Saklani & Valder
[2023] FedCFamC1A 163
•22 September 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Saklani & Valder [2023] FedCFamC1A 163
Appeal from: Valder & Saklani(No 3) [2023] FedCFamC1F 98 Appeal number(s): NAA 67 of 2023 File number(s): CAC 2098 of 2016 Judgment of: ALDRIDGE, JARRETT & STRUM JJ Date of judgment: 22 September 2023 Catchwords: FAMILY LAW – APPEAL – BANKRUPTCY – Where the primary judge set aside property settlement orders made by consent between the appellant and the cross-appellant – Where an order was made in the Supreme Court of New South Wales for equitable compensation to be paid by the cross-appellant to the first respondent – Where the cross-appellant became bankrupt on his own petition – Where the first respondent was a creditor to the bankrupt estate of the cross-appellant – Where the first respondent was successful in her claims under s 79A and s 106B of the Family Law Act 1975 (Cth) before the primary judge – Where the primary judge ordered that the first respondent should be paid her equitable compensation from the sale of the land – Where the remaining assets of the appellant and cross-appellant were to be divided as agreed between them – Where the appellant contends that the primary judge erred in ordering the first respondent be paid her equitable compensation before the property is divided between the appellant and cross-appellant – Whether the orders made were just and equitable – Adequacy of reasons – Error of law – Challenges to weight – Where an order of the primary judge is amended by the Full Court to avoid double payment – Where there is no opposition by the parties to that order being amended – Otherwise, no error established – Appeal dismissed – Appellant and cross-appellant to pay the costs of the first respondent in a fixed sum.
FAMILY LAW – CROSS-APPEAL – BANKRUPTCY – Where the cross-appellant contends the primary judge erred by treating the land as divisible property – Whether the first respondent would have been able to recover her debt under the original consent orders – Application of s 75(2)(ha) of the Family Law Act 1975 (Cth) – Costs order – Procedural fairness – Error of law – Whether the cross-appellant’s discharge from bankruptcy released him from any claims of the first respondent – Where the first respondent remained a claimant with a right to prove in the estate as a creditor – No error established – Cross-appeal dismissed – Cross-appellant and appellant to pay the costs of the first respondent in a fixed sum.
FAMILY LAW – APPEAL – APPLICATION IN AN APPEAL – RECUSAL – Where the cross-appellant sought for the disqualification of each member of the Full Court – Where the cross-appellant filed this application after the appeal was heard – Apprehended bias – Separate reasons provided by each judge – Where the relevant test is well established by Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 – Where the test is not satisfied – Application dismissed – Cross-appellant to pay the costs of the first respondent in a fixed sum.
Legislation: Bankruptcy Act 1966 (Cth) s 58(3), 116, 120, 121, 153
Family Law Act 1975 (Cth) s 75, 79, 79A, 80, 106B, 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 36(1)(b)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 10.13
Conveyancing Act 1919 (NSW) s 37A
Cases cited: A.F.I. Management Pty Ltd v Condon in his Capacity as Trustee of the Bankrupt Estate of Brian Keith Hones [2019] FCA 2012
Argos Pty Ltd v Corbell (2014) 254 CLR 394; [2014] HCA 50
Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148
Biltoft and Biltoft (1995) FLC 92-614
Cantrell & North and Anor (2020) FLC 93-976; [2020] FamCAFC 175
Commissioner of Taxation & Worsnop and Anor (2009) FLC 93-392; [2009] FamCAFC 4
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63
Fraser v Deputy Commissioner of Taxation (1996) 69 FCR 99
Green v Official Trustee in Bankruptcy [2001] FCA 1644
Green v Schneller (2002) FLC 93-114; [2002] NSWSC 671
Green v Schneller (2001) 189 ALR 464; [2001] NSWSC 897
Gronow v Gronow (1979) 144 CLR 513; [1979] HCA 63
House v The King (1936) 55 CLR 499; [1936] HCA 40
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19
Johnson v Johnson (2000) 201 CLR 488; [2000] HCA 48
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Mango Media Pty Ltd v Velingos (2008) 216 FLR 176; [2008] NSWSC 202
Markel Syndicate Management Ltd v Taylor as Liquidator of Heading Contractors Pty Ltd (In Liquidation) (2021) 399 ALR 659; [2021] FCAFC 198
Masi-Haini v Minister for Home Affairs [2023] FCAFC 126
Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Semmens v Commonwealth (1990) FLC 92-116; [1989] FamCA 40
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703; [1996] FamCA 58
QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 66 Fam LR 369; [2023] HCA 15
Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110
Prince and Prince (1984) FLC 91-501
Re JRL; Ex parte CJL (1986) 161 CLR 342; [1986] HCA 39
Saklani v Valder & Anor [2022] HCASL 20
Tarea Management (North Shore) Pty Ltd (In liquidation) v Glass (1991) 28 FCR 93
Tooheys Ltd v Minister for Business and Consumer Affairs (1981) 36 ALR 64
Valder & Saklani (2021) FLC 94-042; [2021] FamCAFC 142
Vakauta v Kelly (1989) 167 CLR 568; [1989] HCA 44
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447; [2003] HCA 48
Zaravinos v Houvardas (2004) 32 Fam LR 490; [2004] NSWCA 421
Number of paragraphs: 275 Date of hearing: 29 June 2023 and 1 September 2023 Place: Sydney Counsel for the Appellant/Second Cross-Respondent: Dr Smith Solicitor for the Appellant/Second Cross-Respondent: Holmes Donnelly & Co Counsel for the First Respondent/First Cross-Respondent: Mr Ash (direct brief) Counsel for the Second Respondent/ Cross-appellant: Mr McGovern SC with Mr Pruscino (direct brief) The Third Respondent/Third Cross-Respondent: Did not participate The Fourth Respondent/Third Cross-Respondent: Did not participate ORDERS
NAA 67 of 2023
CAC 2098 of 2016FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS SAKLANI
Appellant/Second Cross-Respondent
AND: MS VALDER
First Respondent/First Cross-RespondentMR B SAKLANI
Second Respondent/Cross-appellant
MR C SAKLANI (and another named in the Schedule)
Third Respondent/Third Cross-Respondent
ORDER MADE BY:
ALDRIDGE, JARRETT & STRUM JJ
DATE OF ORDER:
22 SEPTEMBER 2023
THE COURT ORDERS THAT:
1.The Application in an Appeal filed on 24 July 2023 is dismissed.
2.The appeal is allowed in part.
3.The cross-appeal is allowed in part.
4.Order 4(e) made on 24 February 2023 is varied as follows:
4. …
(e)in payment of so much of the sum of $1,602,705.89 that remains outstanding following compliance with Order 4(a) herein, to the third and fourth respondents.
5.Orders 5 and 6 made on 24 February 2023 are varied as follows:
5.Following agreement in writing between the
applicanttrustee and first respondent orassessment,due determination of the applicant’s proof of debt as it relates to costs in the equity proceedings yet to be assessed,the costs of the equity proceedingsthe amount so determined will be paid to the applicant subject to the terms of the orders of Katzmann J dated 8 November 2016 from the sum in Order 4(d) above and any balance will be paid to the first respondent.6.
In the event that the applicant has not commenced the application for assessment of costs within 28 days of the monies being placed in the controlled monies account as required by Order 4(d) then the monies are to be paid to the first respondent.The first respondent has liberty to apply to the primary judge in relation to any issue of delay arising in respect of Order 5.
6.The appeal is otherwise dismissed.
7.The cross-appeal is otherwise dismissed.
8.The appellant and the cross-appellant, jointly and severally, are to pay the first respondent’s costs of the appeal and cross-appeal fixed in the sum of $13,923.51 within 28 days.
9.The cross-appellant is the pay the first respondent’s costs of the Application in an Appeal fixed in the sum of $1,200 within 28 days.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Saklani & Valder has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
INTRODUCTION
This is an appeal and a cross-appeal from orders made by a judge of the Federal Circuit and Family Court of Australia (Division 1) on 24 February 2023.
A Notice of Appeal was filed on 23 March 2023 by Ms Saklani (“the appellant”) and an Amended Notice of Cross-Appeal was filed on 5 June 2023 by Mr B Saklani (“the cross-appellant”). Ms Valder is the first respondent in both appeals (“the first respondent”) and the third and fourth respondents did not participate in the appeal.
On 24 February 2023, the primary judge made orders to the following effect:
·Setting aside consent property orders of the Family Court of Australia (as it was then known) made on 13 November 2013 in proceedings between the appellant and the cross-appellant;
·Setting aside a transfer of a property at F Town (“the F Town property”) by the appellant to the third and fourth respondents, being a property which was the subject of the consent orders;
·For the sale of the F Town property with the net proceeds to be paid as follows:
·$594,258.25 to the first respondent;
·$250,000 to be held pending quantification of earlier costs orders made in favour of the applicant and the first respondent;
·$1,602,705.89 to the third and fourth respondents;
·the balance to the appellant pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”); and
·The cross-appellant retain his superannuation, property in Country Q and personal property.
The appeal challenges all orders on a number of different grounds. The cross-appeal challenges all of the above orders principally, but not exclusively, on the basis that the bankruptcy of the cross-appellant and his subsequent discharge terminated the first respondent’s rights under s 79A and s 106B.
In order to understand these orders, the appeal and cross-appeal, it is necessary to set out in some detail the precise history of events.
HISTORY
The first respondent commenced proceedings against the cross-appellant in the Supreme Court of New South Wales. She was initially unsuccessful but her appeal succeeded and she was found to be entitled to equitable compensation in July 2013. In September 2014, her claim was quantified in the sum of $594,028.25.
The appellant and the cross-appellant were married. On 13 November 2013, consent property settlement orders were made by the Family Court of Australia (“the consent orders”). Pursuant to these orders the interests of the cross-appellant in the F Town property were transferred to the appellant.
The documents supporting the application for the consent orders did not mention the first respondent, her claims or the orders of the New South Wales Court of Appeal. Leaving aside the effect of the cross-appellant’s bankruptcy and discharge, there was no challenge to the orders of the primary judge setting aside the consent orders on the basis of that non-disclosure. That is hardly surprising having regard to well established authorities such as Semmens v Commonwealth (1990) FLC 92-116 and Cantrell & North and Anor (2020) FLC 93-976 which deal with the failure to disclose creditors to the court when seeking consent property settlement orders.
