Sora and Sora & Ors

[2012] FamCA 780

FAMILY COURT OF AUSTRALIA

SORA & SORA AND ORS [2012] FamCA 780

FAMILY LAW — PROPERTY — Property application involving mixed purpose trust — accrued jurisdiction relied upon by third party respondents – identification of single justiciable controversy — third party respondents required to file a statement of contentions of fact and law — necessary for third party respondents to confirm or specify the final orders they seek — necessary for third party respondents to confirm or specify the material facts upon on which their claim is based — necessary for third part respondents to specify the statutory and other law upon which they rely to justify the relief claimed.

Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)

Fencott v Muller [1983] HCA 12; (1983) 152 CLR 570
Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553
Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366
Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511
Valceski & Valceski (2007) FLC 93-312

APPLICANT: Ms Sora

RESPONDENT: Mr Sora

SECOND RESPONDENT: T Soratis, S Soratis and C Soratis

THIRD RESPONDENT: M Pty Ltd

FILE NUMBER: MLC 4287 of 2007

DATE DELIVERED: 16 August 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 2 September 2011, 8 September 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr North SC with Mr Sweeney

SOLICITOR FOR THE APPLICANT: Lander & Rogers

COUNSEL FOR THE RESPONDENT: Dr Pannam QC with Ms Vohra

SOLICITOR FOR THE RESPONDENT: GSM Lawyers

COUNSEL COUNSEL FOR THE SECOND AND THIRD RESPONDENT: Mr St John SC with Mr Greenberger

SOLICITOR FOR THE SECOND AND THIRD RESPONDENT: Dermenzies Lawyers

Orders

1. By not later than 12 noon on 27 September 2012 the second respondents file and serve a statement of contentions of fact and law to be relied upon by them at the final hearing in which they:-

   a)Confirm or otherwise specify the relief they seek by way of final orders;

   b)Specify the material facts upon which they rely;

   c)Identify the statutory law and/or legal principles which they contend justify and entitle them to the relief they seek.

2. This matter be listed before me on Wednesday 3 October 2012 at 9.00 a.m. for directions for trial.

3. Any party wishing to make an application for costs file and serve by not later than 12 noon on Monday 1 October 2012 a written  submission to that effect, such submission to be of not more than 6 pages in length and include (but not be limited to) details of:-

   (a)       the sum at which such costs could be fixed on a party/party basis;

   (b)an itemisation of professional fees for solicitors, counsels’ fees to prepare and counsels’ fees to appear, and

   (c)a statement as to whether that party wishes, at this stage, for the matter to be listed for oral argument as to costs.

4. Any party against whom an application for costs is made file and serve by not later than 12 noon on Monday 5 November  2012 a written  submission in response, such submission to be of not more than 6 pages in length and include (but not be limited to) details of:-

   (a)the sum at which the costs claimed should be fixed on a party/party basis in the event that a costs order is to be made;

   (b)a statement as to whether that party wishes, at this stage, for the matter to be listed for oral argument as to costs.

5. Any party who is served with a response pursuant to the preceding paragraph of this Order may, within 14 days of service upon them of that response, file and serve a written submission in reply, of not more than 3 pages, confined to alleged errors of fact and law and say, finally, whether that party wants the matter to be listed for oral argument. 

6. If no party seeks to have the matter listed for oral argument on the issue of costs, the Court may proceed to determine the applications for costs based on written submissions.

7. If any party does seek to have the matter listed for oral argument on the issue of costs, counsel for that party confer with counsel who will be briefed to appear for the other party(s) to ascertain mutually convenient dates on which the matter can be listed before me at 9 a.m. estimated to take not more than one hour.

8. Subject to further order of the court, the times for filing and service of submissions as to costs may be varied by agreement between the applicant for costs and the party against whom costs are sought and any such agreement should be referred to in the submissions or evidenced by correspondence attached to any submission which is filed and served.

9. That pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) I certify that it was reasonable to engage counsel including Queen’s Counsel and Senior Counsel.

IT IS DIRECTED:

1. The email communication to the court from GSM Lawyers dated 7 February 2012 to which was attached the reasons of Ferguson J delivered in Supreme Court proceedings SCI … on … 2011 be marked Exhibit “C3” and remain on the Court file.

IT IS NOTED that publication of this judgment under the pseudonym Sora &Sora and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 4287  of 2007

Ms Sora

Applicant

And

Mr Sora

Respondent

And

T Soratis, S Soratis and C Soratis

And

M Pty Ltd

REASONS FOR JUDGMENT

Introduction  

1. By an application in a case filed on 29 July 2011, the second and third respondents seek to intervene in proceedings between the husband and the wife for alteration of property interests. The second respondents have filed a statement of claim in which they seek, amongst other things, declaratory relief that they are entitled in equity to one half the assets in a family trust, declarations as to control of the trust and consequential orders to give effect to the sale of the assets of the relevant family trust including a business and a division of the proceeds of sale.  In so doing, it is said that they place some reliance on the accrued jurisdiction of the court.

2. The wife supports the intervention of the second and third respondents and does not oppose the relief they seek. In particular, the wife supports a sale of the business and a winding up of the family trust. She is agreeable to the second and third respondents being entitled to one half of the corpus of the family trust and the other half being divisible between herself and the husband in proceedings for a final alteration of property interests.

3. The husband seeks a dismissal of the second and third respondents’ application to intervene. The respondents are already parties to the proceedings. The husband’s opposition to the respondents’ reliance on the statement of claim arises because it is now said by the third party respondents that they seek remedies under state law and therefore require this court to make orders in the exercise of accrued jurisdiction. The husband contends that the relief sought by the second respondents is not necessary, does not fall within this court’s jurisdiction and does not give rise to accrued jurisdiction.

