife was diagnosed with type 2 diabetes in the year 2002. Dr K swore that the wife consulted Dr K every three or four months for ongoing review and treatment.[3]
[3] Affidavit of Dr K sworn 17 February 2016 at paras 2-5.
Dr M, an endocrinologist and diabetologist, swore that the wife had long-standing type 2 diabetes in relation to which she injected insulin three times per day in addition to oral agents and that the wife suffered from chronic kidney disease secondary to her diabetes.[4]
[4] Affidavit of Dr M sworn 17 February 2016 at paras.3-4.
The wife swore that her son suffered from a genetic disorder in which his body was unable to break down certain food substances which, if accumulated, can lead to brain damage. She swore that the son suffered from Russell Silver Syndrome, a form of dwarfism, that he suffered from depression and that he had previously struggled at school. The wife swore that the son received social welfare benefits.[5] A clinical psychologist gave evidence that the son suffered from depression, anxiety, low self-esteem and stress, each of which impacted negatively on his ability to function normally, to obtain employment and to engage in interpersonal relationships. The clinical psychologist swore that the son required ongoing mental health treatment and support.[6]
[5] Affidavit of Ms Paxton sworn 3 October 2014 at para.19
[6] Affidavit of Mr G sworn 17 February 2016 at paras.3-4.
The wife swore that her daughter suffered from a form of cerebral palsy and had learning difficulties. The wife swore that the daughter suffered from a hernia, had not worked since leaving school and received social welfare benefits. The wife swore that she continues to be the primary homemaker and primary care-giver to her children and that the children, although adults, live with her in the former matrimonial home, the wife providing financial and other support. The wife swore that it was likely that her children would continue to depend upon her well into the future having regard to their physical and intellectual difficulties.[7]
[7] Affidavit of Ms Paxton sworn 3 October 2014 at paras.20-22.
The wife sought orders permitting her to remain in the former matrimonial home as a home for her and her children.
In 2009, the wife received an inheritance from her mother’s estate in excess of $53,000.00 used predominantly to improve the former matrimonial home. In 2011, the wife received a superannuation benefit payout in excess of $12,000.00.
In 2011, the husband was diagnosed with leukaemia.
In August 2014, the husband commenced this proceeding in this court.
In January 2015, the husband’s solicitors lodged a caveat against the title to the former matrimonial home purportedly pursuant to a charge granted in their favour by the husband as security for fees owed to them.
The significance of survivorship
[8] (1949) 78 CLR 313, 323.
Considerable time during the trial of this proceeding was devoted to the wife’s contention that according to the doctrine of survivorship under property law, the husband’s interest as joint tenant was extinguished upon his death. Equally importantly was the fact that the husband and the wife chose to become registered as joint proprietors, the presumption in law being that upon the death of one, the survivor assumed ownership as the sole proprietor. In support of the proposition that the husband’s interest as joint tenant was extinguished upon his death, Mr Ewan Hall, who appeared as counsel for the wife, relied on the observations of Latham CJ of the High Court of Australia in
Wright v Gibbons.[8]There, the Chief Justice held –
The interests of each joint tenant in the land held are always the same in respect of possession, interest, title and time. No distinction can be drawn between the interest of any one tenant and that of any other tenant. If one joint tenant dies his interest is extinguished. He falls out, and the interest of the surviving joint tenant or joint tenants is correspondingly enlarged.
In the same case, Dixon J (as his Honour then was) held that –
[I]n contemplation of law joint tenants are jointly seised for the whole estate they take in land and no one of them has a distinct or separate title, interest or possession.[9]
[9] (1949) 78 CLR 313, 329.
Under s.50 of the Transfer of Land Act 1958 (Vic), since the husband’s death, the wife as surviving joint proprietor has been entitled to be registered as proprietor of the former matrimonial home. Of survivorship, the following has been written –
The most important feature of joint interests is the right of survivorship. When one of the several joint tenants dies his interest passes to the survivors and this process continues until there is but one survivor who then becomes entitled to the whole interest in the property. This right of survivorship takes precedence over any disposition made by the will of any deceased joint tenant or the right of the next of kin of a deceased joint tenant who died intestate.[10]
[10] L McCredie, Administration of the Estates of Deceased Persons in Victoria, p.131, 1979, Butterworths.
