Pendleton & Pendleton
[2017] FamCAFC 108
•20 June 2017
FAMILY COURT OF AUSTRALIA
| PENDLETON & PENDLETON | [2017] FamCAFC 108 |
| FAMILY LAW – APPEAL – PROPERTY – SECTION 79A – Whether the primary judge erred in varying consent orders – Where the husband had undisclosed assets and received undisclosed payments – Where the primary judge engaged with the legal representatives on the question of how the case was to be conducted should he find that the husband had suppressed evidence – Where the judge made orders without hearing further from the husband – Where the husband was not accorded procedural fairness in the conduct of the s 79A proceeding and should have been given an opportunity to put further evidence and submissions before the court after his Honour found there had been a miscarriage of justice – Where, having found there was such a miscarriage of justice, his Honour should have considered the relevant provisions of s 79 of the Act before requiring the husband to pay an additional $300,000 by way of variation of the consent orders – Where the magnitude of the change to the orders required that the consent orders be set aside and not varied – Where the husband’s obligation to make disclosure did not extend so far as to require him to explain the meaning of documents to the wife – Appeal allowed. FAMILY LAW – COSTS – COSTS CERTIFICATES – Where it is appropriate to order a rehearing because of an error of law – Where a costs certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) should be granted to both parties for the appeal and the rehearing. |
| Family Law Act 1975 (Cth) ss 75, 79, 79A, 94AAA |
| Harrison & Harrison (No 3) [2011] FamCAFC 241 Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648 Parker and Parker (1983) FLC 91-364 Simpson and Hamlin (1984) FLC 91-576 Trustee for the Bankrupt Estate of N Lasic & Lasic (2009) FLC 93-402 |
| APPELLANT: | Mr Pendleton |
| RESPONDENT: | Ms Pendleton |
| FILE NUMBER: | BRC | 3479 | of | 2011 |
| APPEAL NUMBER: | NA | 18 | of | 2016 |
| DATE DELIVERED: | 20 June 2017 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May, Thackray & Cronin JJ |
| HEARING DATE: | 9 November 2016 |
| LOWER COURT JURISDICTION: | Federal Circuit Court |
| LOWER COURT JUDGMENT DATE: | 15 February 2016 |
| LOWER COURT MNC: | [2016] FCCA 285 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Streit |
| SOLICITOR FOR THE APPELLANT: | Family Law Solutions |
| COUNSEL FOR THE RESPONDENT: | Mr Bunning |
| SOLICITOR FOR THE RESPONDENT: | McAuley Hawach Lawyers |
Orders
The appeal be allowed.
The orders made on 15 February 2016 are set aside.
The proceedings be remitted to the Federal Circuit Court for rehearing by a judge other than Judge Coates.
The rehearing be limited to the exercise of the discretion under s 79A of the Family Law Act 1975 (Cth) to vary or set aside the orders made on 18 December 2012, it having been established that there has been a miscarriage of justice in the making of those orders by reason of suppression of evidence.
There be no order as to costs.
The Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.
The Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.
The Court grants to the appellant husband and the respondent wife a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant and the respondent in respect of the costs incurred by them in relation to the rehearing of the application.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pendleton & Pendleton has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth)
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 18 of 2016
File Number: BRC 3479 of 2011
| Mr Pendleton |
Appellant
And
| Ms Pendleton |
Respondent
REASONS FOR JUDGMENT
May J
I agree with the orders proposed by Thackray and Cronin JJ and agree generally with their reasons.
Thackray and Cronin JJ
This is an appeal by Mr Pendleton (“the husband”) against orders made under s 79A of the Family Law Act 1975 (Cth) (“the Act”) on 15 February 2016 by which Judge Coates of the Federal Circuit Court varied consent orders made in December 2012. His Honour found there had been a miscarriage of justice arising from non-disclosure of information and documents by the husband prior to the making of those orders. His Honour then ordered the husband to pay to the wife a further $300,000, in default of which his house was to be sold.
The appeal is opposed by Ms Pendleton (“the wife”).
