Vella & Buchanan

[2011] FamCA 483

FAMILY COURT OF AUSTRALIA

VELLA & BUCHANAN AND ORS [2011] FamCA 483

FAMILY LAW - PRACTICE AND PROCEDURE - question of appropriate forum - whether proceedings should be heard in the District Court or be part of the substantive proceedings in the Family Court – question as to whether proceedings should be heard by way of discrete trial prior to the substantive applications or together with those substantive applications. 

Family Law Act 1975 (Cth)

Christie and Christie, [2007] FamCA 125
H & H & Ors, unreported, [2006] FamCA 167

APPLICANT: Ms Vella

RESPONDENT: Mr Buchanan

2^ND RESPONDENT: Bank 1

3^RD & 4^TH RESPONDENTS: Mr Y & Ms Y

FILE NUMBER: BRC 281 of 2011

DATE DELIVERED: 24 June 2011

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Mushin J

HEARING DATE: 17 June 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Rivett

SOLICITOR FOR THE APPLICANT: John Philip Rivett

COUNSEL FOR THE RESPONDENT: Mr Hodges

SOLICITOR FOR THE RESPONDENT: Family Law Solutions

COUNSEL FOR THE 2^ND RESPONDENT: Mr Fleetwood

SOLICITOR FOR THE 2^ND RESPONDENT: Thynne & Macartney

COUNSEL FOR THE 3^RD & 4^TH RESPONDENTS: Ms Moyle

SOLICITOR FOR THE 3^RD & 4^TH RESPONDENTS: Peter Sheehy Solicitor

IT IS ORDERED THAT

1. Until further order, the second respondent be and is hereby restrained from exercising any rights under its loan documentation or mortgage over the property at … B Street, Town 1 in the State of Queensland.

2. Pending the finalisation of this application or further order, the second respondent be restrained from proceeding further with its Claim … in the District Court at … .

3. The third and fourth respondents file a response, if any, and any affidavit in support thereof to the wife’s application filed 18 January 2011, within 14 days hereof.

4. All extant applications be adjourned to the Directions Hearing before the Docket Registrar set down on 14 July 2011 at 3:00pm for the making of all orders and directions to list the matter for trial with such priority as may be afforded.

5. Liberty be reserved to all parties to apply.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 281 of 2011

Ms Vella

Applicant

And

Mr Buchanan

Respondent

And

Bank 1

2^nd Respondent

And

Mr Y & Ms Y

3^rd & 4^th Respondents

REASONS FOR JUDGMENT

introduction

1. The wife has brought proceedings against the husband seeking final orders for alteration of property interests.  The husband has responded to that application.

2. The wife has joined three other parties as respondents to her application.  The second respondent is the Bank 1 ("the Bank").  The third and fourth respondents are the husband's parents.

3. The wife seeks declarations against the third and fourth respondent that she is not liable for monies owing pursuant to a particular loan agreement.  While the third and fourth respondents have not yet responded to that application, they have indicated their intention to seek orders with regard to the wife's liability to them.  I will make orders that they file that response.

4. The husband and the wife are the joint proprietors of a property at B Street, Town 1 in the State of Queensland ("the [Town 1] property").  The Bank has advanced monies by way of loan in circumstances which are in issue.  The loan is secured by a mortgage over the title of the Town 1 property ("the mortgage").

5. Payments pursuant to the loan are in arrears to the extent that the Bank has issued proceedings in the District Court of Queensland ("the District Court proceedings") in relation to the Town 1 property seeking to foreclose on the mortgage.  The wife is defending those proceedings.  She alleges that the Bank acted towards her in circumstances which her counsel submitted as being negligent and/or unconscionable. The conduct that is alleged to have occurred relates to the circumstances in which the security documentation was executed by her.

6. In this application, the wife seeks an order that the Bank be restrained from continuing the District Court proceedings, as a consequence of which the issue between herself and the Bank would be part of the substantive proceedings in this Court, either pursuant to the accrued or third-party jurisdiction granted to this Court by the Family Law Act 1975 ("Act").

This hearing

1. This hearing was conducted by counsel appearing for the husband, the wife and the Bank and the solicitor for the third and fourth respondents.

2. The material before me consists of relevant affidavits which have not been the subject of cross-examination.  Accordingly, the usual limitations apply to any factual finding which I might make.  In addition, I heard oral submissions from all counsel and solicitor.

Relevant facts

1. The facts relevant to my determination of this issue are in relatively narrow compass.

2. The husband and the wife commenced cohabitation in Melbourne in 1988 and married there in 1989. They have three children of the marriage who were respectively born in 1989, 1990 and 1992.  They separated in 2008 and their relationship has broken down irretrievably.

