S and S
[2008] FCWA 44
•28 APRIL 2008
[2008] FCWA 44
| JURISDICTION | : | FAMILY COURT OF WESTERN AUSTRALIA |
| ACT | : | FAMILY LAW ACT 1975 |
| LOCATION | : | PERTH |
| CITATION | : | S and S [2008] FCWA 44 |
| CORAM | : | CROOKS J |
| HEARD | : | 25 FEBRUARY 2008 & WRITTEN SUBMISSIONS RECEIVED 31 MARCH 2008 |
| DELIVERED | : | 28 APRIL 2008 |
| FILE NO/S | : | PT 6318 of 2006 |
| BETWEEN | : | KS |
| Applicant | ||
| AND | ||
| RS First Respondent | ||
| TS Second Respondent | ||
| Catchwords: |
Procedural orders - claim for split trial to determine trust issue involving third party - timing and sequence for filing and exchange of trial documents
Legislation:
Family Law Act 1975, s 75, s 78, s 79, s 90, s 106, Part VIII AA
Category: Not Reportable
[2008] FCWA 44
Representation:
Counsel:
| Applicant: | Ms G Anderson |
| First Respondent: | Mr K Wilson |
| Second Respondent: | Ms P Keeley |
Solicitors:
| Applicant: | Dwyer Durack |
| First Respondent: | Butlers |
| Second Respondent: | Clairs Keeley |
Case(s) referred to in judgment(s):
Buxton & Buxton [2008] FamCA 179
Gould and Gould; Swire Investments Ltd (1993) FLC 92-434
Lubich and Lubich [2008] FCWA 29
N & N [2006] FamCA 1232
Patching and Patching (1995) FLC 92-585
Smith v Maloney (1998) 19 WAR 209
[2008] FCWA 44
1 The substantive proceedings between the parties relate to final property orders.
I have previously set out the relevant background to the parties’ relationship in a Judgment delivered on 18 December 2007. I do not intend to repeat those details in this Judgment.
2 The parties now seek a determination of the procedural orders which will apply to the trial of the proceedings.
3 Each of the parties have filed Minutes of Proposed Orders and written submissions to support the making of the orders they seek.
Brief Background
4 It is the applicant’s assertion that the second respondent (who is the mother of
the first respondent) holds shares and sale proceeds on trust for the first respondent. In the applicant’s Amended Form 1 Application filed 20 December 2007 she seeks at paragraphs 6 and 7:
“6. A declaration that [TS] on trust for the First Respondent the
following:-
(a) [SMS Ltd] shares (SMS Shares) registered in her name and proceeds received from the sale of SMS shares from the date of listing (2 November 2006); (b) the two shares registered in her name in [S] Nominees Pty Ltd. 7. The First Respondent and/or [TS]:-
(a) pay to the Applicant the sum of $8m; (b) transfer to the wife such quantity of SMS shares as the Court deems appropriate.”
5 In response to the applicant’s amended application, the second respondent in her
Reply filed 16 January 2008 seeks to dismiss the relief claimed by the applicant at paragraphs 6 and 7 of her amended application.
Separate trials
6 In his Minute of Procedural Orders Sought filed 18 February 2008 the first
respondent seeks inter alia, that the proceedings be listed for a separate trial on the issue of whether the second respondent holds on trust for the first respondent the shares and proceeds set out in paragraph 6 of the applicant’s amended application filed 20 December 2007.
7 The second respondent seeks the same procedural orders for a separate trial as the first respondent. The applicant wife opposes any splitting of the trial.
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Law
8 In Patching and Patching (1995) FLC 92-585, the Full Court emphasised that it is generally preferable that all steps to be determined in an application be dealt with in the one hearing. The Court, however, acknowledged that there may be cases where it is convenient for separate hearings and gave as an example where there is a discrete and separate issue to be determined at an initial step in the hearing process and the property circumstances of the parties are complex.
