Vida & Vida
[2023] FedCFamC1A 175
•18 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Vida & Vida [2023] FedCFamC1A 175
Appeal from: Vida & Vida [2022] FedCFamC1F 968 Appeal number(s): NAA 6 of 2023 File number(s): SYC 1533 of 2019 Judgment of: TREE, HARTNETT & SCHONELL JJ Date of judgment: 18 October 2023 Catchwords: FAMILY LAW – APPEAL – Arbitration – Where the appellant contended before the primary judge that the arbitrator failed to accord procedural fairness by not seeking further submissions and/or evidence as to the effect of capital gains tax that would fall on the appellant in paying the sum ordered to the respondent – Where the appellant argued that the ordinary principles of procedural fairness that apply in judicial disputes apply to arbitrations as well – Where the primary judge rejected the propositions advanced by the appellant and dismissed the review – Where the appellant’s failure to adduce evidence on the capital gains tax did not relieve the decision maker from making orders that were just and equitable – Where the orders made by the arbitrator did not achieve justice and equity in that the net assets retained by the appellant were not as contemplated when considering the capital gains tax that he would have to bear – Where ordinary notions of procedural fairness apply to arbitrations – Error of law established – Appeal allowed – Costs certificates issued.
FAMILY LAW – CROSS APPEAL – Arbitration – Where the primary judge held that an arbitrator appointed under s 13E or s 10L(2)(b) of the Family Law Act 1975 (Cth) (“the Act”) does not have power to make an order pursuant to s 106B – Where the arbitrator was appointed pursuant to s 10L(2)(b) – Where amendments to the Act in 2000 moved the then s 85 and its renumbering as 106B from Pt VIII to Pt XIII – Where the legislative intention behind moving the section to Pt XIII is absent – Where s 10L(2)(b) when read with s 80 enables the making of an order under s 106B – Error of law established – Cross appeal allowed – Costs certificates issued.
Legislation: Family Law Act 1975 (Cth) Pts VIII, XIII, ss 4, 10L, 13E, 13J, 13K, 75, 79, 80, 85, 106B
Family Law Regulations 1984 (Cth) reg 67I
Further Revised Explanatory Memorandum, Family Law Amendment Bill 2000 (Cth)
Revised Explanatory Memorandum, Family Law Amendment Bill 2003 (Cth)
Cases cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41
Allesch v Maunz (2000) 203 CLR 172; [2000] HCA 40
Disorganized Developments Pty Ltd v South Australia (2023) 97 ALJR 575; [2023] HCA 22
Elgin v Elgin (2015) 54 Fam LR 31; [2015] FamCAFC 155
Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143; [2003] FamCA 395
Lacey & Lacey [2020] FamCAFC 73
Russell v Russell (1999) FLC 92-877; [1999] FamCA 1875
Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204
Teal & Teal [2010] FamCAFC 120
Wentworth v NSW Bar Association (1992) 176 CLR 239; [1992] HCA 24
Number of paragraphs: 94 Date of hearing: 1 May 2023, 4 September 2023 and 26 September 2023 Place: Heard in Sydney, delivered in Cairns Counsel for the Appellant / First Cross Respondent: Mr Cox SC with Ms Reid (1 May 2023)
Mr Lynch SC with Ms Reid (26 September 2023)Solicitor for the Appellant / First Cross Respondent: Coleman Greig Lawyers (1 May 2023)
Dorter Family Lawyers & Mediators (26 September 2023)The Appellant / First Cross Respondent: Litigant in person (4 September 2023) Solicitor Advocate for the First Respondent / Cross Appellant: Mr Reeve Solicitor for the First Respondent / Cross Appellant: Marsdens Law Group Counsel for the Second Cross Respondent: Mr Bartfeld KC (4 September 2023) Solicitor for the Second Cross Respondent: Newnhams Solicitors (4 September 2023) ORDERS
NAA 6 of 2023
SYC 1533 of 2019FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR VIDA
Appellant / First Cross Respondent
AND: MS VIDA
First Respondent / Cross Appellant
MS B VIDA
Second Cross Respondent
ORDER MADE BY:
TREE, HARTNETT & SCHONELL JJ
DATE OF ORDER:
18 OCTOBER 2023
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.The cross appeal is allowed.
