VC and GC & Ors

[2008] FCWA 40

[2008] FCWA 40

JURISDICTION	:	FAMILY COURT OF WESTERN AUSTRALIA
ACT	:	FAMILY LAW ACT 1975
LOCATION	:	PERTH
CITATION	:	VC and GC & ORS [2008] FCWA 40
CORAM	:	CRISFORD J
HEARD	:	17-18 & 21 - 22 JANUARY 2008
DELIVERED	:	10 APRIL 2008
FILE NO/S	:	PT 4624 of 2006
BETWEEN	:	VC
Applicant
AND
GC First Respondent
AND
DC Second Respondent
AND
[XYZ] PTY LTD Third Respondent
AND
LB Fourth Respondent
AND
AC Fifth Respondent

[2008] FCWA 40

Catchwords:

Property Settlement - preliminary issue of s 106B applications - application for summary dismissal - principles involved

Legislation:

Family Law Act 1975, s 106B

Family Law Rules 2004

Category: Not Reportable

Representation:

Counsel:

Applicant	:	Mr M Berry
First Respondent	:	Dr Dickey, QC
Second Respondent	:	Mr K Wilson
Third Respondent	:	Mr K Wilson
Fourth Respondent	:	Mr K Wilson
Fifth Respondent	:	Mr K Wilson

Solicitors:

Applicant	:	E Wiese & Assoc
First Respondent	:	O'Sullivan Davies
Second Respondent	:	Kim Wilson & Co
Third Respondent	:	Kim Wilson & Co
Fourth Respondent	:	Kim Wilson & Co
Fifth Respondent	:	Kim Wilson & Co

Case(s) referred to in judgment(s):

Bain Pacific Associations & Ors and Kelly & Ors (2006) FLC 93-270
Beck and Beck (2004) FLC 93-181
Bigg v Suzi (1998) FLC 92-799
Custodio and Pinto & Ors (2006) FLC 93-279
Dey v Victoria Railways Commissioners (1949) 78 CLR 62
Harris and Harris (1991) FLC 92-254
Kelly and Kelly et al [2005] FamCA 298
Lindon v The Commonwealth (No. 2) (1996) 70 ALJR 541
Pelerman v Pelerman (2000) FLC 93-037
Webster v Lampard (1993) 177 CLR 598

[2008] FCWA 40

1 In the substantive proceedings the wife is seeking a melange of orders in relation

to property settlement. Her consolidated minute of proposed orders filed on 17 December 2007 sets out her present claim. Apart from seeking various orders to ensure she receives [the former matrimonial home], her motor vehicle, jewellery, furniture, household effects and superannuation, she seeks orders pursuant to s 106B of the Family Law Act 1975 for the setting aside of some 13 instruments or dispositions relating to the husband’s involvement in the [XYZ] Trust and an associated company [XYZ] Pty Ltd.

2 The other respondents, named second to fifth respectively now seek an order that

the application of the wife for the orders pursuant to s 106B be summarily dismissed. The husband supports that application, but has not made such application on his own behalf.

3 The other respondents seek an order the former matrimonial home now be sold. The wife opposes this course.

4 The husband and wife married on the 6 May 1979. According to the wife, they

separated in February 2005. They continued to live in the former matrimonial home until the husband moved out in November 2006. The marriage was dissolved on the 25 May 2007.

5 There are 3 children of the marriage, [E] now 26 years old and twin daughters

[K] and [S] who turned 25 years of age [in] January 2008. The children are aligned
with their mother.

The course of the proceedings to date

6 The husband commenced proceedings on 18 August 2006. He seeks that the net

assets of the parties be divided in his favour at 70%. The wife responded on
4 October 2006 seeking she receive 70% of the net assets.

7 At the time she also sought that:

“…….

2. The deed dated the 3 August 2001 whereby the husband resigned as a guardian and appointer of the [XYZ] Trust and any other instrument by which the husband purported to resign as guardian and appointer of the [XYZ] Trust be set aside.

…….”

8 On 26 March 2007, her response was amended to increase and particularise the

instruments and dispositions she sought be set aside. It also particularised her claim
but without reference to any percentage division.

9 This response was re-amended on 14 June 2007. It again increased the

instruments or dispositions to be set aside. Yet again and by virtue of a document

[2008] FCWA 40

titled “further re-amended response to an application for final orders” filed
26 September 2007 she sought further instruments or dispositions be set aside.

10 Another document bearing the same title as that of 26 September 2007 was filed on 19 November 2007. It contained further amendments relating to an expansion of the instruments or dispositions to be set aside.

11 Finally, the consolidated minute of orders of 17 December 2007 sought to include further instruments or dispositions to be set aside. I gave brief oral reasons for not allowing most of these amendments on the first morning of trial.