Mr Hall submitted that by reason of the extinguishment of the interest of the husband consequent upon his death, the husband had no interest in the former matrimonial home for the purposes of considerations under s.79 of Act.
In addressing Mr Hall’s submission on point, it is relevant to observe that s.79(8)(b) of the Act makes provision for the eventuality of a person (such as a person in the shoes of the husband in this proceeding) commencing property settlement proceedings but dying before the completion of that proceeding. In that eventuality and despite the death of the applicant, the court may make orders under s.79 of the Act as long as the court is of opinion that it would have made an order with respect to property had the deceased not died and that it remained appropriate to make an order in respect of property.
Therefore, the question became whether I would have made an order with respect to property had the husband in this case not died by the time I tried this case.
Approaching the case in that way is consistent to the reasoning of the High Court of Australia in Stanford.[11]
[11] (2012) 247 CLR 108.
In answering that question, it thereby became necessary to address the elements of s.79 of the Act.
Accordingly, this case was not determined merely by reason of the fact of survivorship, nor whether the consequence of survivorship was that the wife became entitled to registration as the sole proprietor of the former matrimonial home. The system in the State of Victoria of land registration under the Transfer of Land Act 1958 (Vic) creates interest by registration and not registration of interests. An array of decisions of the Supreme Court of Victoria make good that point.[12] When this case was tried before me, the wife was one of the registered proprietors on the title of the former matrimonial home but she had not been registered as the sole proprietor.
Section 79 of the Family Law Act 1975 (Cth)
[12] See Russo v BendigoBank Ltd [1999] 3 VR 376, Perpetual Trustees Victoria Ltd v Xiao [2015] VSC 21, Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133, Pyramid BuildingSociety (in liquidation) v Scorpion Hotels Pty Ltd [1998] 1 VR 188, Beatty v Australiaand New Zealand Banking Group Ltd & Anor [1995] 2 VR 301 and AGC GuaranteeCorporation Ltd v De Jager and Anor [1984] VR 483.
Section 79 of the Act empowers the court to alter the interests of parties to a marriage in relation to property. The touchstone enlivening the court’s jurisdiction to make such an order is s.79(2) of the Act. In essence, that provision forbids the making of an order altering property interests unless the court is satisfied that in all the circumstances it is just and equitable to do so. Section 79(8) of the Act enables the court to alter property interests notwithstanding the death of one of the parties to the marriage. Section 79(4) of the Act records an array of considerations which the court must address in determining whether to make an order altering property interests.
Stanford v Stanford
Despite the many years over which federal courts grappled with s.79 of the Act, in 2012 in the case of Stanford[13] the High Court of Australia examined in minute detail the provisions of s.79 of the Act in the context of a party who died after commencement of property settlement proceedings. The decision is determinative of the outcome in this case. The observations of the High Court bear close examination. There, the husband and wife lived for 37 years in the matrimonial home, the registration of which was in the husband’s sole name. Each had been married previously. After 24 years of marriage, in 1995 the husband made a will in which he left the matrimonial home to the children of his first marriage, subject to a life tenancy in favour of his wife. In 2008 the wife suffered a stroke and was thereupon admitted to full-time care. In 2009 the wife by her litigation guardian applied to the Family Court of Western Australia for orders selling the matrimonial home and dividing the proceeds.
[13] (2012) 247 CLR 108.
The High Court held that it had not been shown that, if the wife had not died, it would have been just and equitable to have made an order under s.79 of the Act. The Court relied on ss.79(2) and 79(8)(b)(ii) of the Act in reaching that conclusion.
In this case I am required to reach a conclusion as to the fate of the former matrimonial home by applying those two provisions of the Act.
The path of reasoning is instructive by which the High Court concluded that it was not shown, had the wife not died, it would have been just and equitable to have made an order under s.79 of the Act.
The majority of the High Court (French CJ, Hayne, Kiefel and Bell JJ) made specific observations about s.79(8)(b) of the Act, the precise section of critical relevance in this case. At paragraph 24 of its reasons the court said the following –
Section 79(8)(b) thus requires a court considering an application for a property settlement order which is continued by or against the legal personal representative of a deceased party to determine first, whether it would have made an order with respect to property if the deceased party had not died and second, whether, despite the death, it is still appropriate to make an order.[14]
It will be apparent that a court exercising the jurisdiction that I was called upon to exercise in this case, must make two determinations. The first is whether the court would have made an order with respect to property if the husband had not died. The second is whether, despite the death of the husband, it is still appropriate to make such an order.