Issues
The grounds of appeal focus on three issues:
a) whether the husband was accorded procedural fairness in the conduct of the s 79A hearing and specifically whether he should have been given an opportunity to put further evidence and submissions before the court after his Honour found there had been a miscarriage of justice;
b) whether, having found there was such a miscarriage of justice, his Honour should in any event have considered the provisions of s 79 of the Act before requiring the husband to pay an additional $300,000 by way of variation of the 2012 orders; and
c) whether the husband’s obligation to make disclosure extended so far as to require him to explain the meaning of documents to the wife, notwithstanding she was represented by lawyers.
Background
The consent orders that were the subject of these proceedings were made on 18 December 2012, at a time when the wife was represented by lawyers. The husband was then unrepresented, but had received legal advice previously.
For the purposes of the consent orders, the parties had agreed that their “net pool” of assets was worth $622,000.
The agreement dividing the assets was described as being 64.63 per cent in favour of the husband and 35.37 per cent to the wife. To achieve that percentage outcome, the husband was to keep two real properties and some other modest assets, and had to make a payment of $140,000 to the wife.
The agreed list of assets made no reference to a significant payment the husband received shortly prior to the making of the consent orders, and it also made no reference to any entitlement to other payments he received later, which his Honour was satisfied he knew about prior to the orders being made.
Subsequently, the husband brought further parenting proceedings. During those proceedings the wife cross-applied under s 79A of the Act to “set aside” the consent orders or, in the alternative, for them to be “varied on such terms as the Court shall think just”. More specific orders were proposed in the wife’s Case Outline filed in September 2015, in which she sought:
1.That pursuant to s.79A of the Family Law Act the Final Property Orders made on 18 December 2012 between [the wife] and [the husband] in the Federal Circuit Court be varied.
2.That the husband pay to the wife the sum of $300,000 … within 28 days hereof ….
The wife also sought orders that in default of the payment of $300,000, the house retained by the husband in the 2012 orders be sold.
The undisclosed amounts
When the parties separated in March 2011, the husband was employed by Company A. The husband claimed that his employment was terminated in September 2012, but said that he continued to perform unpaid services for the company pending its winding up. He also incurred expenses for the benefit of the company, which were later reimbursed. The primary judge noted at [23] a concession that the husband had failed to disclose these and other monies “for the final orders made on 18 December 2012”.
The husband had a contract of employment which defined his entitlements. The primary judge found that the wife had discovered its existence, and thought there was a “strong possibility” that she was aware of it before she consented to the orders. His Honour nevertheless concluded at [47]:
It would very probably be the case that she could not understand or decipher the amounts to be paid pursuant to the wording in the contract, and disclosed material has to be in a form so that it can be understood.
Just before the consent orders were made, the husband received $44,586.84 which he claimed was a reimbursement of expenses. That payment was not brought to the wife’s attention prior to the making of the orders.
In April 2013, the husband received payments of $11,775.83 and $35,000.
The first of these related to expenses incurred on the husband’s credit card, which he claimed had been “noted as a liability on the balance sheet prior to the final orders being made…”. As the primary judge noted, the husband’s financial statement sworn on 4 December 2012 did not refer to any entitlement to reimbursement of the expenses incurred. His Honour described as “incredulous” the husband’s evidence “that he was spending his money for the company when he was in dispute with it and not being paid by it” (at [59]).
The husband claimed that the second of the April 2013 payments was a “bonus gift” from Company A given in recognition for work he had done in finalising the sale of its assets. As his Honour observed at [60], the husband had earlier claimed that he had been involved in a dispute with a director of Company A, yet the same director was said by the husband to have been “in a really good mood” when he met with him in April 2013 and volunteered the $35,000 gratuity, on which the husband did not pay any tax.
The husband had been entitled to a redundancy payment but, notwithstanding that his employment had been terminated in September 2012, the payment was not received until February 2013. The husband had submitted to his Honour that there was no obligation to disclose the redundancy because there was no contractual right to it. His Honour found that the husband had been aware that he was to receive a payment and was therefore obliged to disclose it.
