R v T
[2020] WASCA 109
•8 JULY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: R -v- T [2020] WASCA 109
CORAM: BUSS P
MURPHY JA
VAUGHAN JA
HEARD: 16 APRIL 2020
DELIVERED : 8 JULY 2020
FILE NO/S: CACV 70 of 2018
BETWEEN: R
Appellant
AND
T
First Respondent
X
Second Respondent
ON APPEAL FROM:
Jurisdiction : FAMILY COURT OF WESTERN AUSTRALIA
Coram: MONCRIEFF J
Citation: T and R [2018] FCWA 113
File Number : PTW 4513 of 2009
Catchwords:
Family law - De facto relationship - Application for interim orders for property settlement - Family Court Act 1997 (WA), s 205ZG - Where interim orders made in context of setting aside dispositions under s 222(1) of Family Court Act - Proper construction and application of s 222(1) of the Family Court Act - Where the power to set aside dispositions is enlivened under first limb of s 222(1) of Family Court Act involving an intention to defeat an existing or anticipated order - Where power enlivened under the first limb of s 222(1) of Family Court Act contains no requirement for applicant to establish second limb of s 222(1) concerning whether, irrespective of intention, the disposition is likely to defeat any such order
Family law - De facto relationship - Setting aside contributions to superannuation fund - Whether orders setting aside contributions to a superannuation fund involved contraventions of s 62 of Superannuation Industry (Supervision) Act 1993 (Cth) and reg 5.08 of Superannuation Industry (Supervision) Regulations 1994 (Cth) - Whether judge erred in finding that there were no taxation consequences in setting aside dispositions
Family law - De facto relationship - Adjournment under s 205ZG(5) of the Family Court Act - Interim orders under s 205ZG(6) of Family Court Act - Principles to be applied - Whether judge erred in making interim orders
Family law - De facto relationship - Practice and procedure - Whether appellant entitled to raise new points not litigated at trial - Whether appellant established that it was in the interests of justice to raise a new point in the appeal to the effect that the trustee of the superannuation fund had been denied natural justice in the primary proceedings.
Legislation:
Family Court Act 1997 (WA), s 205ZG(1), s 205ZG(3), s 205ZG(4), s 205ZG(5), s 205ZG(6), s 205ZI(1)(h), s 205ZLF, s 222, s 222(1), s 222(3), s 222(4a)
Family Court Rules 1998 (WA), r 12
Family Law Act 1975 (Cth), s 79, s 79(5), s 79(6), s 80(1)(h), s 85, s 85(1), s 106B, s 106B(1)
Family Law Rules 2004 (Cth), r 6.02
Income Tax Assessment Act 1936 (Cth), pt III div 6
Income Tax Assessment Act 1997 (Cth), s 6-5, s 295 - s 325
Income Tax Rates Act 1986 (Cth), s 26, s 26(2)
Matrimonial Causes Act 1959 - 1973 (Cth), s 120(1)
Relationships Act 2008 (Vic), s 63
Superannuation Industry (Supervision) Act 1993 (Cth), s 62(1)
Superannuation Industry (Supervision) Regulations 1993 (Cth), reg 5.08, reg 5.08(1A), reg 5.08(2)
Result:
First respondent's application filed 8 April 2020 dismissed
Appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | K Wilson SC, J B Hedges SC & S P Bourke |
| First Respondent | : | R S Hooper SC & S Fahey |
| Second Respondent | : | No appearance |
Solicitors:
| Appellant | : | Kim Wilson & Co |
| First Respondent | : | Fahey Mwenda D'Adamo |
| Second Respondent | : | No appearance |
Case(s) referred to in decision(s):
Ascot Investments v Harper [1981] HCA 1; (1981) 148 CLR 337
Australia and New Zealand Banking Group Ltd v Harper (1987) 89 FLR 454
Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321
Benjamin v Benjamin (1976) 11 ALR 211
Currie v Currie [No 2] [2019] WASCA 2
G v O [2018] WASCA 211; (2018) 52 WAR 393
Gabel v Yardley [2008] FamCAFC 162; (2008) 221 FLR 270
Grech v Deak-Fabrikant (No 3) [2015] VSC 581
Halabi v Artillaga (1993) 17 Fam LR 675
In the Marriage of Buckeridge (1981) 56 FLR 386
In the Marriage of D and D (1984) 10 Fam LR 73
In the Marriage of Gelley (No 2) (1992) 107 FLR 160
In the Marriage of Gould (1993) 115 FLR 371
In the Marriage of Grace (1997) 143 FLR 62
In the Marriage of Hajduk (1993) 109 FLR 218
In the Marriage of Harris [1993] FamCA 49; (1993) 113 FLR 472
In the Marriage of Pflugradt (1981) 7 Fam LR 188
In the Marriage of Zschokke (1996) 133 FLR 375
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366
Kriwoschejew v Kriwoschejew, Gerard Investments Ltd (1975) 6 ALR 260
Lippmann v Lippmann [2010] FamCAFC 127
Loder v Aysom (1988) 12 Fam LR 659
Mackah v Mackah [2017] FamCAFC 62; (2017) 56 Fam LR 516
Mighty River International Ltd v Mineral Resources Ltd [2020] WASCA 44
Mitty v Mitty [2010] FamCAFC 256; (2010) 45 Fam LR 20
Newjur Pty Ltd v Panjas (1997) 140 FLR 194
News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410
Pegang Mining Co Ltd v Choong Sam [1969] UKPC 16; [1969] 2 MLJ 52
Pierce v D'Cruz (2010) FamCAFC 99
Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1
Riemann & Riemann (No 3) [2017] FamCA 911
Rizhao Steel Holding Group Pty Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91
Ruane and Bachmann‑Ruane [2012] FamCA 369; (2012) 48 Fam LR 131
Stanford v Stanford [2012] HCA 52; (2012) 247 CLR 108
State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291
Strahan and Strahan [2009] FamCAFC 166; (2009) 214 FLR 1
T and R [2017] FCWA 44
T and R [2018] FCWA 113
Tiao v Lai [No 2] [2010] WASCA 189
Van Essen and Van Essen [2000] FamCA 77; (2000) 26 Fam LR 456
VC v GC [2010] FamCAFC 62
Waterways Authority v Fitzgibbon [2005] HCA 57; (2005) 79 ALJR 1816
XYZ Pty Ltd v Charisteas [2017] FamCAFC 112
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
BUSS P & MURPHY JA:
Introduction
This is an appeal by the appellant (the de facto husband) against pars 1 ‑ 5, 7, 10 - 12 of the interim orders of Moncrieff J dated 25 June 2018 in favour of the first respondent (the de facto wife). The judge's reasons for decision are contained in T and R[1] (primary decision). The primary proceedings are pending in the Family Court of Western Australia. The interim orders involved the setting aside of certain transactions pursuant to s 222 of the Family Court Act 1997 (WA) (the Act), and making interim property orders in favour of the de facto wife pursuant to s 205ZG(5) and s 205ZG(6) of the Act. Amongst other things they had the effect of discharging the de facto husband's arrears in child maintenance exceeding $400,000.
[1] T and R [2018] FCWA 113. (All references to the parties, their business interests and properties have been anonymised.)
The primary proceedings concern, relevantly, orders for a property settlement between the de facto husband and the de facto wife. The second respondent is the de facto husband's daughter of a previous relationship (the de facto husband's daughter).[2] She has not taken part in the appeal. As the parties had not entered into a legal marriage, the proceedings are conducted pursuant to pt 5A of the Act.[3]
[2] Primary decision [23].
[3] Primary decision [5].
The primary proceedings were commenced in 2009. The hearing before the primary judge, pursuant to which the interim orders were made, commenced on 23 October 2017. In the eight years from the commencement of proceedings, the structure of the matter had changed significantly, and there had been more than 50 court appearances. During the trial, the child‑related proceedings were not agitated, and the entire focus of the hearing, over eight days, related to financial matters between the parties. The relief ultimately sought by the de facto wife was significantly different from that which she had originally sought, and this reflected the change in 'landscape' within the dispute and how it had 'morphed over the eight years of litigation'.[4]
[4] Primary decision [4], [14] - [18].
Ultimately, at the time of trial, the de facto wife (1) sought interim orders setting aside certain transactions with the intent of making some property available for distribution to the parties, and (2) thereafter sought to have the matter adjourned to allow for the proper resolution of questions in relation to a superannuation fund in which the de facto husband had a substantial interest (the VW Super Fund), and to enable a final definition of the de facto husband's beneficial interests in property.[5]
[5] Primary decision [76], [82].
The core areas of dispute at trial were the beneficial interests of the parties and in particular of the de facto husband in assets, and the parties' respective interests in the VW Super Fund.[6]
[6] Primary decision [75].
For the reasons which follow, there is no merit in any of the de facto husband's grounds of appeal and the appeal should be dismissed.
Background to the proceedings
In April 1999, the de facto husband and de facto wife commenced living together in a marriage-like relationship.[7] The relationship continued until the de facto husband and de facto wife separated on 26 January 2008. They never married.[8]
[7] Primary decision [1], [56].
[8] Primary decision [1] - [2].
The de facto wife came into the relationship with two children of a prior marriage.[9] The de facto husband also has two children from a prior marriage (one of whom is the second respondent - the de facto husband's daughter).[10] The relationship of the de facto husband and de facto wife produced two children, both of whom were teenagers at the time of the primary decision.[11]
[9] Primary decision [6], [57].
[10] Primary decision [58].
[11] Primary decision [3].
At the point of cohabitation, the de facto wife was employed and had accumulated, in her estimation, some $57,000 in superannuation entitlements in her superannuation fund. She also had a motor vehicle, some furnishings and personal effects, together with a small amount of cash. She did not have assets of any significance.[12]
[12] Primary decision [61].
The de facto husband was employed in accounting and auditing pursuits throughout the relationship and made financial decisions within the relationship. He held an interest in and was employed by a financial services firm. The de facto husband also had a substantial interest in the VW Super Fund, a self‑managed superannuation fund. He also had (amongst other things) a beneficial interest in a number of properties, including properties owned by the de facto husband's mother on trust for the de facto husband.[13]
[13] Primary decision [62], [67], [69].
The de facto wife ceased employment in about May 2002, when she assumed the role of primary homemaker and parent. Her evidence was to the effect that following her resignation from employment, she rolled her superannuation interest into the VW Super Fund, for which the de facto husband assumed, with the de facto wife's agreement, the primary management role.[14]
[14] Primary decision [68].
At the time of their separation, the de facto wife understood, based on representations made by the de facto husband, that the parties' wealth was around $8 million.[15]
[15] Primary decision [73].
The entities in which the de facto husband held, or allegedly held, interests included:
1.GE Pty Ltd;
2.the LMN Investment Trust;
3.the LMN Family Trust;
4.Holdings Pty Ltd; and
5.the VW Super Fund.
Corporate structures
The de facto wife was not challenged about her evidence as to the corporate structure of various entities, including the following.[16]
GE Pty Ltd
[16] Primary decision [114].
To the extent that the de facto wife was aware, the directors of GE Pty Ltd were the de facto wife (subject to compliance with orders for her reinstatement), the de facto husband, the de facto husband's mother, and the de facto husband's daughter. The de facto husband holds 102 shares and the de facto husband's daughter holds one share. The de facto wife was a director from 31 March 2003 until 27 September 2012.[17]
[17] Primary decision [71], [115].
GE Pty Ltd is the trustee for:[18]
1.The LMN Investment Trust.
2.The LMN Family Trust.
3.The VW Super Fund.
The LMN Investment Trust
[18] Primary decision [115].