History

1. There is little factual dispute.

2. Forty or so years ago, the husband and his brother started a business which produced and marketed a food product. The business continues today. In 1980 they placed the business into an entity which they controlled, P Pty Ltd.

3. P Pty Ltd was and still is the trustee of the Sora Family Trust (“the family trust”). The brothers were the joint appointors of the trust. The benefits of the business were derived equally by the brothers from the family trust, through R Pty Ltd.

4. R Pty Ltd was and still is a beneficiary of the family trust and the husband and his brother were each directors of R Pty Ltd. The shareholding in R Pty Ltd was and remains held equally by the third respondent, M Pty Ltd (which was controlled by the husband’s brother) and by F Pty Ltd (which is controlled by the husband).

5. In the early 1980s a unit trust was established under the trusteeship of R Pty Ltd. Accordingly, what was acquired within the corporate structure was still controlled by the brothers. The unit trust commenced to acquire real estate which it still holds.

6. Following the death of his brother in 2000 the husband became the sole surviving appointor of the family trust, a position he still holds. The husband’s brother’s widow, Mrs T Soratis, took over her late husband’s directorships in P Pty Ltd and in R Pty Ltd. Mrs Soratis and her sons became the holders of her late husband’s share in P Pty Ltd. Mrs Soratis assumed control of M Pty Ltd with her sons as directors and shareholders.

7. After a marriage of 26 years the husband and wife separated in April 2006.

8. In 2007, the wife initiated proceedings in this court against the husband for an alteration of property interests. The wife has amended the relief she seeks on several occasions. Initially she sought a cash adjustment in her favour of an amount equivalent to half of the assets divisible between the husband and herself inclusive of one quarter of the value of all the family trust’s business interests and any business interests associated therewith. The one quarter share of all of the businesses represents one half of the Soras’ one half share in the business which produces the food product and the assets of the unit trust.

9. In the context of the property application, the husband’s position is, and always has been, that one half of the family trust’s assets are divisible between himself and the wife.

10. By an amended application filed 16 February 2010, the wife joined the second respondents being Mrs Soratis and the two sons of her marriage to the husband’s brother, S and C. She did so pursuant to Part 6.2 of the Family Law Rules 2004 which simply required the wife to add the names of her sister-in-law and nephews as respondents to her amended application and serve the amended application on them and the husband.

11. By way of a response filed on 26 May 2010, the second respondents sought a declaration that the husband and/or wife are entitled in equity to one-half of the net assets of the family trust. Further or in the alternative, they sought declarations that they are entitled in equity to one half the assets in the family trust, that they are entitled to equal and joint control of the family trust with the husband (inclusive of power of appointment and guardianship) and consequential orders to give effect to the declarations including a sale of the assets of the family trust including a business and a division of the proceeds of sale “as to one-half to the Husband and the Wife collectively and one-half to them collectively”.

12. In a preliminary hearing before Cronin J the issue of the joinder of the second and third respondents by the wife was argued. The husband was not successful in opposing the joinder. Cronin J determined that the second and third respondents ought remain as parties to the proceedings between the husband and the wife as the implementation of the orders then sought by the wife may affect their rights.  In his Honour’s reasons of 10 June 2010 his Honour states:-

    40.      There was also discussion about the nature of the application for orders brought by the second respondents.  Mr. St. John S.C. said that his clients were seeking to rely on s.78 of the Act and the authority for its use was Lanceley (1994) FLC 92-491. That and other authorities of this court have traditionally taken the view that where third parties are either joined or on notice of orders pursued, they are bound by declarations of the court. The unresolved question, and one that I do not have to determine now, is whether the court has a power to entertain an application for a declaration by the third parties based on s.78. Mr. Bartfeld Q.C. suggested the third parties were asking […] the court to exercise its accrued jurisdiction. It would not be possible for me to presently see that as a prospect because there is no statement of claim from the second respondents or the third respondent, nor is there any information in the affidavit filed by or on their behalf which would enable a “defence” to be drawn by anybody who was opposing the orders that they were seeking.

    41.      Mr. St. John S.C. made clear that his clients were not at this stage, pursuing the accrued jurisdiction but in the event that they ultimately decided to or had to do that, a statement of claim would be necessary to enable the court to understand what jurisdiction it was being asked to exercise. 

13. By the husband’s second amended response filed 2 December 2010 the husband does not seek to disturb or affect the interests of the second and third respondents.

14. By way of an amended response filed 14 April 2011 the second respondents filed a statement of claim. In it, they seek the same relief as is sought in their response filed on 26 May 2010 but preface the prayer for relief with twenty four paragraphs which purport to plead the elements of causes of action, material facts and particulars thereof.

15. It is clear that Mrs Soratis and her sons want to have direct control and ownership of one half of the assets of the family trust and the unit trust and for their entities become completely disengaged from the husband. They seek that the husband cooperate with Mrs Soratis to bring about the following outcomes:-

    a)that the family trust sell the business;

    b)that R Pty Ltd sell all assets of the unit trust;

    c)that the net proceeds from the sales of the business and the assets of the unit trust are divided “as to one half, to the Husband and the Wife collectively, and as to one-half, to the second respondents collectively –

    and in the absence of co-operation, “a receiver, or receiver and manager, be appointed to conduct such sales and division of proceeds.”