The husband had also held shares in Company A but had disposed of them prior to the consent orders being made. How he came to have those shares was unclear, but his Honour noted at [54] that it was the husband’s case that the wife was aware of them prior to the orders, but had thought their value “not significant”. The husband claimed he had transferred the shares to a third party who had connections with Company A. He also said the shares were being reacquired by the company but, as his Honour observed, there was no change to the share register and no reported transfer. At [56], the primary judge held that it did not matter that the wife “guessed” the value of the shares as the husband had an obligation to disclose “the real state of affairs”. The disposal of the shares resulted in the husband being paid $55,950 in three tranches. All were received after separation, although prior to the 2012 orders.
In November 2013, the husband incorporated Company B, having seen an opportunity to contract with a company established overseas with a very similar name to Company A. This company had a bank account which documents subpoenaed by the wife showed contained about US$180,000. The husband described this as a “transaction account” to buy and sell goods, but the primary judge held at [51] that documents should have been provided showing that the US$180,000 “could be attributed to the company’s daily business dealings”.
The husband also claimed that he had spent $74,000 on legal fees prior to the consent orders being made. He said these had been paid from his earnings. His Honour found, given the husband’s lack of income during that period, that it was not possible for him to have been able to pay that amount in legal fees other than by overstating his expenditure or not disclosing where his money came from (at [62]). The legal fees were not mentioned prior to the making of the consent orders. His Honour found this was another example of the husband’s non-disclosure.
All of his Honour’s findings led him to say:
52.The lack of disclosure over issues I have referred to are material to the husband’s case and to his credibility. He lacks credibility on this evidence.
…
66.In my view, referring to all of the above evidence and facts as I have set them out, the wife has discharged the onus on her of proving that there has been a miscarriage of justice based on the suppression of evidence by the husband.
Procedural fairness
When the trial began on 14 October 2015, the primary judge engaged with the legal representatives on the question of how the case was to be conducted.
Counsel for the husband submitted that the hearing should involve two stages. The first was to decide whether the ground asserted under s 79A had been established and the second (if the ground had been established) was to decide what to do, including hearing any further evidence and submissions. In other words, a bifurcation of the hearing. The wife’s solicitor advocate took a different approach, saying that if the ground was proved, his Honour had a wide discretion to vary the orders.
These discussions have ultimately led to a ground of the appeal that the husband was denied procedural fairness because his Honour, having found the non-disclosure ground proved, ultimately adopted the wife’s position without hearing further from the husband.
Grounds of appeal
There are four grounds of appeal (a fifth having been abandoned). The procedural fairness issue should be considered first, given its critical importance in the appeal.
Ground 1 – denial of procedural fairness
It is asserted by ground 1:
That in determining what variation to make to the original orders of 18 December 2012 pursuant to s.79A(1)(a) Family Law Act 1975, the learned trial Judge failed to afford the Appellant an opportunity to be heard and otherwise did not afford the Appellant procedural fairness inasmuch as the Appellant, acting consistently with exchanges during the proceedings on 14 October 2015, refrained from making submissions to the extent of any variation to be made in the event the learned trial Judge found that it was appropriate to exercise the discretion under s.79A.
As the trial began, counsel for the husband drew his Honour’s attention to his “two stage process” proposal and more particularly to the fact that his written outline addressed only the first stage. He submitted that the “second stage” would only arise if a s 79A(1) ground was established, in which event he would then make submissions about whether the court should vary the orders. On appeal, counsel for the husband submitted that, if necessary, he would have presented “further and better evidence relevant to ss.79(4) & 75(2)” for the purposes of addressing “the Court’s exercise of that discretion”.
Clearly conscious of the issue, the primary judge raised with the solicitor appearing for the wife (Mr Hawach) what would happen if the asserted non-disclosure was found to have occurred. This was said:
HIS HONOUR: What happens if I find for you? I set the order aside, then I have to have a retrial, do I?
MR HAWACH: I will be asking your Honour to make a variation of the order to give the wife a certain amount of funds and if those funds are not paid, one of the properties of the husband is to be sold and payment of those funds to be paid to the wife.
As his Honour’s question had not been answered, he persisted:
HIS HONOUR: Can I do it like that?
MR HAWACH: In my submission, the discretion becomes – once your Honour makes those findings, the discretion is wide for your Honour to make the variation to the original order.