The LMN Investment Trust is a unit trust of which GE Pty Ltd is the trustee. There are 1,001 income units, two ordinary units and two discretionary capital units. At its establishment the unit holders were:[19]
1.The de facto husband with 1,000 income units.
2.GE Pty Ltd with one discretionary capital unit and one income unit.
3.Holdings Pty Ltd with two ordinary units and one discretionary capital unit.
[19] Primary decision [116].
At trial, the de facto wife's evidence was that the present unit holders (in the event that the issue of units to the de facto husband's daughter did not occur) were (1) the de facto husband with 1,000 income units, and (2) GE Pty Ltd with one discretionary capital unit and one income unit.[20]
The LMN Family Trust
[20] Primary decision [116] - [117].
The LMN Family Trust is a discretionary trust of which GE Pty Ltd is the trustee. The de facto husband's children from his earlier relationship are the specified beneficiaries, and the de facto wife, the de facto husband and the LMN Investment Trust are members of the class of general beneficiaries.
The de facto husband is appointor and guardian of the LMN Family Trust and, accordingly, has effective control of the trust.[21]
Holdings Pty Ltd
[21] Primary decision [120].
Holdings Pty Ltd was deregistered in 2014. The de facto wife and the de facto husband had been directors.
At its inception, Holdings Pty Ltd allotted two types of shares in the form of two ordinary shares to the de facto husband's father, and 340,000 class 1 shares to the de facto husband. When the de facto husband's father passed away, those ordinary shares were distributed to the de facto husband, making him the sole shareholder.[22]
[22] Primary decision [118].
In the primary proceedings, the de facto wife assumed, and the assumption was not effectively challenged, that the units previously held by Holdings Pty Ltd in the LMN Investment Trust were now held by the de facto husband.[23]
The VW Super Fund
[23] Primary decision [119].
GE Pty Ltd is the trustee of the VW Super Fund. The members of the fund are the de facto wife, the de facto husband, the de facto husband's mother, and the de facto husband's daughter.[24]
[24] Primary decision [121].
The de facto husband had already reached his preservation age, and, upon his retirement, his member entitlements in the VW Super Fund would vest.[25]
[25] Primary decision [226].
Even on the de facto husband's case, he would receive $2.6 million upon the vesting of his superannuation entitlements.[26]
[26] Primary decision [239].
The proceedings
On 31 August 2009, the de facto wife commenced the primary proceedings by an initiating application, pursuant to which she sought financial relief by way of property settlement, maintenance for herself and support for her two children from a prior relationship.[27] The de facto husband filed a response on 24 December 2009, which included seeking orders for the sale of certain property.[28]
[27] Primary decision [4], [6], [57].
[28] Primary decision [8]; BB 144.
On 11 November 2011, the de facto wife amended her application to include parenting orders.[29] On 31 August 2011, the de facto husband amended his response to include parenting orders and other financial relief. The net effect of the de facto husband's proposed orders was that the de facto wife would receive nothing by way of settlement of property, other than the property she held by way of chattels, subject to the proposed division, and any superannuation entitlement.[30]
Orders for service on GE Pty Ltd
[29] Primary decision [11].
[30] Primary decision [11] - [12].
On 2 February 2017 there was an application before O'Brien J of the Family Court in which the de facto wife sought, amongst other things, orders to the effect that GE Pty Ltd and the LMN Investment Trust 'not be required to be joined by [the de facto wife] as parties to these proceedings on the basis that those entities act as the alter ego of [the de facto husband] or the parties'.[31]
[31] T and R [2017] FCWA 44 [36]; BB 165.
In relation to that matter, O'Brien J, in reasons for judgment in an interlocutory matter, said:[32]
While I am not prepared to make the finding sought to the effect that [GE Pty Ltd] is the alter ego of the [de facto husband], I am prepared to make orders as to the requirement for service of documents on that entity so as to avoid entirely pointless delay and expense being incurred in circumstances where the [de facto husband] is a director of the company, is at the very least actively involved in the direction of its affairs and resides at the address which is recorded as its registered office. (emphasis added)
[32] T and R [47]; BB 167.
On 31 March 2017 O'Brien J accordingly made orders including the following:[33]
1.Until further order of the Court, special [sic - personal] service on [GE Pty Ltd] or [the LMN Investment Trust] of any documents filed in these proceedings to date, this order and any subsequent order, and any documents filed subsequent to these orders which would otherwise be required to be served on those entities or either of them be dispensed with on the condition that the said documents and orders are forwarded by pre-paid post to [the S Road property][.]
4 October 2017 - amended minute of orders
[33] BB 191.
On 4 October 2017 the de facto wife filed an amended minute of orders, in which she sought, amongst other things:[34]
1.Property settlement orders, via a cash payment to the de facto wife, so as to achieve an overall equal division in the parties' net assets, liabilities, superannuation and financial resources including the property of entities owned or controlled by the de facto husband.
2.The setting aside of:
(a)dispositions to the VW Super Fund on 31 August 2016;
(b)transactions relating to certain concessional contributions made by the de facto husband to his member entitlement to the VW Super Fund; and
(c)transactions in relation to non-concessional contributions made by the de facto husband to his member entitlement in the VW Super Fund.
[34] Primary decision [13].
A further minute of amended orders was filed by the de facto wife on 2 November 2017.[35]
The amended orders sought by the de facto wife on 2 November 2017
[35] Primary decision [19].
On 2 November 2017, the de facto wife applied for and obtained leave to seek further amended orders.[36] By her minute of proposed orders dated 2 November 2017, the de facto wife sought orders, including orders to the following effect:[37]
[36] Primary decision [19].
[37] Primary decision [20]. It is to be noted that the proposed orders of 2 November 2017 did not include orders to set aside the concessional contributions claimed in the orders of 4 October 2017.
Declarations
1.Declarations that each of the LMN Investment Trust and GE Pty Ltd is the alter ego of the de facto husband, that the de facto husband is the true equitable owner of the D 15 property, and that any instrument purporting to issue or transfer to the de facto husband's daughter units in the LMN Investment Trust, is a sham.
Setting aside transactions in relation to the VW Super Fund and consequential orders
2.The purported contribution on 31 August 2016 of around $418,000 by the de facto husband to the VW Super Fund, and the consequential transfer of securities, be set aside.
3.Consequential orders and declarations requiring the repayment of $444,248.62 from the VW Super Fund to the de facto husband.
4.An order that a non‑concessional contribution by the de facto husband to the VW Super Fund in the sum of $96,859 in 2008 be set aside and be deemed to be a contribution of the de facto wife.
5.An order that the non‑concessional contribution by the de facto husband to the VW Super Fund in the sum of $450,000 in June 2011 be set aside, and that the contribution be deemed to be a contribution of the de facto wife.
Corrected financial statements of VW Super Fund
6.The parties in their capacity as directors of GE Pty Ltd appoint Mr Mark Chan to review, and if considered appropriate amend, the financial statements of the VW Super Fund for the years ended June 2008 to June 2015 inclusive with focus on:
(a)the value shown in the accounts of the fund for various unlisted and property investments;
(b)the attribution of contributions and movements in value of property of the VW Super Fund as between members; and
(c)the calculation of member balances as at 30 June 2017.
7.The parties in their capacity as directors of GE Pty Ltd appoint Mr Mark Chan to prepare financial statements and taxation returns for the VW Super Fund for the years ended June 2016 and June 2017.
Cash payments to the de facto wife
8.On or before 1 March 2018, and by way of partial property settlement, the de facto husband pay to the de facto wife $700,000 (the cash payment).
Adjournment - order 22
9.The proceedings be adjourned pursuant to s 205ZG(5) of the Act, with liberty to apply on reasonable notice in writing.
The orders sought by the de facto husband
The de facto husband sought the following orders at trial:[38]
[38] Primary decision [21] - [22].
Minute of Final Orders Sought:
1The children … continue to have contact with [the de facto husband] in accordance with their wishes.
2[The de facto wife] retain for her benefit interim payments totalling [sic] $405,414.
3[The de facto wife] retain for her benefit household effects, artwork and jewelery [sic] of the former matrimonial home, as better particularized in the Insurance Manifest $602,727, item 259‑260, of Schedule of Discovery dated 24 July 2016.
4[The de facto wife] retain for her benefit the two vehicles per her Form 13, namely Honda $45,000 and Toyota $10,000.
5[The de facto wife] resign from the [VW Super Fund] and advise the Trustees the nominated complying fund [the de facto wife] wishes her member entitlements to be rolled over.
6[The de facto husband] retain his membership entitlements in the [VW Super Fund].
7[the de facto husband] retain his capital (2) and income (1003) units in the [LMN Investment Trust].
8[The de facto husband] continue to pay Child Support in the sum of $650 per week or any other rate as determined by the Department of Human Services.
The de facto husband's conduct and arguments at trial
As at 24 December 2009, the de facto husband deposed, in a statement of financial circumstances, to having net assets and superannuation to a value of $3,943,000.[39]
[39] Primary decision [74].
In the statement of financial circumstances on 18 August 2016, upon which the de facto husband relied, the de facto husband deposed to his asset position as:[40]
1.Total value of property owned: $5,005.
2.Gross superannuation value: $2,200,000.
3.Liabilities: $638,256.
4.Total financial resources: $1,005.
[40] Primary decision [74].
The de facto husband's conduct and arguments at trial included the following:
1.The de facto husband contended that there should be no alteration to the parties' legal entitlements to assets, and that the de facto wife's future entitlement in the VW Super Fund should be rolled over into another one.[41]
2.Although he was $440,000 in arrears in child maintenance, the de facto husband made no proposals with respect to the arrears.[42]
3.The de facto husband contended that the de facto wife had an ability to obtain payment of $1.4 million under an insurance policy. However, he failed to disclose that it was a policy owned by the VW Super Fund.[43]
4.The de facto husband, knowingly in breach of his obligations, failed to make proper disclosure of documents.[44]
5.The de facto husband sought to delay the proceedings by not attending on the fifth day of trial in the middle of his cross‑examination.[45]
6.Although the de facto husband had been ordered by O'Brien J in March 2017 to reinstate the de facto wife as a director of GE Pty Ltd, he did not do so until the time of trial.[46]
Interlocutory orders of 2 November 2017
[41] Primary decision [83].
[42] Primary decision [84].
[43] Primary decision [87].
[44] Primary decision [35] - [39], [42] - [46], [94], [113].
[45] Primary decision [44].
[46] Primary decision [95].
On 2 November 2017, the de facto wife applied for, and was granted, interlocutory orders restraining the de facto husband's daughter from dealing with any units in the LMN Investment Trust or exercising any rights which she may have as a unitholder in that trust.[47]
[47] Primary decision [23] - [24].
Also, on 2 November 2017, by consent, the judge made orders[48] for the appointment of an expert, Mark Chan to, in effect:
1.Amend in draft form the Financial Statements for the VW Super Fund for the financial years ending 30 June 2008 to 30 June 2015 (inclusive).
2.Prepare in draft form the Financial Statements for the VW Super Fund for the financial years ending 30 June 2016 and 30 June 2017.
3.Calculate the member balances as at 30 June 2017.
Such drafts were to abide further order of the court.
[48] BB 194 - 195; this was broadly consistent with par 6(a) of the orders sought by the de facto wife on her amended minute dated 2 November 2017.
The judge adjourned the hearing to 14 November 2017.[49]
14 November 2017
[49] Primary decision [24].
On 14 November 2017, the eighth day of trial took place before the judge. The judge extended the injunction against the de facto husband's daughter, until further order of the court, with liberty for her to apply on short notice. The judge also gave leave to the de facto wife to file further references to transcript arising from submissions at the oral hearing, and for the de facto husband to have liberty to apply to be heard in relation thereto.[50]
[50] Primary decision [213]. See also BB 196 - 197.