16. As is appropriate for a statement of claim in the Supreme Court, the statement of claim upon which the second respondents rely contains no propositions or conclusions of law. Neither are there convenient headings or subheadings linking the facts necessary to support a cause of action with any particular cause of action, although some are obvious. Before me, the second respondents could not, or would not, clarify precisely what powers of the court, within the panopoly of powers available under its original and accrued jurisdiction, the second respondents rely upon to achieve the relief they seek.

17. By the wife’s third amended application filed on 2 September 2011, the wife seeks to justify her entitlement by seeking orders pursuant to s 90AE(2). Consistently with the relief sought by the second and third respondents, she seeks a valuation of the businesses and a sale of the husband and wife’s half share and, if no sale can be achieved, “then the Husband, the Wife and the Second and Third respondents do all such acts and things and sign all such documents as may be required to such (sic) realise the entirety of their corporate and real estate assets on terms to be agreed and to cooperate with all reasonable requests and demands to ensure same.”

18. In August 2011, Mrs Soratis and the third respondent, M Pty Ltd, issued an Originating Motion in the Supreme Court of Victoria, proceedings No. SCI … against the husband. The application was made under sec 237 of the Corporations Act2001 (Cth). It sought the calling up of debts, referred to as unpaid present entitlements or “UPE” owed by P Pty Ltd, as trustee of the family trust, alleged to be in excess of $20 million. It sought the sale of the assets of the family trust to pay this debt. The ultimate relief sought, the sale of the assets of the family trust and distribution of the proceeds of sale, is the same as is sought by the second respondents in their first application filed 26 May 2010 and in the statement of claim filed on 14 April 2011 in this court.

19. The application was heard by Justice Ferguson in November 2011 in the Supreme Court of Victoria.  Ferguson J delivered judgement in December 2011[1] and dismissed the application of the third respondent and Mrs Soratis. Her Honour reasoned and concluded that :-

    [1] Exhibit “C2”

    44.      Ms [Soratis] submitted that she and [M Pty Ltd] do not intend to use the proposed proceeding for obtaining some advantage for which the action is not designed and do not intend to use it for some collateral advantage beyond what the law offers.  Ms [Soratis] contended that they want to bring the proposed proceeding for the purpose of enabling [[R] Pty Ltd] to recover payment of the debt which she claims is owed to it by [P Pty Ltd].  If it later transpires that a natural consequence of the proposed proceedings is that in order to satisfy [P‘s] debt to [[R] Pty Ltd], [P] takes steps affecting the interests of the stakeholders in [P Pty Ltd’s] business or in the family trust, Ms [Soratis] says those are not collateral purposes in any relevant sense.  Similarly, she says, if a liquidator is eventually appointed who sells [P’s] business, that would be an outcome for which the proceedings are designed and which is within what the law offers.

    45.      Ms [Soratis] noted that [[R] Pty Ltd] is not a party to the Family Court proceeding and contended that there is no overlap between that proceeding and the proposed proceeding.  Counsel submitted on her behalf that the fact that there are two different circumstances that could ultimately lead to the business being sold, does not mean that one taints the other and it does not mean that if Ms [Soratis] has two courses open to her at law that she cannot take both of them legitimately or that there is a lack of good faith on her part because she is seeking to pursue rights on behalf of [[R] Pty Ltd] at the same time as she is pursuing a claim in the Family Court. 

    46.      Ms [Soratis] submitted that if leave is not granted to her and [M Pty Ltd], then they are left with nowhere to go because [[R] Pty Ltd] is in deadlock and if Ms [Soratis] cannot persuade Mr [Sora] to take steps  to join with her in taking steps to recover the debt owed by [P Pty Ltd], then it will never be recovered.

    47.      In circumstances where [P Pty Ltd] does not have the immediately available funds to pay and Ms [Soratis] will not permit it to borrow, the options available to [P] are few if it is required to pay the UPE amount immediately.  Ms [Soratis] and [M Pty Ltd] are effectively seeking to obtain the same relief that Ms [Soratis] and her sons seek in the Family Court proceedings, that is, the sale of the business.  The proposed proceeding may not be being used as a means for some advantage for which it is not designed or for some collateral advantage beyond what the law offers and therefore it may not amount to an abuse of process in the strict sense.(Willams v Spautz [1992] CHA 34; (1992) 174 CLR 509) Nevertheless, I am not satisfied that the good faith requirement has been established. There are a number of reasons for this. First, for the reasons given above, I am not satisfied that the grant of leave is in the best interests of [[R] Pty Ltd]. Second, stripped bare, the real dispute does not concern [[R] Pty Ltd] and [P] but rather concerns Ms [Soratis], her sons and Mr [Sora]. Third, in my view, it is somewhat artificial to view the current application as one driven by the interests of [[R] Pty Ltd] in recovering a debt owed to it and that the sale of [P’s] business by a liquidator may simply be the product of pursuing that debt. Finally, I do not accept the submission that if leave is not granted to Ms [Soratis] and [M] that they have no remedy. Ms [Soratis] is of the view that there is a deadlock in [[R] Pty Ltd]. If that is so, then it may be possible for [M] to pursue alternative avenues in relation to [[R] Pty Ltd] to achieve the same ends that she and her sons desire. That would be appropriate forum for ventilating the dispute.

    Conclusion

    48.      There is a serious question to be tried as to whether [[R] Pty Ltd] may require [P Pty Ltd] to immediately pay the UPE amount.  The evidence in the accounts is that there is such a liability and Ms [Soratis] has deposed that the amount is due and payable.  Any equitable defence of estoppel is one that would need to be tested at trial (at least on the evidence as it stands at present) and with full agreement.