3. The wife alleges that prior to the commencement of her relationship with her husband, she owned real property, at least some of which remains relevant to these substantive proceedings. The parties also bought property together.  Questions of contribution and like matters are not relevant to this application.  They conducted a business which, the wife claimed, failed.

4. The parties and their children moved to Brisbane in 2000.  That appears to have occurred primarily because of health problems suffered by the husband.

5. Following their move to Brisbane, the parties bought various properties.  As I have already found, one of those properties was the Town 1 property.  That is registered in the joint names of the husband and the wife. 

6. The circumstances of the execution of the security documentation are at the heart of these proceedings.  The allegations are extensive.  As I have already found, the wife claims that the Bank acted in ways towards her which would entitle her at law and/or in equity to be relieved of any liability towards the Bank.  The Bank asserts that it conducted itself entirely appropriately.  The husband does not appear to dispute the Bank's claim in those proceedings.

7. One of the main issues between the wife and the Bank relates to the involvement of the husband and the third and fourth respondents in the matters relevant to the wife’s claim against the Bank.  Counsel for the wife submitted that the relevant loan agreement does not involve the wife at all.  He submitted that it is between the third and fourth respondents on the one hand and a corporate entity which is alleged to be the alter ego of the husband on the other.  In particular, it was asserted that the wife is totally quarantined from any involvement in the transactions and particularly from the corporate entity.

8. It appears to be common ground that the Bank's claim against the wife and the husband is in the sum of $627,000.  That debt is incurring interest at a rate slightly in excess of 7% per annum.  It was submitted on behalf of the wife that the actual value of the property was higher than that claim.  However, the Bank's value for the purpose of a proposed mortgagee's auction is in the sum of $587,000.  Accordingly, on those figures there would be a shortfall of approximately $40,000 which, it was submitted on behalf of the wife, would be comfortably met from the sale of one of her two Melbourne properties.

9. Counsel for the husband submitted that it was clear that the wife's claim could not succeed, even if she succeeded on her best case.  As with other aspects of these applications, that is an issue for the consideration of the Court which hears the applications between the Bank and the wife.  I am not persuaded that such an interpretation of the wife's case is necessarily open on the present facts, particularly given the failure of the third and fourth respondents to make any claim at this stage.

10. There are also issues between the wife and the third and fourth respondents with regard to monies owing by each against the other/s together with the question of whether the third and fourth respondents hold certain property on an equitable trust for the wife.  It was submitted on behalf of the wife that the quantum of the wife's claim against the third and fourth respondents was approximately $445,000. They are all issues for the substantive proceedings and are only background for the purpose of these applications.

Discussion

1. The question before me is whether the issue between the wife and the Bank should be heard in the District Court proceedings or be part of the substantive proceedings in this Court, either by way of discrete trial prior to the substantive applications or together with those substantive applications.  Accordingly, this issue is a question of forum.

2. The matter was argued before me in a manner which was more complicated than was required.  Significant time was spent on submissions which went to the merits of the respective positions of the Bank and the wife, together with the merits of the issues involving the third and fourth respondents.  Ultimately, counsel accepted my proposition that it was neither appropriate nor possible for me to make any determination of those substantive merits.  In the first place, I have not heard the evidence relating to that issue.  That will be a matter for the trial in whichever Court that takes place.  Secondly, the substantive merits are not before me here and are not relevant to my consideration, particularly given the concentration of the ultimate argument on the question of forum.  Thirdly, the failure of the third and fourth respondents to make a claim which it is submitted is available to them would be a complicating factor in my assessment of those merits.

3. Two heads of jurisdiction were referred to in support of the assertion that I had both jurisdiction and power to grant the injunctive relief sought by the wife and contested by the Bank.  The first of those was the accrued jurisdiction of this Court.  It was not submitted that any application had been made to incur that jurisdiction and in any event, in light of the legislation discussed below, the question of that jurisdiction is unnecessary to determine.

4. Ultimately, the jurisdiction to make the orders which the wife seeks is found in Part VIIIAA of the Act. In particular, counsel for the Bank accepted that I had both jurisdiction and power to make the orders sought by the wife and the real issue was the question of the exercise of discretion to either grant or deny that relief. Accordingly, I will consider this matter on the basis of that legislation and the question of the exercise of discretion.

5. Section 114(1) of the Act empowers me to grant "an injunction in relation to the property of a party to the marriage" in circumstances which include the present proceedings. To the extent relevant to this application, that power is expanded to include the making of orders against third parties as follows:

   90AF(1) In proceedings under section 114, the court may:

   (a)…

   (b)grant an injunction restraining a person from commencing legal proceedings against the party to a marriage.