The primary decision
The primary decision was delivered on 25 June 2018. The primary decision included findings to the following effect.
Credibility findings
The judge made trenchant credibility findings adverse to the de facto husband, and favourable credibility findings in favour of the de facto wife.[51] Amongst other things, the judge said that the de facto husband's approach to the treatment of asset values in the VW Super Fund was 'quite extraordinary', involving amounts being transferred into the fund at value, and then subsequently written down to almost nothing. The write downs lacked transparency and lacked any proper explanation.[52] His Honour also said that certain arguments about an insurance policy advanced by the de facto husband were an attempt to mislead the court,[53] and that the de facto husband had 'wilfully obfuscated matters and at times blatantly misled the court'.[54]
Property interests
[51] Primary decision [44] - [50], [65], [95], [141], [162], [234], [237].
[52] Primary decision [91] - [92].
[53] Primary decision [88], [252].
[54] Primary decision [237].
The de facto wife's unchallenged evidence was that during the relationship, the de facto husband and de facto wife had legal and/or beneficial interests in relation to certain properties.[55]
[55] Primary decision [69].
The judge also found that the de facto husband had, in effect, 'deferred' assets being (at least) $2.6 million to his account in the VW Super Fund, $485,000 in respect of a property that would pass to him on the death of his (aged and unwell) mother, and other funds that he stood to receive from his mother.[56]
Adjournment and interim orders
[56] Primary decision [239] - [240].
The judge accepted that it was an appropriate case to make interim property orders, and then to adjourn the matter to a final hearing.[57]
[57] Primary decision [79] - [104].
His Honour effectively accepted that the final exercise of the power under s 205ZG of the Act should be done after the vesting of superannuation entitlements, unless prior to then the agreement between Attorneys General as to the transfer of power from State to Federal government were enacted, such that superannuation splitting orders could be made.[58] His Honour had regard to present uncertainties as to when the de facto husband's entitlement under the VW Super Fund would vest, as well as other uncertainties about his financial position and the likelihood of his inheriting assets on the death of his mother.[59] The judge also found, in effect, that the de facto husband's failures to disclose documents, including in relation to the VW Super Fund, made it difficult for the de facto wife, and the court, to identify the pool of assets available for distribution, and to identify the assets in, and the value to be attributed to, the VW Super Fund.[60]
[58] Primary decision [76], [229], [243].
[59] Primary decision [226] - [228].
[60] Primary decision [79], [89], [92], [225], [230], [273] - [274].
The judge referred to the power to adjourn proceedings pursuant to s 205ZG(5) of the Act and said, in effect, that the circumstances mentioned in s 205ZG(5) applied in the present case.[61]
[61] Primary decision [96].
His Honour also observed that, under s 205ZG(6), the court had power to make interim property orders before granting an adjournment of the proceedings.[62] His Honour said:[63]
The approach to be adopted in the making of interim orders has been judicially considered on numerous occasions by the Full Court. Whilst the interests of the parties and the Court are generally better served by there being only one final hearing, there is little doubt that the exercise of power under s 205ZG of the Act may be 'exercised by a succession of orders until the power … is exhausted (see paragraph 57 Gabel and Yardley (2008) FamCAFC 162).
In Strahan & Strahan (supra) the Full Court determined that the only condition precedent to the exercise of the power was a determination that it was appropriate.
[62] Primary decision [97] - [98].
[63] Primary decision [235] - [236].
His Honour also noted the requirement, under s 205ZG(3), that no order should be made under s 205ZG unless the court was satisfied that it was in the interests of justice to do so, and his Honour was so satisfied.[64]
[64] Primary decision [100] - [104].
The judge said, in effect, that the making of any interim (property) order that settled upon the de facto wife any current asset, and the proper identification of any beneficial interest that the de facto wife or the de facto husband may currently have in the asset pool, required a consideration of the de facto wife's application to set aside certain transactions.[65]
Setting aside transactions involving contributions to the VW Super Fund
[65] Primary decision [108].
The judge observed that the de facto wife sought to set aside three particular transactions involving transfers by the de facto husband into the VW Super Fund:[66]
1.A non-concessional contribution made by the de facto husband in 2008 of $96,859 to the VW Super Fund, resulting from the sale proceeds of the E property by GE Pty Ltd as trustee at the LMN Family Trust.[67]
2.The non-concessional contribution to the VW Super Fund of $450,000 made by the de facto husband in 2011 resulting from the sale of the de facto husband's interests in an accounting company.[68]
3.The purported contribution made by the de facto husband on 31 August 2016 to the VW Super Fund involving certain transfers of interest in property syndicates from the LMN Investment Trust to the VW Super Fund.[69]
[66] Primary decision [109].
[67] Primary decision [128] - [137].
[68] Primary decision [138] - [142].
[69] Primary decision [173] - [180].
As to the three contributions referred to above, the de facto husband's evidence was to the effect that (1) in 2008, almost all of the funds from the sale of the E property were directed solely to his account in the VW Super Fund[70] (which the judge found to include the payment of $96,859),[71] (2) almost all of the profit from the sale of the de facto husband's interest in his firm was put into the VW Super Fund in his name,[72] and (3) he directed the 31 August 2016 contribution to be made in his name to the VW Super Fund.[73]
[70] Primary decision [134].
[71] Primary decision [136].
[72] Primary decision [172]; BB 94.
[73] Primary decision [173] - [174].
The de facto husband accepted (1) that if the contributions were treated as allocated to the member entitlement of the de facto wife, rather than treated as allocations to his account, it would simply be necessary to change the member balances as between the parties in the VW Super Fund,[74] and (2) the setting aside of those dispositions would not cause any adverse taxation liability to the VW Super Fund or the members of the VW Super Fund.[75]
[74] Primary decision [136].
[75] Primary decision [111], [205].
The judge referred to s 222(1) of the Act and said that remedies are only available under that provision if (1) the application is made 'in proceedings under the Act', (2) the application relates to an 'instrument or disposition', (3) the instrument or disposition is 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, and (4) the instrument or disposition is made, or proposed to be made, in order to defeat an existing or anticipated order in the proceedings or, irrespective of intention, is likely to defeat such an order.[76]
[76] Primary decision [124].
The primary judge said that if each of those elements were established, then the court may, in the exercise of its discretion, make an order under s 222(1). His Honour also said that although intention to place assets, or attempt to place assets, beyond the reach of a party to the intent of defeating any claim is not necessary, the factor of intention is highly relevant to the exercise of the court's discretion (once the power is enlivened).[77]
[77] Primary decision [125] - [126].
In relation to the 2008 concessional contribution of $96,859 to the VW Super Fund, the judge said that whilst the payment preceded the commencement of the proceedings, it occurred at a time of marital disharmony and it was not a precondition for setting aside a transaction under s 222(1) that the parties be parties to a proceeding then on foot.[78] Moreover the allocations and variations to the parties' loan accounts relating to the payment which effected the disposition to the de facto husband were made a couple of years after 2008 and subsequent to the parties' separation.[79]
[78] Primary decision [203] with reference to Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366.
[79] Primary decision [135].
The judge found, in effect, that the criteria for the exercise of the power under s 222(1) had been established. His Honour was satisfied that the relevant dispositions had been done with the intention of defeating anticipated orders under the Act by removing property from the asset pool available for the making of property settlement orders.[80]
[80] Primary decision [90], [103], [137], [160] - [162], [164] - [172], [173] - [182], [226].
Having decided that the power under s 222(1) of the Act was enlivened, his Honour considered that the following matters favoured the exercise of a discretion to make orders in favour of the de facto wife:
1.Neither the VW Super Fund nor the de facto husband (nor other members) incurred a tax liability upon the making of the contributions to the VW Super Fund, and an order for the setting aside of the contributions would not, in itself, create any adverse tax liability for the VW Super Fund or for the de facto husband (or other members) - a point conceded by the de facto husband.[81]
2.Accounts for the VW Super Fund were yet to be prepared.[82]
3.Setting aside the three transactions would not result in cashing in a member's benefits to a third party contrary to reg 6.22 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (Superannuation Regulations), as the order would only affect the transactions that created the entitlements in the VW Super Fund, and would not be in the nature of a direction to the trustee of the superannuation fund or a member of the superannuation fund.[83]
4.The transactions were effected by the de facto husband with an intention of defeating anticipated property settlement orders.[84]
Setting aside the transfer of units in the LMN Investment Trust to the de facto husband's daughter
[81] Primary decision [205], read with [111], [135] - [136] and [140].
[82] Primary decision [205].
[83] Primary decision [210]. The judge referred to and distinguished Mackah v Mackah [2017] FamCAFC 62; (2017) 56 Fam LR 516.
[84] Primary decision [204].
The judge observed that the de facto wife also sought to set aside a transfer or issue of units to the de facto husband's daughter in the LMN Investment Trust, or in the alternative, curtail her ability to exercise rights or receive benefits as a unit holder.[85]
[85] Primary decision [110].
The judge effectively accepted submissions by senior counsel for the de facto wife that the transfer of units to the de facto husband's daughter was done with the intention of defeating anticipated property settlement orders under the Act.[86] His Honour also said, in effect, that it was in the interests of justice to make such an order having balanced the interests of the parties and the de facto husband's daughter.[87]
The making of interim orders – whether just and equitable
[86] Primary decision [103], [212.84], [212.87], [224].
[87] Primary decision [224], [226].
The judge, having considered the nature of the power to make interim property orders (see [50] above) said:[88]
I have above considered the difficulties confronting the Court in terms of a singular exercise of power [under s 205ZG] through the lack of ability to identify with precision the extent and the totality of the value of the asset pool. The fault for that inability lies almost entirely with the [de facto husband] who has a unique and intimate knowledge of the parties' financial affairs and financial dealings that he has undertaken during the course of the parties' relationship. He has, as I have found wilfully obfuscated matters and at times blatantly misled the Court.
In the exercise of the power, however, the Court should also be satisfied that the remaining property will be sufficient to meet the legitimate expectations of the parties at the final hearing.
Logically in the circumstances of this case, that is a difficult assessment to make and accordingly I consider that I should exercise the power conservatively. However, I am mindful that even on the [de facto husband's] case there is a deferred asset, which will ultimately come into his hands upon the vesting of his superannuation entitlement of $2,600,000 allowing for the [de facto husband's] write downs through the 'impaired' assets and taking his version of the values for the [VW Super Fund's] interests in property at [S Road] ...
Further, upon the death of his mother the [de facto husband] will inherit property at [D 15], where he does not dispute and has not disputed the value nominated by the [de facto wife], as seen in a notice to admit on 20 February 2017, of $485,000. Additionally the [de facto husband] stands to receive funds held in the name of his mother. (emphasis added)
[88] Primary decision [237] - [240].
The judge also said in effect that it was common ground, notwithstanding the orders made for the appointment of Mr Chan, that the VW Super Fund had sufficient cash to satisfy the setting aside of the dispositions for the making of the interim orders.[89]
[89] Primary decision [231].
The judge further said:[90]
[90] Primary decision [241] - [244].
Of the transactions to be set aside I propose to order that the sums be paid into the Trust account of the [de facto wife's] solicitors and to be dispersed therefrom in accordance with these orders. In particular the first payment is to be made to the [de facto wife] to the extent of the arrears of spousal maintenance and child support, with a direction that she notify the Registrar of Child Support accordingly.
That sum is the liability of the [de facto husband] and it is a liability that he does not challenge, nor does he seek to vary the spousal maintenance order in force. Similarly, he has not sought to enliven the jurisdiction of the court as to matters arising pursuant to the Child Support (Assessment) Act 1989 (Cth). Accordingly, although ultimately it is an exercise to be completed as part of the final hearing of this matter, that is a sum unlikely to be brought to account as an amount received by way of settlement of property by the [de facto wife] other than as to any balance remaining after deduction of the [de facto husband's] said liabilities.