9 In support of his submissions for a separate hearing on the Trust issue, the first
respondent referred to several Supreme Court of Western Australia authorities including Smith v Maloney (1998) 19 WAR 209 where Malcolm CJ said at p. 222-223:
“…In such a case the considerations which are relevant to the question whether there should be a determination of the issue originally raised on the originating summons separately from any other issue are the same as those which arise upon an application for an order that any question or issue be tried separately from any other question or issue between the parties under O 32, r 4 or an order for the trial of a preliminary point of law under O 31, r 2. The usual course is to deal with all questions of law and fact before a judge, alone, at the trial of an action: see Independent Automatic Sales Ltd v Knowles & Foster [1962] 1 WLR 974 at 981; [1962] 3 A11 ER 27 at 30. The preliminary determination of a point of law is an exceptional way of proceeding and should be reserved for the exceptional case and the question should be formulated in the order with precision: see Wilsmore v Court [1983] WAR 190 at 194. Preliminary questions of law should generally only be isolated for separate decision in circumstances where there will be no need for the matter to go back to the primary court whichever way the point of law is decided: see Rocklea Spinning Mills Pty Ltd v Anti-Dumping Authority (1995) 56 FCR 406 at 423. This is not such a case.
Similar considerations apply to the making of an order that any question or issue arising in a cause or matter whether of law or fact or partly law and fact be tried separately from any other question or issue under O 32, r 4. The power to order the trial of a preliminary issue of fact will generally only be appropriate when its outcome will put an end to the action, or where there is a clear line of demarcation between the issues and the determination of one issue in isolation from the others is likely to save inconvenience and expense: cf Dunston v Simmie & Co Pty Ltd [1978] VR 669. It has also been held that the separate trial of issues is only appropriate in clear and simple cases where a single question could be isolated from other questions in the proceedings and its decision may finally determine the proceedings as a whole or where facts can be agreed and the sole question is one of law: see Allen v Gulf Oil Refining Ltd [1981] AC 1001. It has been commented that it is a procedure which frequently adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings and is not an appropriate procedure when the findings of fact could only be made after trial: Tilling v Whiteman [1980] AC 1. It should be noted that all of these cases
[2008] FCWA 44
were decided before the advent of case management, which commenced in the civil jurisdiction on a pilot basis in this Court in 1990 and which has been in full operation since 1 November 1996. Experience has shown that the existence of a significant possibility that the determination of one or more issues tried separately may lead to a settlement is a practical consideration which should also be taken into account.”
10 In N & N [2006] FamCA 1232, Brown J considered the wife’s application for a split hearing in relation to a s 79A application:
“7. The rule of thumb is that a hearing of an application pursuant to s.79A will generally not be split into two or more parts. On occasions courts have heard evidence and submissions referable to the question of whether final orders should be set aside and, if a finding was made to that effect, have the parties adduce, in a separate trial, evidence referable to the orders which should be made in lieu. However, that is a dangerous course, as illustrated by the Full Court’s decision in Patching v Patching (1995) FLC 92-585. What is sought today is something short of that, being an initial hearing which does not proceed (if a ground were proven) to the point of deciding whether the final order, or the financial agreement, should be set aside. …. 10. On the evidence available to me, I could not make a positive finding that the parties' property circumstances are complex. I take the Full Court in Patching to be referring by this to the nature and extent of the parties' financial and other circumstances, which would be relevant to the decision whether to set the orders or financial agreement aside and whether to make other, and if so what, orders. If by reason of their complexity that would involve the preparation of complex, expensive and voluminous material which would be unnecessary were no grounds to be established, the court might determine it to be convenient to divide the trial and make findings on the grounds and whether there had been a miscarriage of justice. ….. 12. Each of the parties asserts that the course for which he or she presses would result in less expense than the alternative. Saving cost is a potentially relevant consideration and no doubt one of the reasons the Full Court gave a complex property circumstances case as an example of an exception. One could envisage fewer costs if the wife were successful in a threshold application, and increased costs if she were not and another round of affidavits and hearings then commenced.