HIS HONOUR: All right.
MR SAYERS [counsel for the husband]: I apologise for interrupting, but in my submission, because it’s relevant, I would be making the submission that it’s a two part exercise, working out, first of all, whether or not the applicant has invoked the discretion to be exercised under section 79A and then a further hearing that takes into account, for instance, section 75(2) factors that would weigh on the exercise of discretion, which currently aren’t sufficiently canvassed in anybody’s material.
HIS HONOUR: Yes. Look, without turning my mind to it, Mr Hawach, I would have thought that I have to do that, but you say I can vary the orders.
His Honour returned to the point raised by counsel for the husband that there was a paucity of evidence for the variation step and asked whether he had to consider “the 79A [sic] factors and the 75(2) factors”. He suggested the solicitor have a think about it saying:
HIS HONOUR: - - - because I would have thought that’s what I had to do.
The dialogue between his Honour and the solicitor for the wife went on in that vein:
HIS HONOUR: But at this stage, I’m leaning towards the submission that it’s really a two part process.
MR HAWACH: Certainly.
HIS HONOUR: And I must say, I have never known it not to be.
MR HAWACH: Certainly.
HIS HONOUR: That doesn’t mean though - - -
MR HAWACH: I don’t wish to cavil with that, your Honour. I’m happy - - -
HIS HONOUR: It doesn’t mean that - - -
MR HAWACH: Yes.
Counsel for the husband entered the discussion again at that moment to redefine his earlier submission:
MR SAYERS: Just in case I may have mislead [sic] your Honour, or led your Honour into error, the submission is not that your Honour has to do it that way, but just given the sufficiency, or insufficiency, rather, of the evidence, it would be prudent to do it that way is my submission.
Moments later, having confirmed that he had understood the submission of counsel for the husband, his Honour added:
HIS HONOUR: There’s still a whole lot of other issues, which - - -
MR SAYERS: Yes.
HIS HONOUR: - - - it seems to me that – it seems to me that if I set this aside, I start afresh.
Both counsel for the husband and the wife’s advocate responded “yes”.
At the conclusion of the trial there was insufficient time for oral addresses and his Honour ordered that any submissions be in writing. In the course of deciding a timetable, counsel for the husband again raised the subject of further evidence, as appears from the following transcript extract:
MR SAYERS: And, by way of trying further to be of assistance, my suggestion would be that this time the submissions isolate and deal only with the question of the section 79A application and not re-exercising the discretion at large in the event it’s successful because - - -
HIS HONOUR: Well, I’ve got real doubts - - -
MR SAYERS: Yes.
HIS HONOUR: - - - about exercising any discretion on this - - -
MR SAYERS: Yes.
HIS HONOUR: - - - because I don’t think I’ve been able to consider the Stanford ruling as to whether it would be just and equitable anyway and whether that’s applicable on such a matter. I really don’t know if I can just re-exercise a discretion.
MR SAYERS: I reiterate what I said earlier today. The sufficiency of the evidence before you is not such as it would be prudent to do so. It would be appropriate to limit ourselves at this time to just the section 79A question. Of course, theoretically, the court can always do both exercises together but not on this evidence, in my submission.
HIS HONOUR: All right. You can have 21 days. You will have a further 21 days.
The parties filed their written submissions within the designated timetable. The husband’s submissions, which were the first to be filed, began by indicating that they were, “as was directed”, limited to the first limb of the application. The submissions dealt only with that issue, and no reference at all was made to the way in which the primary judge’s discretion should be exercised in the event a ground under s 79A(1) was found to have been established.
The wife’s written submissions began (emphasis added):
This is an application made on behalf of the wife in respect of final property orders made on 18 December 2012 [final property orders] to vary or set aside the final property orders pursuant to s. 79A of the Family Law Act [the Act].
The wife’s submissions then went on, over 23 pages, to deal with the issue of whether a ground under s 79A(1) had been made out. The submissions concluded with two brief paragraphs stating what the wife had done with her settlement, and with one paragraph explaining why the wife considered she had an entitlement to benefits received by the husband as a result of his employment with Company A. The final two paragraphs of the submissions sought indemnity costs and proposed that, “in order for the miscarriage of justice to be cured”, the consent orders should be “varied” in the way proposed in the wife’s Case Outline.