The balance which I intend to order be paid to the [de facto wife] will approximately be the sum of $547,000 which represents as against the [de facto husband's] pool of assets a percentage calculated thus:
•$2,725,652, inclusive of superannuation, given that the final exercise of the power will be conducted after the vesting of superannuation, or the agreement between Attorneys General as to the transfer of power from state to federal government, is enacted, such that superannuation splitting orders can ultimately be made; and
•$2,725,652 less $450,000 arrears of child support and maintenance leaving a balance of $2,275,652 of which $547,000 represents 24 per cent.
In determining that the order is just and equitably made, consistent with authority, [I am satisfied] that the dimension of such is not so great that the remaining property will [not] be sufficient to meet the legitimate expectations of the parties.[91]
The parties' contributions - s 205ZG(4)(a), (b) and (c) factors
[91] This sentence, as expressed, is, with respect, rather difficult to read and the interpolated words have been added to reflect what appears to be obvious intent of the sentence.
The judge said:[92]
Having determined that it is just and equitable to make an order pursuant to s 205ZG of the Act and having determined that I should adjourn the proceedings, I turn then to the consideration of contribution and the factors prescribed by s 205ZD(4), being the matters that a court must take into account in considering what order should be made in the alteration of the parties' property interests. …
…
In making the assessment of contribution prescribed in the Act, financial contribution is not to be treated as greater than non-financial contribution or contribution made by a de facto partner to the welfare of the family and any children of the de facto partners.
[92] Primary decision [245] - [246].
The judge said:[93]
[93] Primary decision [253] - [268].
It is the case for the [de facto wife] that she accepts that the [de facto husband] made the greater initial financial contribution at the commencement of the relationship in the form of:
(a)the [P] property;
(b)the [de facto husband's] interests in [his] business … and related entities; and
(c)some superannuation interests.
As to the [P] property I note the [de facto husband's] position as to the same, and if I am wrong in my findings then the [de facto husband's] initial contribution should ultimately be reduced accordingly.
The [de facto wife] came into the relationship with some superannuation interests accumulated during her employment, some savings and otherwise modest assets.
After the parties commenced to cohabitate the [de facto wife] continued in her employment … until the same became untenable through … closure …
The [de facto wife] describes their relationship as being like 'a traditional marriage-like relationship' with the [de facto husband] assuming responsibility for financial decisions.
I accept that the [de facto wife's] knowledge of the financial transactions undertaken by the [de facto husband] was limited. However, it was clear that she was active in assisting the [de facto husband] in his role, for example, in reducing the tax burden on the family from the balance standing to her loan account in the [LMN Investment Trust].
Following the cessation of her employment … in 2002 and having taken paid maternity leave when the parties' elder child … was born, it is the [de facto wife's] case that she took on the role of primary homemaker and parent.
There is no doubt that the [de facto husband] worked hard and was successful in his chosen profession notwithstanding the offensive comments made by him in his submissions about the [de facto wife's] role, the [de facto husband] fails to recognise that the [de facto wife], in adopting the role that she did as primary homemaker and parent, was supportive of the [de facto husband's] commercial endeavours.
It is of note the [de facto husband] submits that his capacity to make a professional income is limited by his inability to travel overseas, and during the course of his evidence much was made of the 'top secret' level of responsibility that the [de facto husband] enjoyed in his overseas work. However, the same again ignores the role that was assumed by the [de facto wife] in supporting the family and household during his absences and which role would have been enhanced during such times.
The [de facto wife's] evidence that she managed renovations to properties and assisted physically at times in that task, was not challenged in any meaningful way by the [de facto husband].
The [de facto wife] acknowledges that she had assistance around the house, about which she was unchallenged. She identified that she had a cleaner once a week, a gardener who mowed the lawns, a person who attended to pool maintenance and a person who did the ironing, which she identifies as being primarily the [de facto husband's] shirts, on average once a week.
The [de facto wife] was on her case otherwise responsible for cooking, cleaning, laundry, managing the household shopping, children's clothing, paying household bills, running errands for the [de facto husband], caring for the children when they were infants and thereafter attending kindergarten, school, sport and extra-curricular events, pick‑ups and drop offs and attending to general gardening.
The [de facto husband's] children spent time with the family, and the [de facto wife] was responsible in a similar way for them during the time that they were present, albeit during school holidays.
It is not disputed that the [de facto husband] was generous in his provision for the [de facto wife's] other children, nor could it reasonably be so.
The parties operated as a partnership and whilst the [de facto husband's] financial contribution may have outweighed that of the [de facto wife], her non‑financial contribution was equally important and significant within the subsisting relationship between the parties to the point of separation.
Post-separation the [de facto husband] has had the benefit of the property that he has retained and an income that he has earned whilst failing to meet his ordered and assessed financial obligations to the [de facto wife].
The judge concluded as to contributions:[94]
Overall I conclude that the parties' contributions to trial should be assessed as equal or close thereto.
Section 205ZG(4)(d), (e), (f) and (g) factors
[94] Primary decision [269].
The judge said:[95]
[95] Primary decision [271] - [274].
In the papers for the judge Senior Counsel [for the de facto wife] nominated the following as applicable:
'SECTION 205ZG(4)(d), (e), (f) and (g) FACTORS
1.Both parties are of similar age, and while the [de facto wife] has suffered from breast cancer and associated complications, both parties are in reasonable health.
2.It is the [de facto wife's] submission that the [de facto husband] has a significantly greater earning capacity than she has. The [de facto wife] also contends that the [de facto husband] has property and financial resources beyond that which have been identified by him in these proceedings.
3.The parties' eldest child … is now living with the [de facto husband]. The parties' youngest child … lives with the [de facto wife].
4.It is likely the [youngest child] will continue to live primarily with the [de facto wife] in the future. The change of residence of [the eldest child] is recent and was at least in part driven by the poverty of the [de facto wife] and the lifestyle that the [de facto husband] is able to offer [the eldest child] and which the [de facto wife] cannot match until she receives a proper financial settlement.
5.The [de facto husband] currently has a child support debt of $467,699.10. The Child Support Agency has, to date, been unable to enforce that debt, and the [de facto husband] has not made a payment of child support or spousal maintenance for a period of more than 10 months.
6.It is the [de facto wife's] submission that the [de facto husband] has failed to provide full and frank disclosure in a timely manner or at all, and has in fact deliberately misrepresented his financial position to the Court. In those circumstances, the [de facto wife] contends that the Court should not be unduly cautious in making findings against him and/ or making an adjustment in her favour.'
I agree with and respectfully adopt those matters identified by Senior Counsel as relevant.
In particular, however, I consider that the [de facto wife] would be entitled to a significant allowance in her favour given my findings as to the conduct of the [de facto husband] as a litigant and his failure to properly and fully disclose matters material to the proceedings.
As seen I reject any suggestion by the [de facto husband] that he was ignorant of his obligations.
The judge concluded, however, that the extent of any adjustment could be left to the final hearing:[96]
However, it is not necessary for me to determine the extent of such an adjustment at this point but rather that is a matter left for the final hearing of the proceedings between the parties, as I am satisfied that on a contribution based assessment the interim award that I propose to order by way of a variation of property interests, is not of such a dimension when considered against the matters prescribed in s 205ZG, that there will be insufficient funds remaining at the final hearing to properly reflect each of the parties’ entitlement. (emphasis added)
Spousal maintenance
[96] Primary decision [275].
The judge said that there was no application before him to discharge the current spousal maintenance order, and that, in any event, he was not satisfied that the de facto wife should be solely reliant upon the capital settled upon her after the discharge of arrears of maintenance and child support, to meet her daily needs.[97] The judge noted that the only application before him in respect of spousal maintenance was an application by the de facto wife to reduce the amount payable, and that it was inherent in the application that she would use capital to meet the shortfall of her present expenditure over income.[98] The judge then said:[99]
In Senior Counsel's submissions, it is noted that the change is sought in expectation of an interim partial property settlement, and, partly, in recognition of [the de facto wife's] income albeit from Social Security.
As the application is not addressed by the [de facto husband] in the context of the orders sought by the [de facto wife], and represents a decrease in his liability, I will order accordingly. Further, the order, continuing as an interim order, will be reviewed in the context of the [de facto wife's] prevailing circumstances at the final hearing of the application.
Form of the orders
[97] Primary decision [276].
[98] Primary decision [277], [279].
[99] Primary decision [280] - [281].
The judge said:[100]
I propose that the transactions I have identified be set aside and that the funds forthwith be paid in the first instance to [the de facto wife's] solicitors … whose receipt shall be a sufficient discharge therefore on behalf of the [de facto wife] to be dispersed therefrom to the [de facto wife] by way of payment or at her direction.
I have not made orders in terms of those sought by the [de facto wife] by way of a redistribution of superannuation accounts within [VW Super Fund], as by setting aside, whether by way of superannuation contribution or otherwise, the transaction the same, it has in effect, never occurred. I have no independent evidence of the tax effect or ordering in the terms sought, and, further, to so order may constitute a Superannuation Splitting Order, which the Court presently does not have the jurisdiction to make.
I will hear submissions otherwise as to the precise terms of orders.
The proceedings will otherwise stand adjourned with liberty to relist upon the vesting of the [de facto husband's] superannuation interests or the Court being empowered for a referral of powers to the federal government to make superannuation splitting orders.
[100] Primary decision [282] - [285].
The orders of Moncrieff J under appeal
On 25 June 2018, the judge made orders relevantly to the following effect:
Orders setting aside transactions - orders 1 and 2
Order 1 is to the effect that certain transfers, payments, distributions or dispositions, made on behalf of the de facto husband to the VW Super Fund, and any associated instruments, be set aside pursuant to s 222 of the Act, including:
(a)certain transfers of securities purportedly made from the LMN Investment Trust to the VW Super Fund on 31 August 2016;
(b)all transactions leading to non-concessional contributions of $96,859 made by the de facto husband to his member entitlement in the VW Super Fund in 2008; and
(c)all transactions leading to the non-concessional contribution of $450,000 made to the VW Super Fund in 2011.
Order 2 is to the effect that any instrument purporting to issue units to, or transfer units to, the de facto husband's daughter in the LMN Investment Trust, or to issue a transfer to the de facto husband daughter's other rights or entitlements in respect of the property of the LMN Investment Trust, be set aside.
Consequential orders - orders 3 and 4
Order 3 is to the effect that in relation to order 1(a), (1) there be consequential orders to the effect that the amount to be repaid by the VW Super Fund to the de facto husband is $444,248.62, (2) the parties, in their capacities as directors of GE Pty Ltd, do all things necessary to cause the amount of $444,248.62 to be paid to the de facto wife into her solicitor's trust account, and (3) the balance of the relevant funds to be paid to a specified bank account held by the VW Super Fund.
Order 4 is to the effect that in relation to orders 1(b) and (c), there be consequential orders that the parties, in their capacities as directors of GE Pty Ltd, do all things necessary to cause the amount of $546,829, currently held in the name of GE Pty Ltd as trustee of the VW Super Fund, to be paid to the de facto wife into her solicitor's trust account.
Distribution of proceeds order - order 5
Order 5 is to the effect that, upon the receipt of the funds referred to in orders 3 and 4, the de facto wife's solicitors cause the funds to be disbursed to discharge the arrears of child support and maintenance owed by the de facto husband to the de facto wife as at 30 June 2018, and as otherwise as directed by the de facto wife.