    49.      However, I am not satisfied that it is in the best interests of [[R] Pty Ltd] that leave to bring a proceeding ought be granted to Ms [Soratis] and [M Pty Ltd].  It is not clear that such a claim ought to be brought in circumstances where there has been a long standing arrangement that [P] may retain the UPE amount for use in its business, [P] does not have the funds immediately available to pay and Ms [Soratis] will not permit it to borrow to do so.  Only one of [R’s] shareholders favours the action.  Ms [Soratis] is most likely to be placed in a position of conflicting duties.  Whilst [M] may not be faced with the same legal difficulties, this does not overcome the other reasons why it is not in the best interests of [[R] Pty Ltd] that it be granted leave to pursue a claim against [P Pty Ltd].

1. It is accurate that R Pty Ltd is not a party to the proceedings in this court. However, as best I recall, there has been a concession by all parties that, where all persons who relevantly have control of and/or own an entity are already parties to these proceedings, those persons say that they will abide orders of the Court with the effect that it is agreed that it is not necessary to join their entities as additional parties to the proceeding. R Pty Ltd is such an entity.

2. The court has not been informed of any further proceedings in the Supreme Court or in any other state court. As between the husband and the wife there were proceedings, instituted by the wife, for an interim property order which were returnable on 10 August 2012. I will return to those proceedings later in these reasons in the context of future case management and a timely final hearing.

The issue to be determined

1. The issue to be determined is whether this court should determine the relief sought by the second respondents in their statement of claim filed 14 April 2012 at the same time as and as part of the property proceedings.

2. I heard lengthy submissions as to case law and argument about accrued jurisdiction which was of assistance save to the extent that there was some  repetition in the oral submissions of the wife and the second respondents.

3. The husband contended that insofar as it is necessary to define the entitlement of himself and the wife in the family trust and businesses associated therewith, there are sufficient powers within the court’s original jurisdiction to do so. It was submitted:-

   14.The Second and Third Respondents to these proceedings were joined upon the Wife’s application and such joinder was sought because of the potential effect on their rights and entitlements of the orders she sought in these proceedings.  For the purposes of providing for a default provision in any Order requiring the Husband to make a payment or payments to the Wife in relation to a property settlement it may be necessary for the Court to make Orders relating to a realisation of the Family Trust assets.  It is clear that the Second Respondents may have a direct interest in that matter.  That is why they have been joined.

   15.The statutory powers of the Family Court are extremely broad in relation to this aspect of the matter.  See: Section 79 and Part VIIIAA.  It is clear that the Second Respondents have the right to be heard in relation to how their interests in the Trust (whatever those may be) are to be protected.

4. Insofar as the second respondents say they rely on accrued jurisdiction, the husband submits that there is no common substratum of facts or a single justiciable controversy arising between him and the wife and the second named respondents which requires or entitles the court to apply state law or exercise non-federal powers. In short, insofar as the second respondents seek to rely on the court’s accrued jurisdiction, the husband submits that their claims are independent of, severable and unrelated to, the proceedings between himself and the wife and, it is submitted, accrued jurisdiction does not arise.

5. The husband alone contends that if, contrary to his position, I find that there is a single justiciable controversy and accrued jurisdiction arises, this court has a discretion to assume or decline to exercise the accrued jurisdiction. So, even if this court is satisfied that a matter is within accrued jurisdiction, it may nonetheless decline to exercise that jurisdiction because it would be more appropriate for another court to determine the part of the controversy in respect of which non-federal remedies are sought. It was submitted on behalf of the husband that the dispute with third parties is more appropriately determined in the Supreme Court to whence the second respondents’ statement of claim should be cross-vested.

6. The wife agrees with the third parties’ contentions to the effect that this court should, as part and parcel of proceedings between herself and the husband for alteration of property interests, decide what rights the third party respondents have vis a vis the husband and makes orders perfecting such rights and entitlements as everyone has.

7. Counsel for the wife and the second and third respondents submit that if accrued jurisdiction arises, the court is required to exercise such jurisdiction as it has. That is, on the facts of this case, the court has no discretion to limit the exercise of jurisdiction and require the third party respondents to seek non-federal law remedies elsewhere.

Parties’ positions

1. It is agreed that the family trust involves two families and that I should proceed on the basis that, for the purpose of identifying the assets divisible between the husband and the wife, the husband and the wife have one half of the corpus of the family trust.

2. It is agreed by the husband and the wife that the other half of the benefits held and to be conferred by the family trust accrue for the benefit of Mrs Soratis and her family.

3. It is not agreed what, if any, entitlement and right the second respondents have, or ought to have, to obtain full and direct ownership of their entitlement to the family trust assets or whether such rights as there may be arise:-

   a)as consequence of the fiduciary duty owed them by the trustee, P Pty Ltd; or

   b)as consequence of the fiduciary duty owed them by the husband;

   c)as it appears the second respondents plead in their statement of claim, a partnership or joint venture which requires the court to disregard the terms of the family trust.

4. In discerning what the respondents’ case is, as opposed to what they want, the court is not much assisted by their statement of claim. The court and the other parties would, I find, be significantly more assisted in preparation for final hearing and at the final hearing by a statement of contentions of fact and law to be relied upon by the second respondents. That is, a document which:-

   a)states the material facts upon which they rely;

   b)identifies the law and legal principles the application of which will result in the relief that they seek;

   c)identifies (or confirms) the relief they seek –

   but I will return to this later in these reasons.

5. I have had the benefit of and have considered the written submissions:-

   a)of the second and third respondents[2] tendered on 2 and 8 September 2011;

   b)of the husband[3] tendered on 2 September 2011; and

   c)of the wife[4] tendered on 2 September 2011 –

   as well as extensive and helpful oral submissions by counsel for each party. I do not propose to restate the submissions more than I have already done so.