   90AF(2) In proceedings under section 114, the court may make any other order, or grant any other injunction that:

   (a)directs a third party to do a thing in relation to the property of a party to the marriage;

   … .

   The circumstances in which the order may be made are contained in subsection (3) as follows:

   90AF(3) The court may only make an order under subsection (1) or (2) if:

   (a) the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and

   (b) if the order concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and

   (c) the third party has been accorded procedural fairness in relation to the making of the order; and

   (d) the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and

   (e) the court is satisfied that the order takes into account the matters mentioned in subsection (4).

6. Before considering the various matters required by the legislation, I refer to the question of the power to make an order in these circumstances.  I note the wording of sub-section 90AF(1)(b) quoted above with regard to the power to enjoin a third party from commencing legal proceedings in relevant circumstances.  The District Court proceedings have already been commenced and accordingly, a literal interpretation would lead to the conclusion that that provision does not apply to this matter.  However, I respectfully agree with the judgment of Cronin J in Christie and Christie, [2007] FamCA 125, in his consideration of that issue in the following terms:

   74. The word “commencing” may be read literally to mean “starting”. To a large degree that would make a nonsense of the provision.  For example, a non-marriage party could thwart the whole intention of the legislation simply by issuing proceedings in another court.  “Commencing” could also mean starting a hearing as distinct from initiating a process.  Whatever the intention was, the issue needs clarification to overcome any difficulty.   For my purposes the Wife does not rely upon section 90AF(1) alone. 

   75. Section 90AF(2) widens the scope of the provision so that in the section 114 proceedings, the Court may direct: “a party to do a thing in relation to the property of the party to a marriage”.

   76. In respect of section 90AE(2) which carries identical words, O’Ryan J [in H & H & Ors, unreported, [2006] FamCA 167] said:

   When section 90AE(2) is read in conjunction with section 90AE(3), section 79 and Part VIIIAA generally, it is clear that what is contemplated is not some arbitrary invasion of the rights of the Third Party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage.

   77. The relevance of the connection to the division of property between the parties to the marriage is important. 

   78. It would also seem odd that the Parliament would limit the Court’s power in relation to proceedings in other Courts only before they have been commenced but not afterwards yet it would allow Courts to order a non-marriage party to do a thing, for example, in relation to a debt of a party of the marriage regardless of whether there has been any proceeding in relation to the debt.  

   79. Accordingly, I do not think anything significant turns on the word “commencing” in section 90AF(1)(b) but if I am wrong about that, section 90AF(2)(a) seems wide enough to cover the action of a creditor against a party to a marriage.

   Accordingly, I find that the submission on behalf of the Bank that questions of jurisdiction and power to make the order sought by the wife were not issues before me and the only issue was the question of whether to exercise that discretion was properly made.

7. I now turn to a consideration of the relevant factors in subsection 90AF(3) quoted above.  The real issue for the wife in this matter is her claim to the Town 1 property in specie.  If the Bank succeeds in its action, the likelihood is that it will foreclose on the mortgage and sell the property.  That would defeat the wife's claim.  If the Bank's claim were heard as part of the substantive applications for alteration of property interests, the question of whether, in the event that the Bank succeeded, the wife could still retain the property would remain relevant.  It was submitted that in the event that the District Court proceedings were heard, that would not be a relevant consideration. Accordingly, it is arguable that the injunction is reasonably necessary in accordance with paragraph (a).

8. At one stage during argument in these applications, I invited the parties to consider, outside Court, the alternative of allowing the District Court proceedings to continue and reserving the question of the wife's right to apply to restrain the Bank from proceeding to execute on any successful judgment at that point.  The Bank accepted that suggestion but the parties were unable to agree.

9. I now turn to a consideration of paragraph (b). The proposed injunction concerns the wife's debt to the Bank and is accordingly subject to this provision.  On the present facts, it appears that the wife would be able to pay the Bank's debt in the event that it were to succeed in the proceedings.  However, there is an uncertain aspect to that because of the potential claim against the wife by the third and fourth respondents.  During this hearing, I was very critical of those respondents for not having made any claim in the proceedings, despite the fact that one is foreshadowed.  They have been aware of these proceedings since January 2011 and it is unacceptable that they should await the outcome of these applications as it was submitted they were doing.

10. There is no suggestion that the Bank has not been accorded procedural fairness.

11. This is an application for an injunction pursuant to section 114(1). I will determine whether it is possible to grant the injunction at the end of my consideration of all relevant matters and particularly those in subsection (4) to which I now turn.