3.The orders of the primary judge made 9 December 2022 are set aside.
4.The Review Application filed 17 February 2022 is remitted for hearing to a judge of Division 1 of the Court other than the primary judge.
5.The appellant / first cross respondent is granted a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in the appeal and cross appeal.
6.The first respondent / cross appellant and the second cross respondent are granted a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth), being certificates that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondents in respect of the costs incurred in the appeal and cross appeal.
7.The appellant, first respondent and second cross respondent are granted a costs certificate pursuant to s 8 of the Federal Proceedings (Costs) Act 1981 (Cth), being certificates that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise payments under that Act to them in respect of the costs incurred by them in relation to the re-hearing.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Vida & Vida has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
TREE, HARTNETT & SCHONELL JJ:
This is an appeal by the appellant / first cross respondent husband (“the appellant”) against orders made by the primary judge dismissing a review of an arbitral award. Part of the primary judge’s orders involved a determination that the arbitrator did not have power to make an order under s 106B of the Family Law Act 1975 (Cth) (“the Act”). Albeit there was no appeal from that determination, on the initial hearing of the appeal, given this issue raised important matters about the extent of an arbitrator’s powers, we determined that the scope of the appeal should be broadened to permit a challenge to that determination.
The appeal was accordingly adjourned. Subsequently, a cross appeal dealing with the s 106B issue was filed by the first respondent / cross appellant wife (“the first respondent”) as were Notices of Contention by each of the appellant, first respondent and second cross respondent (“the second respondent” who is the appellant’s mother).
On the adjourned hearing, the appellant appeared unrepresented and sought an adjournment because his legal representatives had filed a Notice of Ceasing to Act in the week prior to the appeal. The adjournment was opposed by the first respondent while the second respondent was agnostic. We granted the adjournment and indicated that we would provide reasons in due course.
The adjournment was granted as the appeal raised for consideration legal issues of some complexity; where the first respondent conceded little prejudice would be occasioned to her by an adjournment of about a month and where all parties agreed we could still proceed to hear the first respondent’s cross appeal on the s 106B issue. Because this approach obviated the necessity for an appearance by the second respondent on the substantive appeal, we acceded to the adjournment and heard argument on the cross appeal. At the conclusion of this aspect of the appeal, we reserved our decision to await the hearing of the substantive appeal which proceeded some three weeks later.
For the reasons set out below, we are satisfied that there is merit to Grounds 1, 2 and 3 in the Further Amended Notice of Appeal and that the primary judge erred in dismissing the appellant’s review. We are also satisfied that the primary judge erred in finding that the arbitrator did not have power to make orders under s 106B and hence the cross appeal will also be allowed. As this is dispositive of the appeal, it is unnecessary to consider the remaining grounds and the Notices of Contention other than in respect of Ground 4 in the Further Amended Notice of Appeal.
It is desirable to consider Ground 4 as it asserts error by the primary judge in concluding that the ordinary principles of procedural fairness have no application to arbitrations under the Act. As this is a matter we consider of importance to the future conduct of family law arbitrations, we propose to address the arguments in relation to this ground.
BACKGROUND
The appellant and first respondent commenced cohabitation in 2001 and married in 2002. The parties were at issue about the date of separation, which was found by the arbitrator to be July 2018. They were divorced in January 2020.
Prior to cohabitation, the appellant established N Pty Ltd (“N Company”) in which the appellant held one third of the issued shares and his parents the remaining two thirds. Upon the death of the appellant’s father, the second respondent became the holder of two thirds of the issued shares.
On 20 June 2007, the Vida Family Trust (“the Trust”) was settled by deed, with M Pty Limited (“M Company”) appointed as the trustee. Subsequently, the second respondent sold her shares in N Company to M Company for $1,206,939, with M Company borrowing the amount payable to the second respondent from N Company. The arbitrator found at [146] and [147] that by 30 June 2007, the second respondent had sold her interest in N Company and no longer held any legal or beneficial interest in the company.
In November 2018, the corpus of the Trust was transferred to the second respondent.
On 13 March 2019, the first respondent commenced proceedings in the Family Court of Australia (as it then was) seeking orders for financial adjustment. The second respondent was joined to the proceedings as the first respondent’s relief included orders pursuant to s 106B setting aside the November 2018 distribution of the corpus of the Trust.