The cross-appellant became a bankrupt upon his own petition on 6 March 2015.
On 8 November 2016, Katzmann J granted the first respondent leave under s 58(3) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) to commence proceedings against the cross-appellant under s 79A of the Act. The effect of the conditions attached to that order was that the first respondent was obliged to pay any funds she received from the s 79A proceedings to the cross-appellant’s trustee for the benefit of his creditors generally. Those proceedings were commenced against the appellant on 19 December 2016. The cross-appellant was joined to them on 17 May 2019.
In December 2018, the appellant transferred her interest in the F Town property to her son and daughter in law (the third and fourth respondents) for consideration of $1,484,881.20. The appellant retained a life estate in the property. Registration of the transactions took place in early 2019.
Meanwhile, in March 2018, the cross-appellant was discharged from his bankruptcy.
On 19 June 2020, Rees J dismissed the first respondent’s application on the basis that the effect of the cross-appellant’s discharge from bankruptcy was that the first respondent ceased to be a creditor of him and was no longer a “person affected” for the purpose of s 79A.
The appeal from that decision was allowed by the Full Court of the Family Court of Australia in August 2021 and the matter was remitted for further hearing. An application for special leave to appeal against that decision was refused by the High Court on 16 May 2014 on the ground that there was no reason to doubt its correctness.
The third and fourth respondents were joined to the proceedings on 24 May 2022. They each filed a submitting notice on the appeal and took no part in it.
DISQUALIFICATION
The appeal was heard on 28 June 2023.
On 24 July 2023, the cross-appellant, now acting for himself (at the hearing senior and junior counsel appeared for him), filed an Application in an Appeal together with a supporting affidavit seeking that each member of the bench disqualify themselves from the appeal. Accordingly, the appeal was listed for a hearing of the application on 1 September 2023, which was the earliest date on which the Court could reconvene.
If the cross-appellant is successful in obtaining a recusal of one member of the bench, then it was without jurisdiction to hear the appeal which would have to be heard again by a differently constituted court (QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 66 Fam LR 369).
The procedure to be followed where there is an application for recusal from a multi-member court was discussed in that matter with some disagreement between the members of the Court. Chief Justice Kiefel and Gageler J were of the view that the matter was one for the entire court and not the individual judge (at [4] and [29]). Justice Gordon (at [66] and [94]–[104]), Edelman J (at [108] and [133]) and Steward J (at [193]) considered that the individual judge should first consider whether he or she should recuse themselves and if he or she decides to continue, then the Court as a whole must then consider the question.
Justice Jagot took a different course saying it was a matter for the individual judge alone. Justice Gleeson did not address the question.
Taking these together, the favoured position is that the individual judge should first decide whether he or she should properly continue to sit and that where the decision is made not to recuse, the entire court must then consider whether it can continue to do so. The Full Court of the Federal Court came to similar conclusion in Masi-Haini v Minister for Home Affairs [2023] FCAFC 126 at [95]–[97].
Whilst the application seeks the recusal of each of us, it is primarily directed at me. I shall deal with that first in my role as the impugned judge. If I do not recuse myself, it will then be for Jarrett and Strum JJ to decide whether, on the matters raised against me, the Court should continue to sit.
If it then comes to it, I must consider for myself whether the inclusion of either Jarrett or Strum JJ on the bench requires its recusal (assuming they decline to do so individually).
The complaints against myself are fully set out in the supporting affidavit. I shall attempt to summarise them as follows.
Mr Ash was counsel for the first respondent in the appeal heard on 28 June 2023, but not the earlier appeal in this Court (Valder & Saklani (2021) FLC 94-042 (“Valder”)). At that time, the first respondent acted for herself. Mr Ash has appeared for the first respondent on other occasions including an appeal to the New South Wales Court of Appeal determined on 1 July 2011.
Mr Ash and I were members of Frederick Jordan Chambers. We each had expertise in bankruptcy matters and I led him in matters and also appeared against him.
In his supporting affidavit, the cross-appellant has said:
12.It is reasonable for a “fair minded lay observer” to surmise that on 1 July 2011 Mr Ash would have celebrated his success in the Court of Appeal, comprised of the CJ and eminent judges, with his mentor Mr Aldridge SC. Being a Friday that day, a good celebratory “Barossa red” would have been in order or perhaps a sauvignon blanc from New Zealand!
…
15.As a “fair minded lay observer” would query if Mr Ash and Mr Aldridge discussed [Ms Valder’s] predicament- perhaps in words to the effect: “remember the client for whom I had success before a Court of Appeal presided by Bathurst CJ”? Did Mr Aldridge who on any reckoning was an expert in bankruptcy and now a Family Law judge ever suggests 79A to Mr Ash? How did s 79A occur to Mr Ash?
(Cross-Appellant’s affidavit filed on 24 July 2023, paragraphs 12 and 15)
He also raised the following:
·The decision in Valder was “bizarre”, “extraordinary” and “the only plausible explanation I could come up with as a ‘fair minded lay observer’ was bias and because I had no evidence of actual bias it could only be subconscious or unintended bias” (Cross-appellant’s affidavit filed on 24 July 2023, paragraphs 18 and 21);
·The Court used the word “fraud” when such an allegation had never been raised in the proceedings;
·The Court failed to mention the “transgressions” of the first respondent despite its “proclivity for unsubstantiated assertions against [him]” (Cross-appellant’s affidavit filed on 24 July 2023, paragraph 30);
·The Court queried the interest the cross-appellant had in the orders for the sale of the F Town property;
·“The Full Court (including [the primary judge]) treated the debt as if it were an interest in the F Town property. There is no legal or other basis for transmogrifying a debt into a property interest. I cannot see no possible way to justify that bias” (Cross-appellant’s affidavit filed on 24 July 2023, paragraph 34)
·In 2021, the Court sought submissions from the parties on Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703 (“Official Trustee in Bankruptcy v Donovan”) and on s 37A of the Conveyancing Act 1919 (NSW) (“the Conveyancing Act”); and
·The Court misrepresented Official Trustee in Bankruptcy v Donovan as an authority relied upon by the cross-appellant.
The principles to be applied
In Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 (“Ebner”), the key principle was identified in the following terms:
7.… Deciding whether a judicial officer (or juror) might not bring an impartial mind to the resolution of a question that has not been determined requires no prediction about how the judge or juror will in fact approach the matter. The question is one of possibility (real and not remote), not probability. Similarly, if the matter has already been decided, the test is one which requires no conclusion about what factors actually influenced the outcome. No attempt need be made to inquire into the actual thought processes of the judge or juror.
The test to be applied is “whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide” (Johnson v Johnson (2000) 201 CLR 488 at [11]).
The majority added:
12.… At the same time, two things need to be remembered: the observer is taken to be reasonable; and the person being observed is “a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial”.
(Footnote omitted)
None the less, the possibility of impartiality must be real and not remote (Ebner at [7]) and judges have a duty to sit on cases to which they are assigned (Re JRL; Ex parte CJL (1986) 161 CLR 342 (“Re JRL; Ex parte CJL”) at 352). A conclusion of apprehended bias “must be firmly established and should not be reached lightly” (Re JRL; Ex parte CJL at 371).
Finally, “when a party is in a position to object but takes no steps to do so, that party cannot be heard to complain that the judge was biased” (Vakauta v Kelly (1989) 167 CLR 568 (“Vakauta v Kelly”) at 587).
Association with counsel for the first respondent
At the commencement of the resumed appeal I said the following:
ALDRIDGE J: The cross-appellant has raised my association with counsel who appeared for the first respondent on the appeal, Mr Ash.
Mr Ash joined Frederick Jordan Chambers in 1998. I took silk shortly thereafter. We each had a practice in corporate and personal insolvency. I appeared with him as my junior on a number of occasions and also frequently had him as my opponent. We of course, discussed matters of interest from time to time.
I cannot recall going to a restaurant with Mr Ash when at the Bar, although I may have done so. Lunch with colleagues, other than as a large group, was not something I engaged in frequently.
I have no recollection of discussing this matter with him at any time, let alone a proposed appeal in 2011. I did not attend any celebratory event after the outcome of the appeal.
I have met Mr Ash infrequently since my appointment to this Court in December 2012. These were at public functions or as we passed in the street. There may have been a coffee at a café. There was no celebratory lunch. Again, this matter was not discussed. The discussion centred around events at my old chambers, my experience on the bench and his experience as a part-time member of the AAT or possibly NCAT.
The cross-appellant may or may not accept the above to be so. The question is whether there is any reasonable basis to think that I had an association with Mr Ash that leads to the implication that I might not decide the appeal on its merits. If there is such a basis then I should not sit on the appeal, despite my position stated above.
There is no reasonable or rational basis for inferring that I had a celebratory lunch with Mr Ash in July 2011.
However, even if there was such a lunch, I do not see how that would lead to a notional and fair-minded lay observer to conclude that 10 years later, it could suggest that there was a reasonable apprehension of bias.
The cross-appellant did, however, postulate such a link. His affidavit said:
13.Mr Ash next acted for [Ms Valder] in October 2016 again, allegedly pro-bono. As I was then bankrupt, he sought leave from Katzmann J of the Federal Court under s 58(3)(b) of the Bankruptcy Act to bring an application under s 79A of the FL Act, an option, according to Katzmann J that “had not occurred to anyone”.
14.Those to whom s 79A had not ‘occurred’, included Howard Insall SC, his junior barrister and a firm of instructing solicitors. Whether described as oversight, reckless or, in legalese, as “negligence”, it was a mistake the best of us can make but for which we pay a price. In this instance however no explanation has ever been given for that delay and the consequences of the delay are being borne solely by me and my former wife and even my son and his wife but not by those responsible for the laches, [Ms Valder] and her legal advisers, who have never even been questioned.
15.As a “fair minded lay observer” would query if Mr Ash and Mr Aldridge discussed [Ms Valder’s] predicament- perhaps in words to the effect: “remember the client for whom I had success before a Court of Appeal presided by Bathurst CJ ”? Did Mr Aldridge who on any reckoning was an expert in bankruptcy and now a Family Law judge ever suggests 79A to Mr Ash? How did s 79A occur to Mr Ash?