In his reasons for judgment, the primary judge made no mention of any desire on the part of the husband to present evidence or make submissions relevant to the exercise of the discretion to set aside or vary the consent orders. Having found the ground established, his Honour said:
67.I am asked to exercise a discretion and vary the alteration of interests, rather than send the matter back for trial.
That was certainly not the husband’s position. In our view, the husband is justified in saying that the primary judge had led him to believe he would be afforded the opportunity to make submissions in relation to any new order if a s 79A(1) ground was established. All indications in the transcript were to this effect, and the husband was entitled to assume he would not only be given an opportunity to be heard, but that he would be accorded an opportunity to present further evidence relevant to the exercise of the discretion (Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648).
The husband was therefore denied procedural fairness and on that basis alone the appeal must succeed.
Ground 2 – failure to take account of relevant factors
Ground 2 asserts:
That the learned trial Judge erred in law when exercising the power now to order a variation to the orders of 18 December 2012 by giving no consideration (or in the alternative, insufficient consideration) to the relevant s.79(4) and s.75(2) factors.
Ground 2 is connected with Ground 1 in that it is asserted that, having found there was a miscarriage of justice, his Honour had to contemplate the basis upon which to exercise his discretion to vary or set aside the consent orders. It is the husband’s submission that it was incumbent upon the primary judge to give proper consideration to s 79(4) and s 75(2) of the Act regardless of the finding of miscarriage of justice, given that the “property pool” was different to that upon which the earlier orders had been made.
His Honour’s explanation for his orders is set out in these paragraphs:
68.To decide to vary the settlement figure, I am satisfied that it would be just and equitable to have made the original orders for an alteration of property interests, given that the parties had separated, they had joint property built up over the years of the relationship and entered into consent orders to end their financial relationship.
69.However, I do not intend to reconsider the percentage basis upon which the original orders were made – as there is just no way of knowing what monies the husband has or has access too [sic], given that not only did he refuse to disclose all of his financial position for the final orders, he continues in that vein, and I point to the non‑specific claims he made about the $180,000 in US currency in the so-called trading account of [Company B], which he alone controls. In deciding not to try and determine the appropriate percentage division, I take into account that the wife consented to the orders, but her position was believed by her at the time to be an informed decision.
70.Although the wife seeks a payment of $300,000, the submission for the husband was that the disputed figures add up to about $200,000.
71. I was not told why the amount then should be $300,000.
72.When determining the appropriate course upon finding that there has been non-disclosure, the authorities, such as Kannis quoted above and the case of Weir & Weir (1993) FLC 92-338 allow quite extraordinary latitude with regard to decision-making. However, such latitude is limited by a consideration of whether non-disclosure is accidental or deliberate. In this matter it has been deliberate.
73.While it was put that the amounts added up to about $200,000, the existence of the $US180,000 in the [Company B] account remains unexplained – in that there are no supporting documents showing the actual trading conducted through the account.
74. It is a very large amount of money.
75.Because of that money, I accept that the figure of $300,000 sort [sic] by the wife is the appropriate figure to adopt. I will order that he pay such, within 28 days.
76.… In my view those orders are appropriate. The matter should not return to court because of the power under s.79A to vary orders and I am satisfied as to the strength of the wife’s case.
In submissions before us, counsel for the wife accepted that if the consent orders had been set aside, rather than varied, his Honour would have been required to “start afresh” and to consider the matters in s 75(2) and 79(4), because the Act specifically required him to do so. It was argued, however, that there was no such requirement when a court is merely “varying” orders pursuant to the power conferred by s 79A.
In order to consider this argument it will be helpful to consider not only the precise terms of s 79A, but also its legislative history and relevant case law.