Section 221 order - order 7
Order 7 is to the effect that if a party fails, or is not physically available, to comply with a requirement to sign documents or authorise any transaction pursuant to these orders, a Registrar of the Court be and is hereby authorised to sign any such documents on his behalf pursuant to s 221 of the Act.
Injunction orders - orders 10 and 11
Order 10 provides, in effect, that until further order, and save and except with the de facto wife's prior written consent, the de facto husband be restrained from dealing with property in which he has an interest.
Order 11 provides, in effect, that for the avoidance of doubt, save as may be expressly authorised by the de facto wife in writing, the de facto husband and the de facto husband's daughter, in whatever capacity, including as directors of GE Pty Ltd, as attorney for the de facto husband's mother, or by their agent, be restrained from doing any act or thing to cause or allow funds to be withdrawn, transferred, or otherwise removed from, certain accounts held in the name of GE Pty Ltd as trustee for the VW Super Trust.
Dissemination of injunction order - order 12
Order 12 is to the effect that, pursuant to s 243(8)(g) of the Act, the de facto wife have liberty to disseminate a copy of 'the preceding paragraph of these orders' to any third party controlling property, superannuation interests or liabilities referred to in these orders.
Grounds of appeal
Ground 1 alleges, in effect, that the judge erred in law by not considering reg 5.08 of the Superannuation Regulations and s 62 of the Superannuation Industry (Supervision) Act 1993 (Cth) (Superannuation Act), and thereby erred in making orders 1 ‑ 5 and 7 of the orders dated 25 June 2018.
Ground 2 alleges, in effect, that the judge erred in law (at [205] in the primary decision)[101] in finding that there were no taxation consequences in setting aside the transactions when there were taxation consequences pursuant to s 6‑5 of the Income Tax Assessment Act 1997 (Cth) and pt III, div 6 of the Income Tax Assessment Act 1936 (Cth) at the rates under the Income Tax Rates Act 1986 (Cth).
[101] Appellant's written submissions par 10; amended WB 12.
Ground 3 alleges, in effect, that the judge erred in law in setting aside the three transactions relating to contributions to the VW Super Fund because:
1.There were no grounds for finding that the transactions were made, or proposed to be made, to defeat an anticipated order under the Act for the purposes of s 222(1) of the Act.[102]
2.GE Pty Ltd was a person affected by the orders and was denied procedural fairness by not having been joined as a party to the proceedings.
3.The judge failed to require the de facto wife to give an undertaking as to damages.
[102] Appellant's written submissions pars 11 - 13; amended WB 13 - 14.
Ground 4 alleges, in effect, that in setting aside the three transactions relating to contributions to the VW Super Fund (1) the judge was required to determine, under s 222(1) of the Act, whether a reasonable disponor in the position of the de facto husband would have anticipated, at the time of each transaction, an order being made under the Act, and (2) as part of this determination, the judge was required to identify what the available asset pool was for distribution. Ground 4 alleges the judge erred in law by failing to make the requisite determination.
Ground 5 alleges, in effect, that the judge erred in law in that:
1.He was unable to identify, in accordance with common law and equitable principles, the existing legal and equitable interest of the parties in the VW Super Fund (including quantifying their member's balance at the date of the trial) until Mr Chan's work (in accordance with the orders of 2 November 2017) had been completed and any further orders of the court made.
2.Consequently, the judge was unable to make a finding as to the identity and value of the property, financial resources and liabilities of the parties at the date of the hearing, including having regard to:
(a)Mr Chan's investigations in respect of the VW Super Fund for the years 30 June 2008 to 30 June 2017;
(b)the effect of orders 3 and 4 of the orders made on 25 June 2018 on the asset pool; and
(c)the taxation consequences arising from the orders dated 2 November 2017 (concerning Mr Chan's investigations) and 25 June 2018.
3.He failed to provide adequate reasons in relation to his assessment of contributions by the parties to the acquisition, conservation or improvement of any of the property of the parties as required under s 205ZG(4) of the Act, and thereby erred in finding that parties' contributions were equal or close thereto.
It may be noted here that although the de facto husband, by his amended notice of appeal,[103] challenges orders 1 ‑ 5, 7 and 10 ‑ 12 of the above interim orders of Moncrieff J, the de facto husband's grounds and submissions do not address orders 2, 7 and 10 ‑ 12.
[103] Amended WB 1.
The de facto wife's applications in an appeal
Application 28 August 2019
On 28 August 2019, the de facto wife filed an application in the appeal in which (relevantly for present purposes) she sought to adduce additional evidence in the appeal via an affidavit of her solicitor Ms K E Breese sworn 28 August 2019. In that affidavit Ms Breese relevantly deposed:
1.To the recent history of the appeal and the primary proceedings, particularly in relation to Mr Chan's work.
2.To the orders of O'Brien J dated 31 March 2017 referred to in [31] above.
3.To the service of documents on GE Pty Ltd in accordance with the orders of 31 March 2017.
4.To the de facto wife's issue of a subpoena to the de facto husband's mother to give evidence, the unsealed copy of which was served on 18 October 2019 and the sealed copy was served on 19 October 2019.
5.That in relation to the service of the unsealed copy of the subpoena, the process server swore an affidavit to the effect that:
(a)she attended the de facto husband's mother's property and served her with the documents;
(b)the de facto husband's mother said 'I don't know what's going on … my son [the de facto husband] has told me not to accept or sign anything'; and
(c)as the process server was leaving the house a man the de facto husband's mother referred to as her 'son' arrived in a farm ute.
The application to adduce this evidence was in response to an amendment to the grounds of appeal that raised the procedural fairness point referred to at [85.2] above. The application was not opposed. Leave was granted in the interests of justice.[104]
Application 8 April 2020
[104] Appeal ts 35.
On 8 April 2020, the de facto wife also filed an application together with a further affidavit of Ms Breese sworn 7 April 2020. By this application, the de facto wife sought leave to adduce the affidavit of Ms Breese and to file and serve a further amended answer to the appellant's further amended case filed 30 July 2019. By the further amended answer, the de facto wife contended that the de facto husband was in contempt of court in the primary proceedings for failure to comply with certain court orders, and that accordingly, he should not be heard on the appeal.
Ground 1 - alleged breaches of Superannuation Regulations and Act
De facto husband's submissions
The de facto husband submitted, in effect, that the orders setting aside the three dispositions to the VW Super Fund result in contraventions of the Superannuation Regulations and the Superannuation Act.[105] In that regard, the de facto husband referred to reg 5.08(1) of the Superannuation Regulations, which provides:
(1)For subsections 31(1) and 32(1) of the Act, it is a standard applicable to the operation of regulated superannuation funds and approved deposit funds that the trustee of a fund must ensure that a member's minimum benefits in the fund are maintained in the fund until the benefits are:
(a)cashed as benefits of the member, other than for the purpose of the member's temporary incapacity; or
(b)rolled over or transferred as benefits of the member; or
(c)transferred, rolled over or allotted under Division 6.7.
[105] Appellant's written submissions, pars 1 - 2; amended WB 7 - 9.
The de facto husband submitted that none of the exceptions referred to in reg 5.08(1A) and (2) apply, and that the orders effectively place the trustee (GE Pty Ltd) in a position of breach of reg 5.08(1).
Also, the de facto husband submitted that the orders setting aside the three dispositions involved a breach of s 62 of the Superannuation Act, in a context where s 62 is a civil penalty provision carrying both criminal and civil penalties. Section 62(1) of the Superannuation Act provides, in effect, that each trustee of a regulated superannuation fund must 'ensure' that the fund is maintained solely for one or more specified 'core purposes', or for one or more of the 'core' purposes and for one or more specified 'ancillary purposes' in relation to the provision of benefits for members of the fund.
The de facto husband submitted that:
1.There is no provision under the Superannuation Act, or the Act, that confers a power on a court exercising jurisdiction under the Act to make an order which has the effect of binding the trustee of a regulated superannuation fund to take action which contravenes s 62 of the Superannuation Act.[106]
2.The court has no power 'to reverse legitimate transactions' on the part of the de facto husband, citing Ascot Investments v Harper.[107]
3.The effect of the orders setting aside the three transactions is to 'reallocate' the de facto husband's superannuation benefits in the absence of a power to make a 'splitting order'.[108]
[106] Appellant's written submissions, par 6; amended WB 11.
[107] Ascot Investments v Harper [1981] HCA 1; (1981) 148 CLR 337.
[108] Appellant's written submissions, par 9; amended WB 12.
In oral submissions,[109] counsel for the de facto husband sought to raise a point, not the subject of his written submissions in the appellant's case, by reference to [141] of the primary decision.[110] Counsel for the de facto husband contended, in substance, that this court should infer as a fact from the de facto husband's evidence in cross‑examination recorded at [141] of the primary decision, that the non‑concessional contribution to the VW Super Fund in 2011 set aside by the judge included payments directed to the respective accounts of the de facto husband's mother (in the sum of $31,321) and daughter (in the sum of $21,000).
[109] Appeal ts 40 - 41, 43 - 44.
[110] BB 86.
Counsel for the de facto husband also said that a further point, with respect to ground 1, 'arises out of the submissions made on behalf of the [de facto wife], and that's the submission [at [92] of the primary decision[111]], where it is said that [the setting aside] would not affect other members of the [VW Super Fund]'. Counsel said, in effect, that this 'submission' by the de facto wife was wrong. He submitted that other members would be affected because 'interest … was earned on those dispositions … which would have been applied to the members' accounts on a proportionate basis' as opposed to a 'segregated' basis.[112]
De facto wife's submissions
[111] At BB 63.
[112] Appeal ts 44, 93 - 94.
The de facto wife submitted, in effect, that:
1.The judge's orders do not result in a breach of the Superannuation Act or Superannuation Regulations because the effect of the orders is to reverse the dispositions from inception, and to treat the contributions as never having occurred. The de facto wife submitted that the de facto husband's approach to the effect of orders made under s 222(1) does not make sense as it would denude such orders of their efficacy.[113]
2.In any event, the issues had not been raised before the judge, were not the subject of expert evidence, and may be raised by the de facto husband when the matter returns for a final hearing.[114]
3.In that regard, the de facto wife's general response to the appeal[115] was that the orders under appeal were interlocutory, and at the further hearing of the proceedings, the court may make orders which vary or reverse the interlocutory orders of the judge. Reference was made to Gabel v Yardley[116] and Lippmann v Lippmann.[117]
Ground 1 - superannuation - disposition
[113] First respondent's written submissions, pars 13 - 16; amended WB 33 - 34.
[114] First respondent's written submissions, par 17; amended WB 34.
[115] First respondent's written submissions, pars 5 - 12; amended WB 32 - 33.
[116] Gabel v Yardley [2008] FamCAFC 162; (2008) 221 FLR 270 [124] - [128].
[117] Lippmann v Lippmann [2010] FamCAFC 127 [50] - [54].
There is no merit in ground 1. Properly understood, the orders set aside ab initio the de facto husband's contributions to the VW Super Fund. Senior counsel for the de facto husband accepted as much in the appeal.[118] The effect of the orders is that the moneys the subject of the dispositions were never part of the fund to which the obligations of GE Pty Ltd as trustee for the VW Super Fund under reg 5.08 of the Superannuation Regulations and s 62 of the Superannuation Act applied. The orders did not involve a 'breach' of those provisions because those provisions imposed personal obligations on the trustee with respect to the fund, and the consequence, at law, of the orders is that the fund did not relevantly include the moneys the subject of the orders.
[118] Appeal ts 68.
The submission that the court had no power 'to reverse legitimate transactions' begs the question of whether the power under s 222(1) of the Act was exercisable. That matter is the subject of consideration in grounds 3 and 4.