(Cross-Appellant’s affidavit filed on 24 July 2023, paragraphs 13–15)
That is pure speculation. There is no reasonable or rational basis for thinking that such an inference might be drawn by the hypothetical observer.
That leaves my association with Mr Ash in chambers and the rare occasional meeting since. That is not enough to draw the requisite apprehension of impartiality.
The “bizarre” decision in Valder
Essentially, the position of the cross-appellant is that the decision in that appeal was so bizarre and extraordinary that it could only be explained by bias, albeit, “subconscious or unintended bias” (Cross-Appellant’s affidavit filed on 24 July 2023, paragraph 21).
Whilst that may be the opinion of the cross-appellant, it was not universally shared. The cross-appellant sought special leave to appeal the decision in Valder. It was refused. The High Court said that “there is no reason to doubt the correctness of the decision of the Full Court” (Saklani v Valder & Anor [2022] HCASL 20).
The subjective opinion of the cross-appellant is not sufficient to meet the relevant test, which is objective.
The use of the word “fraud”
It is important to note the context in which the word “fraud” appears in the transcript of the hearing of the appeal. It appears 13 times and the word fraudulent twice.
The first use of the word arose in a discussion which commenced with the following exchange:
ALDRIDGE J: But that begs the question of what the proceedings are in respect of the provable debt, because proceedings to set aside a transaction under 37A of the Conveyancing Act are proceedings in respect of a provable debt, clearly, but that has been well now established as somewhere where a creditor can act to recover property for the benefit of the bankrupt estate.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Your Honour, I don’t dispute that proposition.
ALDRIDGE J: All right.
(Transcript 28 June 2023, p.37 lines 15–23)
It then continued:
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: But what I do submit is that in the circumstances of this case, the creditor could bring the action in respect of her provable debt and hold any proceeds for the benefit of the creditors generally. But it’s not the trustee, and the fact that she might be acting in a way that has a benefit for the estate doesn’t mean that she suddenly becomes armed with powers under sections 118 through to 122 - - -
JARRETT J: Agreed. And I absolutely agree.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: - - - or that she has sought to propound a case under 37A of the Conveyancing Act.
ALDRIDGE J: No, no. Here, she’s - - -
JARRETT J: Agreed.
ALDRIDGE J: - - - exercising her rights under section 79A of the Bankruptcy Act [sic] and 106B, which are to the same effect as, essentially, 37A – that where through fraudulent activity, funds are removed from the reach of the court, there’s a remedy to bring those funds back under the control.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]:Your Honour, there was never – in this – in the circumstances of this case, your Honours know from the materials that my client was a senior solicitor in various government employments. He also gave evidence, which was unchallenged, as to his thinking in relation to dealing with the consent orders. There was never a suggestion or a finding that could be possibly made that he had engaged in any fraudulent activity. And if there was a claim for fraud, as your Honours know, at least in this country, it has got to be distinctly pleaded and proved, and you don’t just get convicted on the odour or the feel or the vibe of the matter. You get convicted, as it were, or a finding is made against you - - -
ALDRIDGE J: But the - - -
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: - - - if there are well set out, documented particulars of fraud which are alleged and which you have the opportunity of meeting, and that was not something that occurred in this case nor - - -
STRUM J: He excluded a debt that should have been – that it has been found should have been brought to the attention of the court in the making of the consent orders, [senior counsel for the cross-appellant].
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Your Honour - - -
STRUM J: And as I read his evidence, he seems to be suggesting that because he had a lawyer – seemed to be of the opinion that because he had obtained special leave, it was a – to put it colloquially – a shoo-in. It seems to me to be a very rash - - -
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Well, your Honour - - -
STRUM J: - - - position to take for a lawyer, [senior counsel for the cross-appellant].
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Well, your Honour, firstly, so far as the debt was concerned, he gave credible evidence, which wasn’t challenged, that he didn’t consider that the person was a creditor, because there was no calculation of the equitable compensation at that point.
JARRETT J: No, that can’t be right. And you just told me – told us that he’s a senior lawyer. There was a judgment against him for compensation to be assessed. That’s clearly a liability – clearly a liability.
…
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Yes. It’s contingent on a number of factors, I accept, your Honours. Now, your Honours, I don’t want to get sidetracked, because so far as this court is concerned, this is coming up on an appeal, obviously, and there has been no pleading of a case that this was fraud, and it wasn’t ever a case that was particularised as being a fraud.
…
ALDRIDGE J: Let’s not get too tied up in the word “fraud”, Mr McGovern. There’s no finding of fraud as such. But the point I was trying to make is that section 79A and 106B are analogous to 37A of the Conveyancing Act – that give creditors rights to recover property that has been moved that had at least the effect of preventing that property being used to pay the creditor’s debt.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Well, your Honour, we submit that - - -
ALDRIDGE J: That’s the purpose – evident purpose of those sections. And what Katzmann J and the court in Fraser did – and so where the trustee is not prepared to undertake the recovery proceedings, we will authorise a creditor to do so on behalf of the body of creditors.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Well, that’s wrong, your Honour.
(Transcript 28 June 2023, p.37 lines 25 to p.39 line 16)
Two matters arise from this exchange.
I was raising the evident purpose of s 79A and s 106B of the Act and s 37A of the Conveyancing Act. The latter states that “every alienation of property… with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced”.
As will be explained shortly, leave has been granted to creditors under s 58(3) of the Bankruptcy Act to continue proceedings against a bankrupt under that section for the benefit of creditors. Section 79A(1)(a) also refers to a “miscarriage of justice by reason of fraud”.
My question was directed to the remedial nature of the sections using the word fraudulent and as a convenient shorthand. As is made abundantly clear by me at the end, it was accepted that there was no finding of fraud in the present case and I sought to redirect the discussion as to the evident purpose of the various sections.
As can be seen, senior counsel for the cross-appellant returned to the question of fraud. The intervention of Strum J was on the failure of the appellant and cross-appellant to include a debt that arose from the Court of Appeal decision in the application for consent property orders. The basis for omitting it, said by the cross-appellant, was because he believed he would obtain special leave to appeal to the High Court and then win the appeal. That was described as rash by Strum J, especially for an experienced senior lawyer. It is not an inapt description.
The next use of the word “fraud” was by senior counsel for the cross-appellant when referring to Valder determining only a preliminary point and where “none of the evidence had been taken at that stage, and in particular, whilst the court did have some references to matters like 37A and fraud and things of that sort, the fact pattern wasn’t established at that point” (Transcript 28 June 2023, p.48 lines 3–5).
The other relevant exchange was:
ALDRIDGE J: Well, just before you do that, could I ask you a couple of questions. The fraud for the purpose of section 153 is being held to include what is being described in the authorities as technical fraud, meaning breaches of certain equitable obligations to be regarded as fraud so that there is not a release.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Your Honours, I am fully cognisant of section 153, subsection (2).
ALDRIDGE J: All right.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: The reason that we haven’t raised it is because it’s never – until your Honour the presiding judge just mentioned it now, it has never been a feature of the case. And as we submit, on the basis of any number of cases that support the proposition that an allegation of fraud has to be distinctly pleaded and proved, we would submit that that is not a sanction that should be departed from by this court. I mean, those are serious allegations and - - -
ALDRIDGE J: Well, what - - -
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: - - - could have led to a different approach to the case - - -
ALDRIDGE J: Well, no. it - - -
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: - - - had that been a - - -
ALDRIDGE J: The - - -
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: - - - case in play. And we come to meet the case that we had in front of [the primary judge] and on the appeal.
ALDRIDGE J: I understand the latter point but as to the former point, isn’t it rather whether it’s a – the findings have been made. It’s a question of whether you can categorise the findings that were made by the Court of Appeal - - -
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: We - - -
ALDRIDGE J: - - - as fraud for the purposes of section 153.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Your Honour, we would submit that that would be a serious departure from procedural fairness to even mention the F word, as it were, in circumstances such as has never been agitated before. And we plotted our course in relation to cross-examination and the evidence that we led in the case was all premised upon the case that we had to meet, which was not a fraud case. I mean, I appreciate, your Honour, that that’s a conveniently easy way out of the case in terms of picking that up as a portion that then says, well, 153, subsection (2) is in play, and that’s the end of the matter, but that would be a serious denial of natural justice for my client to face that.
(Transcript 28 June 2023, p.58 line 34 to p.59 line 34)
Section 153(2)(b) of the Bankruptcy Act provides that a release under s 153(1) does not release a bankrupt from a debt “incurred by means of fraud or a fraudulent breach of trust”. As was accepted by senior counsel for the cross-appellant, “fraud” for the purpose of that section extends to fraud in the equitable sense as well as intentional common law fraud (Nadinic v Drinkwater (2017) 94 NSWLR 518 at [22]).
The Court is entitled, if not obliged, to seek submissions on matters of concern to it, especially where they have not been addressed by the parties. That was the case here. Submissions were sought as to whether s 153(2)(b) of the Bankruptcy Act had any application. That is not an indication of apparent bias, but judges doing their job. The fact that one or the other parties may perceive that request for submissions in that way does not advance the proposition that this gives rise to an apprehension of bias.
In a similar vein, the cross-appellant complains that the Court in Valder, and in particular, myself, gave rise to an apprehension of bias by seeking submissions on particular topics.
On 12 April 2021, the appeal judicial registrar, at the direction of the Court, wrote to the parties and their lawyers in the following terms:
Dear [first respondent], [first respondent’s solicitor], [appellant] and [counsel for the cross-appellant],
I refer to the above appeal that is listed for hearing before the Full Court on Wednesday, 14 April 2021.
The Full Court has requested that I contact the parties and request that you be in a position to address the decisions in Green v Schneller [2001] NSWSC 897 and Zaravinos v Houvardis [2004] NSWCA 421, 32 FamLR 421 at the hearing of this appeal.
I trust that this information is of assistance.
…
Appeal Registrar, Eastern Region
At the conclusion of the appeal hearing, the Court made the following direction on 14 April 2021:
(1)The [first respondent] shall by electronic means file written submissions no later than 28 April 2021, on the matter of whether the filing of [the first respondent’s] Application for Final Orders on 19 December 2016 constituted a chose in action over the bankrupt estate of [the cross-appellant], including addressing the issue raised in Official Trustee in Bankruptcy v Donovan (1996) 20 Fam LR 802 at 808 – 809 and 818 – 819, and in reply to the submissions made orally for [the appellant and the cross-appellant].