Section 79A(1) reads as follows (emphasis added):
(1)Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or
(c)a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or
(d)in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or
(e)a proceeds of crime order has been made covering property of the parties to the marriage or either of them, or a proceeds of crime order has been made against a party to the marriage;
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
When s 79A was first introduced into the Act in 1976, it contained no power to vary an earlier order – the only power conferred being the power to set aside an order in its entirety. In appreciating why this might be so, we consider it important to recognise that originally there was only one basis upon which to set aside an earlier order, namely a miscarriage of justice of the type now found in subparagraph (a) of s 79A(1). The power to vary an earlier order was only introduced when the Act was amended in 1983 to include the grounds now set out in subparagraphs (b), (c) and (d) of s 79A(1), two of which contain internal references to an order being varied as well as being set aside.
In Parker and Parker (1983) FLC 91-364, Nygh J dealt with an application under s 79A where it was conceded that it had become impracticable for the order to be carried out and hence subparagraph (b) of s 79A(1) was engaged. His Honour then went on to discuss the options consequently available to him:
What is difficult is the option now given between a variation of the order and the setting aside of the order. What is the difference between those options and how should the choice be exercised?
Two different views were urged upon me. One is that the extent and degree of the intervention determines what option is being exercised. If the existing order has to be replaced entirely with a new order, it is a question of setting it aside. If it is only a question of changing part of the order, it is a variation. In the present case it is not disputed that both parties seek a complete change in obligation and that under that test this would be a case of setting the order aside.
However, for the wife it was argued that setting aside was only appropriate where the order is flawed as from the beginning, as it would be if para. (a) had been applicable. In the present case it was not argued that there had been a miscarriage of justice in 1968 [when the orders were made]. It followed that this was therefore a question of the variation of the obligation not of its setting aside.
The existing use of terminology supports the latter contention. The standard Supreme Court Rules such as are found in Pt. 40 r. 9 of the Rules of the Supreme Court of N.S.W. allow the Court to “set aside or vary” a judgment or order where it has been entered by default of appearance and the defendant wishes to be let in to defend or it is vitiated by fraud, mistake or other such factors, or it has been obtained irregularly or in breach of good faith. Those conditions must exist at the time of entry of the judgment and a judgment cannot be set aside by reason of new facts and circumstances which have arisen since then: Gamser v. The Nominal Defendant (1977) 136 C.L.R. 145. The setting aside of the judgment reopens the original proceedings which subject to terms imposed as to costs and pleadings, continue as if the judgment had never been entered.
It is obvious however from the framework of sec. 79A(1) that the words “setting aside” are not used in that sense. In the first place, the words “setting aside” would be inappropriate to para. (b), (c) and (d) if that meaning were used for all of them expressly refer to subsequent events and circumstances. In the second place the express reference on three occasions in the subsection to the making of orders in substitution of the order set aside indicates that that description covers not merely a reopening of the original proceedings but a variation of obligations occurring at a later stage. In other words, an order under sec. 79A(1) need not be set aside as from the beginning. It can be set aside as of now. I might have been happier if the draftsman had used different words, but the meaning is clear. In view of the fact that each party desires a total replacement of the existing orders, it is appropriate in this case to make an order that orders 4 and 5 be set aside as from the date of the order.
This means that in considering what new order is appropriate I must apply the provisions of sec. 79(2) and (4). This makes it first of all necessary to consider the existing asset position of the parties.
The issue arose again in Simpson and Hamlin (1984) FLC 91-576 where the Full Court was considering a case where subparagraph (d) of s 79A(1) was engaged. The Full Court said at 79,659 (emphasis added):
The husband also complained that in making the variation, his Honour did not consider the present financial circumstances of the parties. Indeed, had his Honour set the consent order aside and proceeded to make a fresh order under sec. 79, he would have been obliged to consider all factors which must be considered under sec. 79(4) and, so far as they are relevant, under sec. 75(2). As Nygh J. explained in Parker and Parker (1983) FLC ¶ 91‑364 at pp. 78,444-78,446; (1983) 9 Fam. L.R. 323 at pp. 328-329, the choice between setting aside and variation depends on the degree of intervention to be made. Where, as here, that intervention consists of a perceived realignment of the distribution of property of the parties from one-third to two-thirds respectively to an approximately equal division, it is in our view a matter which goes beyond mere variation and would require the formal setting aside of the order and the making of a new order with all the consequences of that under sec. 79. Only thus can the Court ensure that the new order will be just and equitable between the parties.
