Porter & Porter
[2022] FedCFamC1F 102
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Porter & Porter [2022] FedCFamC1F 102
File number(s): SYC 4014 of 2012 Judgment of: HARPER J Date of judgment: 3 March 2022 Catchwords: FAMILY LAW – PROPERTY – Where Applicant Wife makes application pursuant to s 106B after final orders –Whether application made in proceedings under the Act – Whether this Court has jurisdiction – Whether s 106B application made to enforce final orders – Where trademarks assigned during the proceedings from one trustee to another – Husband sole appointor of trust and a beneficiary – Where proceedings have been determined and finalised - Where there has been no application under s 79A or s 79 for further property adjustment orders – Whether the wife is entitled to orders setting aside assignment of trademarks – Whether discretion should be exercised pursuant to s 106B – Application dismissed – Where cost application may be made within 28 days. Legislation: Evidence Act 1995 (Cth) s 140(2)
Family Law Act 1975 (Cth) ss 74(1), 79A, 79, 90AE, 90RD, 106B
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 8, 9, 25, 51, 132, 149
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) Ch 11, Div 11.1.4
Cases cited: Bourke v Bourke (Final Hearing Costs) (2010) 43 Fam LR 139; [2010] FamCA 199
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
Clayton v Bant (2020) 62 Fam LR 16; [2020] HCA 44
Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135; [2000] HCA 5
Dovgan & Dovgan [2021] FamCA 306
Equuscorp Pty Ltd and Another v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55
Gabel & Yardley (2008) FLC 93-386; [2008] FamCAFC 162
Gartside v Inland Revenue Commissioners [1968] 1 All ER 121
Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120; [2008] HCA 43
Gould and Gould and Swire Investments Ltd (1993) FLC 92-434; [1993] FamCA 126
Haseloff & Kormann [2013] FamCA 1019
Hazeldell Ltd v Commonwealth (1924) 34 CLR 442
In Marriage of Cullen (1980) FLC 90-899
In the Marriage of D (1984) FLC 91-593; [1984] FamCA 64
In the Marriage of Health (1983) FLC 91-362; [1983] FamCA 44
In the marriage of Kwon (1993) FLC 92-379; [1993] FamCA 46
In the Marriage of Page (1979) 4 Fam LR 663
In the Marriage of Whitaker (1980) FLC 90-813
In the Marriage of Yunghanns (1999) FLC 92-836; [1999] FamCA 64
Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
Kramer v Ward (2017) FLC 93-817; [2017] FamCAFC 270
Milligan v Milligan (2017) FLC 93-811; [2017] FamCAFC 218
Mullane v Mullane (1983) 158 CLR 436; [1983] HCA 4
New South Wales v Kable (2013) 252 CLR 118; [2013] HCA 26
Porter & Porter and Ors (No. 2) [2020] FamCA 554
Public Service Association of South Australia Inc v Industrial Relations Commission of South Australia (2012) 249 CLR 398; [2012] HCA 25
Public Trustee v Smith (2008) 1 ASTLR 488; [2008] NSWSC 397
Riemann & Riemann (No 3) [2017] FamCA 911
Scaffidi v Montevento Holdings Pty Ltd (2011) 6 ASTLR 446; [2011] WASCA 146
Sfakianakis & Sfakianakis [2018] FamCAFC 185
Sharrment Pty Ltd & Ors v Official Trustee in Bankruptcy (1988) 82 ALR 530
Strahan v Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166
Division: Division 1 First Instance Number of paragraphs: 105 Date of hearing: 1 June and 17 November 2021 Place: Sydney Counsel for the Applicant: Litigant in Person The First Respondent: Litigant in Person The Second, Third and Sixth Respondents: Litigant in Person Counsel for the Fourth, Fifth, Seventh and Eighth Respondents: Mr Alexander Solicitor for the Fourth, Fifth, Seventh and Eighth Respondents: Hey Family Law ORDERS
SYC 4014 of 2012 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PORTER
Applicant
AND: MR PORTER
First Respondent
MS O
Second Respondent
CC PTY LTD (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
3 MARCH 2022
THE COURT ORDERS THAT:
1.The Application in a Case filed on 13 August 2020 by the Applicant Wife be dismissed.
2.If any party seeks an order for costs, an application to the Court may be made by Application in a Proceeding within 28 days of the date of these orders, with any affidavit and written submissions in support, to be filed and served within that time period and a copy forwarded to my chambers. If such application is made, the Court will make orders and directions for its determination in chambers.
THE COURT NOTES THAT:
A.If no application is made within the time allowed in Order 2, there will be no order as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Porter & Porter has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
This judgment arises from an Application in a Case filed by the Applicant Wife, Ms Porter (“the wife”) on 13 August 2021, seeking to invoke the Court’s powers pursuant to s 106B of the Family Law Act 1975 (Cth) (“the Act”).
Mr Porter is the First Respondent Husband (“the husband”). The wife and the husband have been divorced for many years. The Second Respondent is Ms O (“Ms O”), who has the controlling interest in the Third Respondent company, CC Pty Ltd (“CC Pty Ltd”). The husband and Ms O were, but are no longer, in a relationship.
The Fourth, Fifth, Seventh, and Eighth Respondents are third parties involved with the dispositions which are the subject of the wife’s s 106B application. I will refer to them collectively as “the third parties”. Their relevance will be explained in the course of these reasons. As I understood the wife’s submissions, other than on the question of costs, the Sixth Respondent was not the subject of the wife’s application.
The wife and the husband represented themselves before me. Ms O appeared for herself as well. The third parties were represented by counsel. I note here that the wife subpoenaed Ms O to give evidence as her witness. The wife also foreshadowed an application to have Ms O declared as an adverse witness, but this was not pursued. Ms O gave some brief oral evidence in chief.
BACKGROUND
The parties and their dealings have a long and complex history. It is unnecessary to rehearse it in detail for present purposes. Most relevant background facts can also be derived from the judgment of Watts J in Porter & Porter and Ors (No. 2) [2020] FamCA 554 (“Porter (No 2)”). I will refer to this judgment and additional factual matters as necessary in the course of these reasons. For the purposes of this judgment, the following facts are important.
In 2004, the husband and the wife married. They separated in 2011, and divorced in 2012.
On 8 August 2013, the wife filed an Initiating Application for final property orders. On 20 June 2014, the parties entered into final consent property orders and a binding child support agreement. The important operative clauses of those orders are described in the judgment of Watts J in Porter (No 2) at [3], [12]–[15].
On 11 November 2016, the wife filed an Application for Contravention to enforce the 2014 orders and the child support agreement. The husband filed a Response seeking a range of relief, including orders setting aside the 2014 orders pursuant to s 79A(1) of the Act, discharge of orders for spousal maintenance, orders setting aside the binding child support agreement, and consequential orders.
On 31 January 2018, the competing applications were set for final hearing. On the morning of the first day, the husband announced he had become bankrupt on his own petition, and in the days beforehand, had transferred all his directorships and shares in multiple corporate entities to Ms O: Porter (No 2) at [23]–[24]. The final hearing was adjourned.
On 1 February 2018, Watts J made a number of interlocutory orders by consent (“the February 2018 orders”). Relevantly, and in summary, these orders restrained the husband and Ms O in their personal capacity and as directors, trustees, appointors or authorised officers of a number of entities (including CC Pty Ltd) from doing any act or thing:
(1)to vary in any way the number of units held in any named unit trust, (including two trusts, the N Trust and the CC Trust (“CC Trust”); or
(2)to dispose of any property (including shares, real estate or any property whatsoever) presently vested in any of the named trusts except in the ordinary course of business (as defined), or causing any named trust to pay or disburse distributions.
In 2013, CC Pty Ltd was incorporated. In mid-2013, the husband became a director, secretary, and sole shareholder of CC Pty Ltd. On 22 January 2018, the husband transferred his shareholding in CC Pty Ltd to S Pty Ltd, a company under the sole control of Ms O. Consequently, as at 1 February 2018, Ms O controlled CC Pty Ltd and was bound by the orders of 1 February 2018.
As at 1 February 2018, CC Pty Ltd was also the trustee of the CC Trust. No party referred me to a copy of, or the terms of, the trust deed of the CC Trust. According to the evidence of the husband, which I did not understand to be challenged, the CC Trust is a discretionary trust. The husband was the sole appointor of the trust as at 1 February 2018 and until the trial before Watts J. However, there is no clear evidence of the nature of the CC Trust as a discretionary trust, the nature of the trustee’s discretion, the classes of beneficiaries, or whether trust property was beneficially vested in any beneficiaries.