[14] (2012) 247 CLR 108, 117.
The High Court instructs that s.79(2) of the Act directs me to not make an order for the alteration of property interests unless I am “satisfied that, in all the circumstances, it is just and equitable”[15] to do so.
[15] Family Law Act 1975 (Cth).
The High Court further observed –
It follows that, in cases where s 79(8) applies, a court must consider whether, had the party not died, it would have been just and equitable to make an order and whether, the party having died, it is still just and equitable to make an order.[16]
[16] (2012) 247 CLR 108, 117.
So far as the operation of ss.79(2) and 79(4) of the Act was concerned, the High Court of Australia held as follows –
The requirements of the two sub‑sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.[17]
[17] (2012) 247 CLR 108, 120.
At the risk of stating the obvious, any order a court may make that has the effect of altering property interests is predicated upon the court being satisfied that in all the circumstances it is just and equitable to make the order. The concept “just and equitable” does not admit of exhaustive definition.[18] In Mallett vMallet (“Mallett”),[19] Gibbs CJ held that s.79 of the Act –
has conferred on the court a very wide discretion to make such order as it thinks fit when it is satisfied that it is just and equitable that an order should be made (see sub-ss.(1) and (2) of s.79) although there are some broad principles to which the court is required to give effect, and some circumstances which it is required to take into account.[20]
[18] (2012) 247 CLR 108, 120.
[19] (1984) 156 CLR 605.
[20] (1984) 156 CLR 605, 608.
Authority at the highest level has held that the power given by s.79 of the Act is not to be exercised in accordance with fixed rules. As is recorded above, in Mallet, Gibbs CJ so held as did the majority in Stanford.[21]
[21] (2012) 156 CLR 108, 120.
In reference to the phrase “just and equitable” as used in s.79 of the Act, the High Court has said, “It is not possible to chart its metes and bounds”.[22] Yet the court has cautioned that “three fundamental propositions must not be obscured”.[23] To interpolate, the phrase “must not be obscured” does not equate to “are mandated” or “have legislative effect”. The phrase means what it says – namely, that those three propositions which the High Court mentioned should not be overlooked when a court considers the application of s.79 of the Act to any particular set of circumstances. Even though the court referred to the propositions as being first, second and third, to my mind that attribution is not to be understood as a reference to the chronological sequence of steps that are to be undertaken when considering the application of s.79 of the Act to the facts of any particular case. The court did not use the word “step” in Stanford.[24] To do otherwise would be to relegate to second place the court’s obligation to exercise the discretion conferred upon it under s.79 of the Act and to exercise that discretion judicially. Or, it would be to subordinate to some position of lesser importance the task of separately considering s.79(2) against s.79(4) of the Act. As the High Court warned in Stanford, courts considering s.79 of the Act must not conflate s.79(2) with s.79(4) of the Act.[25] Expressed slightly differently, the High Court has warned that courts dealing with s.79 of the Act should not conclude that making an order under s.79 is “just and equitable” only because of and by reference to the specific matters canvassed under s.79(4) of the Act without separately considering the stand-alone requirements in s.79(2) of the Act .
[22] Ibid.
[23] Ibid.
[24] (2012) 247 CLR 108.
[25] (2012) 247 CLR 52 108, 121.
It seems to me and I have proceeded in this case on the basis that, the power to make any order adjusting property interests is conditional upon my finding that it is just and equitable to make such an order. It encourages me to learn that other courts have proceeded upon similar lines as was done, for example, in Bevan v Bevan.[26]
[26] [2013] FamCAFC 116 at [71].
Therefore, in the specific circumstances of this case, the threshold question is whether it is just and equitable to make a property settlement order.
I am not satisfied that it is.
Applying s.79 of the Act in the manner the High Court says must be done,[27] the court must address existing legal and equitable interests in the property held by the husband and wife. On the facts of this case, the major asset was the former matrimonial home. Other inconsequential assets amounted to something less than $5,000.00.
[27] (2012) 247 CLR 108, 120.
It fell to me to apply ordinary principles of law and equity to ascertain the legal and equitable interests held by the husband and wife in the property.