12 The information upon which these further amendments were based had been in the possession of the wife and her legal advisors since the proceedings commenced or, at least, for some considerable time. The application to further amend was made after all the trial documents had been filed. There was no attempt to clarify why the application had not been made earlier. There was no explanation for the delay. I am not satisfied the wife will be prejudiced by the failure on this occasion to allow the particular amendments. I am of the view the matter can still be argued by her although perhaps, on a different basis.

13 On 21 September 2007 the Court made orders that the s 106B applications of the wife be dealt with in a discreet hearing prior to the substantive determination. This application was made by the second respondent, [DC] who is the husband’s father, largely as a result of his rapidly failing health. The Court was satisfied that due to grave medical problems his ability to give instructions and attend at trial was likely to become increasingly compromised. It was desirable that the s 106B applications, in which he was directly involved, be determined as quickly as possible. On that basis orders were made for it to proceed in January 2008 ahead of any substantive determination.

14 On 24 January 2008 the hearing in relation to the s 106B applications proceeded. The wife, having carriage of that action, gave evidence and was cross-examined. The parties’ son, [E] gave evidence and was cross-examined. Certain documents were tendered and the wife’s case was closed. Thereafter counsel for the other respondents made an application for summary dismissal of the orders sought by the wife pursuant to s 106B of the Act.

15 The Court then heard submissions from counsel for the other respondents, the husband’s counsel and the wife’s counsel.

Legal Principles - summary dismissal

16 Kirby J in Lindon v The Commonwealth (No. 2) (1996) 70 ALJR 541 at 544-5 (references omitted) sets out the principles which govern an application for summary relief:

“The approach to be taken by the court to the Commonwealth's application
for summary relief is not in doubt:

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1. It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against Government and other powerful interests. This is why relief,

whether under O 26, r 18 or in the inherent jurisdiction of the

Court, is rarely and sparingly provided;21

2. To secure such relief, the party seeking it must show that it is clear,

frivolous or vexatious;23 a reasonable cause of action22 or is advancing a claim that is clearly on the face of the opponent's documents, that the opponent lacks

3. An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination.24 Even a weak case is entitled to the time of a court.

Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;

4. Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer.25 If there is a serious legal question to be

determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts;

5. If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in

to part only of a pleading.27 However, it is unnecessary in this case pleading.26 A question has arisen as to whether O 26, r 18 applies proper form, a court will ordinarily allow that party to reframe its

to consider that question because the Commonwealth's attack was
upon the entirety of Mr Lindon's statement of claim; and

6. The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the Court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit”.

17 Those principles have been consistently referred to and adopted by the Family Court of Australia. Bigg v Suzi (1998) FLC 92-799 referred to them and that case was later quoted and adopted by the Full Court in Pelerman v Pelerman (2000) FLC 93-037 at page 87,582 as follows:

[2008] FCWA 40

“(a)	The power of a summary dismissal is a discretionary one.
(b)	Relief “is rarely and sparingly provided”.
(c)	The parties seeking summary dismissal must show that the application is “doomed to fail” or has been otherwise described “that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious”.
(d)	A weak case or one that is unlikely to succeed is not “sufficient to warrant termination”.
(e)	“If there is a serious legal question to be determined, it should ordinarily be determined at a trial”.
(f)	“If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings”.”

18 These principles were also adopted in Beck and Beck (2004) FLC 93-181 at page 79, 051 and most recently by Chief Justice Bryant in Bain Pacific Associations & Ors and Kelly & Ors (2006) FLC 93-270.

19 The Family Law Rules 2004 also make provision for applications for summary orders in r 10.12. Relevantly here, that rule provides for such an application where a party claims that an application or response is frivolous, vexatious or an abuse of process or that there is no reasonable likelihood of success. The Explanatory Statement considers this process should only be used when the respondent has no realistic prospect of success.

20 This matter raises a number of interesting issues, one of which is the timing of an application for summary dismissal. The authorities generally contemplate such application be made after a consideration of the written documents, whether pleadings or affidavit material, and before any evidence is heard.

21 On this basis the matter of law for the Court to determine is whether the evidence put forward by the applicant, if accepted, is capable of supporting the claim made.

22 Here, of course, the application was made after the close of the wife’s case when there had been some challenge to her evidence and that of her witness, ostensibly making it more likely the application could succeed.

23 In Custodio and Pinto & Ors (2006) FLC 93-279 Finn J noted (at 80,760) that there are limitations on the material upon which an applicant for summary dismissal can rely in establishing a case for that relief. She noted that in order to secure relief by way of summary dismissal, the party seeking it must show that it is clear on the face of the opponent’s documents that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious. This was also considered in Bigg v Suzi (supra) where the Full Court referred at paragraph 6.31 to the fact that the

[2008] FCWA 40

wife, who was the applicant for summary dismissal of a s 79A application filed by the
husband:

“….had no right to adduce any evidence at the summary hearing to contradict the evidence of the husband or to seek to contradict any inference which it might be submitted to be drawn from that evidence.”

24 Kirby J in Lindon (supra) pointed out that the parties seeking the relief must show that it was clear on the face of the opponent’s document that there was a lack of a reasonable cause of action or were advancing a claim that was clearly frivolous or vexatious.