On 5 March 2019, the wife filed a Reply seeking orders pursuant to s 79A of the Act: Porter (No 2) at [31]–[42]. Among these she sought an order that related to the N Trust, described and referred to by Watts J as follows at [32]:
The wife sought orders also that the trustees transfer to her their interest in the [N Trust] which the wife asserted operated [ST Business] at [BE Town]; [BF Business and ST Business] at [BG Town]. As discussed below, there is only vague evidence as to the current value of this asset. The wife believed it was the most significant asset in the husband’s bankrupt estate. The trustees asserted that this interest was of no significant value and although they formally opposed the order sought by the wife, they did not do so with any vigour. The trustees agreed to submit to any order made in respect of the [N Trust]. The husband asserted that the constitution of the [N Trust] did not permit the trustees’ share to be transferred to the wife.
The N Trust is a unit trust. The N Trust deed was in evidence. The husband is not and has never been the appointor. The trustee is the Fourth Respondent, N Pty Ltd (“N Pty Ltd”). N Pty Ltd was incorporated on 2 May 2013, with Mr BL (“Mr BL”) as sole director. Mr BL also owns 100 shares in N Pty Ltd. As I understand the evidence, the other shareholders of N Pty Ltd are V Pty Ltd as the trustee of the EE Trust, and CC Pty Ltd, as the trustee of the CC Trust. Between 8 November 2013 and 12 December 2017, the husband was director and secretary of N Pty Ltd. Thereafter Mr BL remained sole director. As trustee, N Pty Ltd has obligations under the trust deed to distribute the income of the trust each year, and the capital as it determines, to the unit holders in accordance with their proportional holdings of units (clause 14).
Watts J described the relationship between Ms O, CC Pty Ltd, and the N Trust at [72] as follows:
[Ms O] is the director and her company is sole shareholder of [CC Pty Ltd]. This company is the trustee of the [CC Trust] which owns 625 units out of 1713 units in the [N Trusts] (Trustee [N Pty Ltd]), operates [ST Business] (hospitality business in [BE Town]) and [ST Business and BF Business] (hospitality business in [DL Town]). The day to day controller of these businesses is the husband’s cousin, [Mr BL], who was not called as a witness in these proceedings.
The final hearing then took place over several days between March and November 2019 (“the 2019 hearing”). By the time the final hearing took place, most of the husband’s claims had been dismissed and the wife had become the applicant because the issues raised by her reply remained to be determined: Porter (No 2) at [24]–[31].
As noted, on 25 June 2020, Watts J delivered judgment. He made a range of orders which set aside the 2014 orders pursuant to s 79A(1) of the Act, and then made fresh property adjustment orders pursuant to s 79 (“final orders”). It is unnecessary to set out the detail of these orders in full. I will refer to aspects of the orders as necessary in the course of these reasons.
However, it is important to stress that Order 26 specifically dismissed “all other applications”, confirming that the proceedings were concluded after the exercises of statutory discretion pursuant to s 79A and s 79.
His Honour approached the division of the parties’ property using a two pool approach, separating divisible assets (Pool 1) and non-divisible assets (Pool 2). He acknowledged that the evidence did not allow him to find values for a number of assets and liabilities. In the ultimate result, the wife received 82 per cent of the available property, as found by Watts J, as a just and equitable outcome.
The property received by the wife included WX Street, Suburb E, upon discharge of a mortgage by payment of $315,000 to the husband’s trustees, half of the husband’s superannuation, release of the entire balance of a controlled monies account to the wife, the transfer of several interests in companies and trusts to the wife, child support departure orders in favour of the wife, and the dismissal of the husband’s application to discharge existing spouse maintenance orders.
Order 10, which is central to this judgment, was in the following terms:
[Ms O] (and in the event she is not the sole director), the directors of [CC Pty Ltd] and, if necessary, the Trustees and the husband, do all things and sign all necessary documents to transfer to the wife all interest held by any of them in:
•The [CC Trust] which holds the units in the [N Trust];
•[N Pty Ltd];
•[CC Pty Ltd].
The reasons underlying Order 10 appear at [209]–[217], [315] of the final judgment as follows:
209. The second asset which was treated as a divisible asset at the hearing are the units in the [N Trust]. [N Pty Ltd] is trustee of the [N Trust]. [Mr BL], the husband’s cousin, is the sole director and shareholder of the trustee company, although the registered office of the company was the husband’s business premises at [MN Street]. It operates a hospitality business in [BE Town] known as [ST Business] and is developing a hospitality business in [DL Town] operating as [ST Business at BF Business]. The [CC Trust] hold 625 out of 1,713 units in the [N Trust].
210. The trustees have indicated, so far as they are concerned, these units can be transferred to the wife.
211. The husband has raised issues as to whether or not the constitution of that trust would allow the husband’s shares in that trust to be transferred to the wife without the consent of the other unit holders, but the husband’s general assertion by way of submission in that regard was not the subject of any testing of the evidence. It appears that the husband’s interests in the [N Trust] was held indirectly by him as a result of his interest in the [CC Trust]. The trustee of that trust is [CC Pty Ltd] which is currently controlled by [Ms O]. If that is so then an order could be made for [Ms O] to cause [CC Pty Ltd] to transfer all of its interest in the [CC Trust] to the wife and if necessary, also require the trustees to do so in the event that the interest in that trust has vested in them. In those circumstances, no change in the ownership of the units in the [N Trust] would be occasioned. In the event that the [N Trust] did in any event provide hurdles to the wife in obtaining anything from the [N Trust] then I am not in a position to resolve those difficulties.
212. The husband’s evidence was that the husband’s cousin doesn’t want the wife involved in the [N Trust] and that the current lease in [BE Town] ran out in two years from when he gave that evidence and won’t be renewed because the husband’s cousin doesn’t want the wife involved.
213. The trustees place no value on this asset whereas the wife believes, although has not been able to establish, that this asset is of significant value.
214. The wife points to the fact that as part of the settlement with the builders, they took an 8 per cent interest in the [N Trust] for a sum of $320,000 which would have valued the [N Trust] at that time in the sum of $4 million overall and the interest held by the [CC Trust] at around $1,459,428 ($4,000,000 x 625/1713). How the current COVID pandemic has affected any value in these businesses is unknown.
215. The trustees point to the fact that the liquidator of [V Pty Ltd] ([Mr BV]) sold 150 units to an entity controlled by the husband’s cousin [Mr BL] for $25,001. On that basis 625 units would be worth $104,166 (625 x 25,000/150)
216. There is insufficient evidence to say what is the value, if any, of the units in the [N Trust].
217. The wife complains that she did not receive full and frank disclosure in relation to the operations of the [N Trust] and I accept that is so. I find that the husband was in a position to provide evidence as to the actual value of the units held in the [N Trust] and failed to do so. The husband and [Ms O] holidayed with the husband’s cousin in January 2019 and I conclude that the husband could have provided a more fulsome account of the operations and finances of the [N Trust] had he chosen to do so.
…
315. The trustees have conceded that the wife may have any interest that vests in the trustees in the units in the [N Trust]. The trustees are of the view that that interest is not worth them chasing it and might be a maximum amount of $104,166. The wife thinks it might be worth much more ($1,439,428). It is impossible to say if it is currently worth anything. The wife gave up any interest that she had in the [N Trust, N Pty Ltd, the CC Trust and CC Pty Ltd] when she entered into the 2014 arrangements. The wife has made no direct financial contribution to the development of this asset since 2014.
The evident purpose of Order 10 was to bestow upon the wife any interest of the husband, Ms O, or the husband’s trustees in the CC Trust, and the two named companies. This could only mean such interest as was held at the date Order 10 was made, namely, 25 June 2020, on the basis of Watts J’s understanding of what those assets were or may be.
Several other observations should be made about Order 10. As already pointed out, CC Pty Ltd and N Pty Ltd are, and were as at 25 June 2020, trustee companies. Neither owned any assets in their own right. Any interest held in them by Ms O, the husband, or his trustees in bankruptcy, could only be shareholdings, and possibly corporate offices, such as director or secretary.
Otherwise, Order 10 requires the transfer of all the “interest” of Ms O and any other directors of CC Pty Ltd, or the husband and his trustees in bankruptcy, which are “held” in the CC Trust. The nature of the interest held by any of these parties in this trust was not made clear by the parties. There was no evidence which made clear exactly what assets were held in the trust as at 25 June 2020. Order 10 does not transfer to the wife any trust assets held by the trust. It appeared from the wife’s submissions and some of her evidence that she understood Order 10 to require the transfer to her of the 625 units held by CC Pty Ltd in the N Trust. I do not think this is correct. Paragraph 211 of Watts J’s judgment suggests Order 10 was not intended to bring about the transfer of ownership of the 625 units in the N Trust. On the contrary, it was intended to benefit the wife without a change of ownership in those units, by giving her control of CC Pty Ltd, which continued to hold the units as trustee for the CC Trust.