   [2] Exhibit “I1” dated 29 August 2011 and  Exhibit“I4” undated, tendered on 8 September 2011.

   [3] Exhibit “H1” dated 31 August 2011 and  Exhibit “H2” dated  2 September 2011

   [4] Exhibit “W1” undated, tendered 2 September 2011

Law

1. In light of existing cases including Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366, it is clear that part of the corpus or benefit of the family trust is “property” for the purpose of the proceedings for alteration of property interests between the husband and the wife under Part VIII of the Act. Using the description by French CJ at [69] of Spry’s case the family trust is “a trust involving a combination of purposes and family and extraneous assets”. That is, the family trust involves persons with substantive interests who are not the husband or the wife or their children. It is necessary that those persons be joined in the proceedings as their interests could potentially be affected in two ways.

   a)First, in determining what part or portion of the family trust assets form part of the property pool divisible between the husband and the wife;

   b)Second, the impact of any consequential orders requiring liquidation or a transfer of assets to enable the wife to receive her entitlement upon the family trust’s operations and administration of the family trust business and the unit trust.

2. Accrued jurisdiction is based principally on the constitutional notion of "matter" and whether it can be said that the facts and claims between litigants are really part of one matter or “a single justiciable controversy”. It is available where a non-federal claim is to be joined with a federal claim both being based on a common substratum of facts or transactions such that the court determines (usually early in the proceedings) and as a matter of “practical judgment”, that it is feasible and desirable to hear the claims at the same time.

3. The application of accrued jurisdiction should avoid the potential for two different courts to come to different conclusions as to the same set of facts or as to facts which largely overlap. It should deliver a simultaneous outcome on actions which are based on common facts in preference to requiring the parties to prosecute an action based on the common facts in two courts either concurrently or subsequently.

4. In Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 at 585 - 586 Gummow and Hayne JJ described the process to be undertaken by the court at the stage of the proceedings that this case is now, as follows (references omitted):-

   139.    The central task is to identify the justiciable controversy. In civil proceedings that will ordinarily require close attention to the pleadings (if any) and to the factual basis of each claim.

   140.    In Fencott it was said that "in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter." The references to "impression" and "practical judgment" cannot be understood, however, as stating a test that is to be applied. Considerations of impression and practical judgment are relevant because the question of jurisdiction usually arises before evidence is adduced and often before the pleadings are complete. Necessarily, then, the question will have to be decided on limited information. But the question is not at large. What is a single controversy "depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships". There is but a single matter if different claims arise out of "common transactions and facts" or "a common substratum of facts", notwithstanding that the facts upon which the claims depend "do not wholly coincide". So, too, there is but one matter where different claims are so related that the determination of one is essential to the determination of the other, as, for example, in the case of third party proceedings or where there are alternative claims for the same damage and the determination of one will either render the other otiose or necessitate its determination. Conversely, claims which are "completely disparate", "completely separate and distinct" or "distinct and unrelated" are not part of the same matter.

5. With respect, I adopt the observations of the plurality of the High Court in Fencott v Muller("O'Connors Winebar case") [1983] HCA 12; (1983) 152 CLR 570, at 608-610, which appear in the following passages:-

   30.      […] The unique and essential function of the judicial power is the quelling of such controversies by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion. In identifying a s. 76(ii) matter, it would be erroneous to exclude a substantial part of what is in truth a single justiciable controversy and thereby to preclude the exercise of judicial power to determine the whole of that controversy. What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. But in the end, it is a matter of impression and of practical judgment whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter.

   31.      A judicial power which is not exercised to determine the whole of a controversy is, generally speaking, not appropriately and conveniently exercised. Not appropriately, because the controversy is not quelled; not conveniently, because the parties — the principal beneficiaries of the exercise of judicial power — must litigate anew to have the outstanding questions and issues determined. The reference by Barwick C.J. in Philip Morris (1981) 148 CLR, at p 475 to what is necessary or convenient for the resolution of a federal claim is perhaps too restricted a limitation on the ambit of "matter". Such a test would be unexceptionable if the primary purpose of the exercise of federal judicial power in a s. 76(ii) matter were the judicial administration of the federal law; that is, if the primary purpose were to ensure that the federal law applicable to a particular claim was correctly applied in resolving it. But the primary purpose of exercising judicial power is not the maintenance of legal principle: that is incidental to the determination of the dispute in hand.

   32. The power judicially to determine the whole of a dispute is inconsistent with a limitation which would restrict the Court to resolving only the federal claim and what is necessary for that purpose. To adopt a more restrictive approach to the ascertainment of the ambit of a matter is to ensure that the obstacles of arid jurisdictional dispute will beset the path of a party who must invoke federal jurisdiction, especially federal jurisdiction exclusively vested in a federal court pursuant to s. 77(ii). The judicial ascertainment of facts in a particular controversy would be bedevilled by the possibility of divergent findings or by unseemly attempts to secure a first finding from one court rather than another. The judicial award of effective remedies in resolution of a controversy would be impaired, especially in cases where remedies are discretionary or reciprocal. The judicial power of the Commonwealth would at once prove insufficient to accomplish its purpose and productive of inefficiency in the exercise of the judicial power of the States. These consequences cannot be accepted unless they follow from the language of the Constitution, and they do not. As Mason J. said in Philip Morris (1981) 148 CLR, at p 514 :

   "In deciding whether to attribute either a broad or a narrow content to 'matter', we should take into account that the adoption of the broad meaning will lead to the speedier determination of entire controversies between parties without undue duplication of proceedings. Perhaps the adoption of this view will have some adverse consequences for State courts, though this is by no means self-evident, but even if this be so, it is a consideration which is secondary to the interests of litigants. This circumstance is an additional reason for giving the word a broad rather than a narrow meaning."