25 Finn J in Custodio (supra) referred to the decision in Bain Pacific Associations & Ors and Kelly & Ors (supra) in which the Full Court referred to the consideration of the issue in Beck at 80,761 observing:

“21…..that apart from material in the case of the respondent to an application for summary dismissal, the court may have regard to rel[E]t non-contentious facts, even if raised by the applicant for summary dismissal.”

26 Before me, counsel for the respondent to the application sought to limit the evidence upon which the applicant could rely simply to the affidavits sworn by the wife and her witness. He sought to exclude any evidence elicited in the course of cross- examination or by virtue of any documents tendered by the applicant through the wife or her witness.

27 That stance arose as a corollary of his argument that an application for summary dismissal was to be dealt with only on the papers and was not an appropriate application to make once evidence had commenced. He did, however seek to rely on other material before the Court albeit raised by all the respondents.

28 Given the timing, the application by the other respondents is, in my view, more akin to a submission there is no case to answer than what is generally understood to be an application for summary dismissal. The other respondents had every opportunity to make the application before the proceedings commenced but appear to have made a forensic decision to await the conclusion of the wife’s case. Having heard the wife’s case the question is whether, if the facts she put forward are established, her claim to set aside the transactions has been made out.

29 There may also be scope to argue the application of the Rules of the High Court in so far as they apply to summary relief to the Family Court of Western Australia or to consider the question of the exercise of an inherent jurisdiction reposed in this Court to dismiss the wife’s claim.

30 Although there are differences in the way the various principles are applied it is unlikely to effect the outcome here. I am of the view that whichever path is appropriate the application for “summary dismissal” will be unsuccessful in any event. This is not to say that when all the evidence is heard a different outcome is possible or likely.

[2008] FCWA 40

31 In Beck (supra) the Full Court set out certain passages from the joint judgment of Mason CJ, Dean and Dawson JJ in Webster v Lampard (1993) 177 CLR 598:

“………The power to order summary judgment must be exercised with ‘exceptional caution’ (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, at p 129) and ‘should never be exercised unless it is clear that there is no real question to be tried’ (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, at p 99). As Dixon J commented in Dey v Victoria Railways Commissioners (1949) 78 CLR 62 at p 91:

‘A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his (or her) case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether a fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.’”

32 The general practice in civil cases where a no case submission is made is for the Judge to require the party making the submission of no case to elect whether to call evidence, and to decline to rule on the submission until that election is made. However the general rule relating to election is not adhered to if it will not serve the ends of justice or convenience. It is not an inflexible practice and in the context of Family Court matters the Court is unlikely to adopt a view that fails to give the parties the opportunity to fully test their case.

33 For ease of reference, given I find in this particular case any such application is unlikely to be successful, I will simply refer to the application as one for summary dismissal.

34 Apart from non-contentious material I have disregarded any evidentiary material on behalf of the applicant for summary dismissal, or indeed, the husband who supported the application, although not a party to it. I have however taken into account the answers given by the wife and her son in the course of cross-examination, although little turns on this.

35 Despite the fact this hearing was one relating to quite a discreet issue and despite the parties theoretically understanding what material the Court would consider, all of them, the husband to a lesser extent, canvassed issues well outside the parameter of the particular dispute before the Court. I have addressed factual matters relevant to this particular application only.

[2008] FCWA 40

Facts relied upon by the wife

36 All the transactions sought to be set aside centre around the husband’s involvement in the [XYZ] Trust and the associated company [XYZ] Pty Ltd. The [XYZ] Trust was established by deed on 28 June 1985 by the husband’s father, the second respondent. The husband was made appointor and guardian of the Trust and his father was appointed trustee. The husband, wife and their three children were included as beneficiaries under the Trust. A short time after the establishment of the [XYZ] Trust, the company [XYZ] was formed on 9 July 1985. The husband and his father were the directors and shareholders. On 30 August 1985 [XYZ] replaced the husband’s father as trustee of the [XYZ] Trust.

37 For the purpose of considering the wife’s evidence, I have categorised the transactions into three parts.

I. Transactions relating to the director of [XYZ] and the appointor and guardian of the [XYZ] Trust

38 There are three transactions that the wife seeks to set aside associated with the husband’s resignation as director of [XYZ] and as appointor and guardian of the [XYZ] Trust:

• The husband’s letter to [Mr F] dated 27 February 1997 evidencing the husband’s resignation as appointor and guardian of [XYZ] Trust, and his resignation as director of [XYZ];

• The memorandum of resolutions of the directors of [XYZ] dated 25 June 1997 only in respect of the husband’s resignation as secretary and director of [XYZ] and his resignation as appointor and guardian of the [XYZ] Trust; and

• The deed of variation of the [XYZ] Trust dated 10 December 2001 whereby the husband’s father replaces the husband as appointor and guardian of the [XYZ] Trust with effect from 27 February 1997.