No other “interest” of the husband, his trustees in bankruptcy, or Ms O was identified by Watts J as existing in the CC Trust as at 25 June 2020. There was no evidence which made clear whether the CC Trust had a closed and identified class of beneficiaries, including the husband, in whom a proprietary interest in trust assets was vested. If, as the husband says, it is a discretionary trust of which the husband was one among a class of discretionary objects, on established principles, his only proprietary interest in the trust is an equitable chose in action for due administration of the trust and to be considered as an object of the exercise of the trustee’s discretion; there is no beneficial interest in the trust assets: Gartside v Inland Revenue Commissioners [1968] 1 All ER 121 at 134; Kennon v Spry (2008) 238 CLR 366 at [47], [50]; Public Trustee v Smith (2008) 1 ASTLR 488 at [105], and my discussion in Dovgan & Dovgan [2021] FamCA 306 (“Dovgan”) at [273] ff.
The husband was however, the sole appointor of the CC Trust. In Scaffidi v Montevento Holdings Pty Ltd (2011) 6 ASTLR 446 at [151], Murphy JA and Hall J, in relation to the interest of an appointor under a trust instrument, pointed out:
If, however, on the proper construction of the instrument, the power of the appointor to remove and appoint trustees may be exercised for the purpose of controlling the trust estate for the appointor’s benefit, the trust property may be regarded, at least for certain statutory purposes, as effectively owned by the appointor, or as property in which the appointor has a contingent interest.
(Citations omitted)
However, Watts J made no finding that the trust assets held by CC Pty Ltd were property “of” the husband or “property of the parties to the marriage” for the purposes of Part VIII of the Act. He did not, and was not asked to, consider the value or importance of the equitable chose in action held by the husband in the CC Trust.
It seems to me that Watts J, in making Order 10, intended that the wife receive control of an indirect interest in the 625 units of the N Trust, enjoyed by the husband, as explained at [211] of the judgment, on the basis that the husband had no proprietary interest directly in the trust assets held by CC Pty Ltd as trustee of CC Trust. He did not intend the wife to herself to own the units.
There was no dispute that in compliance with Order 10, on 24 July 2020, the husband resigned as appointor, and on 12 September 2020 the wife became the appointor of the CC Trust. The wife also received the shareholding in CC Pty Ltd from a company controlled by Ms O, who also resigned as director. Therefore, as I understand it, the wife is currently the sole director and shareholder in CC Pty Ltd, and the sole appointor of the CC Trust. As a result, the wife controls, but does not own, 625 units in the N Trust held by CC Pty Ltd. However, there is no evidence that she has become a beneficiary of the CC Trust, for example, by being included in the class of discretionary objects. Nonetheless, I will assume that as appointor, the wife has the power to include herself as a beneficiary.
It was not argued by the wife that either the husband or Ms O were obliged to take any further step with regard to N Pty Ltd to comply with Order 10.
It is also important for the purposes of this judgment, to take account of the basis for the fresh exercise of the s 79 discretion by Watts J in the final orders to reach a just and equitable outcome in the final judgment. In assessing contributions, Watts J concluded, relevantly, at [332]:
As a result of the contribution findings the wife would receive 70 per cent of the known value of assets in pool 2 which is of the value of approximately $1,786,000. The wife will also take all the interest in CC Trust which holds 625 units in the [N Trust] which the trustees have assessed as having little value. The wife will be also liable for an unknown tax debt in relation to the disposition of the sale of properties which have led to monies being placed in the controlled monies account.
His Honour then stated his conclusions about Pool 1 as follows:
370. In relation to pool 1, on a contributions basis, the trustees (on behalf of the husband’s unsecured creditors) retain an equity in [Suburb E] in the sum of $315,000. The wife will receive the units in the [N Trust]. The trustees will be able to pursue any potential recovery of preference payment to the Commonwealth Bank and will be responsible for the payment of their own fees and distribution of any remaining amount (small that it will be) to the large amount of the husband’s unsecured creditors. In those circumstances I find that it is not appropriate to make any further adjustment to pool 1 pursuant to s 79(4)(d) – (g) of the Act.
371. In relation to pool 2, taking into account the factors that have been discussed above, I find that it is appropriate to make a further adjustment in favour of the wife of 12 per cent.
Watts J was aware that there may be unresolved issues arising out of the transfer of interests in the CC Trust. At [374] he said:
I am mindful that, given the history of this matter, s 81 of the Act encourages a s 79 order which is as final in its terms as it can be. However in this case, there are limits to which finality can be achieved. It is appropriate to give the wife an opportunity to retain the [Suburb E] property (notwithstanding the lack of evidence of the pathway by which she may do that). I acknowledge that the wife taking control of the [CC Trust] may lead to other litigation elsewhere involving the husband’s cousin but there is little I can do to guard against that possibility.
The just and equitable adjustment of Pool 2 was found by Watts J as follows at [379]–[380]:
379. I acknowledge that doing justice to the wife in the circumstances of this case has been made particularly difficult by the complex nature of the husband’s financial arrangements, the opaqueness of many of those arrangements and the doubt I have as to whether I have got a complete picture of the husband’s financial circumstances. In the end the distribution of assets, as set out in the table in the next paragraph, achieve what is effectively a 82/18 split and is the most appropriate and just and equitable property settlement order possible.
380. A division of assets with known values in pool 2 will accordingly be as follows:
Wife
65 per cent of equity in Suburb E
$585,000
Partial property order
$200,000
Artwork and jewellery
$120,000
Controlled monies account
$738,859
50 per cent of the husband’s superannuation interests
$453,750
$2,097,609
Husband
50% of the superannuation interests
$453,750
It should also be emphasised that it is clear from the judgement of Watts J that Order 10 was based on the underlying factual conclusion that the interests of Ms O, the directors of CC Pty Ltd, the husband and his Trustees in the N Trust and the CC Trust, were of little or no value. As made clear by [217] of his judgment, Watts J took account of the fact that the husband had a close relationship with Mr BL and he failed to provide disclosure and evidence about the financial position of the N Trust. Therefore, the just and equitable outcome determined by Watts J, which delivered 82 per cent of the assets to the wife, was comprised of the range of other assets, not the value assets of the CC Trust, the value of any equitable chose in action owned by the husband as a discretionary object of the CC Trust, or in particular the value of the units in the N Trust. Watts J reached his conclusion as to the s 79(2) question on this basis.
THE WIFE’S APPLICATION
On 13 August 2020, the wife filed the relevant Application in a Case which sought a number of orders, but substantially sought orders pursuant to s 106B of the Act. It included interlocutory relief that N Pty Ltd be restrained from dealing with CC Pty Ltd’s 625 units (“The Units”). The wife apparently sought this order because she believed that the 625 units had been dealt with contrary to her rights. Watts J ordered an interlocutory restraint however, it transpired that there had been no dealings with the 625 units. On 30 August 2020, the wife agreed to the discharge of this interlocutory order, although she contends she was misled into doing so.
The substantive orders which the wife seeks are in the following terms:
6. That pursuant to section 106B of the Family Law Act 1975 (Cth), the assignment of the registered trade marks [ST Business] (Australian Trade Mark Number …), [ST Business] (Australian Trade Mark Number …) and [ST Business] (Australian Trade Mark Number …) from [CC Pty Ltd] ACN … ATF [CC Trust] to [CA Pty Ltd] ACN … ATF [CA Trust] registered with IP Australia on … 2018 be set aside.
7. That pursuant to section 106B of the Family Law Act 1975 (Cth), the assignment of the registered trade marks [ST Business] (Australian Trade Mark Number …), [ST Business] (Australian Trade Mark Number …) and [ST Business] (Australian Trade Mark Number …) from [CA Pty Ltd] ACN … ATF [CA Trust] [DG Pty Ltd] ACN … ATF [DG Trust] registered with IP Australia on …2019 be set aside.
CA Pty Ltd (“CA Pty Ltd”) is the Fifth Respondent, and DG Pty Ltd (“DG Pty Ltd”) is the Seventh Respondent to the wife’s application. Mr BL is the Eighth Respondent and is a director of both CA Pty Ltd and DG Pty Ltd.