At the date of the trial of this proceeding, the wife held 100 per cent of the legal interest in the former matrimonial home by reason of her status as the sole surviving joint proprietor. The husband had no equitable interest in the former matrimonial home as at the date of his death. His counsel did not assert that the husband had an extant equitable interest in the former matrimonial home as at the date of the husband’s death.
Mr Paxton asserted that his late brother’s estate included a Nissan Micra motor vehicle the valuation of which was said to be $7,000.00. In her affidavit sworn 15 February 2016 and filed in this proceeding, the wife deposed to owning a (omitted) Nissan Micra worth approximately $7,000.00, purchased by her in 2010. She swore that in April 2015, the car was severely damaged in a motor vehicle collision and that the insurer paid her the sum of $7,300.00 in respect of her loss. She swore that she purchased a replacement motor vehicle with the proceeds paid by the insurer and that she was involved in a collision of that replacement vehicle rendering its value at no more than $1,000.00.[28] For the purpose of this litigation, in view of the extremely modest sum involved, I have not brought the sum of $1,000.00 into account for the purposes of my tasks under s.79 of Act.
[28] Affidavit of Ms Paxton sworn 15 February 2016 at para.11.
In my view, the only asset that fell for consideration under s.79 of the Act was the land and improvements on which was constructed the former matrimonial home.
Two motorcycles were mentioned in the evidence concerning assets. They were disposed of prior to the hearing. In relation to one, a Kawasaki road bike motorcycle, said to have been worth $4,000.00 (according to the husband’s financial statement dated 13 August 2014),[29] Mr Paxton gave evidence that it was registered in the husband’s name and that he removed it from the garage at the former matrimonial home in accordance with the husband’s inter vivos wishes by the giving of the motorcycle to him as a gift.[30] Mr Paxton said the motorcycle “wasn’t part of the marriage pool.”[31] On behalf of the wife, Mr Hall did not seriously challenge Mr Paxton on the assertion that the Kawasaki motorcycle was taken by him by reason of the fact that the husband had given the motorcycle to Mr Paxton as a gift. No doubt the wife’s inability to challenge Mr Paxton about the husband’s gift of the Kawasaki motorcycle to his brother arose because the gift was constituted by a verbal voluntary assignment of title made during a conversation to which the wife was not privy. Be that as it may, the uncontested evidence of Mr Paxton remained – the Kawasaki motorcycle was the subject of a gift made between the husband and Mr Paxton. Upon physical transfer of the Kawasaki motorcycle, the gift was complete. The Kawasaki motorcycle ceased to form part of the matrimonial pool.
[29] Transcript of proceedings of 24 February 2016 at p.30.
[30] Transcript of proceedings of 24 February 2016 at p.30.
[31] Ibid.
A second motorcycle was the subject of evidence. It was a (omitted) motorcycle. Mr Paxton gave evidence that he sold the (omitted) motorcycle to a person in (omitted), Victoria for the sum of $2,000.00.[32] Mr Paxton swore that he used the proceeds of the sale of the (omitted) motorcycle to discharge a debt owed by the estate.[33] Beyond challenging Mr Paxton to the effect that the husband’s financial statement contained no reference to any liabilities (whether in the sum of $2,000.00 allegedly owed to a person in (omitted) or at all) the sale of the (omitted) motorcycle to a person in (omitted), its price of $2,000.00 and the application of those funds so as to discharge a debt owed by the estate was not contested by the wife.
[32] Transcript of proceedings of 24 February 2016 at p.34.
[33] Transcript of proceedings of 24 February 2016 at p.35.
It follows from the foregoing that title to each of the motorcycles had passed from the husband to others by the date on which this proceeding was tried.
Accordingly, so far as existing legal interests were concerned, the wife was the registered proprietor of the former matrimonial home and there were no other legal interests with which I was concerned in this proceeding.