39 The second and third transactions are consequential upon the first.

40 The wife refers to a number of relevant events which can be set out chronologically as follows:

27.02.97 A letter marked with this date was sent by the husband to [Mr F], Accountant, resigning as director of [XYZ] and as appointor and guardian of the [XYZ] Trust and to be effective from that date.

[2008] FCWA 40

24.06.97	A letter marked with this date was sent by the husband to [Mr F] asking him to provide appropriate documentation to complete the matters rel[E]t to the resignations prior to 30 June 1997.
25.06.97	A memorandum of resolution of the directors of [XYZ] marked with this date notes the husband’s resignation as secretary and director of [XYZ] and as appointor and guardian of the [XYZ] Trust.
06.08.97	Wife’s solicitors, Holden Barlow correspond to the husband stating the marriage has now irretrievably broken down with no prospect of reconciliation. It says there has been no communication between the parties for some weeks prior to the wife instructing solicitors in July 1997.
09.10.97	Notification of change to officeholders lodged at ASIC noting husband ceased holding position of director and secretary of [XYZ] as at 25 June 1997.
03.08.98	Deed of variation to the [XYZ] Trust stamped 10 August 1998 which recites the retirement of the husband on 27 February 1997 but that a replacement has not been appointed.
04.12.01	Correspondence from husband’s accountant to husband stating that the removal sought in February 1997 had not been acted upon and he still held the relevant offices in accordance with the Trust.
10.12.01	Second respondent replaces husband as appointor and guardian of the [XYZ] Trust with effect from 27 February 1997 pursuant to a deed of variation.

41 In regard to the entries of 3 August 1998 and 4 December 2001 it was argued by the husband’s counsel that the wife, the respondent to the application for summary dismissal, was seeking to rely on some evidence which was not admissible, at least at that stage of the hearing. It must be borne in mind that an enquiry in a summary dismissal application does not focus on whether a party can prove every point of a claim, but whether an arguable claim appears. In a submission of no case to answer the focus is on whether the evidence, taken at its highest would prove the matter on the balance of probabilities.

42 In any event, Finn J in Custodio (supra) did not take issue with the proposition that a respondent could rely upon all material before the Court.

43 The wife argues that the husband was deliberately placed as appointor and guardian of the [XYZ] Trust in 1985. If it was a mistake there was ample opportunity in the ensuing 12 years to rectify the situation. The wife says that if the husband’s parents were to be considered the controllers of the Trust they would have been made guardian and appointor from the Trust’s inception.

[2008] FCWA 40

44 The wife says that she believed all the assets of the [XYZ] Trust were the husband’s as at the date the Trust was established. She said that it was the husband’s life work. She admitted during cross-examination that she held this belief based on what the husband had told her, and that in 1985 she had only a vague idea about the husband’s parent’s involvement in the [XYZ] Trust.

45 The wife disputes the husband resigned his positions in accordance with the letter ostensibly dated 27 February 1997 and as noted in the memorandum of resolution of the directors of [XYZ] of 25 June 1997. She says these transactions occurred after the date of the Holden Barlow letter and as a result of the clear statement the marriage was over. The marriage was in peril when the letter was sent and the husband then took steps to distance himself from the assets of the [XYZ] Trust by backdating the documents.

46 The wife countered any suggestion deposed to by her husband that due to an argument with his father about the sale of certain Trust property he sought to relinquish his position as guardian and appointor in February 1997.

47 The wife deposes that over that period of time as far as she was concerned her husband and her father-in-law did not have any falling out. She goes on to say:

“176…..I regularly visited my “in-laws” as did the children and at no time was there any discussion with them about a falling out between [GC] and his father.

177. Our two families had a good relationship and we would discuss matters which concerned us. There was no such mention of any falling out by anyone.”

48 On the wife’s evidence her husband and her brother [Mr M] had a good relationship. Her brother separated from his wife in March 1997. She deposes to her husband and brother spending many hours discussing her brother’s Court case. She recalled a discussion at their home relating to the law applicable to financial proceedings. She deposes to this covering the position of a guardian and appointor of a trust in relation to such proceedings. She said she was surprised how little it appeared her husband knew of the significance of being an appointor and guardian of a trust. She got the impression the husband was made aware of the significance of the positions of guardian and appointor from discussions with her brother.

49 After March 1997 she says there were difficulties in her own marriage. Communication stopped between the parties. She instructed Holden Barlow in July 1997 and the letter was sent in August 1997.

50 The wife’s position is that this letter flagging the end to her own marriage coupled with the earlier discussions her husband had with her brother, were the catalyst for the various transactions referred to. She does not accept the dates on various letters and documents are accurate.

[2008] FCWA 40

51 The wife’s position is supported by the parties’ son, [E]. He said in his affidavit filed on 17 December 2007 that his uncle [Mr M] discussed his Family Court proceedings with his father. He said at paragraphs 27 and 28 of his affidavit:

“…....I recall that there was a very difficult period in their marriage in 1997. I remember this, as it was at the same time that my uncle, [Mr M] was going through a very bitter divorce settlement with [his wife].