12. Subsection (4) requires me to consider questions of the effect of any taxation or social security issue on the making of the order.  I accept the submissions that it is common ground that there is no such effect on those matters which are therefore not relevant. 

13. The subsection requires me to consider the wife's capacity to repay the debt upon the granting of any injunction.  I have considered that previously and do not repeat my findings with regard to it.  There is no issue with regard to the Bank's economic, legal or other capacity to comply with the order and procedural fairness has been accorded.

14. The final matter in subsection (4) which I must consider is "any other matter that the court considers relevant."  Counsel for the wife submitted that his client would be better able to conduct her case against the Bank in this Court rather than in the District Court proceedings.  The basis for that submission was his asserted need to cross-examine at least the husband, and possibly the third and fourth respondents, as part of that case.  He submitted that an essential part of the case concerned the conduct of the husband in the facts directly relevant to and surrounding the financial issues in which the transaction with the Bank was involved.  He asserted that he would be required to raise the question of alleged family violence against his client as being relevant.

15. Counsel for the wife submitted that the issues referred to in the previous paragraph would be the subject of significant cross examination during the trial of the substantive applications in this Court and would therefore involve a duplication if they were also conducted in the District Court proceedings.  Further, he submitted that his client would be potentially prejudiced by the husband being given the opportunity to have notice, submitted as being a "dry run", of the allegations made against him.

16. The submissions particularised above are significant.  In a sense they involve questions of natural justice.  In the event that the facts were litigated to that extent in the District Court proceedings, it is possible that a res judicata may be created, thereby preventing the conduct of the same issues in this Court on the trial of the substantive proceedings.  Those issues would be potentially relevant to matters which extend beyond issues in the District Court proceedings.

1. During the hearing of these applications, one counsel suggested that the trial of the substantive applications might take up to 10 days in this Court.  If the proceedings were to be tried in this Court it is possible that the Bank may need to be represented for the entirety of the trial which would be desirable to avoid if possible.  By contrast, I would expect the District Court proceedings to occupy significantly less time because they would involve one discrete issue.  That must be qualified to a certain extent by the submission of counsel for the wife that he will seek to cross-examine the husband and perhaps the third and fourth respondents.  That would undoubtedly increase the length of the trial as compared with the alternative of only the wife and the officers of the Bank being witnesses.

Balance of discretionary issues

The wife

1. On the wife's part, the main discretionary issues are -

   ·    the opportunity to conduct her case on the basis of certainty that her counsel will be able to cross-examine the husband and, if necessary, the third and fourth respondents on all relevant issues before this Court rather than risk the possibility of the creation of a res judicata;

   ·    having all relevant issues arising out of the breakdown of the parties' marriage determined in the one proceeding; and

   ·    not giving the husband, and perhaps the third and fourth respondents, the opportunity to have what was referred to as a "dry run" by way of cross-examination.

2. The drawback for the wife is that a trial in this Court will take significantly longer to prepare than will a trial in the District Court proceedings.  For example, it was submitted that it will be necessary to have an accounting of up to 12 properties by way of preparation.  As a result, interest will continue to run, no matter who is ultimately required to pay it.  If the wife is required to pay, that will reduce her financial resources.

The Bank

1. The discretionary issues as they relate to the Bank are -

   ·    having an earlier determination of its proceedings against the wife and on the discrete issue, thereby shortening the time within which it receives a potentially positive determination resulting in an earlier discharge of the security;

   ·    not having to be represented throughout a lengthy trial which would include most issues not relevant to the District Court proceedings; and

   ·    being able to litigate in its forum of choice.

Conclusion

1. I have determined that the balance of the discretionary issues particularised above is in favour of the wife and that it is appropriate to grant the relief which she seeks.  The issues involved in the District Court proceedings are integrally linked to the issues before this Court in the substantive proceedings.  If the Bank is permitted to continue the District Court proceedings, it is very likely that the same issues will need to be litigated in the proceedings in this Court, thereby creating a duplication.  Further, if the consequence of such duplication were the creation of a res judicata, the wife might be prevented from presenting part of her case to this Court.  That would produce an intolerable situation.

2. Accordingly, I will make orders essentially in accordance with paragraphs 1 and 2 of the wife's application for interim orders filed on 18 January 2011.   I will also order the third and fourth respondents to file any application within 14 days and refer the proceedings for the making of orders and directions in preparation for trial.

3. I have considered the question of an undertaking as to damages.  On the basis of my finding that at the present time the Bank would appear to have sufficient security, that is not appropriate.  If the situation changes, it is open to any party to make an application.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Mushin delivered on 24 June 2011.

Associate: 

Date:  24 June 2011