The property the subject of the assignments is comprised of three trademarks as identified in the wife’s orders. They can be referred to collectively in this judgment as the “trademarks”. Although the evidence was not very clear, it did not seem to be in issue that the trademarks are used for the purpose of, or are connected to the operation of the hospitality business in BE Town known as “ST Business” by the N Trust.
It was clear that the existence of the trademarks and the assignments formed no part of the evidence before Watts J. Their existence was not known to Watts J in reaching his conclusion as to a just and equitable outcome at the time the final orders were made.
There is also no dispute that as at 25 June 2020, when Order 10 was made, CC Pty Ltd, subject to the wife’s contentions about sham transactions, owned none of the trademarks, or at least held none in its possession.
The wife seeks to impugn both assignments as “shams” or pursuant to s 106B of the Act, because, according to her argument, the assignments were part of a collusive arrangement between the husband, Ms O, and Mr BL intended to, or irrespective of intention, likely to defeat anticipated orders of this Court. The wife then seeks consequential orders for the relevant parties to take the necessary steps at their own cost to restore the trademarks to CC Pty Ltd. The wife explained the basis of her application as follows in final submissions:
[MS PORTER]: Collusion between all the parties and their solicitors, and I do put their solicitors in there because Family Law litigants are tired, your Honour, and I know a lot of women who can’t get out of bed some days, including myself, and it’s time that the court – and I say this respectfully because I’m not suggesting it’s you, but it’s time that the court really started to crack down on who is disclosing what and how much time is wasted in these in-court proceedings, and there’s just an expectation that everyone does what is right, not going away, as I said, and researching reasons why they shouldn’t have to disclose something because their lawyer said something. It’s just – it has got to stop. It has just got to stop.
And in relation to – I don’t think it’s – it would be fair in any way to find me responsible in the circumstances, given it was defended, given they had the same lawyers. For me to be responsible for paying costs of any party to these proceedings at all based on matters that weren’t disclosed, that I had to find out myself, that I had to try to extract, as I said, information from by order of the court. [Ms O] was required to produce that information and there was an omission of the matters, being the trust deed that relates to this application before the court now.
There are many things that have happened since final judgment was delivered that I have uncovered. They couldn’t possibly even be all included in here. One of the other cases, sorry, that, in considering my interests in relation to the competing interests of a third party, interested party or a bona fide purchaser, what has to be considered is state of the matrimonial pool at the time. I was left with a $1.8 million debt on my home, your Honour. I wasn’t left with an unencumbered asset. I have spent 600,000 on legal fees, or been charged 600,000 on legal fees. I have done everything I can, and it’s hard to even find representation any more because, I have to be frank with you, [Ms SS] picks up the phone to every new lawyer I get, denigrates me so badly that I can’t get representation in this state in the Family Court. That is why I’m in the situation I’m in.
So I think enough is enough, really, and it would be nice to have a win, because I even read the notes on [Ms O]’s iPad, which say, “[Ms Porter] never wins anything,” and I’m asking your Honour not to consider the split that Watts J gave me in the end because 82 per cent of not much at all is not much at all. I think we have to – what I ask you to do is, when you are by yourself and you are thinking about this case, think about the conduct of the parties and that your Honour really understands how hard I have tried to bring all the information before the court. I’m not asking your Honour for anything more than what – the access I’m entitled to in terms of a section 79 claim, and that was taken from me and the job – and the onus has been on me at all times to uncover the – I didn’t even get to the other things that I’ve uncovered, as I said.
It has been placed on me to try and work out the asset pool. Eve in Dr [Porter]’s in the Family – in the final hearing, he said that the business was worthless, the [N Trust] business was worthless, and you will see from my affidavit in – I think it’s the 20 October affidavit, that [Mr BL] has just recently rejected an offer for $1.85 million for the worthless asset that we’ve been told about.
(Transcript 17 November 2021, p.88 lines 6–46 to p.89 lines 1–5)
It was clear the wife felt she had been tricked and disrespected by the husband, Ms O, and the husband’s trustees, and she is the victim of a collusive campaign involving all those parties and their lawyers. She clearly thinks the processes of the Court have been abused by the husband and other respondents, by significant non-disclosure which suppressed knowledge of the trademarks, and possibly other assets. As a result of her continued efforts, she has extracted information which she believes confirms her suspicions about collusion. It appears she also believes she did not receive a proper entitlement under the judgment of Watts J. It seems clear that she holds firm to the view that there are more assets to which she is entitled and there has been a miscarriage of justice by reason of non-disclosure. She considers the outcome before Watts J to be onerous, because she has a $1.8 million debt on her home and “82 per cent of not much at all is not much at all”. The wife told me she was emotional because her home loan is $153,000 in arrears. In short, the wife does not accept the outcome before Watts J is just and equitable.
In short the wife, because CC Pty Ltd once held the trademarks, by reason of Order 10 now believes she is entitled to orders having the effect of returning the trademarks to CC Pty Ltd, and thereby gain control of them to be used by her as financial leverage against the husband and his alleged co-conspirators. As I understand it, the wife argues they should have formed part of her entitlement pursuant to s 79 of the Act. The wife argues that the trademarks have value. Therefore, if they return to CC Pty Ltd as assets, she will be able to realise their value because Order 10 has placed them in her control. She made clear in submissions that if the trademarks were returned to CC Pty Ltd and her control, she perceives Mr BL or his interests would have to pay her to get them back (Transcript 17 November 2021, p.98 lines 38–41). In this way, the wife seeks to improve the property settlement ordered by Watts J.
In her evidence and submissions, as the extract above at [43] demonstrates, the wife made a range of serious allegations generally against various solicitors, but specifically the husband’s solicitors, RR Lawyers (“RR Lawyers”), to the effect that they participated in the collusive and fraudulent conduct of the husband, Ms O, and others. None of those allegations were pursued by the wife at the hearing before me. RR Lawyers played no part in the hearing as a separately represented party. The wife sought no relief against RR Lawyers in her minute of proposed orders, although she foreshadowed an application for costs against the firm.
I have given close and careful consideration to the evidence and the arguments of the wife. For the reasons which follow, I conclude the wife’s application fails.
Section 106B
Section 106B of the Act is in the following terms:
Transactions to defeat claims
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1A) If:
(a) a party to a marriage, or a party to a de facto relationship, is a bankrupt; and
(b) the bankruptcy trustee is a party to proceedings under this Act; the court may set aside or restrain the making of an instrument or disposition:
(c) which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the bankrupt; and
(d) which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1B) If:
(a) a party to a marriage, or a party to a de facto relationship, is a debtor subject to a personal insolvency agreement; and
(b) the trustee of the agreement is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c) which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the debtor; and
(d) which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2) The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3) The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4AA) An application may be made to the court for an order under this section by:
(a) a party to the proceedings; or
(b) a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c) any other person whose interests would be affected by the making of the instrument or disposition.
(4A) In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).
(5) In this section:
"disposition" includes:
(a) a sale or gift; and
(b) the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
"interest" :
(a) in a company includes:
(i) a share in or debenture of the company; and
(ii) an option over a share in or debenture of the company (whether the share or debenture is issued or not); and
(b) in a trust includes:
(i) a beneficial interest in the trust; and
(ii) the interest of a settlor in property subject to the trust; and
(iii) a power of appointment under the trust; and
(iv) a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and
(v) an interest that is conditional, contingent or deferred.
It is important to note that the precursor to s 106B was s 85 of the Act. In Kramer v Ward (2017) FLC 93-817 (“Kramer”) at [158], the Full Court pointed out:
Section 106B was materially altered by amendments to the Act in 1983. The precursor to its former iteration, s 85, applied only to “proceedings under this Part ... [in respect of an] anticipated order in those proceedings for costs, maintenance or the declaration or alteration of any interests in property...” These amendments make plain that the provision in its amended form applies to transactions likely to defeat any order of the court in proceedings of any kind under the Act. That includes an order incidental or consequential to a s 90 declaration.
Subject to the differences identified by the Full Court, decisions of this Court given under s 85 thus remain relevant to the construction of s 106B.
It is well established that an applicant under s 106B must obtain a favourable answer to four central questions:
(1)Are there “proceedings under the Act?”;
(2)Is there an “instrument or disposition?”;
(3)Is the instrument or disposition made or proposed to be made by or on behalf of a party, or by direction of a party, or in the interest of a party?; and
(4)Is the instrument or disposition:
(a)made or proposed to be made in order to defeat an existing or anticipated order in the proceedings; or
(b)irrespective of intention, likely to defeat any such order?