So far as equitable interests were concerned, s.79 of the Act does not require me to consider equitable interests asserted by non-parties to the marriage. I mention that because the wife’s amended response to the initiating application included an application for the removal of a caveat lodged by the husband’s former solicitors.[34] The evidence revealed an oblique reference to the husband’s former solicitors having lodged a caveat asserting an entitlement to do so pursuant to an equitable charge given in favour of those solicitors by the husband. Whatever may have been the status of the enforceability of the charge, the interest asserted by the husband’s former solicitors is not an interest of the parties in the property for the purposes of s.79 of the Act. Therefore, I am free to disregard the contention asserted by the husband’s former solicitors. The caveat itself was not put into evidence nor was the alleged charge. I cannot be satisfied that there is a factual or legal basis to support that so-called charge. In any event, I will not allow this property proceeding to be held up by the continued presence of the caveat identified in the wife’s amended response.
[34] Amended Response to Initiating Application (Family Law) filed 16 February 2016 at p.2.
I will make an order directing a registrar of this Court to cause that caveat to be removed. The Supreme Court of Victoria is the proper venue in which the caveator can bring a proceeding to maintain its interest in that caveat, if indeed one exists.
In Stanford, the High Court expressed the third of its three fundamental propositions in terms that the question whether the making of a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property divided between them.[35] To my mind, that proposition is critical in this case. In his capacity as the husband’s legal personal representative, Mr Paxton has proceeded in this case in the manner most legal personal representatives proceed when administering an estate, that is to say, by getting in the assets and by discharging the liabilities. So much was addressed in The Administration of the Estates of Deceased Persons in Victoria.[36] However, it is wholly erroneous for Mr Paxton in his capacity as his late brother’s personal representative to proceed in this litigation on the premise that the husband had (or Mr Paxton now has) the right to have the former matrimonial asset divided between the wife and the estate.
[35] (2012) 247 CLR 108, 121.
[36] L McCredie, The Administration of the Estates of Deceased Persons in Victoria, (at pp.57-61), 1979, Butterworths.
No such right exists.
Orders under s.79 of the Act are not to be gainsaid.
Whether I make any order at all dividing the asset of the marriage is predicated upon my being satisfied that it is just and equitable to do so. In answering that question, it is not to the point to first march through the elements of s.79(4) of the Act. Doing that would conflate the statutory requirements of s.79(2) with s.79(4) of the Act and that would ignore the principles laid down by the Act, something the High Court in Stanford held a court must not do.[37]
[37] (2012) 247 CLR 108, 121.
The reported cases in the family law jurisdiction are inundated with illustrations of the just and equitable requirement being readily satisfied by observing (to use the words of Stanford) that, as a result of a choice made by one of the parties, both husband and wife are no longer living in a marital relationship.[38] In those cases the justice and the equity of making a property settlement order is readily apparent because there is not and will not thereafter be the common use of property by the husband and wife. The following passage from Stanford is on point –
No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order.[39]
[38] (2012) 247 CLR 108, 122.
[39] (2012) 247 CLR 108, 122.
In most property settlement litigation, once the parties reach that point the court invokes the provisions of s.79(4) of the Act.
In this case, the express and implicit assumptions that underpinned the property arrangements when the husband and the wife lived together in the former matrimonial home, prior to their separation, were brought to an end when the husband formed the de facto relationship with Ms J and permanently moved out of the former matrimonial home so as to live with her. The husband lived with Ms J from 2004 until his death.
In Stanford the court addressed the error made at first instance where the court did not take into account the consequences to the surviving spouse if a property settlement order was made.[40] The High Court referred to the fact that the surviving spouse would have been required to sell the former matrimonial home in which the survivor was still living (a consideration applicable in this case) despite the needs of the spouse (who eventually died) being met elsewise. Those facts have a remarkable factual parallel to the facts of this case. In Stanford the court held that no basis was identified for concluding that “it was just and equitable to make any order dividing the parties’ property between them”.[41] The court held that it had not been shown that the wife’s needs during her lifetime were not or would not be met. Applying those holdings to the facts of this case, Mr Paxton has not demonstrated that it is just and equitable to make any order dividing the interests of the wife and her late husband. Mr Paxton has not shown that his late brother’s needs were not being met during his lifetime nor that they required addressing at this time.
[40] (2012) 247 CLR 108, 123.
[41] (2012) 247 CLR 108, 124.
For the reasons set out above, I have concluded that for the purposes of s.79(2) of the Act, it is not just and equitable for a property settlement order to be made in this case.