Section 79A(1) was also considered in Trustee for the Bankrupt Estate of N Lasic & Lasic (2009) FLC 93-402 where the primary judge had “amended” orders after it was conceded that s 79(1)(a) was engaged. There the Full Court, when considering the distinction between setting aside and varying of an order, cited with evident approval the passage we have extracted above from Simpson and Hamlin (and their Honours also emphasised the words we have emphasised). Having done so, the Full Court went on to observe at [237] (emphasis added):
We accept in this case, having regard to the time which had elapsed since the making of the consent orders and changes in circumstances pertaining to the real estate, the orders proposed by the trustee presented obvious practical difficulties. Nevertheless, in our view, in light of the magnitude of the adjustment to the outcome contained in the consent orders, this was a case where the orders should have been set aside rather than merely being varied or, as his Honour said, “amended”.
The issue arose again in Harrison & Harrison (No 3) [2011] FamCAFC 241 (“Harrison”) where subparagraphs (b) and (c) were engaged. The applicant in that case had sought to set aside the orders rather than vary them, but the Federal Magistrate found they “must be varied”. In allowing the appeal, the Full Court (May, Ainslie-Wallace & Johnston JJ) said (emphasis added):
28.Under the heading characterised as “Vary or set aside?” the Federal Magistrate said:
37.Under section 79A of the Act, the Court may vary the relevant orders or set them aside. Variation may be appropriate where the overall structure is to remain but some changes either by additions or deletions are appropriate and sufficient. If the Court chooses to set aside the relevant orders they cease to operate from that time. In that situation the Court would then proceed to make another order under section 79, but there are circumstances where it may not do so. If the Court chooses to make another order it must follow the normal section 79 steps and procedures.
38.The Court must also consider, under s.79A(1)(c), upon a finding of default, that in the circumstances which have arisen as a result of that default, it is just and equitable to vary or set aside the order and to make another order in substitution. The Court finds that it is just and equitable to vary the order, and to substitute many of the orders sought by the wife. (footnote omitted)
29.His Honour was entirely correct that this is the proper approach. Unfortunately, in this case the Federal Magistrate did not have the necessary evidence to allow him to make another s 79 order. Nor did he follow the provisions of s 79, including answering the question as to whether in all the circumstances it is just and equitable to make the order (s 79(2)).
We do not regard Harrison as authority for the proposition the Federal Magistrate stated at [37] of his reasons and which we have emphasised in the extract above. When the Full Court said that the approach adopted by his Honour was “entirely correct”, we consider their Honours were referring only to what the Federal Magistrate had said at [38] of his reasons. Given the finding at [29] of their reasons, their Honours clearly deemed it unnecessary to engage with the issue concerning the circumstances in which it is appropriate to vary rather than to set aside orders when exercising the s 79A(1) power. Accordingly, there was no discussion of the earlier authorities to which we have referred, nor did the Federal Magistrate cite any of those authorities to support the proposition at [37] of his reasons.
In the present case, using the terminology employed in Simpson and Hamlin, we consider that the magnitude of the change made to the consent orders was such as to go beyond mere variation and would require the setting aside of the order and the making of a new order “with all the consequences of that under sec. 79”. His Honour’s failure to appreciate this fact and hence to give full consideration to the matters arising under s 79(4), including the matters incorporated by reference in s 75(2), constitutes appealable error.
There is therefore merit in ground 2.
Grounds 3 & 4- obligation to explain documents
We propose to deal with grounds 3 and 4 together. By these grounds it is claimed:
That the learned trial Judge erred in law and misdirected himself when finding that the Appellant had a duty not only to provide disclosure of his financial circumstances but to explain that disclosure in a way that could be understood by the Respondent, who was legally represented at all relevant times.
Contrary to the weight of the evidence, the learned trial Judge found that the Respondent was probably unable to understand a contract of employment provided in the Appellant’s disclosure.
Some of the payments the husband received, and on which the wife relied, were said to have flowed from the husband’s contract of employment. The contract was available to the wife prior to the making of the consent orders, and it was argued by the husband at trial that it was not his obligation to explain its terms to the wife, especially as she had legal representation.