The fourth question requires consideration of intention, or, irrespective of intention, the impact or likely impact of the impugned disposition. There are two situations. To fall within the first, it is necessary for the applicant to establish the existence of intention on the part of the party disposing of the asset to defeat an existing or anticipated order. To fall within the second, it is not necessary for the applicant to establish intention on the part of the party disposing of the asset. Rather, the requirement is to establish the likelihood of an existing or anticipated order being defeated by the disposition: In the Marriage of Health (1983) FLC 91-362 at 78,425 per Nygh J; In the Marriage of D (1984) FLC 91-593 at 79,777 per Gee J; Bourke v Bourke (Final Hearing Costs) (2010) 43 Fam LR 139 at [45]; Haseloff & Kormann [2013] FamCA 1019 at [58]; Riemann & Riemann (No 3) [2017] FamCA 911 at [39]–[46].
Since In the Marriage of Whitaker (1980) FLC 90-813 (“Whitaker”) (at 75,129), it has been clear that the disposition must be shown to have the direct effect, or the likely direct effect of defeating an existing or anticipated order “in the sense that if that disposition had not taken place the order would have been effective”. If the order “was, or would in any event have been, defeated by other supervening circumstances, it cannot be said that the order was defeated by the disposition or was at any time likely to have been defeated by it.”
In Gould and Gould and Swire Investments Ltd (1993) FLC 92-434 at 80,433–4 the Full Court held that:
... an applicant ... may establish [the s 106B claim] by demonstrating that the pool of property of the parties has been diminished by the making of the instrument or disposition in question to an extent that is likely to have an impact on the anticipated orders.
If the applicant demonstrates an affirmative answer to the four questions, the Court’s discretion in s 106B is enlivened. The question then is whether the discretion should be exercised in the manner sought by the applicant.
In Proceedings under the Act
The first question is whether the wife’s application pursuant to s 106B, has been made “in proceedings under the Act”. Often, this question will be readily answered in the affirmative. But, if this question is answered in the negative, the jurisdiction is not engaged and discretion in s 106B is not enlivened. This case raises a number of surprising difficulties relating to this question.
The term “proceedings” is broadly defined in s 4 of the Act:
"proceedings" means a proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding.
However, this definition does not assist greatly in determining whether an application pursuant to s 106B has been made “in” proceedings. It is well settled that proceedings under s 106B (or the repealed s 85) cannot stand alone. For example, Nygh J, in his decision in Whitaker dealt with a situation in which orders had been made for property settlement and child maintenance proceedings by the Supreme Court of NSW under repealed legislation before the commencement of the Act. The wife later brought proceedings under the Act for the revival and increase of a child maintenance order. Nygh J was clear that there must be in existence proceedings “under Pt VIII of the Act before s 85 can come into operation” which proceedings “must be proceedings under Pt VIII, other than proceedings under s 85…”, which cannot “stand by themselves but must be ancillary to proceedings already on foot or completed under Pt VIII of the Act”. The wife seemed to understand this. She stated during her cross examination of the husband: “it’s a requirement of section 106B application that there be proceedings before the Family Court at that time” (Transcript, 17 November 2021, p 21 lines 40–42).
The existence of an application “in” proceedings under the Act is a jurisdictional fact, in the sense that without the existence of such an application, there is no discretion or power enlivened under s 106B to set aside the impugned disposition. It is the criterion “satisfaction of which enlivens the power of the decision-maker to exercise a discretion”: Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135 at [28]; Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120 at [43].
No attention was given by the parties in submissions to the question of whether there existed proceedings under the Act in this Court in the sense required by s 106B. It appeared to be assumed by the parties that the wife’s application was “in proceedings under the Act”. But an assumption by the parties does not give the Court jurisdiction. Jurisdiction is a question about which the Court must be satisfied itself. It is the “first” duty of the Court to consider whether it has jurisdiction: Hazeldell Ltd v Commonwealth (1924) 34 CLR 442 at 446; Public Service Association of South Australia Inc v Industrial Relations Commission of South Australia (2012) 249 CLR 398 at [54]; New South Wales v Kable (2013) 252 CLR 118 at [34].
The necessary proceedings must also be proceedings in the Court in which the application is made. This Court is a court created by statute. On 1 September 2021 the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the new Act”) commenced. Section 8 continues the existence of the Family Court of Australia, but under the name “The Federal Circuit and Family Court of Australia (Division 1)” (“Division 1”). Section 9 of the new Act provides that Division 1 is a “superior court of record” and “a court of law and equity”. The Federal Circuit Court of Australia is also continued in existence by s 8, but under the name “The Federal Circuit and Family Court of Australia (Division 2)” (“Division 2”). Division 2 is an inferior court. Thus Division 1 and Division 2 are entirely separate Courts, albeit constituted by the same statute. Division 1 exercises the original jurisdiction specified in s 25 of the new Act, which includes jurisdiction conferred by other statutes. Division 2 holds original jurisdiction in a range of matters, including with respect to matters which may be instituted under the Act, conferred by s 132 of the new Act. However, little or no jurisdiction is now conferred on Division 1 directly under the Act. Rather, Division 1 only has jurisdiction in proceedings which have been transferred to it from Division 2, pursuant to ss 51 or 149 of the new Act, or conferred upon it directly by another federal statute. The importance of this matters for this judgment and will become apparent shortly.
As already pointed out, when the wife filed her Application in a Case on 18 August 2020, Watts J had delivered his final judgment on 25 June 2020. By reason of this final judgment, the powers of the Court under s 79A and s 79 were exhausted. There was, and could only have been, one single exercise of power under both sections, which power was exhausted once exercised: Mullane v Mullane (1983) 158 CLR 436 at 440; Sfakianakis & Sfakianakis [2018] FamCAFC 185 at [26]. This is so even if the single exercise of power may be comprised of a succession of orders until all known property of the parties is dealt with: Gabel & Yardley (2008) FLC 93-386; Strahan v Strahan (Interim Property Orders) (2011) FLC 93-466 at [108]–[113]. The High Court has recently made clear that traditional concepts of finality or “merger” of rights operate in relation to final orders made under s 79(1) or s 74(1) in the exercise of statutory powers; those powers are then exhausted, so as to support well known types of “issue” or “claim” estoppel: Clayton v Bant (2020) 62 Fam LR 16 at [26] per Kiefel CJ, Bell and Gageler JJ. Consequently, after the decision of Watts J which dealt with all known property, this Court at first instance was functus officio, irrespective of any appeal, from the date of the final orders, although there remained the possibility of proceedings for enforcement of the final orders. In any event, there was no appeal by any party.
According to her evidence, the wife has made a number of subsequent applications against the husband, apart from the application which is the subject of this judgment. She has applied for this Court, Division 1, to issue Third Party Debt Notices for payment by the husband of unpaid spousal maintenance. This is an administrative process carried out through the Registry pursuant to Div 11.1.4 of Ch 11 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), not “proceedings under the Act”. Indeed, the wife made it clear in her affidavit of 14 September 2020 that there were no current proceedings in this Court by her to enforce the husband’s obligations under the final orders of Watts J to pay spousal maintenance (paragraph 21). She has brought no other proceedings of a substantive kind under the Act to set aside or otherwise disturb the final orders, for example, pursuant to s 79A of the Act.
Therefore the only “proceedings” before this Court, Division 1, is the wife’s Application in a Proceeding itself, seeking to rely upon s 106B. Subject to the following, this application having been filed in proceedings which have been completed in Division 1, cannot be made “in proceedings under the Act” in this Court, because the only relevant proceedings are determined and completed.
However, as appears from the decision of Nygh J in Whitaker, there is authority that s 106B, or its predecessor s 85, may be invoked in respect of “completed” proceedings. At 773 in Whitaker, Nygh J said:
An interesting question which has not yet arisen and was not really argued before me is whether the reference to “proceedings under this Part” include proceedings instituted and completed prior to the commencement of this Act under the repealed Act, as was the case here with the original proceedings for property settlement, child maintenance and costs. In my view s 85 does include such proceedings. Sub-section (1) refers to “an existing order … in those proceedings” by which is clearly meant the “proceedings on foot” the section envisages that proceedings may actually have been completed. An “existing order” must by virtue of s 3(2)(c) include orders made before the commencement of the Act. Admittedly on a literal interpretation such orders would not have been made “in proceedings under this Part”. I am encouraged by the reasoning of Mason J in Taylor v Taylor (1979( 5 Fam LR 289; 25 ALR 418 (Fam LR at 298) to conclude that “proceedings under this Part” should not be construed restrictively but as including proceedings which would be proceedings under Pt VIII had they been instituted under this Act. Otherwise, as Mason J pointed out in relation to s 79A, a most embarrassing gap in the legislation would ensue which can hardly have been the intention of Parliament. I am further strengthened in my conclusion by the analogous reasoning of Ellis J in In the Marriage of Rodway (1979) 5 Fam LR 585; [1979] FLC 90-722 in relation to s 105(3) of the Act.