For the purposes of s.79(8) of the Act, even if the husband had not died, it was similarly not just and equitable for a property settlement order to be made in this case. The husband died in (omitted) 2015. No material difference in the circumstances of the husband and the wife existed between 2004 when the husband permanently departed the former matrimonial home, (omitted) 2015 when he died and February 2016 being the date of the trial of this proceeding. Aside from the gradual deterioration in the health of both the husband and the wife over the period following the husband’s permanent departure from the former matrimonial home until the date of his death, no material alteration occurred in the respective state of the legal and equitable interest in the property of the husband and wife.
In his submissions on behalf of the wife, Mr Hall contended that it would not be just or equitable (curiously, the wording of s.79(2) of the Act is “just and equitable”) to make orders altering the existing property interests (in which the wife is the sole surviving registered proprietor) having regard to the wife’s unmatched financial and non-financial contributions over many years after separation. To my mind that submission flirted with the impermissible conflation of the separate considerations required by s.79(2) of the Act with the elaborate considerations of s.79(4) of the Act. It is essential to keep the concept in s.79(2) of the Act separate and apart from the seven different considerations as are prescribed in s.79(4) of the Act.
Impermissible deviations from the holding in “Stanford”
Mr Hall placed reliance upon the decision of Federal Magistrate Walters (as he then was) in Erdem v Ozsoy (“Erdem”).[42] Mr Hall contended that the decision in that case was particularly illuminating in the determination of this case. Whatever may be said about the authority of that decision, it does not bind me. Judgment in that case was delivered on 5 December 2012, less than a month after the decision of the High Court in Stanford, judgment in which was handed down on 15 November 2012. The facts of Erdem differed to those with which I am concerned in this case although the two pieces of litigation have the common theme that each involved a spouse who died after separation and after the commencement of a proceeding under s.79 of the Act and which were continued by the legal personal representative of the deceased spouse. In the decision of Erdem, the federal magistrate specifically addressed the decision of the High Court of Australia in Stanford, pointing out that the decision in Stanford had been very recently handed down.
[42] (2012) 272 FLR 16.
In several places in the decision in Erdem, the federal magistrate spoke of “steps” through which a court must pass when considering the operation of s.79 of the Act. For example, at paragraph 113 of his reasons, the federal magistrate referred to the three fundamental propositions set out in Stanford and then said that the court’s first step was to undertake the examination prescribed in Stanford as the first of three fundamental propositions. It is erroneous to describe the three fundamental propositions recorded by the High Court in Stanford as “steps”. They were not described as “steps” by the High Court nor did the High Court in Stanford embrace the nomenclature of “steps” that the federal magistrate examined at length in his reasons in Erdem in paragraphs 100 and following. At no stage in Stanford did the High Court even use the word “step” or “steps”. Between paragraphs 100 and 116 of his reasons in Erdem, the federal magistrate examined an array of decisions, some of which were handed down by the Full Court of the Family Court of Australia in respect of the operation of s.79 of the Act prior to Stanford.
Then, in paragraph 116 of his reasons in Erdem, the federal magistrate said that it was arguable that the effect of the decision in Stanford was “that the first step in the property settlement exercise”[43] was to identify, according to ordinary common law and equal principles, the existing legal and equitable interests of the parties in their property. In Stanford, the court did not describe that as “the first step”. The court in Stanford described that activity as the first of “three fundamental propositions” but at no stage did the High Court use the phrase “the first step”.
[43] [2012] FMCAfam 1323.
Returning to Erdem, the federal magistrate said that the second step involved ascertaining whether it was just and equitable to make an order altering the interests of the parties in the property. The High Court said no such thing. The High Court did not describe any “second step”.
In paragraph 38 of its reasons in Stanford, the High Court said that the second of the three fundamental propositions related to the judicial discretion conferred by s.79 of the Act. At no stage in paragraph 38 of its reasons in Stanford did the High Court use the word “step”. It was wholly erroneous in paragraph 116 in the decision in Erdem to speak of the second step involving the ascertainment of whether it is just and equitable to make an order. It was equally wrong for the Federal Magistrate in paragraph 116 of his reasons in Erdem to say, as was said, that it was only after the court had concluded that it is just and equitable to make “such orders” (whatever that means) that the court should proceed to take what might be regarded as the third and fourth steps. Under no circumstances could any legitimate reading of paragraphs 37, 38, 39 and 40 of the reasons of the High Court in Stanford be construed in the way reported in paragraph 116 of the decision in Erdem.