   33.     However, federal judicial power is attracted to the whole of a controversy only if the federal claim is a substantial aspect of that controversy. A federal claim which is a trivial or insubstantial aspect of the controversy must, of course, itself be resolved in federal jurisdiction, but it would be neither appropriate nor convenient in such a case to translate to federal jurisdiction the determination of the substantial aspects of the controversy from the jurisdiction to which they are subject in order to determine the trivial or insubstantial federal aspect. Again, impression and practical judgment must determine whether it is appropriate and convenient that the whole controversy be determined by the exercise of federal judicial power.

Discussion

1. Unlike the position of family member beneficiaries in Spry type trusts frequently encountered in proceedings for alteration of property interests, here it is recognised by all parties that the second respondents have a real interest in the family trust. How that interest may eventually by characterised and perfected, if it is to be perfected at all, is part of the cause they wish to agitate. However, the fiduciary duties owed by the husband (and or entities he controls) to the second respondents are substantial and may well affect the control and management of what is admitted to be a one half entitlement of unspecified character. 

2. The second respondents have a right to expect that any fiduciary duties owed to them will be respected by the court in dealing with the wife's claim for an alteration of property interests.  Thus the precise nature of the interests and fiduciary duties must be determined to deal with the wife's claim. It may be that the duties restrict what the husband can do with an asset, which may impact on the valuations or orders and consequential orders. 

3. I am satisfied it is necessary to define the entitlement of the second respondents at the point of identifying the nature and the value of the assets which are divisible between the husband and the wife in the property proceedings. Is it identifying and clarifying these interests and the nature of and effect of the fiduciary duties that is a common substratum of fact and law in all of the claims.

4. Furthermore, at the point of making orders which implement the wife’s property entitlement, it will be necessary for the court to consider making orders which require the husband to act in a certain way in relation to the assets, including those which form part of the corpus of the family trust and the unit trust. At that point, the court must again take into account whatever duties or liabilities the husband, or any entity under his control, has to the second respondents. It is a further substratum of fact common to both claims.

5. In my view, any rights of the third party respondents and such duties and responsibilities as the husband owes them directly or through an entity are interconnected with the alteration of property interests between the husband and the wife to the extent that they are inseparable.

6. Accordingly, on the facts of this case, I am satisfied that accrued jurisdiction is available to this court to determine the claim by the second respondents in relation to the family trust including the unit trust. In so doing, I make the following findings and observations:-

   a)First, I accept that there is a single justiciable controversy or matter in  which the federal issue of alteration of property interests and the non-federal issue of the equitable or other claimed entitlements of the second respondents are interrelated.

   b)Second the non-federal claim of the second respondents is a significant and substantial part of the federal claim between the husband and the wife.

   c)Third, the court has wide powers to grant appropriate remedies, from state as well as federal law, so as to quell the whole of the controversy or matter and not just a part of the matter that relates to the alteration of property interests (see Valceski & Valceski (2007) FLC 93-312 at [52] and [54]).

   d)Fourth, as accrued jurisdiction is available in this matter, the court has no discretion to refuse to exercise it (see Bergman & Bergman (2009) FLC 93-395 at [27] and Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 at [27]).

7. I am satisfied that it is appropriate for this court to exercise judicial power to quell the disputes for which the parties respectively seek outcomes.

Statement of contentions of fact and law

1. As indicated earlier in these reasons, in discerning what the respondents’ case is, as opposed to what they want, the duly filed statement of claim is not of great assistance.

1. The written submissions of the second respondents did not specify how the relief they seek could be granted as a matter of any particular equitable principle or particular statutory provision.

2. The following interchange[5] on 2 September 2011, between Mr St John SC and the court, did not elucidate the legal principles relied upon by the third party respondents to justify the relief they seek.

   [5] Transcript in Confidence 2 September 2011 p47, line 33 to p 46, line 2

   HER HONOUR:   So how do you seek the relief?

   MR ST JOHN: Well, your Honour, we say it’s under the general State law which will be the Supreme Court Act and may well be the Trustee Act as well.

   HER HONOUR: Well, which part of the Supreme Court Act?

   MR ST JOHN:   It’s common law, your Honour.  Common law capacity for grant release.

   HER HONOUR: Well, why is it in the Supreme Court Act and not - - -

   MR ST JOHN:   But as your Honour - with respect - - -

   HER HONOUR:   - - - principles of common law?

   MR ST JOHN:   With respect, if the accrued jurisdiction is attractive, which we say it is, your Honour has access to all the powers - - -

   HER HONOUR:   I know, but can you tell me what one particular ones you’re seeking I use?

   MR ST JOHN: Well, your Honour, under the Supreme Court Act and the Trustee Act.

   HER HONOUR: Right. Which part of the Supreme Court Act?

   MR ST JOHN:   Your Honour, I’m happy to specify it, but I haven’t yet performed that exercise, your Honour.  I’m happy to do so, of course.  But we’re seeking the - it’s just the general powers of the court of the State of Victoria.  My friend says it may well be under the Trustee Act.  He may well be right, your Honour, but we’re simply saying - - -

   HER HONOUR:   But wouldn’t you know seeing as it is your Statement of Claim?  I mean, you collectively know?

   MR ST JOHN:   Your Honour, the claim, as articulated, is not under the Trustee Act.

   HER HONOUR:   No.