I was still at school at this time. I remember my uncle, [Mr M] visiting our house quite regularly at this time. My Uncle and my father had a reasonably good relationship. They would discuss various matters, including the situation of my Uncle’s divorce and the legal implications for him. I know this as on occasions [my Uncle] openly discussed his divorce with my parents in my presence.”

52 [E] also noted in his affidavit that during his time working with his father at [the business purchased by the parties], he often witnessed his father alter the dates of documents. He said at paragraph 90:

“I have seen my father both forward date and backdate documents and letters, sometimes going back or forward 2 or 3 months or even longer. This occurred a lot concerning and relating to [expiry and review] correspondence.”

53 [E] conceded during cross-examination that the altering of dates by his father was often reasonable. However, it was clear he suspected his father of using the backdating for, here, other purposes.

54 The relevance of these three transactions to the wife’s property settlement application is that she argues they evidence a series of transactions in which the husband has distanced himself from [XYZ] and the [XYZ] Trust. The wife says that the husband became the de facto controller and owner of the [XYZ] Trust when it was established in 1985. The wife’s counsel referred to the Full Court decision in Harris and Harris (1991) FLC 92-254 at 78,708:

“In our opinion, the husband’s interest as a beneficiary under the trust in combination with his rights and powers as appointor and guardian place him, for the purposes of section 79 of the Family Law Act 1975, into the position of an owner of property which property is constituted by his interest and his rights and powers under the trust. This property is properly evaluated as equivalent to the value of the assets of the trust.”

55 The wife argues that the husband’s powers were extensive in that he could remove and replace the trustee and amend the Trust Deed. She says that the extent of the powers establishes the husband as the de facto owner of the Trust in the sense of Harris and Harris (supra). The wife’s counsel then referred to several deeds evidencing the husband exercising his powers as appointor and guardian.

II. Transactions relating to the mortgage over former matrimonial home

[2008] FCWA 40

56 The wife seeks to set aside two transactions which relate to a mortgage registered over [the former matrimonial home] by [XYZ] as trustee for the [XYZ] Trust. The transactions as specified by the wife are:

• Undated document signed by the husband and the wife attached to the minutes of the meeting of directors of [XYZ] on 16 June 2005, so far as it refers to the ‘divorce’ of the husband and the wife as a condition requiring repayment of the loan; and

• Mortgage xxxxx registered over the title to the former matrimonial home on 29 July 2005 (discharges previous NAB mortgage).

57 In around June 2005 the husband entered into discussions and negotiations with Members Equity to obtain finance of $2.7 million for [XYZ] as trustee for the [XYZ] Trust. A finance proposal was sent to the husband by Members Equity in a letter dated 10 June 2005. According to the documents, a meeting of the directors of [XYZ] was then held on 16 June 2005, with the directors’ accepting the Members Equity proposal.

58 The proposal was that certain [XYZ] Pty Ltd loans and three loans of the parties to the National Australia Bank would all be consolidated into one and secured over the former matrimonial home and various other properties. The repayment of the parties loan was required immediately upon the occurrence of a number of events, including divorce. The minutes of the meeting are signed by the husband and wife, and the husband’s parents. The loan was later accepted by all parties on 7 July 2005. Subsequently, the three NAB mortgages totalling $707,000 which at the time were registered over the former matrimonial home were discharged and refinanced by way of mortgage to [XYZ] on 29 July 2005. Accordingly the parties owe [XYZ] as trustee for the [XYZ] Trust $707,000.

59 Although the wife acknowledged during cross-examination that she signed the relevant documents and that the amount of $707,000 is apparently owing to [XYZ] as trustee for the [XYZ] Trust, she says that at the time of signing the documentation she did not understand or even have knowledge of its content. The wife says that the husband had stopped communicating with her in February 2005 and so she signed the documents as instructed by him to avoid any further conflict. She also said in cross- examination that she did not know why the original three NAB mortgages over the former matrimonial home existed. She could not recollect any renovations.

60 The features of the [XYZ] mortgage are different from the National Australia Bank mortgages it replaced. The wife says that as a result of the refinancing she and the husband are now personal guarantors for the entire debt being $2.7 million and not simply the $707,000 allegedly relating to the home itself.

61 The wife says that the husband frequently put documents in front of her to be signed without explanation. The personal guarantee is documented in a Deed of Guarantee and Indemnity signed by the husband and wife on 25 July 2005. The guarantee and indemnity covers all debts and monetary liabilities of [XYZ] Pty Ltd as trustee of the [XYZ] Trust to the Lender, Industry Funds Management (Nominees 2) Pty Ltd (which is the Members Equity loan). Although the wife acknowledges this guarantee she

[2008] FCWA 40

gave evidence that on the face of the document her signature has been witnessed by [Mr T], who was the parties’ best man and family friend however she says did not sign this document in his presence. Further, the guarantee is noted under item 12 of the Member Equity Business Loan Term Sheet attached to the loan agreement dated 7 July 2005 which is signed by the husband and wife and the husband’s parents that security for the $2.7 million loan includes a guarantee and indemnify from the husband and wife.