I make those observations about the erroneous construction by the federal magistrate of the decision of the High Court in Stanford because subsequent learning on the point by the same federal magistrate, later a judge, perpetuated that erroneous reasoning. For example, in Jewel v Jewel (“Jewel”)[44] the court quoted from the decision in Erdem making the erroneous observations to which I have averted above. In paragraph 72 of the reasons in Jewel, the court, again erroneously, said that it was arguable that the effect of the High Court’s decision in Stanford stood for a five-step approach in making a determination under s.79 of the Act. The High Court said no such thing. The observations in paragraph 72 of the decision in Jewel have been taken from some case but not from the decision of the High Court in Stanford. To my mind it is important to point up precisely where the metes and bounds of the decision in Stanford have been drawn. The observations in paragraph 72 of the decision in Jewel do not accurately convey the holdings of the High Court in Stanford and paragraph 72 of the decision in Jewel should not be understood as having the imprimatur of the decision of the High Court in Stanford.
[44] [2013] FCWA 81 at [55].
Likewise, the same erroneous reasoning was perpetuated in paragraph 116 of the decision in Dekker v Dekker (“Dekker”)[45] where the so-called five step process attributed to the High Court’s decision in Stanford was set out. At the risk of repetition, no such stepped approach was prescribed by Stanford. It is wrong to say as was said in Dekker that “it is arguable that the effect of the High Court’s decision in Stanford”[46] was to prescribe a five-step approach. No such stepped approach was mentioned by the High Court. By no means was it therefore arguable that Stanford embraced, expressly or impliedly, any such stepped approach.
[45] [2014] FCWA 61.
[46] [2014] FCWA 61 at [116].
Having regard to what was in fact said by the High Court in Stanford, it is important to point out that according to principles of stare decisis, a single judge exercising federal jurisdiction is bound by the ratio decidendi of decisions of the High Court of Australia, as is this court (along with single judges and Full Courts of the Family Court of Australia). So much was held by the High Court of Australia in Trident General Insurance Co Ltd v McNiece Bros Pty Limited (“Trident”)[47] where Brennan J held as follows –
Courts are bound to apply the principles laid down by courts higher in the appellate hierarchy and observance of that rule avoids the futility of delivering judgments which will be reversed on appeal.[48]
[47] (1988) 165 CLR 107.
[48] (1988) 165 CLR 107, 129-130.
More recently Palmer J made similar observations in Tryam Pty Ltd v Grainco AustraliaLtd.[49]
[49] (2003) 142 IR 243 at [127].
The doctrinal rationale for the sensible application of precedent was explained by Sir Anthony Mason, writing extra-judicially where the former Chief Justice wrote –
Precedent plays an important part in eliminating inconsistency, thereby promoting justice and rationality. Likewise, precedent enhances continuity and predictability which are also essential qualities in an acceptable system of law. In order that the citizen may order his affairs and make decisions, the courts must apply uniformly rules and principles that are ascertainable in advance.[50]
[50] (1988) 4 Aust Bar Rev 93, 93
Foretelling of the dangers of ambitious judicial activism in 2003 The Honourable Justice J D Heydon (as former High Court Justice Heydon then was) wrote his acclaimed article ‘Judicial Activism and the Death of the Rule of Law’[51] in which his Honour said the following –
However, a fundamental change in the judiciary has taken place which has caused two new types of pressure on probity. The fundamental change is that it has a different character from that of a generation ago. There is within its increased ranks a large segment of ambitious, vigorous, energetic and proud judges. Ambition, vigour, energy and pride can each be virtues. But together they can be an explosive compound. Rightly or wrongly, many modern judges think that they can not only right every social wrong, but achieve some form of immortality in doing so … Trial judges permit themselves considerable liberties in distinguishing High Court decisions on very narrow grounds. They do not limit themselves to reported cases, but use computers to obtain access to unreported ones … John Gava has rightly described the judges so affected as ‘hero judges’.[52]
[51] (2003) 23 Aust Bar Rev 110
[52] (2003) 23 Aust Bar Rev 110, 118-119.
The reference to ‘hero judges’ was a reference to an article by John Gava entitled “The Rise of the Hero Judge”.[53] I do not wish to be a hero judge by departing from Stanford.