The submission that the orders effected a 'reallocation' of the parties' superannuation entitlements with the VW Super Fund, involving 'splitting orders' (1) is outside the scope of ground 1 and (2) in any event lacks merit as that is what the judge did not do, and said in terms that he did not do.[119]
[119] Primary decision [283].
The new point sought to be raised in oral submissions at [96] above has no merit. First, there was no application to amend the appellant's case to raise it. An appellant is bound by their appellant's case unless leave is granted to depart from it. That is sufficient to dispose of the point. Secondly, even if there had been an amendment, (1) the judge made no findings to the effect that the contribution in 2011 the subject of an order setting aside the transactions included non‑concessional payments directed to the accounts of the de facto husband's mother or daughter, (2) counsel did not point to any objective evidence to that effect - by reference to accounting records of the VW Super Fund or otherwise, and (3) this court is not in a position to make findings of fact based on that passage from the de facto husband's evidence. That is so given the judge's adverse findings generally as to the de facto husband's credibility and, moreover, the judge's reference to this particular evidence as an illustration that the de facto husband gave 'unreliable' evidence 'at best' when it appeared that 'there could be a perceived advantage' to his case.[120] Finally, even if there were such findings of fact, it would not affect the reasoning and conclusion referred to in [99] above.
[120] Primary decision [141].
The further point raised by counsel for the de facto husband, referred to in [97] above, also has no merit. First, it was also not part of the submissions in the appellant's case. Secondly, it involves a mischaracterisation of the judge's reasons. Insofar as counsel for the de facto husband described the passage at [92] of the primary decision as a 'submission' by the de facto wife that the setting aside of the contributions would not affect other members of the VW Super Fund, counsel's description is inaccurate. At [92] of the primary decision, the judge was setting out evidence given by the de facto husband. It was not a submission by the de facto wife and, moreover, the judge referred to the evidence as an illustration of the facts that (1) the de facto husband's conduct and treatment of values for the purposes of the VW Super Fund was 'quite extraordinary', and (2) he was involved in transferring assets to the VW Super Fund which had been acquired for value and which he then 'deemed … to be "impaired" and [had the assets] written down to the value of almost nothing'.[121] Thirdly, whilst the de facto husband's evidence may, in appropriate circumstances, be used as an admission against his interests, his evidence cannot be accepted, given the adverse credibility findings, as proof that 'interest was earned on the dispositions' which 'would have been applied' to members' accounts on a 'proportionate basis' as alleged. Counsel did not point to any objective evidence in support of the submission.
[121] Primary decision [91] - [92].
Ground 1 should be dismissed.
Ground 2 - taxation
De facto husband's submissions
The de facto husband submitted that the judge erred in finding, at [205] of the primary decision, that setting aside the three transactions involving payments into the VW Super Fund had no taxation effect.
The de facto husband submitted that there was a taxation effect - in relation to investment earnings - in that:[122]
1.The funds from the three transactions had been maintained in the concessionally taxed superannuation environment since they were completed.
2.The investment earnings on the funds have been receiving concessional tax treatment at the taxation rate of 15% pursuant to s 26 of the Income Tax Rates Act.
3.If the funds were not held in a superannuation fund, but were held personally or by the entity responsible for the asset, the earnings on the funds would be taxed at marginal rates for individuals (up to 45%) or at 30% if the funds were held by a corporation.
4.The statements made by the de facto husband conceding that there would be no taxation effect (referred to at [111] and [205] of the primary decision) relate to the contribution of the funds to the VW Super Fund rather than earnings on the investment of those funds throughout the successive tax years. Also, the exchange between counsel for the de facto wife and the de facto husband (referred to at [140] of the primary decision) related to the taxation effect of the contribution of funds to the VW Super Fund, and not to the taxation effect of the ongoing investment earnings of those funds.
5.The Australian Taxation Office (ATO) is the regulator for self‑managed funds and 'may take the view that the action taken pursuant to the order [constitutes] an unauthorised release of the superannuation funds'. In that event, the ATO would apply a penalty (pursuant to s 26(2) of the Income Tax Rates Act) to the total value of the investments less the part of the crystallised undeducted contributions (see s 295 - s 325 of the Income Tax Assessment Act 1997).
[122] Appellant's written submissions, par 10(a) - (f); amended WB 12 - 13.
The de facto husband also submitted that his Honour erred in finding that there was no taxation effect in the absence of expert evidence relating to the taxation effect of the orders.[123]
[123] Appellant's written submissions, par 10(g); amended WB 13.
Counsel for the de facto husband sought to raise another new point in oral argument, again not advanced in the submissions in the appellant's case. He said that the judge erred in finding that there were no taxation consequences given certain evidence referred to by the judge at [174] of the primary decision.[124] That evidence, the de facto husband's counsel said, indicated that the de facto husband's contribution on 31 August 2016 included a concessional payment of $25,000, and that the amount of $25,000 had 'immediate taxation consequences'.[125] He did not say for whom, but he presumably meant for the de facto husband.
De facto wife's submissions
[124] At BB 96.
[125] Appeal ts 47 - 48.
The de facto wife submitted that:[126]
1.The treatment of profits or income was not a matter raised by the de facto husband before the judge. The de facto husband ought to be bound by the conduct of his case at trial, and should not be permitted to raise this new point now.
2.The matters raised by the de facto husband in ground 2 should be dealt with at trial. The calculations that enable the judge to deal with this can be prepared by Mark Chan as part of the process of preparing the VW Super Fund's financial statements and taxation returns. The appropriate time for this matter to be dealt with is when the matter resumes, and when the primary court has the benefit of Mr Chan's work, accurate accounts and expert evidence.
3.Insofar as the de facto husband's submissions characterise the orders setting aside the three transactions as a 're‑allocation' of superannuation benefits in the VW Super Fund, that is incorrect. Rather, the orders were made pursuant to s 222(1) of the Act and are of that character.
Ground 2 - taxation - disposition
[126] First respondent's written submissions, pars 20 - 25; amended WB 34 - 35.
Ground 2, as explained in the de facto husband's submissions, seeks to impute to the judge a finding to the effect that the earnings on the amounts contributed, once in the VW Super Fund, would not be taxed at a rate different from the tax rates applicable to the disponor. The judge did not make that finding. The finding under challenge by ground 2 is at [205] of the primary decision. There the judge found that the contributions themselves created no tax liability in the VW Super Fund or for the de facto husband or other members, and that an order setting aside the contributions would not, of itself, create any adverse tax liability for the VW Super Fund or for the de facto husband or other members.[127] The judge's reasons properly construed are as set out in [60.1] above. That conclusion is sufficient to dismiss ground 2.
[127] Primary decision [111], [136], [139] - [140], [205].
Even if the judge's finding at [205] of the primary decision should be read more broadly as a finding that there were no taxation consequences for earnings on the impugned contributions to the VW Super Fund, the ground has no merit. On that characterisation of the finding at [205] of the primary decision, ground 2 effectively seeks to raise a new point not raised at trial - the (alleged) earnings on funds in the VW Super Fund. It may possibly have been met by evidence, and, accordingly, the de facto husband cannot raise it now.[128] That is also sufficient to dispose of ground 2.
[128] Rizhao Steel Holding Group Pty Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 [48] - [54]; Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [65] - [66].
Further, any such alleged error is immaterial and could not sustain the relief claimed by the de facto husband for the following reasons. The fact that the disponee has a differential tax rate from the de facto husband disponor on funds invested is not, in and of itself, a consideration weighing against the exercise of discretion under s 222(1) of the Act and is not a precondition of the exercise of power under s 222(1). Section 222(1) is an 'anti-avoidance' provision. The mere fact that the disponee had a lower tax rate on funds invested than the disponor (as will often be the case where the disponor de facto spouse has a high income and the disponee is a corporation) would not ordinarily be a factor which weighed against the exercise of power under s 222(1) in respect of a disposition which enlivens that section of the Act. Moreover, even if there were some income tax liability incurred by the de facto husband as disponor arising from the setting aside of the dispositions, it could be taken into account in final orders under s 205ZG, to the extent that the court considered it just and equitable to do so.
Further, insofar as the de facto husband was seeking to contend (it was not clear from the submissions) that the judge erred in the exercise of his discretion under s 222(1) of the Act because he failed to take into account (alleged) adverse taxation consequences for the de facto husband's daughter and mother, four points may be made.
First, that is not the error alleged in ground 2 and the contention is outside its scope. Ground 2, and the written submissions in support, do not go on to assert that there were, in fact, taxation consequences for the de facto husband's mother and/or daughter which the judge ought to have taken into account. Secondly, the de facto husband's counsel did not point to any evidence of the taxation position of the de facto husband's mother or daughter which would enable this court to find, as a fact, that there were adverse taxation consequences for them. Thirdly, the de facto husband's counsel did not suggest that the de facto husband had sought to resist, before the primary judge, the s 222(1) orders on the basis of adverse taxation consequences for his mother or daughter. The judge was not in error in not addressing a point allegedly relevant to the exercise of his discretion which had not been raised with him for consideration at the hearing, and in circumstances where the point was by no means fundamental or obvious.[129] Also, as regards the de facto husband's daughter, she was a party to the proceedings and did not contest the proposed orders on that basis (or apparently at all).
[129] Mighty River International Ltd v Mineral Resources Ltd [2020] WASCA 44 [77].
Fourthly, if at any further or final hearing of the property settlement proceedings the de facto husband's mother, or the trustee on her behalf, contended that, as a member of the VW Super Fund and having regard to her taxation position, she was a 'bona fide purchaser or other person interested' within the meaning of s 222(3) of the Act, the court could fashion protective orders at that stage.[130] Both the trustee of the VW Super Fund, GE Pty Ltd, and the de facto husband's mother are now, the court was told, formally parties to the primary proceedings.[131]
[130] See s 222(4a), s 205ZI(1)(k) and (l) of the Act; Loder v Aysom (1988) 12 Fam LR 659; Mitty v Mitty [2010] FamCAFC 256; (2010) 45 Fam LR 20 [113], [115].
[131] Appeal ts 90.
The above matters are sufficient to conclude that the de facto husband is not entitled to raise the new point on appeal. That conclusion is confirmed by, but not dependent upon, the considerations referred to next.
GE Pty Ltd is merely a trustee who holds the assets of the VW Super Fund on the trusts established for that fund in accordance with the regulatory environment for a self‑managed superannuation fund. In the absence of any exposure by the trustee to breaches of the Superannuation Regulations or Superannuation Act as contended in ground 1 (which has been dismissed), the de facto husband has not demonstrated how the setting aside of these three particular transactions has affected the rights and interests of the trustee. For example, there is no evidence that the setting aside of the transactions in question would materially prejudice any right of indemnity or exoneration that GE Pty Ltd may have out of the trust fund.
Further, insofar as the dispositions which were set aside related to contributions allocated, or intended to be allocated, to the de facto husband's member entitlement in the VW Super Fund, plainly he was a party and was afforded procedural fairness. Similarly, insofar as the de facto wife's interests may have been affected, she was a party - and indeed the moving party - to the orders sought. Also, insofar as the de facto husband's daughter might allegedly have been affected, she too was a party. Insofar as the de facto husband's mother might allegedly have been affected by the orders - as to which there is no finding or objective evidence - the observations in [115] above apply.
The de facto husband's submissions in [177] above are outside of the scope of the ground and have no merit for that reason. Further, insofar as they purport to raise matters the subject of grounds 1 and 2, they have no merit for the reasons given in relation to grounds 1 and 2.
Finally, the de facto husband's contention regarding the fact that the de facto wife was not required to give an undertaking as to damages was not developed in submissions and there was no attempt to demonstrate error by the judge in that regard.