62 [E] also deposes to witnessing his father asking his mother to sign the Members Equity loan documentation and that his father did not explain any details to her. He says that he simply asked her to sign the documents for the home loan and she did.

63 In my opinion an issue arises in that the wife has not sought to set aside the loan agreement dated 7 July 2005. Thus, if the dispositions referred to in paragraphs 10.4 and 10.5 of her orders sought and which create the mortgage over the former matrimonial home to the [XYZ] Trust and requires repayment upon divorce, are set aside, the wife is still personally liable, together with the husband, for the Members Equity loan of $2.7 million, which includes the amount of the mortgage. If the application for summary dismissal is unsuccessful, in this regard at least it may be a pyrrhic victory for the wife.

III. Transactions occurring after the institution of these property settlement proceedings

64 There are eight transactions which the wife seeks to set aside that occurred after the parties separated and she had commenced the property settlement proceedings. There are four which occurred on 23 November 2006, namely:

• The revocation of power of attorney signed by the husband’s father whereby [XYZ] revokes the power of attorney it executed in favour of the husband on 16 August 2004;

• The power of attorney executed by [XYZ] in favour of [AC] and [LB];

• The power of attorney executed by the husband’s father in favour of [AC] and [LB]; and

• The memorandum of resolution of the director of [XYZ] in respect of the first two transactions above.

65 The remaining four transactions occurred on 8 December 2006:

• The appointment of beneficiaries of the [XYZ] Trust whereby [XYZ] with the consent of the husband’s father appoints the husband’s father and [AC] as beneficiaries of the [XYZ] Trust;

• The exclusion of beneficiaries of the [XYZ] Trust whereby [XYZ] with the consent of the husband’s father (and subject to any order of the Family Court of Western Australia) excludes the husband and the wife as beneficiaries of the [XYZ] Trust;

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• The memorandum of resolutions of the directors of [XYZ] whereby [AC] and [LB] were appointed additional directors of [XYZ]; and

• The irrevocable appointment of succeeding guardians and appointors of the [XYZ] Trust.

66 The wife’s evidence in relation to these transactions is that they all occurred after she filed a response on 4 October 2006 seeking to set aside the transactions in which the husband purported to resign as appointor and guardian of the [XYZ] Trust, and seeking 70% of the parties’ assets. It is her position that there is a direct reference between the eight transactions and these proceedings. She says the transactions were done in light of these proceedings being commenced and they were designed to further distance the proceedings from the affairs and assets of the [XYZ] Trust. The wife argues that if the transactions are accepted by the Court then it will be difficult for the Court to acknowledge that the husband even has a financial resource in the [XYZ] Trust.

67 In supporting her argument the wife refers to a “letter of wishes” written by the husband’s father on 27 November 2006 to his accountant [LB]. The letter refers to the father’s will executed on 23 November 2006 and the two powers of attorney he executed on the same day. It notes that the husband is not to be included as a beneficiary of his estate, and goes on to state:

“As a result of the breakdown of my son’s marriage, I have been reluctantly drawn into the Family Court proceedings between my son and my daughter-in-law. I am incurring expense and inconvenience as a result. My solicitors are unable to say how much the proceedings will cost to run. I am aware that it is likely to be very expensive and that the proceedings will be lengthy and complicated.

Significant provision has already been made for [my son] from my financial resources including access to the loan accounts of myself and my wife in the [XYZ] Family Trust. [My son] has also had the use of the assets of the trust as security. Other assistance has been given also.

As a result, I have determined that no provision should be made for
[my son] from my estate”

68 There are two versions of the document, a typed version and a handwritten version. Both letters bear the date 27 November 2006, however the typed version bears a date of 23 November 2006 on the footer of the document. The wife says it is arguable that the typed letter of wishes was prepared by the second respondent’s solicitors on 23 November 2006 together with the other documents effecting the disputed transactions, and that the handwritten letter was not the source of the typed documents but that it was copied by the father at a later stage.

69 The wife’s case is that the purpose and motivation for the dispositions entered into in November and December 2006 arose as a direct consequence of her seeking s 106B relief in October 2006. The overall effect of the transactions is that the husband will not receive any future or present benefits of the [XYZ] Trust.

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70 She, through her counsel, also refers to several other events which occurred after these transactions that provide a context to the overall position. On 8 December 2006 [LB] was appointed director of [XYZ] Pty Ltd. Following his appointment there was a resolution of the company on 15 March 2007 that all further communications with Members Equity be through [LB], that no further distributions of income be made to the husband, and that the [XYZ] Trust resign as a trustee for the [GC & SC] Superannuation Fund, a position the company had held until then. The Court was referred to the wife’s application filed on 25 June 2007 for injunctive relief seeking, inter alia, to restrain the [XYZ] distributing income to any beneficiaries without 21 days notice to the wife. A resolution of the company was subsequently made on 30 June 2007 to distribute the income of [XYZ] Pty Ltd equally between the husband’s parents.