Provision was made for submissions in reply.
The submissions made by senior counsel for the cross-appellant included “the decision of Rees J is thus on all fours with the decision of Moss J” (Cross-appellant’s written submissions filed on 7 May 2021, paragraph 4).
It is therefore difficult to understand the cross-appellant’s assertion that:
36.… it came as a surprise when the Full Court in 2021, misrepresented Donovan as a case ‘the second respondent’ relied on. (J48) The issue of ‘revesting’ was not then relevant and was considered would never to arise given the dealings with the [Country Q] property. Revesting, it appears was however an issue for the Full Court and apparently even before the hearing as shown by the timing of the email from Aldridge J. We felt we were snookered by the way the Full Court raised and dealt with Donovan. …
(Cross-Appellant’s affidavit filed on 24 July 2023, paragraph 36)
The cross-appellant is mistaken. As is apparent from the reasons in Valder, there was no reliance on revesting.
In any event, the court is obliged to raise for consideration by the parties matters that concern it. To fail to do so would be procedurally unfair.
The cases of Zaravinos v Houvardas (2004) 32 Fam LR 490 and Green v Schneller (2001) 189 ALR 464 referred to in the email from the appeal judicial registrar were potentially relevant not because they were cases concerning s 37A of the Conveyancing Act, but because there had been in those cases leave granted to a creditor under s 58(3) of the Bankruptcy Act to pursue that remedy for the benefit of the bankrupt estate of the debtor.
Again, this cannot give rise to an apprehension of pre-judgment.
The cross-appellant also complains that the Court questioned his senior counsel as to the interest the cross-appellant has in the order for the sale of the F Town property. The ground of appeal contended that the order for sale was procedurally unfair because the cross-appellant was not given sufficient notice that such an order was sought.
Under the consent orders, the cross-appellant disposed of his interest in the F Town property. It is reasonable, therefore, to ask what his interest was to appeal against an order for sale. An appellant must have some interest in the order the subject of the appeal. They must be aggrieved or affected in some way beyond the interest of a mere member of the public (Tooheys Ltd v Minister for Business and Consumer Affairs (1981) 36 ALR 64 at 79, Argos Pty Ltd v Corbell (2014) 254 CLR 394 at [61]).
The query therefore was a legitimate one. The cross-appellant’s assertions in his affidavit that “[the F Town property] was my home since 2018” and that “the Full Court did not even contemplate that my former wife had a life-estate in writing” does not answer the question (Cross-appellant’s affidavit filed on 24 July 2023, paragraph 31).
The above contentions of the cross-appellant are not reasonable. They are speculative and redolent of a conspiracy theory. They are well beyond what a reasonable lay observer would take into account. There is no basis for recusal.
Finally, it is well established that litigants must act reasonably promptly in raising allegations of apprehended bias. In Vakauta v Kelly, Brennan, Deane and Gaudron JJ said at 572:
Where such comments which are likely to convey to a reasonable and intelligent lay observer an impression of bias have been made, a party who has legal representation is not entitled to stand by until the contents of the final judgment are known and then, if those contents prove unpalatable, attack the judgment on the ground that, by reason of those earlier comments, there has been a failure to observe the requirement of the appearance of impartial judgment. By standing by, such a party has waived the right subsequently to object.
See also, Dawson J at 577–579.
The cross-appellant has been represented by senior counsel both in Valder and in the current appeal, until he brought the application for recusal, which he had done himself. In the course of his affidavit he said:
3.The issue of whether Aldridge J should recuse himself from hearing this appeal was not raised by any lawyer and not mentioned by Aldridge J for parties to comment on. Upon learning from the Registrar in April of the bench constituted for the hearing I wrote to both the Chief Justice and Deputy Chief Justice setting out my concerns of apprehended bias and my plea that Aldridge J should not be on a bench for this appeal. I was surprised that Aldridge J had accepted the appointment without flagging any concern with the parties.
4.I had also foreshadowed to the Registrar at a tele-hearing my concerns at Aldridge J being on the bench given his decision in 2021 the details of which I discuss later below.
5.My counsel were disinclined to raise bias because in their view, there was insufficient ‘proof’. Given comments and questions from the bench at the hearing, I have a stronger belief than before of apprehended bias for which there is no need for direct evidence.
(Cross-appellant’s affidavit filed on 24 July 2023, paragraphs 3–5)
It is difficult to think of a clearer case of waiver of matters known to the cross-appellant prior to the commencement of the appeal. At the hearing of the application, the cross-appellant said that the discussion with counsel referred to in his affidavit was limited to actual bias and did not touch upon apprehended bias. That is not a natural reading of the above paragraphs taken together.
However, even if the discussion was limited in that way the point remains. The cross-appellant had the benefit of senior and junior counsel at the hearing of the appeal.
The question then arises as to whether anything said or done during the hearing could add to or amplify earlier matters so that taken in combination they may give rise to an appearance of an apprehension of bias. The cross-appellant relies on the comments made at the hearing which have already been discussed.
The cross-appellant was represented throughout the hearing of the appeal by senior and junior counsel and solicitors. No recusal application was made then or shortly thereafter. This again amounts to waiver.
Thus, even if there were matters that could otherwise appear to a reasonable and intelligent lay observer to give rise to an appearance of an apprehension of bias, they have been waived. However, as I have explained earlier, I do not consider there to be such matters. The subjective beliefs and speculations cannot be a basis for a successful application for recusal.
I decline to disqualify myself.
It follows from the above that I see no basis whatsoever for the disqualification of Jarrett or Strum JJ.
THE APPEAL
The appeal raises five grounds but Ground 4 was ultimately abandoned.
Did her Honour err in making Orders 4(a) and 4(e)? (Ground 1)
Under these orders the primary judge protected the third and fourth respondents from loss by requiring their mortgage on the F Town property and the funds they had spent on it to be repaid from the proceeds of its sale. Order 4(a) dealt with the payment of the mortgage and Order 4(e) required a payment to the third and fourth respondents of $1,602,705.89 prior to the balance of proceeds being paid to the first respondent.
The point of the ground is that the mortgage is included in the sum of $1,602,705.89 so that the orders provide for its payment twice.
Counsel for the appellant accepted that the evidence on this point was limited and unclear. No clear submissions were made to the primary judge on this point. Recognising this, the order that was proposed to be substituted for Order 4(e) was:
13. …
(e)in payment of so much of the sum of $1,602,705.89 that remains outstanding following compliance with para (a) herein, to the third and fourth respondents.
(Appellant’s Summary of Argument filed on 19 May 2023, paragraph 13)
Counsel for the cross-appellant and the first respondent did not oppose an order, effectively under the slip rule, to amend the orders to that effect. Neither of them is affected by the order. The effect is on the third and fourth respondents, but not adversely. It is simply to avoid any question of a double payment.
It may readily be accepted that her Honour did not intend a double payment. The proposed order prevents that possibility whilst protecting the position of the third and fourth respondents.
Whilst there are doubts that r 10.13(1)(e) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) applies on appeals, pursuant to s 36(1)(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth), the Court may, in the exercise of its appellate jurisdiction, make such order as it thinks fit.
In the above circumstances I am persuaded that the order should be made.
Did the primary judge err by requiring the first respondent to be paid before dividing the property of the appellant and the cross-appellant? (Ground 2)
In short, the appellant submitted that the cross-appellant should bear the entirety of the first respondent’s claim and that therefore, the property division as between the two of them should disregard the obligation to pay the first respondent.
The appellant submitted that there were three errors:
(1)The primary judge failed to consider the circumstances surrounding the cross-appellant incurring the liability;
(2)The primary judge failed to consider whether it was just and equitable for the appellant to be called upon to repay the liability and
(3)Her Honour’s reasons were inadequate.
It is well established that generally “where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors the Court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities” (Biltoft and Biltoft (1995) FLC 92-614 at 82,124). The Court referred to the following well known passage in Prince and Prince (1984) FLC 91-501 per Evatt CJ at 79,076:
In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under sec. 79.
The Court concluded at 82,127:
Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.
It must be recognised that since that decision, in 1995, s 79(10) was amended so that a creditor who may not be able to recover his or her debt if the order under s 79 is made, is entitled to become a party to the proceedings. This is a statutory recognition that the ability of a creditor “of a party” to be paid is a relevant consideration for the court.
Also s 75(2)(ha), which applies pursuant to s 79(4)(e), has been inserted into the Act. It obliges the court to take into account “the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant”.
Her Honour first considered this issue at [87] when discussing and rejecting the appellant’s submissions that the consent orders should not be set aside because “allocating funds to a creditor of the [cross-appellant] would diminish the funds available to the appellant as a consequence of her contributions over a long period”.
The primary judge returned to this issue in the context of the s 79 orders saying:
138.The [appellant] argued that the liabilities of the [cross-appellant] are not liabilities which should be included in the balance sheet for the purpose of considering the adjustment of assets as between herself and [the cross-appellant] on the basis that the monies owed to [the first respondent] either by way of equitable compensation or by way of costs arose in the context of [the cross-appellant’s] relationship with [the first respondent], a relationship which [the appellant] says [the cross-appellant] denied when it was raised with her by her brother who was married to [the first respondent].
139.The Court has the discretion, in order to do justice and equity as between the parties, to alter the interests of the parties in their property (or not). In exercising that discretion it is orthodox to have regard to all of the assets, liabilities, superannuation and financial resources of the parties. In an appropriate case, however, it may be necessary in order to do justice and equity between the parties to, in effect, treat certain liabilities as the liability of one or other of the parties rather than taking those liabilities into account when determining the net pool available for adjustment: Biltoft and Biltoft (1995) FLC 92-614.
140.If I were to accede to the [appellant’s] position and make the liability to [the first respondent] the responsibility of [the cross-appellant], not to be satisfied from the sale proceeds of the F Town property, then I would not be satisfied that the debt would be repaid. This is a matter I am required to take into account under s 75(2)(ha) of the Act. In order to ensure the orders I make are just and equitable as regards the interests of all parties, I will require [the first respondent] to be paid from the funds of the [cross-appellant] and [appellant].