The result is that the applicant [under s 85] can rely not only on proceedings instituted by her in September 1979 [for revival and increase in the child maintenance order] but also point to the proceedings previously instituted by her under the repealed Act.
Nygh J’s reasoning in Whitaker recognised that the reference to an “existing order” in s 85 could, in the circumstances of that case, only refer to orders made under repealed legislation in completed proceedings. He distinguished the earlier decision of Tonge J in In the Marriage of Page (1979) 4 Fam LR 663 (“Page”), which suggested the relevant proceedings must be on foot. The view expressed by Nygh J in Whitaker was plainly directed to a statutory interpretation designed to avoid an inconvenient lacuna between repealed legislation and the Act, as it then was.
These early authorities are not entirely consistent. Treyvaud J in the slightly later decision of In Marriage of Cullen (1980) FLC 90-899 (“Cullen”) also cited and followed Tonge J in Page, holding the relevant proceedings must be on foot at the time when the application under s 106B is made and when the Court comes to exercise the discretion under s 106B. At 75,667, he said:
The authorities interpreting s 85 merely continue, and apply, the principles to which I have adverted; although each is the decision of a single judge, and thus of merely persuasive authority, their ratio is strong and clear, namely that an offending transaction may anticipate proceedings and orders, but it cannot be set aside under s 85 unless there are on foot proceedings seeking orders which the transaction anticipated, and was designed to defeat. See Page and Page (1978) FLC 90-525 at 77,782 per Tonge J.; Rickie and Rickie (1979) FLC 90-626 at 78,249 per Pawley S.J.; Whitaker and Whitaker (1980) FLC 90-813 at 75,128 per Nygh J.; Menz and Menz (1980) FLC 90-852 per Marshall S.J. The relevant wording of s 85(1) is not difficult to interpret. The words “In proceedings under this Part'', when coupled with the words “in these proceedings'', in my view admit of no other interpretation than that as a prerequisite to the exercise of the power contained in s 85(1) there must be in existence, at the time when the application to exercise that power is made, an application seeking orders which the offending transaction is designed to defeat.
In Cullen, as Treyvaud J pointed out, there were no proceedings on foot for alteration of property interests, nor for the maintenance of the husband, in which the Court could exercise the s 85 power to set aside the impugned transaction between wife and the intervener. Treyvaud J held that in those circumstances he could not exercise the power contained in s 85.
In the absence of argument, this is not the place to express a view about, or attempt to reconcile, the apparent tension between the views of Nygh J in Whitaker about the ambit of the expression “existing order” reaching to completed proceedings and the necessity for an application pursuant to s 106B to be made “in proceedings under the Act”, being proceedings on foot. Later authority has not resolved the apparent difference of view between Whitaker and Cullen, but in relation to completed proceedings, the Full Court has applied a concept of “appropriate relationship” between the completed proceedings and an application pursuant to s 106B (or s 85).
In In the marriage of Kwon (1993) FLC 92-379 (“Kwon”), notwithstanding the dismissal of all applications and cross-applications of the husband and interveners, there remained on foot the two cross-applications of the wife, for enforcement. The Full Court pointed out both these applications were “proceedings under” the Act. There were therefore proceedings on foot. The wife made an application under s 85. The Full Court held that this application bore an “appropriate” relationship to the completed property proceedings by reason of the enforcement proceedings contained in the wife's cross-applications.
The decision in In the Marriage of Yunghanns (1999) FLC 92-836 (“Yunghanns”) at [119]–[120] concerned very complex facts, but the jurisdiction to make certain interlocutory orders was a central question. As the source of power, the primary judge had relied upon, inter alia, s 80 and s 85 of the Act, as it then stood. The Full Court explained that s 85 is not an independent source of jurisdiction:
119. As for s 85, it too is not an independent source of jurisdiction, but a section which expands the jurisdiction of the Court to enable it to make orders, even affecting third parties’ rights, in cases where there are already on foot or completed other proceedings under the Act within the Court’s primary jurisdiction: In Marriage of Cullen (1980) 50 FLR 161; In Marriage of Kwon (1993) 113 FLR 79.
120. However, for s 85 to be available as a source of jurisdiction in relation to completed proceedings there must be “an appropriate relationship” between the s 85 proceedings and those completed proceedings: (Kwon at 81-82). In the context of this case, such an appropriate relationship could only exist if the s 85 proceedings can properly be categorised as proceedings to enforce or to aid in the enforcement of the orders made in the completed proceedings, which again begs the very question which was in issue before her Honour, and the mere assertion of s 85 as a source of jurisdiction cannot answer that question.
The decision in Yunghanns therefore establishes that a s 106B application may be sustained if it bears the appropriate relationship to completed proceedings, or can itself be characterised as application for the enforcement of final orders made in completed proceedings.
More recently in Kramer, the Full Court dealt with a situation in which a judge of the then Federal Circuit Court made final orders. The final orders included a declaration pursuant to s 90RD of the Act, that a particular de facto relationship did not exist, and a consequential order releasing to the putative de facto wife, funds held in the trust account of the solicitor for the putative de facto husband. There was no dispute that the trust fund was made up of the balance of the proceeds of sale of a property owned solely by the wife before any relationship arose. On appeal, the Full Court held the trial judge had juridical power to make the final consequential order for the release of the trust funds to the wife, as consequential upon his exercise of the jurisdiction under s 90RD of the Act (at [107]).
However, after the final orders were made, the solicitor released the trust funds to the husband. The wife then brought an application seeking enforcement of the final orders of the trial judge, including payment to her of the trust funds. The trial judge made orders for the husband and the solicitor’s firm to be jointly and severally liable for the amount released to the husband and to pay an account equivalent to the amount released to the husband into the wife’s account by direct deposit. The trial judge did not identify any specific jurisdictional basis for these orders. The solicitor argued that the trial judge had no power to make such orders, having made final orders. But the Full Court held this was not fatal to the orders and s 106B was available, not to provide jurisdiction for the order in general terms that the solicitor be “jointly and severally liable” for the full amount disbursed, but it was a juridical source of power in respect of any portion of the trust funds which the solicitor received for himself, whether for legal fees or otherwise (at [170]). In my view, the use of s 106B in Kramer was held to be available to enforce the clear order of the primary judge to release the funds to the wife, not the husband.
In reaching this conclusion, the Full Court cited Whitaker at [159] saying:
In Whitaker, In Marriage of (1980) 5 Fam LR 769; Nygh J considered that “proceedings under the Act” was not confined to current proceedings but was broad enough to encompass completed proceedings.
Therefore, in a long line of authority stretching back more than forty years, it has been made clear that an application under what is now s 106B of the Act cannot stand alone and must be made in existing proceedings under the Act. The only recognised broader interpretation of the phrase, “In proceedings under the Act” is where subsequent applications under s 106B bear an “appropriate” connection to completed proceedings, so as to be made “in” those proceedings.
The decisions in Whitaker, Kwon, and Kramer are all consistent in demonstrating the appropriate connection between completed proceedings and a s 106B application is generally limited to proceedings to enforce the final orders made in the completed proceedings, or where the s 106B application itself can be characterised as proceedings to enforce or to aid in the enforcement of the orders made in the completed proceedings (Yunghanns; Kramer). Since the Court is functus officio upon final determination of proceedings at first instance, and the Full Court has made clear in Yunghanns, following first instance decisions such as Cullen, that s 106B (s 85), like s 80, is not an independent source of jurisdiction, it is difficult to conceive of any other type of proceedings which could be said to be relevantly appropriately connected to the completed proceedings.
As pointed out, the wife did not appeal the orders of Watts J, nor has she brought any application pursuant to, for example, s 79A(1)(a) which is specifically directed to situations, if proven, which enliven a jurisdiction in the Court to set aside final orders. Consequently, the final orders of Watts J, which by definition are a just and equitable outcome, unless set aside or varied, remain undisturbed and exhaust the jurisdiction of the Court. The wife’s application pursuant to s 106B is intended to provide her with additional property. It cannot be characterised as a proceeding to enforce Order 10 of the final orders made by Watts J for the simple reason that it was never contemplated that the trademarks would be affected by Order 10, they never formed part of the just and equitable outcome ordered by Watts J and Order 10 has been complied with. There is nothing requiring enforcement.