71 It is the wife’s case that since the transactions were made in November and December 2006 the husband been further distanced from the affairs of the [XYZ] Trust to the extent that it would be difficult for the wife to claim that he ever had a resource in the Trust.

s 106B – principles

72 The provisions of s 106B provide a discretionary power to set aside or restrain transactions including those which may affect the interests of third parties.

73 There are necessary elements which need to be established before the exercise of the discretionary power can be contemplated:

(i) There must be an existing or completed proceeding. In this matter this is not in dispute as there are pending property settlement proceedings.

(ii) An instrument or disposition must have been made or proposed. Section 106B(5) provides definitions which apply here.

(iii) The instrument or disposition must be “by or on behalf of, or by direction or in the interest of the party.”

(iv) It is to be demonstrated that the instrument or disposition must be made to defeat an existing or anticipated order or which, irrespective of intention is likely to defeat any such order.

74 The wife’s counsel in his closing submissions noted that the wife’s case centred on two propositions. Firstly, that all of the instruments or dispositions were done with the intention to defeat an anticipated order, and secondly, if there is no requisite intention, then the likely effect was to defeat an anticipated order.

75 Counsel for the other respondents argues that none of the transactions defeat an existing or anticipated order because even on the wife’s case her claim can presently be satisfied from the parties’ assets.

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76 In its present form the wife’s claim seeks specific assets. Although previously on 4 October 2006 she had sought 70% of the assets, her present claim before the Court seeks the nominated assets. She accepted that even on her revised schedule of assets and liabilities what she was seeking could be met without the need to widen the present pool, albeit she would receive close to all the identifiable assets.

77 Counsel for the other respondents says that this puts an end to it. As her claim can presently be met with the assets of the parties the Court does not even reach the stage of having to exercise its discretion. This argument is not without some superficial attraction.

78 The nub of the wife’s argument centres around the husband’s actions in 1997. Almost all the ensuing transactions she seeks to set aside have some relationship or flow from what she says were the initial attempts to change the control of the [XYZ] Trust.

79 It is instructive to consider the position in 1997. If the wife’s evidence is accepted on the most favourable construction possible then the intention of the husband was the removal of the Trust and company assets from any potential pool. The intention is important and it may well have had the effect of being likely to defeat any order or legitimate claim the wife may have had as at the date of the disposition.

80 Given the wife’s evidence about her lawyer’s letter, the inferences she seeks the Court draw in relation to timing and the discussions between her brother and her husband Court proceedings were a distinct possibility.

81 In any application for property settlement the Court needs to identify the pool of assets available for division. It needs to identify the financial resources of the parties. It needs to consider whether any orders it intends to make are just and equitable. It is not enough to say on the wife’s present application her claim can be met. This is not the only consideration in the property settlement exercise.

82 Although the wife has seen fit to amend her application on myriad occasions, for some reason she has not ever reverted to simply quantifying her claim as a percentage of any asset pool. It may well be that she makes such an application and the Court would need to entertain that application depending on the circumstances at the time such application was made. Although there are some question marks about the way the wife’s case has been run she is entitled to a just and equitable division of the available property of the parties.

83 In closing the husband’s counsel argued that paragraphs 10.2 and 10.4 of the wife’s application do not fall within s 106B as the section only allows for an instrument or disposition to be set aside and does not allow the Court to “blue-pencil” individual parts. He said the wife’s counsel attempted to cure the problem by seeking to strike out the final sentences of paragraphs 10.2 and 10.4. As I refused permission for him to do so at the commencement of the hearing both paragraphs should fail in any event. The husband’s counsel did not refer to any authority to support his position.

84 In Kelly and Kelly et al [2005] FamCA 298 Rose J considered the principles to be followed in a s 106B application:

[2008] FCWA 40

“26. The following are the necessary or essential elements which need to be established before the exercise of the discretionary power can be contemplated. I have included my findings where rel[E]t:-

….

(ii) An “instrument or disposition must have been made or proposed. Section 106B(5) provides the definition that “disposition includes a sale and a gift”.

In these proceedings it was submitted on behalf of the 3rd, 4th, 6th and 10th respondents that “instrument” includes the whole of the document and cannot be considered in relation to part of it. That issue of course arose because Clause 11 of the Shareholders Agreement represents part of the instrument sought to be set aside. I accept the submissions made on behalf of the wife that “instrument” includes either the whole or a part of the document. I do so by following the guidance contained in Section 15AA of the Acts Interpretation Act (1901) (Cth) as the construction I favour promotes the purpose or object underlying the Act which is to give the Court a discretionary power to set aside a transaction, instrument or disposition which has the purpose or likely effect of defeating an order of the Court. Support for the principle to which I have referred is found in the Judgment of Dawson J in Mills v Meeking otherwise a potential absurdity could be encountered whereby the rel[E]t transaction or disposition falls for consideration if it is the subject of the instrument as a whole but not if it is exclusively contained in a particular clause or clauses which represents only a part of the instrument.”