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13. The question of whether a judge who heard a threshold hearing on the grounds would be part heard for the balance of the trial (if there were a balance of the trial) was not addressed in submissions.
14. Considering all factors to which I have been referred, I am not satisfied the wife's application for a split hearing should succeed and I do not make the order sought.”
11 The issue of splitting a trial, again in relation to s 79A applications, has recently
been considered by Dawe J in Buxton & Buxton [2008] FamCA 179 in Penny J in Lubich and Lubich [2008] FCWA 29, with differing outcomes. In Buxton (supra) Dawe J said at paragraphs 40 to 43:
“Therefore whilst there is clearly a discretion to divide the matter into two separate hearings, hearing in the first step the discrete issue concerning the existence of a ground which establishes a miscarriage of justice, the Court must give careful consideration to such a procedure. It is a discretion which must be exercised with caution.
The decision in this case must be one which balances the considerations applicable to this particular matter.
Whilst there is some attraction to the simplicity of a separate discrete hearing on the grounds alleged to establish a miscarriage of justice, the factors involved in that hearing may also have a direct influence upon the exercise of the discretion whether to set aside or vary the original order. I am also satisfied that significant costs have already been incurred in preparing the matter for a full hearing.
This matter therefore is one where it would be preferable to deal with all of the steps in the one hearing.”
12 In Lubich (supra) Penny J granted a split trial for a s 79A application as she considered the case to fall under the exception to the general rule. Her Honour stated:
“In my view, this matter falls within the exception to the general rule as stated in Oastler and Oastler. It is convenient to divide the procedure into several hearings and, in my opinion, there are good reasons for doing so. If there is not found to be a suppression of evidence by the husband there will be no necessity for a full hearing on the financial circumstances of the parties, both during and after their marriage. If it is determined that the husband has suppressed the evidence as alleged by the wife and it is the view of KPMG, or another valuer, that the Lubich Trust’s interest in the Plan B shares when the consent orders were made was in the vicinity of around $20m, then it is hard to imagine that the discretion of the trial judge would not be exercised and the orders made by consent would be set aside.
This is not a situation where the effect of the suppression of evidence would result in a slight adjustment to the asset pool. The wife alleges the shares were worth $12m more than the valuation provided by KPMG.
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In addition to the matters mentioned above, a determination of the issues raised pursuant to s 79A may, if an order is made that the consent orders be set aside, mean that the parties will be able to negotiate a settlement in relation to their claims for property settlement. Without a determination of the s 79A issue, this is highly unlikely to occur. This is another factor which convinces me that a trial on the issues raised in the s 79A application is appropriate.”
13 The Family Court has also considered the merits of separate trials where the issue for determination was not an application under s 79A.
14 In Gould and Gould; Swire Investments Ltd (1993) FLC 92-434 the Full Court said in response to a submission by the third parties that where the jurisdiction of the Court to make orders under s 85 is dependent upon the third parties being the alter ego of the husband, it is necessary for the Court to determine that as a threshold issue:
“In Re Ross-Jones; Ex parte Green, supra, the High Court pointed out that a court such as the Family Court has both the authority and the duty to decide whether a controversy brought before it lies within the limits of its jurisdiction and in appropriate circumstances to determine that as a preliminary issue. In addition, good case management and fairness to the parties, in particular to a third party, suggest that in appropriate circumstances the claim against a third party, or more particularly the jurisdictional base of that claim, be determined as a preliminary issue where it is appropriate and practical to do so. (On this aspect see the discussion by Gummow J in the Empire Shipping case, supra, although that was an admiralty case involving the arrest of the vessel so that issues of jurisdiction and objections to it were particularly acute.)
However, it should also be said that in a case like the present, where the claims against the third parties coincide with major aspects of the claims against the husband, it may be impractical and inappropriate to conduct separate trials in relation to what may be fundamentally the same issues. That would be especially so where, as would appear to be the case here, the claims may each involve important issues of credit and complex issues of fact and law.”