It should be recorded that there have been other filings by the parties since 1 September 2021. The wife filed a contravention application on 6 October 2021 in Division 2. This alleges contravention by the husband of the February 2018 orders, specifically Order 1(g), by failing to quarantine a payment of $16,418.56 from CC Pty Ltd to N Pty Ltd. This application was given the same proceedings file number of the original proceedings, SYC4014/2012. This seems to be the result of a continued registry practice which existed prior to 1 September 2021. However, it is here that the importance of the impact of the new legislation becomes clear. By reason of s 51 of the new Act, the wife’s contravention application was filed and commenced in Division 2, which as pointed out, is a completely separate court from Division 1, which, as the former Family Court, heard and finalised in the original proceedings. The use in Division 2 of the file number of the original proceedings in what was the Family Court is somewhat misleading. The wife’s contravention application is a proceeding in Division 2. This Court, Division 1, has no jurisdiction in respect of it, unless it is transferred to Division 1, in which case it must be a new proceeding in Division 1. The husband also filed an Initiating Application on 28 January 2022 seeking a range of orders, including discharge of child support orders and spousal maintenance orders made by Watts J and variation to parenting orders. The wife filed a Response on 7 February 2022, seeking leave to issue subpoenas and disclosure from the husband. Again these documents were given the same file number as the original proceedings, SYC4014/2012. But again this must be incorrect. The husband’s Initiating Application was filed in Division 2, a separate court, as it was required to be. So was the wife’s response. By definition, these proceedings commenced by the husband, being in a separate court, must be different proceedings to the original proceedings. This would remain so even if they are transferred from Division 2 to Division 1.
For these reasons, and consistently with the evidence of the wife, there are no proceedings, for enforcement or otherwise, on foot here in which the wife has filed her application pursuant to s 106B. Thus, the authorities which have suggested that the power in s 106B may be engaged in respect of completed proceedings, do not assist the wife.
I accept that the exercise of the Court’s discretion pursuant to s 79 in reaching a just and equitable outcome in the final orders may have been different if the existence of the trademarks had been known to Watts J. However, contrary to the view of the wife, this does not mean she would have received control of the trademarks through CC Pty Ltd. Knowledge of their existence may have led to a different just and equitable outcome before Watts J, but it does not follow that this would mean the trademarks would have been simply placed into the control of the wife. Indeed, the fact that they are integral, or at least connected, to the third party businesses operated by the N Trust suggests that there may be reasons for not placing them in the control of the wife. Third party interests would have to be taken into account by the Court. None of the Fourth, Fifth, Seventh, and Eighth Respondents to the wife’s present application were parties to the finalised proceedings before Watts J. Mr BL was not a witness before Watts J. At most, knowledge of the trademarks would mean that in the exercise of the s 79 discretion, the trademarks would have formed part of the property to be taken into account in reaching a just and equitable outcome. Now that the trademarks are known about, they potentially could form part of the factual matrix supporting a re-exercise of the s 79 discretion, or, possibly, an exercise of the discretion reposed in s 90AE, leading to a different outcome in favour of the wife. But, as pointed out, there is no jurisdictional basis raised in the wife’s s 106B application to re-exercise the s 79 discretion, or any other statutory discretion affecting the rights of third parties, while taking account of the trademarks. These considerations illustrate why the use of s 106B, if not relied upon in existing proceedings, has been limited to enforcement in relation to completed proceedings.
I am unable to find that the wife’s application under s 106B has been made in any proceedings under the Act in this Court at the time when the wife seeks exercise of a discretion pursuant to s 106B by this Court. The discretion is therefore not enlivened.
This conclusion is sufficient to dispose of the wife’s application. However, if it is wrong, there are further discretionary reasons why, in my view, the wife’s application should not succeed. These reasons relate to the exercise of discretion, if enlivened.
On the view I take, it is unnecessary to make findings or reach conclusions as to whether the remaining three questions should be answered favourably to the wife.
However, in case the matter goes further, I express the following views. I accept the assignments were dispositions for the purposes of s 106B. But on the evidence, if it was necessary to make a finding, I would be unable to conclude that either assignment was “made or proposed to be made by or on behalf of a party, or by direction of a party, or in the interest of a party to the proceedings”. It seems to me that the reference to a “party” here must be a reference to a party to existing proceedings in which there is a defeated existing order or a likely defeat of an anticipated order. The wife’s contention is that the assignments were made on behalf of, at the direction of or in the interest of the husband or Ms O, or both. I will accept that is one possible inference.
But the relationship of the trademarks to the business operated by the N Trust raise another possible inference, of equal weight, that the assignments may have been made for the purposes of this business. In other words, the assignments were made on behalf of or in the interests of N Pty Ltd as trustee of the N Trust and its unit holders. It is salient to note here that there is no evidence or argument that the assignments had the effect of diminishing the value of the 625 units held by CC Pty Ltd in the N Trust, which the wife now controls. Since there are inferences of equal weight, I would not find that the assignments were made by or on behalf of, at the direction of, or in the interest of either the husband or Ms O, or any party to the proceedings up to the final determination by Watts J.
N Pty Ltd originally owned the trademarks and registered the trademarks in 2013. They were transferred to CC Pty Ltd in April 2014. The contention of the husband and Mr BL is that the trademarks were transferred to CC Pty Ltd as a security for loans made by the husband to the N Trust. They claim CC Pty Ltd never enjoyed a beneficial interest in the trademarks. The husband gave evidence, with which Mr BL agreed, that from 2013 he lent funds to N Pty Ltd to pay for fit out building works carried out by DM Pty Ltd (“DM Pty Ltd”). There was evidence DM Pty Ltd sued N Pty Ltd, the husband and Mr BL in the District Court of NSW for unpaid building work in 2014. DM Pty Ltd commenced further proceedings in the Supreme Court of NSW in 2014 against the same parties. The litigation in both courts was settled. In 2015, the husband provided further funds to N Pty Ltd for payments required by the settlement. The husband and N Pty Ltd entered into a Loan Agreement and General Security Agreement at about the same time. The husband and Mr BL gave consistent evidence that N Pty Ltd made repayment of the husband’s loans in 2017 which made appropriate release of the trademarks held as security by CC Pty Ltd. The first assignment effected such a release.
The wife challenged these contentions and the dealings between the husband and N Pty Ltd. She argued that the version of the husband and Mr BL was implausible and was the result, in part at least, of collusion and recent fabrication. I do not accept this. It is true the narrative about the reasons for the assignment of the trademarks from N Pty Ltd to CC Pty Ltd and the supporting documents contain inconsistencies which are not clearly explained. But an allegation of fraudulent conduct requires cogent evidence, even where the evidentiary standard is proof on the balance of probabilities. Where the allegations of fact involve criminal or quasi-criminal conduct the degree of satisfaction may need to be stronger, taking account of the nature of the subject matter, the seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding: Briginshaw v Briginshaw (1938) 60 CLR 336 at [361]–[363]; s 140(2) of the Evidence Act 1995 (Cth). While the version of the husband and Mr BL is unconvincing in some respects, I am not satisfied the wife has demonstrated it is untrue. For example, there is no plausible explanation for the initial transfer in 2014 from N Pty Ltd to CC Pty Ltd other than the trademarks being used as some kind of security. There is also documentary evidence which partly supports their version. It is not unusual for private commercial dealings between extended family members to be untidy and the transactional documents to be flawed or unclear. On balance, I find it is more probable than not that CC Pty Ltd was not intended to, and did not own, the trademarks beneficially.
For this reason, I would not find the husband, Ms O, and Mr BL intended to defeat existing or anticipated court orders, and to do so entered into collusive arrangements and fraudulent dealings in relation to the assignments and the trademarks. The wife argued that the first assignment appeared to be intended to defeat the February 2018 orders. The husband gave evidence that he thought the first assignment was permitted as a dealing in the ordinary course of business, as the February 2018 orders allowed. Orally, Ms O gave evidence to the same effect. I found their evidence plausible in this regard. This does not necessarily deny there may have been a contravention of the February 2018 orders, but it is inconsistent with an intention to defeat them for the purposes of s 106B.
I refer to the findings and conclusions of Watts J discussed above at [19]–[36] and the matters considered below at [93]–[98]. For the reasons explained there, I could not find either of the assignments had the effect of diminishing the pool of available assets for the purposes of s 79 so as to be “likely to defeat an existing or anticipated order”, irrespective of the intention of the husband, Ms O or Mr BL.
Therefore I would not conclude that the wife has demonstrated the discretion in s 106B has been enlivened.