   MR ST JOHN:   But it may well be that reliance will ultimately be placed on the Trustee Act, but - - - 

   HER HONOUR:   Well, now is the time to say it.

   MR ST JOHN: With respect, your Honour, we’re perfectly entitled to have access as it were or for the Court to exercise any of its powers under the State jurisdiction. Now, my friend says his submission may well be that it could only be done under the Trustee Act. Well, your Honour, I haven’t considered that. The claim has bordered on the Supreme Court Act, but either way, your Honour, we’re simply saying these are the powers that this Court will have attracted to it or has had attracted to it by the fact it’s an accrued jurisdiction claim.

   HER HONOUR:   Mr St John, you’re seeking that this Court exercise accrued jurisdiction.  The very least you would have to do is to say what jurisdiction that is.  What State legislation or common law principles.

   MR ST JOHN:   Well, your Honour, I can say generically it’s all powers - - -

   HER HONOUR:   But I don’t want generically.

   MR ST JOHN:   - - - available to a State court, but, your Honour, I’m quite happy to add and/or the Trustee Act.  We’re not convinced of that, your Honour, but if my friend says that’s his ultimate submission then so be it, we’re happy to take - - -

   HER HONOUR:   To be fair - - -

   MR ST JOHN:   I understand that, your Honour.

   HER HONOUR:   - - - his submission was trying to figure out what your submission might be and I don’t think that was his task. 

   MR ST JOHN:   Yes.

   HER HONOUR:   Right.  It’s your task.  How long do you need to fulfil it?

   MR ST JOHN: No, no, your Honour. The way the claim is being put is set out in the application. They are claims sought in equity, so we say they come under the Supreme Court Act. Now, my friend is saying, well, if you’re going to get that sort of relief the only way it could be done is under the Trustee Act. That is not our view of it, but it may be as such further other orders the Court deems fit. Your Honour will see it may be, but a different view is ultimately taken. As presently pleaded, and it’s made perfectly clear, we’re seeking injunctive relief under the Supreme Court Act - sorry, declarations and consequential orders which are under the Supreme Court Act.

   HER HONOUR:   You think that’s abundantly clear?

   MR ST JOHN:   Well, that’s what it says, your Honour.  Well - - -

   HER HONOUR: Or the Family Law Act.

   MR ST JOHN:   - - - you will see, your Honour, paragraph 2, for example - first of all, paragraph 1, we’re entitled in equity.  Paragraph 2 are entitled in equity;  declaration of collective entitlement of equal and joint control of a particular trust;  consequential orders.  So the claim is based in equity.

   HER HONOUR:   Well, what - - -

   MR ST JOHN:   Not on the Trustee Act.

   HER HONOUR:   - - - principles of equity get you 1?

   MR ST JOHN:   Well, your Honour, the agreement between the parties which is being asserted and which - - -

   HER HONOUR:   The joint venture agreement?

   MR ST JOHN:   That is the way it’s put, your Honour, yes.  And, indeed, the husband says he and - there has been hitherto common ground.  One family has half, the other family has half.  We say that’s right and we’re seeking - but the husband, for reasons of his own, opposes any declaration or any formalisation which would reflect that agreement.  Accordingly, we seek an order a declaration needed.

   HER HONOUR:   Well, in relation to that alleged agreement and the joint venture, if you were to succeed in that, what is the trust?

   MR ST JOHN:   I’m sorry, your Honour?

   HER HONOUR:   What is the trust?  What status does - - -

   MR ST JOHN:   We say it’s a perfect record of what was the joint venture, your Honour.  It’s merely a vehicle, a misnomer - well, I’m sorry, it’s a vehicle which does not correctly reflect the agreement between the relevant parties - - -

   HER HONOUR:   There was no trust?

   MR ST JOHN:   - - - or the position in equity, even as the husband puts it.

   HER HONOUR:   There was no trust?

   MR ST JOHN:   Well, there is a trust, your Honour;  of course there was a trust.

   HER HONOUR:   And there’s a document?  No, but you’re saying there is no - - -

   MR ST JOHN:   We don’t say there’s no trust, your Honour, because clearly it - - -

   HER HONOUR:   Are you sure?  Are you sure you’re not saying that there’s a document but there’s no trust?

   MR ST JOHN:   No, your Honour, we don’t say that.

   HER HONOUR:   Well, if there’s a trust - - -

   MR ST JOHN:   There is a trust;  we’re not saying it’s a sham.

   HER HONOUR:   Well, where is the room for the joint venture agreement?

   MR ST JOHN: Well, your Honour, that is the declaratory relief in equity that we assert. Now, your Honour, I didn’t come prepared to argue the merits of the case. I’m happy to do so at some subsequent time your Honour sees it as appropriate. What we’ve said is we bring the claim under the Supreme Court Act when my friend says, well, it can only be under the Trustee Act. Well, that may be a magnificent defence, your Honour, and it may be that at some later time we may seek to vary, but at this stage the claim is brought under the Supreme Court Act and inequity, as the application makes clear.

3. And later, at page 47, line 22 to page 48, line 6 of the Transcript in Confidence for the proceedings on 2 September 2011 (emphasis added):-

   MR ST JOHN: Your Honour, this has been clear, with respect, throughout. We say that we’re entitled to relief under the Family Law Act, but we say, if there’s any doubt about that, that we also have a cross vested claim and that was made clear before Cronin J. When the matter was before your Honour your Honour required - I don’t say inappropriately - that that cross vested claim - I shouldn’t say cross vested claim, it’s accrued claim. I’m sorry, your Honour. That we had an accrued claim and that we say that we had made clear we had a separate accrued claim. Your Honour required that accrued claim, if it was to be ventilated, to be ventilated by way of a statement of claim begin filed and we did so. We say we’re entitled to like relief and above.