[53] J Gava, ‘The Rise of the Hero Judge’ (2001) 24 UNSWLJ 747.
There is no doubt that in the High Court’s decision in Stanford, principles intended for widespread application in cases concerning s.79 of the Act were laid down. Single judges such as me or the federal magistrate in Erdem have no choice but to apply such principles. There is no scope to interpret principles of the sort laid down in Stanford saying that the case “arguably” gives credence to a five-stage approach in the construction of s.79 of the Act. The decision in Stanford laid down what it described as “three fundamental propositions”.[54] They are easy to read, easy to understand and easy to apply. They do not “arguably” invite application of any stepped approach towards the interpretation of s.79 of the Act. If a single judge fails to follow Stanford, that judge acts in contravention of the admonition given by Brennan J in Trident.[55] In this case, I regard myself bound by the decision in Stanford, I propose to apply it and I expressly reject adherence to any authority that qualifies it, countermands it or which loosely interprets what are the express statements of principle in it.
[54] (2012) 247 CLR 108, 120.
[55] (1988) 165 CLR 107.
Disposition of this case
From the foregoing it will be readily apparent that Mr Paxton has failed in this application. I refuse to make a property settlement order under s.79(2) of the Act. Accordingly, his application is dismissed.
On the wife’s application, I make orders pursuant to s.106(A)(1) of the Act appointing a registrar of the court at the Melbourne registry to forthwith execute a withdrawal of caveat in relation to the caveat identified above.
Otherwise, I make orders in accordance with the wife’s application.
Costs of the proceeding are to be paid by Mr Paxton
So far as costs are concerned, the wife urged me to make a costs order against Mr Paxton. There is force in that submission. I am willing to make a costs order against him. In this case, it was unrealistic for
Mr Paxton to have maintained the application seeking orders under s.79 of the Act. This was a case that called for particular care. It was erroneous for Mr Paxton to have applied ordinary principles applicable to the administration of a deceased estate in the circumstances of this case. The wife was in extraordinarily straitened circumstances, a fact either known or which ought to have been known to Mr Paxton when he brought the application to continue with the proceeding under s.79(8) of the Act. He either expressly knew or ought to have known about her serious health issues and those of the children who lived with the wife. It was wholly inappropriate for him to have maintained this proceeding knowing of the hardship that was likely to have been occasioned to the wife and to her dependent children. He must have known that having regard to the extraordinarily modest value of the former matrimonial home, a sale of the former matrimonial home was the only way any amount of money was to be generated in favour of the husband. Mr Paxton failed to give any form of consideration of the wife’s hardship before making application to this Court to continue this proceeding. He should have done so.
Ordinarily, each party to a proceeding under the Act bears his or her own costs. Under s.117(2) of the Act the court may make such order as to costs as the court considers just, but in doing so the court must have regard to the specific considerations adumbrated in s.117(2A) of the Act.
So far as the financial circumstances of each party to the proceeding were concerned, the evidence revealed that the wife’s circumstances were utterly straitened. Mr Paxton’s were not.
Neither party was in receipt of legal aid.
As to the conduct of the parties to the proceeding generally, neither behaved improperly. However, as I have recorded above, Mr Paxton should have paid closer attention to the appalling financial circumstances of the wife before instructing solicitors to make an application under s.79(8) of the Act by which he continued the proceeding commenced by the deceased husband. At that juncture, he should have stopped and assessed the merits, appropriateness and likely legal outcome of the continuation of the proceeding commenced by the husband. Had he done so, he would have been struck by the fact that in reality only one asset fell for consideration and that the justice and equity of the circumstances of the case demanded that the wife retained that asset.
Neither counsel pointed to any failure of a party to comply with orders of the Court previously made.
As to a consideration of whether any party has been wholly unsuccessful, Mr Paxton as applicant has been wholly unsuccessful. As the party who maintained this proceeding he has failed in circumstances where he should not have maintained the proceeding in the first place. In those circumstances it is appropriate that a costs order be visited upon him.
The material does not reveal (as I expected to have been the case) the terms of any offer in writing to settle the proceedings. Ordinarily, the trial judge is not appraised of that matter until the final pronouncement of orders which are dispositive of the case.
I make orders largely in accordance with the wife’s proposed orders.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Date: 7 July 2016
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