Ground 3, insofar as it alleges an absence of procedural fairness, should be dismissed.
Conclusion
The appeal is wholly without merit. It should be dismissed. On that basis, it is unnecessary to deal with the merits of the de facto wife's application referred to in [91] above. That application should nevertheless also be dismissed given that the appeal is being dismissed in any event.
VAUGHAN JA:
Introduction
I have the considerable benefit of having read Buss P and Murphy JA's reasons for decision. I adopt their Honour's description of the primary decision, the grounds of appeal and the parties' arguments. I also agree with Buss P and Murphy JA that grounds 1 - 2, 3 (so far as it is bound up with ground 4 and the proper construction and application of s 222(1) of the Act), 4 and 5 should be dismissed for the reasons that their Honours give. I wish, however, to develop my own reasons in relation to the remainder of ground 3, ie the part of ground 3 that alleges a denial of procedural fairness in relation to GE Pty Ltd. It should become evident, however, that my reasons for rejecting that part of ground 3 overlap with Buss P and Murphy JA's reasons.
The relevant part of ground 3 reads:
5.In addition, the Trial Judge should have but did not take into account the provisions of s 205ZLF of the Family Court Act 1997 and Rule 6.02 of the Family Law Rules 2004 and therefore should not have made orders on 25 June 2018 pursuant to s 222 affecting [GE Pty Ltd] because at the time of the Orders:
(a)[GE Pty Ltd] was not a party to the proceedings, and,
(b)Was not found to be the alter ego of the [de facto husband];
and [GE Pty Ltd] was not accorded procedural fairness.
6.The effect of the Orders was to remove from the superannuation fund a substantial portion of the assets under its control;
7.No order was made requiring the First Respondent to provide an undertaking as to damages.
Beyond the ground referring to the fact that there was no undertaking as to damages, no submissions were directed to its absence. That part of the ground (par 7) goes nowhere. The consequence of the impugned orders (see par 6) was, as I apprehend matters, referred to simply to demonstrate that GE Pty Ltd was a person whose rights may be directly affected by the orders. While otherwise referring to aspects of the particular statutory context, the burden of the ground was that GE Pty Ltd was not accorded procedural fairness.
It is, in my view, significant that the complaint as to denial of procedural fairness was made by the de facto husband rather than GE Pty Ltd. It is unusual, to say the least, that the person who complains on appeal about a denial of procedural fairness is not the person who is said to have been deprived of the opportunity to contest the making of the relevant orders.
The statutory provisions relied on by the appellant
In the ground the de facto husband referred to s 205ZLF of the Act. In oral submissions senior counsel for the de facto husband referred to s 205ZLF(3) and (4).[220] The relevant parts of those statutory provisions provide
[220] Appeal ts 60, 62 - 63, 69 - 70.
(3)The court may make an order under subsection (1) or (2) only if:
…
(c)the third party has been accorded procedural fairness in relation to the making of the order; and
…
(e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).
(4)The matters are as follows:
…
(b)the taxation effect (if any) of the order on the third party;
…
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters, those matters;
As appears from the provisions relied on, they are concerned with orders under s 205ZLF(1) or (2). These are orders in proceedings under s 205ZG which bind a third party in particular respects. It is not necessary to set out the type of orders being referred to. In broad terms they correspond with the type of orders referred to in s 90AE(1) and (2) of the Family Law Act 1975 (Cth). In the present case, however, the primary judge was not relevantly concerned with an order under s 205ZLF(1) or (2). His Honour was instead being asked to exercise the power under s 222 of the Act to set aside particular dispositions. The various references to according procedural fairness to third parties in s 205ZLF of the Act is an irrelevancy that does not need to be pursued further.
Rule 6.02(1) of the Family Law Rules 2004 (Cth) is of broader application.[221] It provides:
A person whose rights may be directly affected by an issue in a case, and whose participation as a party is necessary for the court to determine all issues in dispute in the case, must be included as a party to the case.
Example: If a party seeks an order of a kind mentioned in section 90AE or 90AF of the Act [ie the Commonwealth Act], a third party who will be bound by the order must be joined as a respondent to the case.
[221] Rule 6.02 applies for the purpose of the exercise of the Family Court of Western Australia's non-federal jurisdiction under the Act: Family Court Rules 1998 (WA) rules 12, 13(4).
A note to rule 6.02 explains, by reference to rule 1.12, that the court may dispense with compliance with the rule.
Senior counsel for the de facto husband was asked to identify the rights of GE Pty Ltd that may be - and were - directly affected by the orders sought and made pursuant to s 222 of the Act. Senior counsel suggested that the relevant rights were coextensive with obligations that GE Pty Ltd had as trustee of the superannuation fund, these being:[222]
1.A responsibility to ensure that there was no breach of the statutory duties associated with the Superannuation Regulations - here apparently picking up the matters complained of in relation to ground 1.
2.Potential taxation responsibilities - the nature of such responsibilities being undeveloped.
3.A responsibility to the members of the superannuation fund as to the treatment of their members' balances and the management of the asset pool.
[222] Appeal ts 67
On behalf of the de facto husband it was contended that GE Pty Ltd's participation was necessary to determine all issues in dispute as the orders under s 222 of the Act were in the nature of final orders having the effect that the transactions were void ab initio.[223] In broad terms the submission was that GE Pty Ltd, as trustee, was a person who was 'interested' so far as the orders applied for sought to remove a significant amount of money from its control.[224]
[223] Appeal ts 68.
[224] Appeal ts 66. See also ts 68.
As will be seen from the next section of these reasons, rule 6.02(1) - at least as to its first limb - is reflective of the principles that inform the general law as to joinder. I am inclined to the view that the second limb (ie that of 'necessity') adds little to the first: where the court is invited to make an order directly affecting the rights or liabilities of a non-party, the non-party is a necessary party.[225] In turn those principles are based on the principles which underpin the law of procedural fairness.[226] Non-compliance with rule 6.02(1) does not of itself mean that there has been a failure to accord procedural fairness. All the more so it does not mean that there has been a failure to accord procedural fairness such as would entitle a third party to set aside an order made in its absence. The Family Law Rules do not dictate any particular consequences for failure to comply with rule 6.02. And, as is mentioned by the note to the rule, compliance may be dispensed with.
[225] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 [131].
[226] Tiao v Lai [No 2] [2010] WASCA 189 [121].
For these reasons it is not essential to dwell on whether or not rule 6.02 required the joinder of GE Pty Ltd. In my view - as I explain below - rule 6.02 did require that GE Pty Ltd be joined as a party. However, the application of rule 6.02 is not determinative of this aspect of ground 3.
Procedural fairness and the non-joinder of a third party to proceedings
There is high authority approving the following observations of Lord Diplock in Pegang Mining Co Ltd v Choong Sam in respect of the rules as to joinder:
[O]ne of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard ... a better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?[227]
[227] Pegang Mining Co Ltd v Choong Sam [1969] UKPC 16; [1969] 2 MLJ 52, 55 - 56. See State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291 [77]; John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [131]. (In John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd the relevant footnote directs attention to State of Victoria v Sutton. However, the text echoes the language of Lord Diplock: 'where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined').
The 'directly affected' test has been said to involve matters of degree, and ultimately judgment, having regard to the practical realities of the case and the nature and value of the rights and liabilities of the third party which might be directly affected.[228]
[228] News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410, 525.
In State of Victoria v Sutton McHugh J explained that:
The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order. That practice also assists in avoiding duplication of hearings on the same issues and in avoiding the spectre of inconsistent decisions … [229] (emphasis added)
[229] State of Victoria v Sutton [77].
The consequences of non-joinder of a third party whose rights or interests were directly affected by an order of a court were considered by the Full Court of the Federal Court in News Ltd v Australian Rugby Football League Ltd and the High Court in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd. Those cases, and State of Victoria v Sutton, were considered in detail by this court in Currie v Currie [No 2][230] in terms that I adopt without repeating. I note, however, that in News Ltd v Australian Rugby Football League Ltd the third parties (coaches and players not joined to the primary proceedings) were granted leave to intervene on appeal for the limited purpose of making submissions to the effect that they should have been joined as parties. In John Alexander's Clubs Pty Ltd v White City Tennis Club Ltdthe third party (an entity claiming an interest as mortgagee in land the subject of the proceedings) sought that it be joined as a party to the appeal so that certain orders in the primary court said to affect it could be set aside.
[230] Currie v Currie [No 2] [2019] WASCA 2 [216] - [229].
In those respects, in both cases, the relevant third parties took part in the appellate process and sought to set aside the order of the primary court made in their absence.[231]
[231] That was also the case in Tiao v Lai [No 2].
In Currie v Currie [No 2] this court summarised the principles emerging from the authorities as follows:
A person is entitled and required to be joined if that person's rights against, or liabilities to, any party to the action in respect of the subject matter of the action may be directly affected by an order which may be made. An order with such a direct effect should not be made unless the person whose rights or liabilities are affected is also joined as a party. It is not sufficient to give notice to the third party who is so affected; the party seeking the order must join the third party.
Ordinarily at least, a person whose rights or interests are affected by an order made in breach of these principles is entitled to have the order set aside.
Where the orders sought establish or recognise a proprietary interest in (relevantly) land, all persons who have or claim an interest in the relevant land are necessary parties. That is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.[232] (emphasis added; citations omitted)
[232] Currie v Currie [No 2] [236] - [238].
Importantly, as is contemplated by the second paragraph in the quoted passage, it is the third party who was not heard at trial by reason of non‑joinder who is - ordinarily at least - entitled to have the order set aside. So far as the third party must seek leave to be joined as an appellant to the appeal (not being a party to the primary proceedings), a person who shows a prima facie case that an order made in the primary proceedings directly affected his or her rights against or liabilities to any party to the action in respect of the subject matter of the action will be entitled to be joined as a party to the appeal.[233]
[233] Currie v Currie [No 2] [241].
The setting aside of the order on appeal is grounded on the denial of procedural fairness rather than the lack of an order for joinder.[234] As a 'general proposition', while the order is not a nullity, the third party is entitled to have the order made in its absence set aside rather than seeking that result through the favourable exercise of discretion.[235]
[234] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [153]. See also [138].
[235] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [137].
Disposition
I accept that this is a case where GE Pty Ltd should have been joined as a party to the proceedings prior to trial.
Orders 1, 3 and 4 of the orders of the Family Court of Western Australia made 25 June 2018 directly affected the rights and interests of GE Pty Ltd. The coercive aspects of the order did not name GE Pty Ltd. However, GE Pty Ltd was the relevant counterparty to the transactions that were set aside by par 1 of the orders. The effect of the orders was to set aside, as if they had never occurred, the three dispositions of property GE Pty Ltd had received in 2008, 2011 and 2016. In practical terms the consequence was that some $989,077.62 was to be paid out of the superannuation trust fund as maintained by GE Pty Ltd as trustee. In my view it is not without significance that the payment orders were directed to the parties in their capacities as directors of GE Pty Ltd.
It is not necessary to consider the putative rights asserted by senior counsel for the de facto husband. Some of those plainly have difficulties. For example, the putative right to avoid breach of the Superannuation Regulations (if there could ever be such a 'right') falls with the dismissal of ground 1. It is enough to conclude, as I do, that prior to the orders challenged by the appeal GE Pty Ltd enjoyed all the relevant rights as legal owner of the property the subject of the impugned dispositions. However, after the orders, it did not. It matters not that GE Pty Ltd held those rights as legal owner of the property on trust. Even if this mattered, the effect of the orders was to deprive GE Pty Ltd of the right of indemnity, supported by equitable lien, that it held in relation to the property.
As GE Pty Ltd was a person whose rights may be directly affected by the orders sought pursuant to s 222 of the Act, its participation as a party was necessary for the Family Court of Western Australia to determine all issues in dispute in the case. GE Pty Ltd should have been joined as a party.
There was, in this respect, no duty on GE Pty Ltd to seek to be joined.[236] It is the responsibility of the prosecuting party to ensure joinder of all necessary parties.[237] It might be that the de facto wife chose not to do so because of the applications that are mentioned in Buss P and Murphy JA's reasons at [29] and [34.1] above. While that might explain the failure, it does not excuse any denial of procedural fairness occasioned thereby. Similarly, it is irrelevant that GE Pty Ltd may have had the same or similar interests to those of the de facto husband; the existence of any such common interest does not justify or excuse the failure to join GE Pty Ltd as a necessary party whose interests were directly affected.[238]
[236] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [140].
[237] News Ltd v Australian Rugby Football League Ltd (526 - 527).
[238] Tiao v Lai [No 2] [123].
Senior counsel for the de facto wife made the submission that the service of documents on GE Pty Ltd sufficed for joinder.[239] I do not accept that submission. No doubt GE Pty Ltd was on notice of the proceedings and the orders sought in them. Notice of proceedings is different to joinder. The Family Law Rules identify those who are parties to a case[240] and the methods by which a person may be added as a party[241] or seek to intervene to be added as a party.[242] Mere service without compliance with rule 6.03 does not suffice. To the extent that the de facto wife relied on a case suggesting to the contrary, that case did not consider the terms of rule 6.03.[243]
[239] Respondent's submissions par 40(e) WAB 41; Appeal ts 83 - 84.
[240] Family Law Rules rule 6.01.
[241] Family Law Rules rule 6.03.
[242] Family Law Rules rule 6.05.
[243] XYZ Pty Ltd v Charisteas [2017] FamCAFC 112 [115]. Alternatively, it might be that the Full Court was contemplating service of a claim for relief including an amended application in terms of rule 6.03.
Senior counsel for the de facto wife made a further submission to the effect that, as final orders were yet to be made under s 205ZG of the Act, GE Pty Ltd's position could be taken into account - and it could be accorded all necessary procedural fairness - when the matter returned to the Family Court of Western Australia. For example, to the extent necessary, there could be adjustments as between the parties - or even GE Pty Ltd. Mention was made that matters might arise as a result of the work being done by the court-appointed accountant, Mark Chan.[244] In my opinion, while relevant for other reasons discussed below, this provides no answer to the non-joinder. The mere possibility of further orders in the context of a final order for alteration of property interests under s 205ZG does not neutralise or overcome any denial of procedural fairness in having been deprived of the opportunity to contest the making of the orders under s 222 of the Act. As matters stand, at present, orders have been made, the dispositions have been set aside, and money has been paid out of the superannuation trust fund of which GE Pty Ltd is the trustee.
[244] Appeal ts 89 - 91.
The circumstance that GE Pty Ltd should have been joined as a party to the proceedings prior to trial does not mean that the de facto husband must succeed in the procedural fairness aspect of ground 3.
There is, as Buss P and Murphy JA explain at [188] above, no doubt that the de facto husband was a party to the proceedings and was accorded procedural fairness with respect to the application for orders under s 222 of the Act. The only issue is whether GE Pty Ltd was not accorded procedural fairness. It might, in this respect, be questioned what GE Pty Ltd might have done in addition to contest the orders sought by the de facto wife. Nothing concrete was identified in the written or oral submissions on behalf of the de facto husband. Accordingly, in terms of the allegation of denial of procedural fairness, it is not obvious that there was any practical injustice. More importantly it was conceded that the appellant de facto husband controls the operations of GE Pty Ltd.[245] An inference thus arises whereby GE Pty Ltd can be taken to be aware of the appeal. Notwithstanding that fact, GE Pty Ltd has not sought to challenge the orders under appeal. GE Pty Ltd makes no complaint of denial of procedural fairness. Indeed, senior counsel for the de facto husband was at pains to eschew any suggestion that the procedural fairness issue taken in relation to the orders under appeal was taken by the de facto husband for GE Pty Ltd. It was a contention advanced for the appellant and the appellant only.[246]
[245] Appeal ts 62.
[246] Appeal ts 95.
Accordingly, as senior counsel for the de facto husband accepted at the appeal hearing, the de facto husband sought to take a point as to denial of procedural fairness that GE Pty Ltd - the entity with the proper interest in taking the point - had chosen not to take.[247]
[247] Appeal ts 96.
The general rule is that a third party is entitled to have an order set aside where the order directly affects the rights of the third party, and the third party should have been, but was not, joined as a necessary party. The present case is outside that general rule. The point is not taken by the third party (GE Pty Ltd) but rather is taken by a person (the de facto husband) who was a party to the proceedings and who participated at the trial of the proceedings.
Accordingly, the procedural fairness aspect of ground 3 stands outside and is not to be determined by the general rule as established in News Ltd v Australian Rugby Football League Ltd and John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd. In circumstances where there is no challenge on appeal by GE Pty Ltd it is not the case that the s 222 orders should be set aside as of right simply because GE Pty Ltd was entitled and required to be joined as a party to the proceedings and - despite that not occurring - orders were made which directly affected GE Pty Ltd's rights in relation to the property the subject of the orders.
The absence of GE Pty Ltd is significant for another reason. It is possible that, had GE Pty Ltd taken the point on appeal, the de facto wife would have been able to answer it by asserting estoppel by conduct or abuse of process. The former was raised in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd but failed on the facts.[248] The latter may be open given the concession that the de facto husband controls the operations of GE Pty Ltd. It is unnecessary and inappropriate for present purposes to consider whether either possible response would succeed. It is enough to conclude, as I do, that these matters could not be litigated on appeal in the absence of GE Pty Ltd. The possibility - unexplored - that these matters might provide an answer to the procedural fairness point if agitated by GE Pty Ltd serves to emphasise the importance that the point be raised by GE Pty Ltd rather than the de facto husband.
[248] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [141] - [144].
While, for the above reasons, the general rule does not apply and there is no entitlement requiring that the orders be set aside, it ought to be acknowledged that the procedural fairness point could have been taken by the de facto husband at the trial. Had that occurred the non-joinder of GE Pty Ltd would have precluded orders being made under s 222 of the Act to the extent that those orders directly affected GE Pty Ltd's rights. However, the de facto husband did not take the procedural fairness point before the primary judge. Thus, as was said on behalf of the de facto wife,[249] it is a new point advanced on appeal and must be considered in the context of the well-established principles as to when an appellate court will entertain a new point on appeal.
[249] First respondent's submissions par 40(a) WAB 38.
Those principles include the following:
1.An appellant is bound by the conduct of his or her case at trial. The opportunity to assert a new case at another trial should only be granted where the interests of justice 'require it' and such a course can be taken without prejudice to the other party.
2.The circumstance that an appeal is by way of rehearing does not mean that the issues and the evidence are considered at large. Other than in exceptional circumstances it is contrary to principle to allow a party to raise a new argument which, whether deliberately or by inadvertence, he or she failed to put during the trial when there was an opportunity to do so. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at trial.
3.A point cannot be raised for the first time on appeal when it could possibly have been met by calling evidence at the trial …
4.However, an appellate court may allow a new point to be raised on appeal where it is both 'expedient and in the interests of justice' to entertain the new point and '[w]here all the facts have been established beyond controversy or … the point is one of construction or of law'.
5.Even if no question of further evidence arises it may not be in the interests of justice to allow a new point to be raised on appeal - particularly if it will require a further trial of the action.
6.Before any new point is allowed the court should be satisfied that the raising of it could work no injustice to the other party and it is otherwise in the interests of justice to allow the new point to be raised.[250] (citations omitted)
[250] Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [66].
To the extent that the principles have their origin in estoppel by election the relevant consideration is not that the other party is put in a worse position, but that he or she may have been put in a worse position. Accordingly, a new point of law cannot be taken if, had it been taken at trial, the course of the proceedings could have been altered - whether by the adducing of other evidence or otherwise. The possibility that the hearing would have taken a different course may suffice to deny raising the new point.[251]
[251] Zerjavic v Chevron Australia Pty Ltd [67].
Applying these principles there are three reasons, in my view, why the procedural fairness point should not be entertained by this court on appeal at the behest of the de facto husband.
First, to allow the new point to be raised on appeal - thereby necessitating, if upheld, a new trial - offends the public interest that there should be finality in litigation. The principle of finality applies with more than usual force given the tortured history of the primary proceedings and the length of the trial before the primary judge. The point now taken could and should have been raised before the primary judge. The failure to do so is stark given that the de facto husband controlled the operations of GE Pty Ltd. There is no suggestion that GE Pty Ltd might have raised any further matters in answer to the application for orders under s 222 of the Act. There is no suggestion that it will do so now if the appeal is allowed and there is a new trial. Moreover, final orders are yet to be made under s 205ZG of the Act. If, which has not been demonstrated, the orders of 25 June 2018 work any injustice as between the de facto husband and the de facto wife - they being the only interested parties who appeared on the appeal - that is something that can be taken into account and remedied when the Family Court of Western Australia makes final orders. In all the circumstances this is not a case where it is in the interests of justice to allow the new point to be raised by the de facto husband on appeal.
Second, I am not satisfied that the raising of the point on appeal could work no injustice to the de facto wife. It is inevitable that, should the procedural fairness point be upheld necessitating a new trial, such a new trial would prejudice the de facto wife by causing further delay in proceedings that have already suffered inordinate delay. The injustice in this respect outweighs any injustice suffered by the de facto husband as a result of the non-joinder of GE Pty Ltd in circumstances where: (1) the de facto husband fully contested the application for orders pursuant to s 222 of the Act; and (2) final orders are yet to be made under s 205ZG of the Act and, if required, any injustice as between the de facto husband and the de facto wife can be ameliorated at that point.
Third, and in my view most significantly, this is a case where the de facto wife was put in a worse position vis-à-vis joinder as a result of the point not being taken at trial. Had the point been raised at trial it would have been a very simple matter for the de facto wife to have taken steps to join GE Pty Ltd as a party. By rule 6.03 of the Family Law Rules all that is required is that: (1) the application be amended to add the name of the person as a party; (2) an affidavit be filed setting out the facts relied on to support the addition of the new party; and (3) service be effected on the new party of those materials and any other relevant document. Had the point been raised at trial, joinder to regularise and properly constitute the proceedings would, at most, have required a short adjournment - and possibly no adjournment at all given the orders previously made by O'Brien J and the de facto husband's control of GE Pty Ltd's operations.
The de facto wife was represented by very experienced senior counsel at trial. It is, in my view, almost certain that had the procedural fairness point been taken at trial the course of the proceedings would have been altered by the de facto wife taking these steps to address and nullify the issue. GE Pty Ltd would have been added as a party and the point now sought to be agitated on appeal would have fallen away. In all the circumstances of this matter I am of the view that this alone suffices to conclude that the de facto husband ought not be permitted to raise the procedural fairness point on appeal. In combination with the other two matters the de facto husband has, all the more so, not made out that his case meets the established criteria whereby error might be corrected on appeal by entertaining a new point on appeal not advanced before the primary judge.
Accordingly, like Buss P and Murphy JA, I would dismiss ground 3 so far as it alleges that GE Pty Ltd was not accorded procedural fairness. It follows that I, like Buss P and Murphy JA, would dismiss the appeal. I also agree Buss P and with Murphy JA that it follows that the de facto wife's application dated 8 April 2020 need not be considered and should be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
NF
Research Associate to the Honourable Justice Murphy and the Honourable Justice Mazza8 JULY 2020
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