In rejecting the husband’s argument, the primary judge said (emphasis added):
36.For reasons I will state later, whatever the contract refers to, it does not relieve a party from disclosing or explaining any statement made so that its status can be understood, such as statements in the employment contract. It is not the case that mere disclosure of material which needs explaining relieves a party of the rules of disclosure.
…
43.It was submitted that there was no obligation to disclose a redundancy, because there was no contractual right to a redundancy. That is a specious argument in my view. Such a submission diverts from the absolute obligation on parties to disclose all assets, no matter what their source. If the husband did not have the attachment of the planned payment sent to him on 7 December 2012 by [Company A] (as he claimed), he was most certainly on notice that he was about to receive a payment, and he was obliged by the disclosure rules in proceedings under the Family Law Act to make whatever enquiry was necessary, in order to inform the wife of what he would be receiving.
…
47.The authorities support the proposition that it is not then permissible that a litigant in the husband’s position, on notice that he is to receive a payment, whether he knows the amount to be received or not, avoids putting the wife on notice that there is a payment coming. It is not the wife’s position that she has to try and work out the figures based on the wording in the contract of employment, because that is exactly what is being argued here by the husband. It would very probably be the case that she could not understand or decipher the amounts to be paid pursuant to the wording in the contract, and disclosed material has to be in a form so that it can be understood. The husband has simply failed to disclose expectation of or receipt of a large amount of money prior to the consent orders being made, despite the absolute obligation to disclose. Yet he had notice that he was to receive an amount from the company. Whether the money was termed a redundancy payment or an ex gratia payment or whatever other characterisation is given, his obligation was breached.
…
58.…If the husband knew that he was to receive monies, or likely to receive monies, then his duty was to disclose, in terms that the wife could understand, even if any amount which would possibly come his way could not be identified. Disclosure is not just “dumping” documents into the mix, it is explaining the meaning of documents as well. The husband here was content to submit that the wife must have had his employment contract so must have known what he was to receive, or must simply not have enquired. However these share monies were to be accounted for, he had the obligation to disclose prior to the property settlement, not after. The amounts are there and he simply has not disclosed these amounts.
The husband maintained on appeal that he had no obligation to explain the documents to the wife, and that the primary judge erred in holding that he did. We accept the premise in the argument, but the statement we have highlighted in [58] of the reasons must be read in the context of the other paragraphs we have recited. It is tolerably clear that his Honour meant no more by his remark than that the husband had to be frank so as to place the wife in possession of the information he had, which would, in turn, allow the wife to form her own view of the likelihood of him receiving benefits under the contract.
We therefore find no merit in these grounds.
What orders should be made?
Having found merit in some of the grounds, the appeal must be allowed.
Both parties proposed that the proceedings be remitted if we found merit in the appeal. Counsel for the wife submitted that if the court was minded to remit the matter, it should be returned to the primary judge, whereas the husband proposed it be remitted to another judge.
Having regard to the findings his Honour has made, particularly as to the credibility of the husband, we consider that it would be appropriate for the rehearing to be conducted by another judge.
We have the power to order a re-hearing on such terms and conditions as we consider appropriate (s 94AAA(6)). Given there has been no effective challenge to the finding that there has been a miscarriage of justice, we consider that the only question that should be remitted is whether the court should exercise its discretion to vary or set aside the orders, and if so, how.
We therefore intend to set aside the order made by the primary judge and remit the matter on this limited basis. This will give both parties the opportunity to adduce such further evidence as they may wish to adduce and to make submissions about the way in which the discretion ought to be exercised.
Costs
The husband’s position was that if he was successful on appeal, he would not seek costs against the wife but rather seek a costs certificate in respect of the appeal and a certificate in respect of the retrial. A similar position was adopted by the wife in respect of her being unsuccessful.
Having regard to the circumstances of this case, we would not have made an order for costs in favour of either party and as we have found error, such that the matter now requires a retrial, costs certificates should be issued for both the appeal and the retrial.
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Thackray & Cronin JJ) delivered on 20 June 2017.
Associate:
Date: 20 June 2017
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