15 From these authorities, it remains the general rule that the Court should deal
with the proceedings at one hearing, unless there is a clear and discrete issue which can conveniently be determined, particularly in circumstances where the determination of the issue to be dealt with at a separate trial is likely to save inconvenience and expense and lead to an increased prospect of the dispute being resolved by the parties.
Summary of First Respondent’s position
16 The first respondent submits:
(a)
the applicant’s claim that the shares, and proceeds from the sale of shares, are held on trust by the second respondent for the benefit of the first respondent is a discrete and separate issue that ought to be
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determined by the Court prior to proceeding with the s 79 application. He divides the issue into three discrete sub-issues to be determined at a separate trial, namely whether the second respondent holds on trust for the husband:
• the [SMS] shares registered in her name; • the proceeds she received from the sale of her [SMS] shares in October 2007; • the two shares registered in her name in [S] Nominees Pty Ltd;
(b)
the above discrete issues are sufficiently precise to allow the Court to reach a proper conclusion at a separate trial and they need to be determined to enable the Court to determine the asset pool, which is the starting point for any s 79 determination;
(c) a split hearing would expedite a resolution of the action; (d)
the determination of the preliminary issues may increase the likelihood of settlement or at least create greater certainty as to the ambit of the dispute;
(e)
a separate trial may avoid further substantial costs, particularly in relation to the second respondent and could be heard in one to two days; and
(f)
a separate trial would assist in a prompt resolution of the matter consistent with the intent and spirit of the Family Court of Western Australia Case Management Guidelines of which paragraph 1.1 of the recently amended guidelines states:
“The Court has a duty to facilitate the prompt, economical and just
resolution of disputes”.
Summary of Second Respondent’s position
17 The second respondent supports the submissions of the first respondent. She
submits that if the issues in dispute were conducted at one property settlement trial she would incur unnecessary legal costs by being involved in a trial which will also involve a determination of contributions and the s 75(2) factors which concern the applicant and the first respondent and to which she would be a witness at best. She further submits that the orders she and the first respondent are seeking are “threshold issues” and if they were determined prior to the trial there is an increased likelihood that the s 79 proceedings may settle.
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Summary of Applicant’s position
18 In response to the submissions of the first and second respondents, the applicant
submits:
(a)
this is a case where the general rule, that there be one hearing, should apply;
(b)
if the Trust issue was to be determined at a separate trial and other matters such as contributions and s 75(2) factors were not resolved there would still need to be a further trial. This would result in the parties being placed in a queue for another trial date;
(c)
the preliminary issue sought to be heard separately by the first and second respondents will form the major part of the applicant’s claim and will overlap with issues in the substantive s 79 proceedings;
(d)
the first and second respondents’ financial history has been intertwined for many years;
(e)
the applicant disagrees with the second respondent’s submission that separate trials will save legal costs and argues that two trials will incur greater costs. She disputes that the preliminary questions could be resolved in one or two days and says that the issue of costs can be dealt with by the Court once the final proceedings have concluded.
Conclusion on issue of separate trials
19 Whilst there are circumstances where it is convenient for the Court to order
separate hearings, particularly in some cases dealt with under s 79A, I do not consider
a split hearing is appropriate in this case.20 I accept the submission of the applicant that the preliminary issues sought to be
tried separately involve questions which will form the major part of the applicant’s case for final property orders and there is likely to be an overlap between the issues to be determined on any preliminary hearing and those issues raised on the final hearing. Therefore, there is the potential for evidence adduced at any first trial to be repeated at the final hearing on this matter.
21 In my opinion, making an order for separate hearings in this case would not
result in good case management, nor is it likely to be economically beneficial for the parties. I also accept that a trial of the preliminary issues sought to be determined in this case could not reasonably be dealt with in one to two days. The discretion to order separate hearings is one which must be exercised with caution and on balance, I am not persuaded this is an appropriate case.
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The timing and sequence for filing and exchange of trial documents
The first and second respondents seek the following procedural orders:
1. That within 30 days the applicant file and serve her trial affidavits on the solicitors for the first respondent and the solicitors for the second respondent.