   HER HONOUR:   Okay.  Well, when will you be able to say what common law or equitable - - -

   MR ST JOHN: Your Honour, we have. We have. We already have. We’ve asserted under Supreme Court Act.

   HER HONOUR:   Not the Trustee Act?

   MR ST JOHN:   No, we haven’t.

   HER HONOUR:   And you don’t?

   MR ST JOHN:   No.  We see no present need to.  No, your Honour.  But, with respect, your Honour need not be unduly concerned as to which particular act because the whole canopy will be available to the Court under the approved jurisdiction;  be it the Trustee Act - - -

   HER HONOUR:   Yes.

   MR ST JOHN: - - - the Supreme Court Act or the Dog Act. They’re all available to your Honour.

4. It is not open to the second and third respondents to merely state the final orders they seek and leave the husband to guess by what particular equitable principle or by what particular statutory provision that relief will be justified. The husband is entitled to a statement of the contentions of fact and law to be relied upon by the second respondents. It appears that the wife supports the second respondents’ claim. However, she too should know how their case is put so that she is able to assess the strength of the case with which she aligns herself.

5. The statement of contentions will:-

   a)state the material facts upon which they rely;

   b)identify the statutory law and legal principles the application of which justify the relief that they seek;

   c)identify (or confirm) the relief they seek.

6. I am mindful that the gaps in this case, which I expect the statement of contentions to address, reflect the fact that our Rules provide, at Reg. 6.03 and 6.05, for a third party being joined. However, the Rules do not go on to provide for how the third parties’ case is to be stated after they intervene.  Sometimes case management directions in this court have included a direction that a statement of claim be filed, as in this case. However, in spite of the second respondents having done what they were ordered to do[6], my view is that the result falls well short of putting each other party on notice as to the evidence they rely upon and what statutory provisions or legal principles will be relied upon to justify the final orders they seek.

   [6] The husband’s defence was filed under cover of a Reply on 6 May 2011 and the wife filed a defence on 17 May 2011

7. The main purpose of the Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the court that is reasonable in the circumstances of the case (Reg. 1.04.). As the Rules do not specify a pathway for cases such as this case, other provision must be made.

8. I am confident that a continued lack of specificity by the third party respondents, as to the specific legal basis upon which they seek relief, will prolong the case in away which is not fair to the parties to this proceeding or, from the perspective of the best use of court resources, to other litigants whose cases are awaiting allocation for final hearing. Accordingly, I will require the second respondents to file a statement of contentions as I have described above. That should occur within the next month or so and well prior to the matter coming before me again so that each other party to the proceeding has an opportunity to digest the statement of contentions before they return to court.

9. It is notable that the Rules also do not prescribe the form of documents which are required to be filed in a case with the complexities of this case both in terms of a number of parties and issues which necessitate a statement of a claim, points of a claim or contentions of the type that I require. In this case, many applications, responses, applications in a case and responses to an application in a case and amended versions thereof and one reply have been filed. I understand that it is difficult from an administrative perspective to keep track of which of these remain ‘alive’ from one listing to another. My understanding is that, with the handing down of this decision, there are no pending interim proceedings.

Availability of dates for final hearing

1. On 10 August 2012 the husband and wife came before me for the first return date of the wife’s application filed 13 July 2012 in which she sought an interim property settlement. In the course of discussion I indicated that there was time available for the final hearing of all issues to take place in 2013 between 22 and 25 January (inclusive) and 11 to 22 February (inclusive).

2. On 3 October 2012 I will provide the second and third respondents with an opportunity to be heard on the appropriateness of the dates in January and February for final hearing. All parties will be heard on orders for filing documents for the final hearing, excluding the statement of contentions of fact and law described above which should be filed by 27 September 2012, which is in the week prior to the mention and, I intend, in sufficient time for the husband and wife and their lawyers to consider and take advice on it.

Mediation

1. I suggest that all parties consider a further mediation being convened after it is clear how the relief sought by the second respondents is said by them to be justified at law.

2. I know that the parties previously invested in a mediation with Mr Glick SC which was not successful. However, the case has progressed significantly since then. For instance, to the extent that a derivative action by Mrs Soratis may have loomed on the horizon, it has now sunk below it. Likewise, the contention of the husband that these proceedings could be confined, so as to avoid the claims of the second respondents for direct control and ownership of half of the corpus of the family trust, has not been successful.

3. Once the second respondents state with precision the statutory provisions and specific common law doctrines or equitable principles upon which they rely, there will be a firmer basis upon which parties can assess, negotiate and (maybe) resolve their claims.

4. It is of benefit to the parties to have an opportunity to reach a principled outcome, over which they retain control, without the expense of a final hearing. However, where a matter cannot be resolved, the mediation process serves to focus the parties and their practitioners on what is realistically achievable at the final hearing and how equipped each is to run his/her case.

5. I raise the possibility of a further mediation now so that the parties and those by whom they are advised can consider it and discuss timetabling and choice of mediator prior to the matter returning to Court on 3 October 2012. Mediation or conciliation should not delay the final hearing but it would influence the dates upon which the parties are required to file evidence.

Costs

1. I will make provision for submissions as to costs. My preference will be to fix the costs rather than to involve the parties in the delay and expense of an assessment process.

Conclusion

1. For these reasons I make the orders set out at the beginning of this judgment.

I certify that the preceding sixty seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 16 August 2012.

Associate: 

Date:  16 August 2012