141.Here, the [appellant] in effect contends that, should the Court set aside the consent orders and the disposition of the [F Town] property to her son and daughter in law, the Court will not otherwise adjust the interests of the [cross-appellant] and the [appellant] in the assets. The [cross-appellant] appears to agree to that approach. The [cross-appellant] and the [appellant] are each legally represented. It was open to the [appellant] to seek superannuation splitting orders if, in her view, the non-superannuation assets were not sufficient to recognise her entitlements. She has chosen not to pursue that course.
I do not accept the appellant’s submission that [140] is the totality of her Honour’s reasons – clearly all the above paragraphs are relevant. The nature of the liability and the fact that it arose in the context of a relationship between the cross-appellant and the first respondent whilst the cross-appellant was in an intact marriage with the appellant is squarely taken into account in [138].
Her Honour then weighed that consideration against the probability of the creditor being paid, as she was obliged to do.
The appellant had conducted her s 79 proceedings in a particular way. The three significant assets available for division between the appellant and the cross-appellant were the cross-appellant’s interests in property in Country Q (over which he had granted his brother some rights), his Super Fund 1 superannuation and the F Town property. The appellant’s proposed order was that she receive the whole of the F Town property leaving the cross-appellant with his interests in Country Q and superannuation.
The practical effect of these proposed orders would be that the first respondent would remain entirely unpaid. There could be no execution against the superannuation interests and it is unreasonable to think that she could do so against the property in Country Q. This was considered at [141].
In short, her Honour undertook the requisite considerations contrary to the appellant’s submissions.
It follows that I am also unable to accept the submissions that the reasons are inadequate because none of these considerations find their way into their way into the reasons. They do.
The first respondent pointed to Exhibits 7 and 8 which are a letter written by the appellant to the first respondent on 20 June 2006 and a statement signed by the appellant and cross-appellant on 7 June 2006. Each of these contains a promise to the first respondent that she would obtain a proprietary interest in the F Town property. Such statements were along the same line as those made by the cross-appellant which led to his liability to pay equitable compensation.
I am unable to see the significance of the distinction which the appellant sought to draw between the representations of the cross-appellant – the subject of the suit – and those of the appellant, which were not. The point is that the appellant was not as remote from the cross-appellant’s liability as she might wish to be seen.
The primary judge does not mention those exhibits. I see no reason why she should as they seem not to carry significant weight. A trial judge is not expected to deal with every piece of evidence (Whisprun Pty Ltd v Dixon (2003) 200 ALR 447) or grapple with every submission (Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247).
I am able to follow her Honour’s reasoning process and how she took the relevant considerations into account. The reasons are therefore adequate (Bennett and Bennett (1991) FLC 92-191; Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110).
This ground does not succeed.
Did the primary judge misinterpret s 75(2)(ha) and in doing so, prioritise the position of the first respondent over the appellant? (Ground 3)
Section 75(2)(ha), which applies pursuant to s 79(4)(e) obliges the court to take into account “the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant”.
As can be seen, the above quotation at [140], contains a reference to s 75(2)(ha) in unremarkable terms. Her Honour did not say that the subsection required the creditor to be paid. Rather, she raised that consideration against those raised in [138] and [139]. The fact that the order required payment before the division of assets does not mean that her Honour prioritised the first respondent’s debt or started from the fixed position that it must be paid. It is simply the outcome of the consideration.
Effectively, the suggestion of prioritisation is a weight challenge which faces a high bar (Gronow v Gronow (1979) 144 CLR 513; Norbis v Norbis (1986) 161 CLR 513) and requires the appellant to show that the decision was unreasonable or plainly wrong (House v The King (1936) 55 CLR 499 at 504–505).
No such submission was made.
This ground fails.
Did the primary judge err in interpreting s 79(2) so that orders under s 79 must be just and equitable to all parties, including non-parties to the marriage? (Ground 5)
I confess that I had some difficulty in following the submissions made under this ground.
The appellant accepts that the “‘principles’ of fairness, justice and equity to a creditor” should properly be taken into account “where there is in prospect a reduction in the property of the debtor spouse, for the purpose of satisfying the s 79 claim of the other spouse, which reduction might adversely affect the prospects of recovery of the creditor, but this position does not arise because of the application of s 79(2)” (Appellant’s Summary of Argument filed on 19 May 2023, paragraph 54, referring to Commissioner of Taxation & Worsnop and Anor (2009) FLC 93-392).
However, the appellant submitted that because [140] referred to the orders being “just and equitable as regards the interests of all parties”, as opposed to the appellant and cross-appellant only, the primary judge must have “applied the requirement for justice and equity found in s 79(2) of the Act to all parties, elevating the [first respondent’s] rights above those of a normal creditor” (Appellant’s Summary of Argument filed on 19 May 2023, paragraph 56).
I do not agree.
At [140] her Honour was undertaking a balancing of the appellant’s contention that she should not bear the burden of any part of the first respondent’s debt and the appropriateness of the first respondent being paid. The reference to the parties in that context is unremarkable – so too is affording the parties justice and equity. That falls far short of elevating the first respondent’s rights to those of a party to the marriage entitled to a property division.
At [142], her Honour turned to equity and fairness as between the appellant and cross-appellant and the proper orders that should be made as between them. This led to the following conclusion:
144.The effect of leaving the property of each of the parties as is would be to provide that the [cross-appellant] has his superannuation pension and the lease over the property in [Country Q] and the [appellant] has the proceeds of the sale of the [F Town] property after the payment of the debts. Based on the evidence filed by the [cross-appellant] and the [appellant], that division appears on one view to be approximately equal. Their circumstances have changed since the earlier orders such that neither is working. Having regard to such information as is available to me regarding their contributions over a long relationship, different but equivalent, and having regard to their positions as retired persons, this result is just and equitable.
This was an entirely separate determination of justice and equity as between the appellant and the cross-appellant which was a distinct and separate task to that at [140].
I am not persuaded of any error and this ground does not succeed.
Conclusion
It follows that, subject to the amendment to Order 4(e) referred to above, the appeal should be dismissed.
THE CROSS-APPEAL
The cross-appeal raises 11 grounds. Ground 3 was abandoned.
Was the cross-appellant denied procedural fairness by the making of an order that the F Town property be sold? (Ground 4)
In her Amended Initiating Application filed on 26 April 2022 and Case Outline filed on 9 December 2022, the first respondent sought an order for the payment of $594,028, being the damages she was awarded as equitable compensation, and costs of $350,000.
The Case Outline was filed three days before the hearing. After referring to the proposed payment the Case Outline said:
Accordingly, to avoid further delay and obfuscation by [the appellant and the cross-appellant], the [first respondent] asks the Court may make the order under s 79 on terms pursuant to s 80(c), (i) or (k) such that the amount payable will be secured against that property. Or alternatively, make an order to sell [the E Property] block (being the property the subject of the equity proceedings) or transfer same into [the first respondent’s] name so that she may effect a sale to recover her funds and pay outstanding legal fees. Although [the appellant and cross-appellant] strongly resisted the joining of their son [the third respondent] and daughter-in-law [the fourth respondent] in this matter, the contested block presumably remains the property of [the third and fourth respondents] and is subject to the orders of this court.
(First Respondent’s Case Outline filed on 9 December 2022, p.7)
The complaint of the cross-appellant is that there was, therefore, no sufficient opportunity “to obtain evidence relevant to the appropriate form [of] relief, including the progress of the subdivision of the [E Property], or alternative arrangements for the payment of the first respondent” (Cross-appellant’s Summary of Argument filed on 5 June 2023, paragraph 30).
At the time of the hearing, the registered owners of the F Town property were the third and fourth respondents. The cross-appellant disposed of his interest in it to the appellant who then transferred it to the present owners. It is not suggested that the cross-appellant retained or subsequently acquired an interest in that property. It is difficult to see therefore, what interest the cross-appellant has to appeal against an order for the sale of the F Town property.
However, the answer to the ground lies in the above quotation in the Case Outline, which squarely raised the possibility of the sale of, at least, Lot 4. The possibility of further orders under s 80(1) of the Act was raised.
The primary judge also raised the possibility of the sale of the whole property in the following exchange:
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: …And there’s also then pretty much endemic delay on the part of the [first respondent] such that by the time any steps were taken against my client or could be taken against my client, the trustee wasn’t invited to take any further steps. And in the circumstances, looking at an overall discretion, I’m not sure whether this is within the parameters of the exercise of discretion, but we would certainly submit that the [F Town] property should remain in the title in which it is for reasons that I’ve expressed. If I am wrong in that, then it should remain with the [appellant], and insofar as my client is concerned, we would submit that the Bankruptcy Act has the answer, and that is section 153 has released him from his debts.
HER HONOUR: Yes. And so to the extent that [senior counsel for the appellant] said that were I to find myself in a position where I was exercising section 79 power and probably, in those circumstances, ordering that the [F Town] property be sold, your client ought not take any of the proceeds of sale if any? That was the submission as I understood it.
[SENIOR COUNSEL FOR THE CROSS-APPELLANT]: Yes. Well, I – we would agree with that, your Honour.
HER HONOUR: Okay.
(Transcript 14 December 2022, p.205 lines 25–42)
There, counsel for the cross-appellant addressed the question of where the title to the F Town property should reside after orders were made and the primary judge responded with the possibility of sale of the F Town property.
No objection was raised at the time in respect of the possibility of sale, no adjournment was sought and the possibility of further evidence was not raised.
In these circumstances no procedural unfairness arose.
The fact that the exchange then turned to the possibility of subdivision does not alter that conclusion.
I would only add that it is clear from that discussion that no subdivision of the F Town property had been effected so that Lot 4 could not be separately sold. Any sale must necessarily, therefore be of the whole property.
In the circumstances where the first respondent sought the payment of a substantial sum, an obvious issue arose as to how payment of that sum could be effected. As explained earlier, the only reasonable asset available for that payment was the F Town property.
This ground does not succeed.
Did her Honour err in treating the divisible property of the cross-appellant as including the F Town property? (Grounds 6 and 8)
It is useful to commence by setting out these two grounds in full:
6.Her Honour should have held that upon the bankruptcy of the appellant the only property of the appellant that vested in the Official Trustee at the commencement of the bankruptcy or devolved upon him before his discharge was the property he took under the property settlement with his former wife, and that only that property being the property that belonged to the appellant or was vested in him at the commencement of his bankruptcy or was acquired by him and after the commencement of his bankruptcy and before discharge was divisible among the appellant’s creditors.