2. That within 30 days the applicant particularise orders 6 and 7 of her Amended Form 1 Application filed 20 December 2007 to show whether she is seeking to proceed under s 78, s 106 or Part VIII AA of the Family Law Act.
3. That the first respondent and second respondent file and serve their trial affidavits within 30 days of being served with the applicant’s trial affidavits.
The applicant seeks that all parties file and exchange trial affidavits within 21 days.
The second respondent submits inter alia:
(a)
she cannot make out the basis for the orders sought at paragraphs 6 and 7 of the applicant’s amended application for final orders;
(b)
she did not receive correspondence from the applicant or her solicitors prior to service in accordance with the usual pre-action procedures. It is not sufficient notice or procedural fairness to the second respondent for the applicant to inform the first respondent that the second respondent may be joined as a party; and
(c)
she cannot from the documents already filed in the proceedings identify what transactions the applicant says are the basis for the final orders she seeks at paragraphs 6 and 7 of her amended application for final orders.
The first respondent submits inter alia:
(a) s 90AE(3)(c) of the Family Law Act 1975 requires the Court to ensure that a third party has been accorded procedural fairness in relation to the making of orders; (b) the second respondent was joined late in the proceedings and after all of the pre-action procedures had been undertaken; (c) in paragraph 15 of his written submissions: “It is unclear whether the wife is seeking to set aside the subsequent transactions in October 2007 when the husband’s
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mother sold 12.5 million SMS shares and [another family member]
sold 14 million SMS shares”.
22 The applicant in relation to the issue of procedural fairness submits:
| ||||||
| Conclusions |
23 Whilst the first respondent makes reference in his submissions to the applicant
seeking to set aside certain transactions under s 106B, the applicant’s amended application filed 20 December 2007 does not seek orders setting aside transactions. The relief claimed at paragraph 6 is a declaration that the second respondent holds the named assets on trust for the first respondent.
24 These proceedings were commenced with the filing of the applicant’s
application for final orders on 20 November 2006. The applicant and the first respondent have filed various affidavits which I detail in my judgment delivered 18 December 2007. In that judgment at paragraph 11, I set out a summary of the applicant’s evidence from her affidavits filed 20 November 2006 and 29 June 2007 which detail the first respondent’s [business] activities including the float of [another related company] on the ASX [in] November 2006 and the involvement of members of the first respondent’s family in those activities, including the first respondent’s mother. Since my earlier judgment was delivered the applicant has completed inspection of the relevant bank records and has filed an amended application which particularises her claim for property settlement including the relief sought against the second respondent. In my view, given this background, the first respondent should be in a position to prepare and exchange his trial affidavits.
25 I consider that paragraph 4 of the orders made on 12 March 2007 which requires
the applicant and the first respondent to exchange their affidavits of evidence, which order was extended by the orders made on 9 November 2007, should not be departed from other than to set new time frames for the filing of these documents.
26 In my opinion, different considerations apply to the position of the second
respondent. She was joined as a party to the proceedings relatively late in the day. It is for the applicant to establish to the satisfaction of the Court that the second respondent holds the specified assets on trust for the first respondent. It is important that the second respondent be fully appraised of the issues to be raised by the applicant
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to support her claim for the existence of a Trust so that the second respondent will not be disadvantaged in the presentation of her case. To avoid any suggestion that the second respondent has not received procedural fairness in this matter, the second respondent should receive the applicant’s trial affidavit setting out her evidence to establish the existence of the trust before she must file her trial affidavit.
Proposed orders
27 Subject to hearing from counsel, I propose making the following orders:
1.
The applicant and the first respondent do file and exchange their trial affidavits and any further affidavits intended to be relied upon within 14 days.
2.
Within 14 days the applicant and the first respondent serve on the second respondent their trial affidavits.
3.
Within 30 days of service of the trial affidavits by the applicant and first respondent, the second respondent do file and serve her trial affidavits.
4.
The proceedings be placed in the next available callover of defended cases for the allocation of a date for trial.
I certify that the preceding [27] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
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