But for completeness, even if it was, I make clear that I would not exercise the discretion in her favour for the following reasons.
DISCRETION
First, there was no clear evidence that the trademarks have an independent value. This is an issue on which the wife bears the onus of proof. I raised the question of value directly with the wife in submissions. She argued the question of value was unimportant or that the trademarks must have value because the respondents argue strongly against her s 106B application. As pointed out already, the objective of the wife was to have the trademarks returned to CC Pty Ltd to enable her to force the respondents to negotiate with her to buy them back. I assume, although the wife did not state this clearly, this would likely happen, and benefit her directly, by her exercising the (assumed) power as appointor to make herself a beneficiary of the CC Trust.
There is an available inference that, although it was far from clear, the trademarks have a value as intellectual property connected to the operation of the hospitality business in BE Town conducted by N Pty Ltd. Their use as security for loans by the husband support this to some extent. But there was no valuation evidence which substantiated this, and another available inference is that the trademarks have no independent value unconnected to the restaurant and cocktail business. There is no way to choose between these inferences on the available evidence.
It is necessary then to return to the fact that, as is clear from his judgment, Watts J was persuaded it was just and equitable to give the wife the interests nominated in Order 10 as part of the property settlement orders, because the units in the N Trust had little or no value. The wife has not demonstrated before me the conclusion the units have little or no value is wrong, even if the trademarks are associated with the business conducted by the N Trust. I am still unable to form any sensible view about the value of the trademarks, especially where there are competing inferences of equal weight which bear on value. For this reason, I am not satisfied the wife has demonstrated there would be any point to exercising the discretion in her favour because an order of the Court has been defeated.
Secondly, the final orders of Watts J have not been defeated, in the sense that even though the assignments have taken place, Order 10 has been effective (Whitaker, above at [56]). The wife has received exactly what Watts J ordered she should get: Milligan v Milligan (2017) FLC 93-811 at [91]–[94]. Her argument is misconceived in my view because she assumes that because Watts J made Order 10, his Honour therefore also would simply have intended her to have the benefit of the trademarks, if he knew about them, in addition to the property he actually ordered in her favour. As already explained, there is no secure basis for this view in the judgment of Watts J.
Thirdly, I am not satisfied that the wife has demonstrated either assignment had the effect of diminishing the pool of available assets between the wife and the husband. As discussed above, there was no finding by Watts J that the assets of the CC Trust were property “of” the husband. I would not make any findings inconsistent with the undisturbed determination of Watts J, and in any event, I am not persuaded the wife has demonstrated the assets of the CC Trust were property “of” the husband within the provisions of the Act. As already mentioned, I assume he enjoyed an equitable chose in action, as a discretionary object of the trust. But the value of this chose in action cannot be known on the evidence before me. I recognise the possibility that the assignment of the trademarks may have diminished the value of this chose in action (see Dovgan at [299]–[301]), but Watts J obviously made no such finding, and I could not make such a finding on the available evidence. On the husband’s version, of course, the assignment to CA Pty Ltd could not have diminished the value of his chose in action, because CC Pty Ltd never held the trademarks as trust assets. In the same way, the wife as now the appointor of the CC Trust, I assume, could make herself a discretionary object of the trust, but that would simply give her the same chose in action as the husband, and all other discretionary objects of the trust. In any event, the logic of the approach of Watts J was to put the wife in control of the 625 units in the N Trust held by CC Pty Ltd, and the wife now has that control, while the N Trust still apparently conducts the relevant businesses. As already noted, there was no evidence that the assignments diminished the value of those 625 units.
Fourthly, and quite separately from the need to establish the jurisdictional fact that the wife’s application has been made “in proceedings under the Act”, the absence of any substantive proceedings by the wife under the Act weighs against the exercise of discretion. As the husband submitted, many of the wife’s submissions were couched in terms which would be apt for an application pursuant to s 79A of the Act, for example, contending there had been a miscarriage of justice. But I refer to [81]–[83] above. There is no application under s 79A, with a consequential application under s 79, for further property adjustment orders.
It is the logical result of the wife’s argument that if the trademarks have value and they are simply returned to CC Pty Ltd by an exercise of the Court’s powers pursuant to s 106B, the wife would effectively receive more than 82 per cent of the divisible assets. That is the point of her application. As noted, the wife’s submissions (above at [43]) showed that in her mind she is entitled to a greater property settlement. But this is a sound reason not to exercise the s 106B discretion in her favour in the way her application has been constituted. The orders of Watts J are, by definition, just and equitable, unless set aside or varied, which the wife does not seek. If the discretion was exercised in her favour, almost certainly the inherent basis of the just and equitable outcome ordered by Watts J would be impugned or materially disturbed. As already said, if Watts J had known of the trademarks, and the interests of Mr BL with respect to them, he may not, indeed probably would not, have made orders in the same terms as the final orders, especially Order 10. Even if orders were to be made pursuant to s 106B, as the wife seeks, this would then simply beg the question of what then would be the appropriate just and equitable outcome between her and the husband, taking account of the trademarks and the interests of the third parties. But, as the application before me is presently constituted, this question does not arise and cannot be addressed.
These considerations address two other submissions made by the wife (see above at [38]). She argued, correctly, that the orders of the Court must be upheld. This argument applied to both the interlocutory orders of February 2018 and the final orders. As already pointed out, the final orders have been complied with. I accept there is reason to conclude the February 2018 orders may have been contravened by the first assignment. But even if this is assumed in the wife’s favour, and contravention may disclose an intention to defeat an existing order, it raises the possibility of other remedies, and it does of itself justify an exercise of the discretion under s 106B for the same reasons given in [94] and [96] above. In any event, the February 2018 orders were interlocutory and ultimately overtaken by the final orders.
The wife also argued that the assignments were a “sham” citing Sharrment Pty Ltd & Ors v Official Trustee in Bankruptcy (1988) 82 ALR 530. The legal meaning of “sham” in this sort of context has been explained many times. It refers to “steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences”: Equuscorp Pty Ltd and Another v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at [46]. The wife contended the assignments were intentionally undertaken by the husband, Ms O, and the third parties to defeat anticipated Court orders, by placing the trademarks beyond the reach of the Court’s anticipated orders. She asked the Court to infer the requisite intention for a “sham” from the timing of particularly the first assignment, and the implausible nature of the husband’s and Mr BL’s explanation for it. Mr BL gave evidence that at the time of the first assignment on 18 September 2018, he had no knowledge of the February 2018 orders. The wife’s cross examination of Mr BL did not convince me that he was untruthful in this evidence. I accept he was, with Ms O, one of the relevant controlling minds of CC Pty Ltd, and the relevant controlling mind of CA Pty Ltd, as at the date of the first assignment. The husband gave evidence that he thought the first assignment was permitted as a dealing in the ordinary course of business, as Order 10 allowed. Orally, Ms O gave evidence to the same effect. I found their evidence credible in this regard. This does not necessarily deny there may have been a contravention of Order 10, but it is inconsistent with an intention to defeat Order 10. I am unable to find the parties to the first assignment intended it to have no legal effect. In light of this conclusion, no convincing reason is advanced why the second assignment should be understood as a sham. I do not accept either the first or second assignment is a sham.
But in any event, for the purposes of s 106B, the wife’s argument assumes an intention on the part of the husband and the third parties that the assignments should have their apparent legal consequences, the opposite of a sham. The wife did not explain why the facts to which she pointed raised a stronger inference that the assignments were intended to have no legal effect. I would not on the evidence find that the assignments were a sham. But even if this is assumed in the wife’s favour, it still would not justify an exercise of the discretion under s 106B for the same reasons given above.
Accordingly, in my view, the wife has not demonstrated that there is a proper basis to exercise the discretion under s 106B, even if it is enlivened.
The wife’s Application in a Case will be dismissed.
As to costs, I am inclined to make no order as to costs. The wife has been unsuccessful and she is self-represented. So is the husband. Although the third parties have enjoyed overall success, many of their contentions were either beside the point or did not really engage with the fundamental questions with which this judgment has dealt. Nonetheless I will make provision in the orders for any party to apply for a costs order within 28 days of this judgment. If application is made, procedural orders will be made to determine the application in chambers without any further hearing, unless any party seeks to be heard orally. If no application is made within the time allowed, there will be no order as to costs.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 3 March 2022
SCHEDULE OF PARTIES
SYC 4014 of 2012 Respondents
Fourth Respondent:
N PTY LTD
Fifth Respondent:
CA PTY LTD
Sixth Respondent:
S PTY LTD
Seventh Respondent:
DG PTY LTD
Eighth Respondent:
MR BL
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