…
8.Her Honour should have followed the decision of Moss J in Official Trustee in Bankruptcy v Donovan and Donovan and Stevens which was indistinguishable on the fact, and dismissed the respondent’s claim.
As I shall explain, these grounds are a non sequitur. The primary judge did not proceed on the basis that the F Town property became, in some way, divisible property in the cross-appellant’s bankrupt estate. Rather, her Honour set aside the transfer of the F Town property to appellant from the third and fourth respondents as an order consequent upon setting aside the consent orders as a transfer that had the effect of defeating an anticipated order in those proceedings (namely, the payment of creditors). The order for the sale and distribution of the proceeds of the F Town property were to be paid, in part, to the first respondent who was then obliged to pay them to the cross-appellant’s bankruptcy, were further consequential orders. Those funds were available to be paid to creditors, as is the case with all funds trustees recover from third parties.
In doing so the primary judge relied upon s 79A and s 106B to remedy a miscarriage of justice caused by the failure of the appellant and cross-appellant to disclose the claims of the first respondent when seeking property settlement orders. That, it seems to us, is the very point of such provisions.
The submission put by the cross-appellant was:
48.When the [cross-appellant] entered bankruptcy on 6 March 2015 the [F Town] property was not “property of the bankrupt” nor was it property that was “divisible among creditors” because it did not belong to and was not vested in him at the commencement of his bankruptcy, it was not acquired by him, nor did it devolve on him after the commencement of the bankruptcy and before his discharge, the discharge having occurred on 7 March 2018 pursuant to s 149 of the Bankruptcy Act.
49.Any orders that could be made by the Court under ss 79A or 79 of the Family Law Act could only be made after the date of discharge of the [cross-appellant] from bankruptcy and could therefore not constitute after acquired property of the bankrupt so as to enlarge the bankrupt estate.
(Cross-appellant’s Summary of Argument filed on 5 June 2023, paragraphs 48–49)
The cross-appellant relied on the following passage in Official Trustee in Bankruptcy v Donovan at 83,413–83,414; as recorded in the Full Court decision of Valder at [49]:
In the course of his consideration of this issue, the trial Judge said:—
…
“50. But the question that seems to me to arise is this: where an order is made under s. 79A(l)(a) setting aside orders earlier made under s. 79, which has the effect of vesting in or divesting from a party proprietary rights in respect of property, does not the creation of such rights spring from the making of the s. 79A order as at the date the order is made? If, as will usually be the case, where such an order is set aside, a further order is made pursuant to s. 79, then the same question arises as to proprietary rights in property which arise because of the terms of the s. 79 orders. The relevance of this inquiry seems to me to be crucial to the Applicant’s case, because if such proprietary rights in property owe their existence to either the making of the s. 79A orders or the subsequent s. 79 orders, then those rights come into existence at the date of the relevant orders. In the circumstances of this case, this would mean that any proprietary rights in property created by any such order in favour of the second Respondent would not vest in the Applicant, because such property would not be property which was vested in the second Respondent at the commencement of the bankruptcy or which was acquired by him prior to his discharge from bankruptcy.”
…
55. In my opinion the clear result of these authorities in the present circumstances, is that if the second Respondent were to acquire proprietary rights in the property by reason of an order made in the present proceedings, whether under s. 79A(1)(a) or s. 79, no provision thereby made would have been acquired or have devolved upon him prior to his discharge from bankruptcy (cf Bankruptcy Act, s. 58(1)(b) and (6) and s. 116(1)(a)), and accordingly such provision would be beyond the reach of the Applicant. The result must be that these proceedings commenced by the Applicant are incompetent: Re Davies (1961) ALR 866.”
The Full Court in Valder said:
51.We are left then with the reasons for judgment of Moss J. They are predicated on the assumption that the effect of any varied or substituted order will be to revest property in the former bankrupt. As we have explained, that is by no means the necessary outcome.
52.We are confirmed in this view by the presence of s 79A(4) of the Act which was not in the Act at the time of the Official Trustee in Bankruptcy v Donovan decision. Again, we see no reason to limit the meaning of creditor in that section to a creditor of a non-bankrupt or undischarged bankrupt. As we have explained, creditors retain some rights after discharge, including those under s 58(3) of the Bankruptcy Act.
I see no reason to differ from that view.
It is important to recollect that Official Trustee in Bankruptcy v Donovan, like the present case, was one where consent property orders were obtained from the Court without disclosing the existence of a creditor to the Court or having given that creditor notice of the proposed orders. As was explained in Official Trustee in Bankruptcy v Donovan, such a course is very likely to lead to the orders being set aside, especially if the effect of the orders was to defeat the creditor’s claim to be paid.
Section 79A is a remedial provision and empowers the court in such circumstances to set aside the earlier s 79 consent orders and “make another order under section 79 in substitution”. Under s 79, the Court may make “such order as it considers appropriate” altering the interests of the parties in the property.
It is well established that such an order can include orders for the payment of creditors. The very point of setting aside the earlier consent orders is to make funds available for possible payment to the creditors from the property that was transferred. There seems to us to be no reason why appropriate orders could not be made directly against the entity holding the property at the time of the order.
Such a course is quite different to working on the basis that the F Town property revested in the cross-appellant with orders then being made against him in relation to his interest in the property.
Thus, I consider the primary judge was quite right to say:
76.[The cross-appellant] was not the registered proprietor of the [F Town] property at the date of his bankruptcy. And hence the [F Town] property did not vest in the Trustee. However, that issue was at the very heart of the application to the Federal Court for leave. That is, [the first respondent] was seeking leave to bring proceedings to set aside the orders which had had the effect of transferring the [F Town] property from the name of [the cross-appellant] and his wife to that of his wife alone. If that disposition were to be set aside (and the Court were to grant the s 106B relief) the [F Town] property is to be treated by this Court as available to meet the liabilities of any creditors of the husband or wife, notwithstanding the fact that it was not in the name of [the cross-appellant] at the date of his bankruptcy or during its currency.
So as to be quite clear, I do not consider that the law is as stated by Moss J. His reasons, with respect, miss the point and should not be followed.
The cross-appellant’s submissions continued:
53.No authority was cited by her Honour for the proposition that leave under s 58(3)(b) of the BankruptcyAct had the consequence of enabling the [F Town] property to be treated in its entirety as available to meet the liabilities owed to any creditor notwithstanding that it was not in the name of the [cross-appellant] at the date of commencement of his bankruptcy nor during its currency.
(Cross-appellant’s Summary of Argument filed on 5 June 2023, paragraph 53)
This again misses the point. The Court has ample powers to require payment of creditors from the property of the parties or either of them, even if the debt is only owed by one of them.
This ground does not succeed.
Did the cross-appellant need to be a party to the proceedings at the time the appellant transferred the F Town property to the third and fourth respondents? (Ground 9)
The cross-appellant submitted:
63.…s 106B is a temporal requirement and the test is to be applied at the point of time when the transfer or disposition occurs. At that point the [cross-appellant] had not been joined… at that point in time it could not be said that the transfer was made to defeat an anticipated order or that it was likely to defeat an anticipated order because the disposition could not have been impugned in the absence of the [cross-appellant] as a necessary party at that time.
(Cross-appellant’s Summary of Argument filed on 5 June 2023, paragraph 63)
The cross-appellant called in aid John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1, where the High Court discussed the principle that all persons interested in the subject matter of a suit ought to be parties to it.
The cross-appellant was such a party and was ultimately joined to the proceedings well before the hearing.
Section 106B(1) of the Act provides:
Transactions to defeat claims
(1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
No “temporal requirement” emerges from its text and there is no basis for implying one. It is a remedial provision and to read it down so that it only applied when a disposition occurred whilst proceedings under that section were on foot with all relevant parties joined would reduce it to a nonsense.
Did the trial judge err because the first respondent would have been able to recover her debt if the s 79 consent orders stood? (Ground 10)
The primary judge said:
63.[The cross-appellant] submitted that [the first respondent] was not a person affected at the time of the making of the consent orders because she had not demonstrated that her debt was unrecoverable. The basis for this submission was said to be because the [cross-appellant] had $900,000 of property in [Country Q], $500,000 of [Super Fund 1], $150,000 in a SMSF and land worth $500,000.
64.There are a number of difficulties with that argument. The first is that the assets which the [cross-appellant] asserted he had did not absolve him of the requirement to provide the Court with information about his liabilities and/or creditors: Trustee of the Bankrupt Estate of Hicks & Hicks [2019] FamCA 695 (“Hicks”). The second is that the calculation ignores the fact that the net assets of the [cross-appellant], as reflected in his Application for Consent Orders – following payment to the [appellant] - were $695,000. Perhaps the net assets could have been $895,000 if the valuation of the [Country Q] property some three months later was accurate. At the time of the consent orders it was not apparent what the figure for the equitable compensation would ultimately be nor was it evident what the figure for the costs order would be. The [cross-appellant] cannot confidently assert that the $695,000 (or even $895,000) would have been sufficient to meet [the first respondent’s] claims. This becomes even more stark when one considers the composition of the assets said to comprise the $695,000 net, their location and the paucity of objective evidence about their value.
The cross-appellant submitted that the property identified in [63] was sufficient to enable payment of the first respondent’s debt.
There are two difficulties with this submission.
The first is that in [63] her Honour was not making a finding that such property was available to meet the first respondent’s debt, but merely recording the cross-appellant’s contentions. The finding is contained in the following paragraph which relied on the evidence given by the cross-appellant to the Court at the time the consent orders were made. That evidence failed to establish that there were sufficient assets held by the cross-appellant, after the transfer of his interest in the F Town property, to pay the first respondent.
The second is that even accepting the propositions contained in [63], the contention is not made out. The cross-appellant could not explain how the first respondent could access his superannuation or self-managed superannuation fund in any enforcement procedure. Neither entitlement would be available in a bankruptcy (see s 116 of Bankruptcy Act).
Thus the first respondent would be left seeking to enforce her judgment against property in Country Q – an unreasonable task with, on the evidence, no certainty at all of recovery.
This ground fails.
Did the primary judge misapply s 75(2)(ha) of the Act? (Ground 11)
This ground was dealt with in the appeal (at Ground 3) and fails for the same reasons.
Did the primary judge err in making Orders 4(d), 5 and 6 for the assessment and payment of costs? (Ground 12)
The relevant orders are:
4.The third and fourth respondents apply the proceeds of sale of the [F Town] property in the following order and priority:
…
(d)In payment of the sum of $250,000 into a controlled monies account held by the [appellant’s] solicitors on behalf of the [first respondent] and [the appellant];
5.Following agreement in writing between the [first respondent] and [appellant] or assessment, the costs of the equity proceedings will be paid to the [first respondent] subject to the terms of the orders of Katzmann J dated 8 November 2016 from the sum in Order 4(d) above and any balance will be paid to the [appellant].
6.In the event that the [first respondent] has not commenced the application for assessment of costs within 28 days of the monies being placed in the controlled monies account as required by Order 4(d) then the monies are to be paid to the [appellant].
The quantum of the costs to be determined was that of the first respondent’s costs in the Supreme Court of New South Wales. The contention of the cross-appellant is that the Court lacked jurisdiction, perhaps power, to make those orders.
I accept at the outset that neither s 117 of the Act or the Rules provide the basis for the order. They relate to costs of proceedings in this Court.
Subject to one matter to be discussed, the orders are however justified by s 80(1)(k) of the Act which empowers the Court to make any other order which it thinks is necessary to do justice.
The orders provide for an assessment of the costs. However, the claim of the first respondent is as a creditor with a right to prove in the bankrupt estate. Here, her proof of debt will include the claim for equitable compensation and the costs of the equity proceedings. It is the role of the trustee in bankruptcy to deal with the assessment of proofs of debt, at least in the first instance. Thus it is appropriate to amend the orders as suggested by the first respondent to replace the assessment with a determination of a proof of debt by the trustee in Order 5. There should be a consequential adjustment to Order 6 to vary the time limit which it imposed on commencing the assessment.
Justice Gordon, with whom Edelman J at [152] and Steward J at [193] agreed considered at [66] that:
… there is not, nor should there be, a single set of universally applicable procedures for dealing with recusal applications in multi-member courts. However, if an objection is raised or there are matters giving rise to a real potential for apprehended bias, and the judge in question decides not to recuse themselves (as occurred here), the Full Court as constituted must be satisfied it has jurisdiction before proceeding to hear the matter. In most, if not all, cases, the judge in question should have the opportunity initially to decide to recuse themselves, without that matter needing to be decided by the Full Court. If the judge decides not to recuse themselves and the objection is maintained, or the other judges consider that there are matters giving rise to a real potential for apprehended bias, a procedure that might be followed is set out below.
Justice Gleeson did not address the issue: [271]. Justice Jagot dissented on this point and considered that an application for recusal should be solely answered by the judge to whom the application is directed: [311].
Notwithstanding those differences of approach, it was uncontroversial that where there are circumstances that give rise to a reasonable apprehension of bias on the part of one member of a multi-member court, the court constituted by its several members is deprived of jurisdiction to hear the proceeding before it and it should be heard by a separately constituted court.
The present case
As explained by Aldridge J, the present application arises in the context of an appeal from a single judge of the Federal Circuit and Family Court of Australia (Division 1). We heard that appeal on 28 June, 2023 and reserved our decision.
The application filed by the cross-appellant on 24 July, 2023 seeks the following orders:
1.That his Honour Aldridge J recuse himself from further involvment in the appeal
2.That their Honours Jareett and Strum JJ also recuse thmelves from further involvement in the appeal
3.The appeal be re-listed for hearing before a different bench
4.Such further or other orders necessary to make or implement above orders.
(As per the original)
It was not entirely clear from the application whether the cross-appellant wanted Strum J and me to disqualify ourselves on a separate basis to Aldridge J, or whether the cross-appellant simply sought for the matter to be reconstituted before a separate Full Court due to the reasonable apprehension of bias he alleged befell Aldridge J. The cross-appellant did not clarify that ambiguity in his oral submissions.
Here, Aldridge J has determined to refuse the cross-appellant’s application that he disqualify himself from further involvement in the appeal. With respect, I agree with his Honour’s decision about that matter.
The cross-appellant contended that a reasonable and fair-minded lay observer might surmise that counsel for the first respondent and Aldridge J, many years ago, might have celebrated counsel for the first respondent’s success in a certain appeal in proceedings involving these parties before the New South Wales Court of Appeal and otherwise discussed the case. The cross-appellant acknowledged that the matters he alleged to support his application were pure speculation. A reasonable apprehension of bias must be real and not a remote possibility: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at [7]. A reasonable apprehension of bias must be an inference open on proven facts, not mere speculation.
The statement made by Aldridge J at the commencement of the hearing of this application demonstrates that the presiding judge and counsel for the first respondent were in chambers together prior to his Honour’s appointment to the bench. They appeared together on a number of occasions and frequently as opponents. They have had infrequent chance meetings since then. They have not discussed this case.
A reasonable apprehension of bias is not open on those facts. The legal industry is a small world. It is not uncommon for counsel to appear before judges with whom they may have previously shared chambers. There are no facts specific to this case that would give rise to a reasonable apprehension of bias.
The other matters raised by the cross-appellant in his affidavit are not matters that would give rise to a reasonable apprehension of bias. For the most part, they appear to be an attempt by the cross-appellant to reargue matters from not only this appeal, but prior appeals in these or related proceedings. I respectfully agree with the reasons of Aldridge J as to why these matters do not establish a reasonable apprehension of bias on the part of the presiding judge.
As a matter of prudence, I have considered whether I should disqualify myself from further participation in the appeal for reasons of apprehended bias, though the cross-appellant did not address this matter in oral submissions.
The law in relation to the test for apprehended bias is accurately set out by Aldridge J. I have nothing to add to his Honour’s discussion of those principles.
The affidavit makes one mention of me:
29.In the same vein, Jarett J cut short [counsel for the cross-appellant] with comments to the effect; “But [counsel for the cross-appellant] you just said your client was a highly qualified senior lawyer.” The context was that as a senior lawyer I should have foreseen [the first respondent’s] debt in Nov 2013 given that there was an adverse Court of Appeal judgment against me on 1 July 2013. That judgment was pending an appeal to the High Court in Nov 2013 when settlement orders were made. The High Court decided in [the first respondent’s] favour in May 2014 and finally a debt arose for the first time on 18 Sep 2014 pursuant to a Supreme Court judgment.
(As per the original)
The affidavit refers to an exchange which is set out by Aldridge J at [45] above. To the extent that the affidavit complains about the content of that exchange, I do not accept that it gives rise to a reasonable apprehension that I would not bring an impartial mind to the resolution of the appeal. At the time the cross-appellant entered into the impugned consent orders, there was a judgment of the New South Wales Court of Appeal against him for equitable compensation to be assessed. The matter was to be remitted to the New South Wales Supreme Court for quantification of damages. An appeal from that decision was pending in the High Court of Australia. The cross-appellant’s persistent protestations that there was no liability because the matter was pending appeal and he was assured of his impending victory (see, e.g., the cross-appellant’s affidavit filed 31 August 2023 at [30]), are without basis. There was a contingent liability at the time of the consent orders which the cross-appellant, as a senior lawyer, ought to have known he must disclose as part of his obligation to make full and frank disclosure of his financial position in those proceedings.
I do not consider that a fair-minded lay observer might reasonably apprehend that I might not bring an impartial and unprejudiced mind to the resolution of the appeal on the basis of making the above comment.
To the extent the cross-appellant complains that I cut short counsel for the cross-appellant, the transcript does not make out that proposition. My statement appears at the end of a passage (ending in a complete sentence) from the cross-appellant’s senior counsel. The factual basis for this assertion falls away.
In any event, even if the exchange between senior counsel for the cross-appellant and me is properly characterised by the cross-appellant, I do not consider that this is capable of giving rise to a reasonable apprehension of bias. It is not unusual for judges to interrupt counsel to ask questions or direct submissions in a particular way. Such a course not only promotes the efficient management of a hearing, but helps parties conduct their case in a manner that is likely to assist the bench in resolving the questions at the heart of a dispute. I do not consider that a fair-minded lay observer might reasonably apprehend bias on the basis of my interjection.
There is no basis upon which I should disqualify myself from further participation in this appeal.
Conclusion – Disqualification application
The application for Aldridge J to disqualify himself from further participation in the appeal should be dismissed. There is no warrant to reconstitute this Full Court on the basis advanced by the cross-appellant.
To the extent that the cross-appellant seeks that I too, disqualify myself from further participation in the appeal, that application should also be dismissed. Consequently, the Application in an Appeal should be dismissed.
Substantive appeal and costs
Having concluded that there is no basis for any member of the Full Court to recuse themselves, it follows that the Full Court has jurisdiction to deal with the substance of the appeal.
I respectfully agree with the reasons of Aldridge J on the substantive appeal and have nothing to add. Save in the respects that orders were agreed between the parties, both the appeal and the cross-appeal should be dismissed.
I agree with the orders proposed by Aldridge J.
STRUM J:
I have had the benefit of reading the reasons for judgment of Aldridge and Jarrett JJ.
Like Jarrett J, I too respectfully agree with the reasons of Aldridge J on the substantive appeal and cross-appeal and have nothing to add. The appeal should be allowed in part and the cross-appeal should be dismissed.
I also agree with Aldridge J’s reasons for dismissing the application that he recuse himself from participation in this appeal, as well as those of Jarrett J.
I agree with the orders proposed by Aldridge J.
However, I wish to add the following brief observations in relation to the recusal application.
We heard the appeal and cross-appeal (together “the appeal”) on 28 June 2023 and reserved judgment. The cross-appellant was represented that day by senior and junior counsel.
Nearly one month later, on 24 July 2023, the cross-appellant filed an Application in an Appeal seeking that Aldridge J recuse himself from “further involvement in the appeal”; that Jarrett J and I also recuse ourselves; and that the appeal, which had already been heard, be relisted for hearing between a different bench (“the recusal application”). The recusal application was listed for hearing before us on 1 September 2023 and, on that day, the cross-appellant was self-represented. However, at the hearing of the appeal, he was described by his senior counsel as having been a “senior solicitor in various government employments”.
In support of the recusal application, the cross-appellant filed two affidavits, albeit that they contain more submission than evidence. The first affidavit was filed on 24 July 2023, contemporaneously with the recusal application. The second affidavit was filed on 31 August 2023, being the eve of the hearing of that application. Save for the addition of one further paragraph, it is identical to the first affidavit. That further paragraph is not germane to these reasons.
As Jarrett J observes, it is not entirely clear from the cross-appellant’s recusal application, his supporting affidavits or his oral submissions, whether he seeks that we disqualify ourselves on a separate basis, or by reason of having heard the appeal together with Aldridge J, due to the reasonable apprehension of bias he alleged on the part of his Honour or, indeed, by reason of matters subsequently arising at the hearing of the appeal.
The cross-appellant complains that when Mr Ash, counsel who has appeared on behalf of the first respondent for over a decade, including at the hearing of the appeal before us, joined the New South Wales Bar in 1998, he acquired chambers in Frederick Jordan Chambers, of which Aldridge J was then a leading member.
On 1 July 2011, counsel for the first respondent was successful in the New South Wales Court of Appeal in proceedings between the first respondent and the cross-appellant.
Without any factual basis whatsoever, the cross-appellant speculates that:
It is reasonable for a “fair minded lay observer” to surmise that on 1 July 2011 Mr Ash would have celebrated his success in the Court of Appeal, comprised of the CJ and eminent judges, with his mentor Mr Aldridge SC. Being a Friday that day, a good celebratory “Barossa red” would have been in order or perhaps a sauvignon blanc from New Zealand!
(Cross-appellant’s affidavit filed 31 August 2023, paragraph 12)
Not only is that, by its terms, entirely speculative, it is also impudent – all the more so from someone who was a senior solicitor – insofar as it relates to Aldridge J.
The cross-appellant also refers to a hearing in October 2016 before Katzmann J in the Federal Court of Australia at which counsel for the first respondent had also appeared and sought leave pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) to bring an application under s 79A of the Family Law Act 1975 (Cth), in respect of orders for property settlement made by the Family Court of Australia by consent between the cross-appellant and his former wife (the appellant) in 2013.
The cross-appellant asserts that the proposed s 79A application was described by Katzmann J as an option that “had not occurred to anyone”. He further asserts that:
Those to whom s 79A had not ‘occurred’, included Howard Insall SC, his junior barrister and a firm of instructing solicitors. Whether described as oversight, reckless or, in legalese, as “negligence”, it was a mistake the best of us can make but for which we pay a price. In this instance however no explanation has ever been given for that delay and the consequences of the delay are being borne solely by me and my former wife and even my son and his wife but not by those responsible for the laches, [Ms Valder] and her legal advisers, who have never even been questioned.
(Cross-appellant’s affidavit filed 31 August 2023, paragraph 15)
The cross-appellant, again without any factual basis whatsoever, speculates that:
As a “fair minded lay observer” would query if Mr Ash and Mr Aldridge discussed [Ms Valder’s] predicament- perhaps in words to the effect: “remember the client for whom I had success before a Court of Appeal presided by Bathurst CJ”? Did Mr Aldridge who on any reckoning was an expert in bankruptcy and now a Family Law judge ever suggest s 79A to Mr Ash? How did s 79A occur to Mr Ash?
(Cross-appellant’s affidavit filed 31 August 2023, paragraph 12)
Justice Aldridge was appointed to the Family Court of Australia in December 2012. I described the cross-appellant’s earlier speculation as impudent. I have no hesitation whatsoever in describing this further instance of speculation, namely, that a sitting judge gave tactical advice to a member of counsel in relation to a case in which he was appearing, as scandalous. It should not have been made and all the more so by someone who is or was a lawyer, let alone a senior lawyer.
In any event, the statement made by Aldridge J at the commencement of the hearing of the recusal application makes clear that counsel for the first respondent and his Honour have not discussed this case.
These appellate proceedings were commenced on 23 March 2023, when the appellant filed a Notice of Appeal. The cross-appellant filed a Notice of Cross-Appeal on 5 June 2023.
The cross-appellant asserts that, even prior to filing his Notice of Cross-Appeal:
…Upon learning from the Registrar in April of the bench constituted for the hearing I wrote to both the Chief Justice and Deputy Chief justice [sic] setting out my concerns of apprehended bias and my plea that Aldridge J should not be on a bench for this appeal. …
(Cross-appellant’s affidavit filed 31 August 2023, paragraph 3)
He further asserts that:
I had also foreshadowed to the Registrar at a tele-hearing my concerns at Aldridge J being on the bench, given his decision in 2021 …
(Cross-appellant’s affidavit filed 31 August 2023, paragraph 4)
That is a reference to the earlier decision of the Full Court in Valder & Saklani (2021) FLC 94-042, of which Aldridge J was a member.
Importantly, although the cross-appellant, whilst a senior lawyer, may not have appreciated how much so, he continues:
My counsel were disinclined to raise bias because in their view, there was insufficient ‘proof’. Given comments and questions from the bench at the hearing, I have a stronger belief than before of apprehended bias for which there is no need for direct evidence.
(Cross-appellant’s affidavit filed 31 August 2023, paragraph 5)
It is therefore apparent that the cross-appellant contends bias arising both from matters prior to, as well as arising at, the hearing of the appeal.
Turning, first, to matters prior to the hearing of the appeal; at the hearing of the recusal application, the cross-appellant contended, in my view disingenuously, that his counsel were disinclined to raise actual (rather than apprehended) bias. However, that makes no sense given his assertion in the following sentence that, since the hearing before us on 28 June 2023, by reason of comments made in the course of that hearing, he now apparently has “a stronger belief than before of apprehended bias”. Further, in circumstances where the cross-appellant was described by his senior counsel at the hearing before us as having been a senior lawyer, he should have known, more than most self-represented litigants, that he could (and should) have adduced evidence from his counsel that the bias which they were disinclined to raise was actual, rather than apprehended, bias. He has clearly waived legal professional privilege in relation to that issue. That he failed to adduce such evidence, in my view, gives rise to an inference that their evidence would not, in fact, have assisted his case: Jones v Dunkel (1959) 101 CLR 298.
However, having held concerns regarding (at least) apprehended bias on the part of Aldridge J since becoming aware that his Honour would be a member of the Bench at the hearing of the appeal and done nothing, and his counsel having been disinclined to raise bias – actual or apprehended – he cannot now be heard to complain. As Brennan, Deane and Gaudron JJ said in Vakauta v Kelly (1989) 167 CLR 568 at 572:
Where such comments which are likely to convey to a reasonable and intelligent lay observer an impression of bias have been made, a party who has legal representation is not entitled to stand by until the contents of the final judgment are known and then, if those contents prove unpalatable, attack the judgment on the ground that, by reason of those earlier comments, there has been a failure to observe the requirement of the appearance of impartial judgment. By standing by, such a party has waived the right subsequently to object.
Similarly, at 577, Dawson J said it was:
… strictly unnecessary for me to consider whether the course adopted by counsel for the plaintiff was such as to constitute a waiver of any objection to the trial judge’s continuing to hear the matter before him. However, it may be useful if I indicate that, had the objection been open, the course taken did, I think, amount to a waiver of it. No objection was taken to the continuation of the trial before his Honour, either formally or in effect. The purpose for which certain of his Honour’s remarks were raised by counsel was to have them recorded on the transcript, presumably for use in the event of appeal, and the failure to identify any other purpose necessarily implied that no other point was then taken. If those remarks, or his Honour’s response, displayed bias, actual or ostensible, then the failure of counsel to object did, I think, amount to a waiver of the objection. I do not mean to suggest that an objection will be waived if it is not made in formal or even explicit terms. The circumstances may be such that it is plain, without it being put into words, that a judge is being asked to consider his position having regard to the requirement of impartiality. But when the matter of the trial judge’s remarks was expressly raised, counsel not only failed to give any indication that the trial judge was being invited to disqualify himself or take some other step to cure the situation but appeared to suggest that the purpose of raising the matter was only to enable the trial judge’s remarks to be recorded in the transcript. It cannot be the position that a party can wait to see whether the outcome of a case is favourable to him before raising an objection, the availability of which he was previously aware, on the ground of bias. …
Justice Toohey similarly said, at 587, that “when a party is in a position to object but takes no steps to do so, that party cannot be heard to complain later that the judge was biased”. That dictum, together with the dicta of Brennan, Deane and Gaudron JJ and of Dawson J, are all apposite to and on all fours with this present recusal application.
Turning, secondly, to matters arising at the hearing of the appeal; the cross-appellant relies on the comments made at the hearing before us on 28 June 2023. The relevant passages from the transcript are set out in the reasons for judgment of Aldridge J at [45], [51] and [52].
Like Jarrett J, given the opacity of the cross-appellant’s recusal application, as a matter of prudence, I too have considered whether I should disqualify myself from further participation in the appeal for reasons of apprehended bias. Although, unlike his Honour, no complaint is made about me in the cross-appellant’s affidavits, Aldridge J at [45] of his reasons for judgment, sets out a passage from the transcript which includes an exchange between senior counsel for the cross-appellant and me.
In my view, it has not been demonstrated by the cross-appellant that any of the comments, whether by Aldridge J, Jarrett J or me, either severally or jointly, would lead a fair-minded lay observer to “reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide”, remembering that “the observer is taken to be reasonable; and the person being observed is ‘a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial’”: Johnson v Johnson (2000) 201 CLR 488 at 492–493.
Further, in circumstances where the cross-appellant practised as a senior lawyer and was represented by senior counsel, as well as junior counsel and solicitors, at the hearing of the appeal before us, even if there might have been a reasonable apprehension of bias, no recusal application was made on the day or until nearly a month thereafter. In the circumstances, any objection was similarly waived.
Accordingly, no basis for recusal by any member of the Full Court has been established by the cross-appellant, the recusal application should be dismissed and, therefore, there is no impediment to us dealing with the substantive appeal.
As I have indicated above, I respectfully agree with the orders proposed by, and the reasons for judgment of, Aldridge J in the substantive appeal.
I certify that the preceding two hundred and seventy-five (275) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Aldridge, Jarrett & Strum. Associate:
Dated: 22 September 2023
SCHEDULE OF PARTIES
NAA 67 of 2023
CAC 2098 of 2016Respondents
Fourth Respondent/Fourth Cross-Respondent:
MS D SAKLANI
3
23
5