85 Some of the respondents in Kelly and Kelly et al (supra), being entities described in the Shareholders’ Agreement, filed an application for permission to appeal the decision. The Full Court decision, being Bain Pacific Associations & Ors and Kelly & Ors (supra) dismissed the application, however the issue of whether s 106B referred to a whole instrument or disposition or part thereof was not considered in the Full Court decision.

86 Although I acknowledge in this particular case the facts are slightly different in that in paragraphs 10.2 and 10.4 the wife is seeking to set aside only a portion of the documents referred to in those paragraphs, I am not of the opinion that as a result paragraphs 10.2 and 10.4 of the orders sought by the wife are incapable of falling within s 106B.

87 The wife is seeking to set aside the particular portions of the disposition stated in those paragraphs because of the direct nexus to other dispositions she is seeking to set aside. That is, paragraph 10.2 relates to the wife’s position that the husband has intentionally distanced himself as a controller of the [XYZ] Trust and the portion of the disposition referred to in paragraph 10.4 led to the creation of the mortgage debt owing by the husband and wife to the [XYZ] Trust. In my opinion, the paragraphs are capable of falling within s 106B despite not being worded to include the entire disposition.

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88 It is necessary to consider the principles relevant to s 106B in the context of the facts advanced by the wife and the uncontentious facts available to the Court.

Conclusion

89 The wife’s argument largely centres on her position that the assets of the [XYZ] Trust were in control of the husband as at its establishment in 1985. She says they were referred to as “our assets”. Since the parties have encountered difficulties in their marriage the husband and his parents have entered into transactions in an attempt to minimise the husband’s involvement in [XYZ] and the [XYZ] Trust. The evidence in the wife’s case is based mainly on her own account and the account of her witness.

90 [E] stated in his trial affidavit that he remembers on one occasion his parents having arguments some time in early 2004 so he left the house and his father followed him. He says that while walking together his father said “words to the effect that he had made changes to the [XYZ] Trust in case he was divorced from my mother” and “the worst case scenario would be that he would have to give my mother some of the [XYZ] assets or otherwise pay her out.” [E] then deposes to remembering another occasions when he was in his father’s office and he said words to the effect “that he had arranged his affairs to ensure that my mother would not be able to touch the [XYZ] assets.” He said during cross-examination that his father was referring to the selling of shares of a company he owned back to his father, the second respondent.

91 It was evident from the wife’s cross-examination that there were a number of matters concerning the parties’ finances, [XYZ] and the [XYZ] Trust that she did not have direct personal knowledge of, rather she had been told the position by her solicitors through supporting documents, or had been told information by the husband during their marriage.

92 I indicated to the wife’s solicitors that I consider it a dangerous practice to frame affidavits in a manner in which evidence appears to be the deponent’s personal knowledge when is it not.

93 However, be that as it may, based on all the evidence before the Court and taking the wife’s evidence at its highest it is not possible to say that her case in relation to the s 106B applications is doomed to failure or that it lacks a reasonable cause of action or that she is advancing a claim that is clearly frivolous or vexatious. During the marriage the husband was clearly responsible for the parties’ finances. The wife was simply not privy to many matters and accordingly has put forward a case to the best of her ability.

94 Overall I have come to the conclusion that there are particular questions of fact that may represent matters of substance that do require further enquiry. There are also likely to be matters of law. Although I am not satisfied that the wife’s case is very strong, even if it is weak, that “is not sufficient to warrant termination.” The final outcome of the s 106B applications may not be favourable to her. That is yet to be determined.

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95 In the absence of further material of a factual and indeed a commercial nature there are questions to be argued. The leading authorities emphasise caution especially where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact.

96 Unfortunately, the second respondent is now deceased. The Court is mindful of the involvement of third parties in these proceedings. However, it would be short sighted to deprive the wife of the opportunity to fully canvass all these issues. I am not able to conclude that her application is “clearly frivolous or vexatious”.

97 The application for summary dismissal is unsuccessful.

Sale of [the former matrimonial home]

98 Although I have some concerns about the wife’s behaviour in relation to the issue of the sale of the former matrimonial home, I do not intend to make the order sought at this stage. The matter, given some of the issues raised in the s 106B applications, is best dealt with at the completion of all the evidence.

Orders

1. The application in a case filed by the wife, [VC] on 10 January 2008 be dismissed.

2. The oral applications of the second to fifth respondents, that the wife’s application in so far as it relates to s 106B of the Family Law Act, 1975 be summarily dismissed be dismissed.

3. The application in a case filed by the second and third respondents on 8 August 2007 in paragraphs 9, 10 and 11 be dismissed.

I certify that the preceding [98] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate