SJZ and Ors & FHN

[2005] FamCA 756

FAMILY LAW ACT 1975

IN THE FULL COURT OF THE
FAMILY COURT OF AUSTRALIA

AT PERTH Appeal No. WA4 of 2005
File No. PT2223 of 2003

IN THE MATTER OF: Z
SJ

First Appellant/Second Respondent

AND: Z
TJ

Second Appellant/Third Respondent

AND: Z
PJ

Third Appellant/Fourth Respondent

AND: Z
JJ

Fourth Appellant/Fifth Respondent

AND: N
FH

Respondent Wife

CORAM: BRYANT CJ, KAY AND WARNICK JJ

DATE OF HEARING: 5 JULY 2005

DATE OF JUDGMENT: 12 AUGUST 2005

JUDGMENT OF THE FULL COURT

Appearances: Mr Kirk of Senior Counsel, instructed by Messrs Chalmers & Partners, Solicitors, 6/524 Hay Street, Perth, WA, 6000 appeared for the four appellants

Dr Dickey one of Her Majesty’s Counsel, instructed by O’Sullivan Davies, Lawyers, Level 11, 30 The Esplanade, Perth, WA, 6000 appeared for the respondent wife

Z and Z
WA4 of 2005
CORAM:  Bryant CJ, Kay and Warnick JJ
DATE OF HEARING:  5 July 2005
DATE OF JUDGMENT:                 12 August 2005

Catchwords: APPEAL – PROPERTY – proceedings continued by wife against husband's estate - transactions effected by the husband before his death in relation to the entities in which he held positions of power – application to set transactions aside - asserted that the trial Judge erred in setting aside the transactions under s 106B where those orders were only sought in the event that the property of the deceased immediately prior to his death was no longer available – no such finding yet made - conceded by the respondent that the trial Judge erred in making orders without satisfaction of the precondition upon which the orders were sought - orders set aside and matter remitted for further consideration.

On 5 July 2005, we made orders allowing this appeal and setting aside certain orders made by Penny J on 11 March 2005. We also granted certificates under the Federal Proceedings (Costs) Act 1981. These are our reasons for the orders of 5 July 2005 which are set out in full at the conclusion of these reasons.
The appeal arose out of the following circumstances. NFH married PZ in September 1998. It was a second marriage for each party. The husband had four adult children, SJZ, TJZ, PJZ and JJZ. The husband conducted a business and held assets through a number of entities established years before the marriage to the wife and in relation to which he held various positions. His children or some of them were also in various positions in one or more of those entities.
The husband was diagnosed with cancer in about April 2002. Material before the trial Judge included the wife’s assertion that in about August 2002 the wife told the husband that the marriage was at an end, but that she would remain in the home to take care of him until he recovered.
Between August (when the husband’s condition was declared terminal) and October 2002, the husband caused a number of steps to be taken in relation to the entities in which he held positions of power.
The effect of these steps was initially a matter in issue in the appeal, but the wife contended that they disadvantaged her in her application for property settlement, which she filed on 17 April 2003. The wife did not immediately serve the application on the husband, who died four days later.
Consequently, the husband’s brother, G, the husband’s legal personal representative, became a party to the proceedings.
There were proceedings, some for obviously interim orders, brought in March 2004, including requests by the wife for payment by the husband’s legal personal representative of certain loans and outgoings. The hearing on 27 May 2004, which led to the orders appealed, made 10 months later, arose out of these proceedings, but that hearing also, as later discussed, might have, at least in effect, included embarkation upon a final hearing.
By the orders of 11 March 2005, namely the orders appealed, various of the steps taken by the husband between August and October 2002 were set aside, pursuant to section 106B of the Family Law Act 1975 (Cth) as amended (“the Act”).
The appellants are the four children of the deceased, the wife the respondent.
Ultimately the appeal succeeded on a point conceded by Dr Dickey, Senior Counsel for the wife. We will come shortly to that point, but before doing so will indicate the major points raised in the appeal as it presented for hearing.

Grounds of Appeal

Argument on the appeal commenced on amended grounds of appeal which raised some important and interesting issues. These included challenges to findings (or implied findings) by the trial Judge;
·that assets of the Z Family Trust were property of the husband immediately prior to his death
·that subsequent to the death of the husband, if the steps taken by the husband were set aside, his legal personal representative would have control of the trustee and therefore the Trust, and;
(i) would be bound by orders of the court such that there would be “property in existence” for the purposes of section 79(8),
(ii) would, by necessary inference, exercise the powers deriving from his position as appointor contrary to the terms of the Trust Deed and his duties as a trustee, such as to distribute trust capital and/or income to other than a named beneficiary.
Also asserted were failures of the trial Judge, in effect, to appreciate the consequences of the setting aside of certain steps and error in finding that any of the transactions set aside were likely to defeat an anticipated order in favour of the wife, as there was no evidence from which the trial Judge could form a view as to the likely quantum of the wife’s anticipated order.
However, it has been unnecessary for us to rule upon these grounds for, during the course of the hearing of the appeal, Mr Kirk, senior counsel for the appellants, sought and was granted leave to add two further grounds of appeal, one of which asserted error by the trial Judge in making the orders under section 106B, in circumstances where those orders were only sought:
“…in the event that the Trial Judge held that the property of the deceased immediately prior to his death was not available as property pursuant to section 79(8)(b) in respect of which the Court might make orders and she made no such order.”
Counsel for the respondent conceded merit in that ground.

The ground conceded

In full, the ground was:
“4.5 That the Trial Judge erred in making the Orders sought under 106B in that such Orders were only sought in the event that the Trial Judge held that the property of the deceased immediately prior to his death was not available as property pursuant to section 79(8)(b) in respect of which the Court might make orders and she made no such order.”
Notwithstanding the concession, we have independently considered the issue raised by the ground, which we think best understood in the context of the proceedings which led to the orders appealed.
On 8 April 2004, Penny J delivered reasons for orders made that day, in relation to applications heard by her on 30 March 2004. Her Honour recorded that the wife had, as earlier indicated, sought orders that the legal personal representative discharge a loan on a leased motor vehicle, pay for the repair of the vehicle, insure it and licence it, make a payment in relation to loans on the former matrimonial home and pay the wife a sum by way of interim costs. The wife also sought an order that her Form 3 application be “set down for hearing within 14 weeks with an estimated hearing time of one to two hours”.
The final paragraph of the reasons delivered on 8 April 2004 was:
“18. The wife’s financial position is very poor and she is dependent on Social Security payments. Having dismissed the legal personal representative’s Form 3A, it is important, in my view, that the issue of whether the transactions effected by the husband before his death are to be set aside, should be dealt with as a matter of priority and, if this application is successful, then the various entities can be valued and a determination made of the husband’s entitlement in them. At this stage, in my view, it would be premature for the wife to spend money on valuations of the various businesses.”
In her reasons of 11 March 2005, the trial Judge recorded the matter that came before her for determination on 27 May 2004 to be:
“…whether the Court can set aside certain transactions, specified in paragraph 4 of the wife’s Minute of Orders Sought filed 16 April 2004, under s106B of the Family Law Act 1975.”
However, paragraphs 3 and 4 of the minute of orders referred to read as follows:
“3. In the event that the Court should hold that for the purposes of section 79(8)(b) the expression ‘the property of the parties to the marriage’ does not include the totality of the property that was, or would be deemed to have been, the property of the Husband at the time immediately prior to the Husband’s death, the immediately following two orders be made. [emphasis added]
4. The following transactions be set aside pursuant to section 106B:
(a)The Binding Death Nominaiont Form for the [PZ] Superannuation Fund executed 12 September 2002;
(b)The Deed of Amendment of the [Z] Family Trust executed on 9 October 2002;
(c)Such appointments to directorships of and transfer of shares in [C] Pty Ltd., [K] Pty Ltd, [FV] Pty Ltd and [A] Pty Ltd that were made by the Husband on and from 29 August 2002 as may be necessary for the legal personal representative of the Husband to give full force and effect to paragraph 1 of these orders.”
Thus, an order setting aside transactions was only sought if a prior condition was met. The concession was that it was not and could not be until the trial Judge made findings on the issue at the final hearing.
When the matter commenced before Penny J on 27 May 2004, Dr Dickey initially seemed to plainly enough convey what was sought, but as to that, the position quickly became less certain, as seen from the following exchange:
“DR DICKEY: The matter before you is the 106B part of the wife’s amended application filed on the 21st of November last year. The relevant orders being sought are those in the wife’s minute of orders sought filed on the 16th of April this year.
The matter for determination today results from your Honour’s reasons for judgment delivered on the 8th of April this year, in particular paragraph 18, concerning the wife’s application for interim costs. Your Honour may recall that the wife sought interim costs for expense in valuing assets.
…
DR DICKEY: Your Honour thought that that would be unnecessary if there was to be no order under 106B and thus the matter before you today.
HER HONOUR: Issue seems to be taken in the other side’s papers as to the fact that I shouldn’t make a determination until I had a valuation.
DR DICKEY: I will be half agreed with that.
HER HONOUR: Right.
DR DICKEY: In other words, as I understand it, today is to decide whether the circumstances clearly come within section 106B.”
Somewhat later, there was a further exchange between Dr Dickey and her Honour about what was sought:
“I’ve got two lines of attack, your Honour. The first is the proposition - - my proposition that the court can still make an order in respect of all the husband’s property at the moment before his death simply under section 79(8). In that case, recourse to section 106B is unnecessary.
…
DR DICKEY: Yes. Secondly, if I’m wrong there my second proposition, relief under section 106B is available in the present circumstances.…”
It will be noted that what was stated in the exchange just quoted was not dissimilar from the orders sought in order 4 of the minutes of order sought by the wife, that order sought conditionally upon a finding as expressed in order 3. Later however, another concept, that of a finding of a prima facie case in relation to the wife’s application for orders pursuant to section 106B, was introduced. Dr Dickey said:
“…Clearly, before your Honour can even decide that there’s prima facie case for section 106B your Honour must recognise that there is a proper property claim by the wife.
…
The relief that we are seeking under section 106B is in sum such relief as will enable the court to make appropriate property orders in favour of the wife. We are not asking your Honour necessarily to set aside each of the transactions but just simply enough to ensure that the wife will receive the former matrimonial home encumbrances free plus half of the total net assets of the husband’s property at the time of his death.
…
DR DICKEY: Well, this is - - this really brings me to a point where with my learned friend in his summary of argument – that it is probably impossible for your Honour to decide which section 106B orders to make now, until after you have determined, first of all, what the size of the asset pool is and, secondly, whether the wife is, in fact, entitled to what she is claiming.
Now, in the normal case what happens is, with section 106B applications, the court first of all works out what the applicant’s entitlement is and then exercises section 106B in order to achieve that end.”
Following that, a further exchange between Dr Dickey and the trial Judge, and later Mr Dowding, included the following:
“DR DICKEY: So I can’t see that your Honour can make the specific orders - -
…
- - at this time.
…
DR DICKEY: But what the purpose of today’s hearing was, as I understand it from your Honour’s judgment of last month, was to decide that there can be a finding under section 106B so that then - -
HER HONOUR: Any of those assets notionally could be added back in.
…
DR DICKEY: - - the wife can set about expending money - -
…
DR DICKEY: - - valuing, that’s right.
…
DR DICKEY: So we’re agreed – I have to agree – that the actual 106B orders can’t be made now.
…
DR DICKEY: It’s really does this - - do the transactions come within section 106B? Your Honour, those are my submissions.
…
MR DOWDING: Well, it’s probably even narrower than can the transactions come within 106B; it’s probably can the transactions come within 106B if you ultimately in a trial to find that the necessary elements for 106B existed because we’re not having a trial about those issues and, in…
…
HER HONOUR: So what am I doing today?
MR DOWDING: Well, I think - - as I understand it, what you’re really being asked to do - - to say - - to do today is - -
HER HONOUR: Say there’s a prima facie case.
MRE DOWDING: To say there’s a prima facie case in relation to the 106B issue but,…”
Not only then, were the orders in paragraph 4 sought only in the event that the court should hold that, for the purposes of section 79(8)(b), the expression “the property of the parties to the marriage” did not include the totality of the property that was, or would be deemed to have been, the property of the husband at the time immediately prior to the husband’s death, but it does not appear that, in the hearing before the trial Judge, orders under section 106B were sought at that time.
In our view, the proceedings before her Honour on 27 May 2004 were uncertain in character and scope. There was firstly the question of whether those proceedings represented the commencement of a hearing for final orders, that hearing being divided into at least two parts, the first of which was to determine whether transactions would or should be set aside under section 106B of the Act.
In this regard, the orders of 11 March 2005 are stated to be upon the hearing of the following applications:

Form 3 application filed by the Applicant on 17 April 2003
Form 3A response filed by the First Respondent on 19 June 2003
Amended Form 3 application filed by the Applicant on 21 November 2003
Amended Form 3A response filed by the First Respondent on 24 December 2003
Further Amended Form 1A response filed by the Second, Third, Fourth and Fifth Respondents on 3 May 2004.

Most of those applications sought final orders.
Then, there is the uncertainty expressed by counsel during the hearing as to whether orders could be made, because of the lack of valuation of assets and indeed, whether what was sought was merely a finding of a prima facie case that transactions might be set aside under section 106B.
We are quite satisfied that, together with the making of orders without satisfaction of a precondition upon which the orders were sought, the course of proceedings just described meant that those proceedings and the orders resulting therefrom were tainted by error.

Costs certificates

Each party sought costs certificates and in view of what we have said of the process and the result we considered the grant of certificates appropriate.

ORDERS

The orders made were:
That the Orders 1(b) and 1(c) of the Orders made by the Honourable Justice Penny on 11 March 2005 be set aside.
The Appellants are granted a certificate pursuant to s.9(1) of the Federal Proceedings (Costs) Act 1981 that in the opinion of the Court it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellants in respect of the costs incurred by the appellants in relation to the Appeal.
The Respondent is granted a certificate pursuant to s.6(1) of the Federal Proceedings (Costs) Act 1981 that in the opinion of the Court it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the Appeal.

I certify that the 33 preceding
Paragraphs are a true copy of the reasons for judgment delivered by this
Honourable Full Court.
Sgnd: ………………

Associate

[2005] FamCA 756

12 August 2005

Key Legal Topics

Areas of Law

Administrative Law

Civil Procedure

Legal Concepts

Judicial Review

Standing

Jurisdiction

Procedural Fairness

Appeal

Costs