On 1 March 2021, an order was made referring the totality of the proceedings to arbitration pursuant to s 13E of the Act. The arbitrator raised with the parties a potential absence of jurisdiction to make orders pursuant to s 106B within the ambit of a s 13E arbitration. To resolve this issue, the parties by consent discharged the earlier order and agreed to participate in an arbitration pursuant to s 10L(2)(b), “so that all relief in [the] proceedings including the section 106B applications may be determined by way of a ‘relevant property or financial arbitration’ pursuant to the Act” (orders made 15 June 2021, Notation D).
The arbitration commenced on 30 August 2021, with final written submissions on 15 October 2021.
At the arbitration, the appellant sought the net assets be considered in two pools, with one pool containing real estate owned by him at the commencement of cohabitation to which he sought 100 per cent of the pool, and the other pool, being the balance of the net assets, to be divided as to 70 per cent to himself and 30 per cent to the first respondent. The first respondent for her part sought orders dividing the net assets as to 80 per cent to her and the balance to the appellant.
The parties were at issue as to the composition of the pool of assets. Part of the assets contended by the first respondent included the distribution of the corpus of the Trust in November 2018 to the second respondent. The appellant also raised an issue about capital gains tax.
The arbitrator found that the Trust was controlled by the appellant. The arbitrator made the following findings in so far as they relate to the s 106B claim:
179. On the basis of the findings already made, I do not accept that the second respondent had any entitlement to the ‘corpus’ of the [Trust] in November 2018 or at any other relevant time, at least to any extent that exceeded the amount outstanding to her on her beneficiary account.
…
197. I find however, that regardless of the intention of the [appellant] in relation to the November 2018 resolution, it is and was one likely to defeat an anticipated order.
…
199. I have already found that the [appellant] had the control of and the capacity, at his election, to benefit solely from the [Trust] at the time of the November 2018 resolution. As a result, the effect of that resolution as implemented following that of December 2018 was to remove from the funds so available to the [appellant] the corpus of the [Trust] in the amount of $1,309,248.15.
…
201. Accordingly I find that the November 2018 resolution is, irrespective of intention, likely to defeat an anticipated order and I will determine the s.79 application as if the resolution had not been made and given effect to and then turn to whether or not an order should be made under s.106B to set aside the November 2018 resolution.
In the award, the arbitrator addressed his reasons as to s 106B as follows:
309. Eighthly I return to the question of whether it is necessary for an order to be made pursuant to s.106B consequent upon the above determinations.
310. The award that I shall make is that the [appellant] pay the [first respondent] a sum of $1,920,043 within a period of 4 months. Whilst not in respect of the amount to be paid pursuant to this Award, the [appellant] submits that he proposes to draw down on equity or, alternately, to sell property to effect any payment required. Whilst there are a series of interests identified which may permit the [appellant] to do so without recourse to the interest of the [Trust], it is recognised that a number of the values have been struck at 30 June 2020 and accordingly the current position is unknown.
311. If the [appellant] does not make the payment, then an issue arises as to how the [first respondent] would be able to receive that money.
312. Section 106B(3) of the Act provides that when considering to exercise discretion to make an order under s.106B(1), regard needs to be had in respect of the interest of a bona fide purchaser or another person interested. For the reasons already set out, I do not consider that such a consideration arises here, particularly in relation to the second respondent
313. Accordingly, I shall provide pursuant to s 106B(1) of the Act a default order that will operate if the payment to be made by the [appellant] is not made.
On the capital gains tax issue, the appellant identified that a sale of real estate would give rise to “significant tax implications” and that he had asked his accountant to calculate the capital gains tax payable on sale of properties (appellant’s affidavit filed 13 August 2021, paragraph 263). Despite this statement, he adduced no evidence from his accountant.
The appellant’s written submissions said that the cash payment sought by the first respondent (namely a sum of $2,360,654.92) could only be achieved by a sale of real estate. The written submissions recorded as follows:
7.17. …
7.17.3.The capital gains taxation on selling two assets (which the [appellant] acknowledges would be two of the investment properties) would be significant given the length of time he has retained them and the cost base.
7.17.4.Should the Court make orders for the sale of any investment property then the capital gains liability (not specified given the uncertainty of the [the first respondent’s] application) should be considered as a 75(2)(o) consideration.
(Appellant’s written submissions dated 11 October 2021)
Relevantly, the appellant did not propose a Minute of Order to give effect to this outcome, seek an adjournment to obtain the relevant evidence nor assist the arbitrator as to how any proper assessment of the s 75(2)(o) adjustment could have been undertaken in the absence of evidence as to the quantum of capital gains tax.
The arbitrator on this issue said:
293. Finally, the [appellant] submits that whilst ‘he intends to draw down on the equity in one of the assets’ to make at least the cash payment he proposes to the [first respondent], if he is unable to do so he seeks to nominate a property for sale in which event a potential liability for capital gains tax ought be taken into account. The difficulty that confronts the [appellant’s] position in this regard is that, knowing that which the [first respondent] contends and the payment that she seeks, the [appellant] has not nominated any property which might be realised in such an eventuality. Further, and despite deposing to the fact that he was seeking such advice, the [appellant] has adduced no evidence as to any taxation liability that might arise consequent upon the realisation of any of his interests. In such circumstances, there is no evidentiary or other basis upon which any such potential liability ought be taken into account.
The arbitrator found the net assets to be $7,478,806 and that the first respondent should receive 45 per cent. The award provided for the transfer to the first respondent of the former matrimonial home and directed the appellant to pay the first respondent the sum of $1,920,043 within four months. If the appellant defaulted, then pursuant to s 106B the distribution of the corpus of the Trust to the second respondent was to be set aside.
On 14 January 2022, the award was registered.
THE PRIMARY JUDGMENT
On 17 February 2022, the appellant sought a review of the award pursuant to s 13J, which he subsequently amended to include additional relief under s 13K.
Before the primary judge, the appellant argued eight grounds as well as what the primary judge described as “so-called other matters” (at [159]), including a contention that the arbitrator had no jurisdiction to make orders pursuant to s 106B.
On 9 December 2022, the primary judge ordered that the appellant’s Review Application be dismissed, but that Order 2 of the arbitral award, being the order pursuant to s 106B, be set aside, having found that the arbitrator had no power to make orders under s 106B.
In circumstances where the appellant’s appeal is narrowly confined to what were in essence the first two grounds before the primary judge and the cross appeal raises the issue of s 106B, we will confine ourselves only to the discussion of the issues before the primary judge which are the subject of the appeal and cross appeal.
GROUNDS OF APPEAL
The appellant’s Further Amended Notice of Appeal filed 22 March 2023 contended eight separate grounds as follows:
1. His Honour misapplied the law set out in Elgin v Elgin (2015) 54 Fam LR 31 and Lacey & Lacey [2020] FamCAFC 73 and erred in finding at [48] and [51] that the arbitrator was not required
did not have an onus, in making an order under s 79 that was just and equitable, to give the parties the opportunity to make submissions about the proposed form of orders, and/or the likely capital gains tax implications (including further evidence)the way in which the taxation burden should be shared.2. His Honour misapplied the law set out in Elgin v Elgin (2015) 54 Fam LR 31 and Lacey & Lacey [2020] FamCAFC 73 and erred in finding at [46] that the arbitrator did not make an error of law enlivening s 13J by failing to apply the principles in Rosati.
3. His Honour erred in finding at [57] that the arbitration process as agreed between the parties and the arbitrator did not require the arbitrator to give the [appellant] an opportunity to address the arbitrator on the tax liabilities arising from an order, once the arbitrator had reached a conclusion as to what orders ought be made.
4. His Honour erred in finding at [58] that the general principles of substantive law concerning procedural fairness did not apply to family law arbitrations.
5. His Honour erred in finding that the arbitrator had regard to s 79, s 79(4)(e) and s 75(2)(n)(i).
6. His Honour erred at [74] in finding that the Arbitrator did not fail to take into account the loss of rental income and the impact on the [appellant’s] earning capacity.
7. His Honour erred in asserting that Rosati was not settled law in respect of how capital gains tax ought be taken into account when determining orders pursuant to s 79 Family Law Act 1975 (Cth).
8. At [198], after correctly setting aside the paragraph in the Award which was purportedly pursuant to s 106B, and noting that the Court then ought consider whether the remaining paragraphs in the Award were just and equitable, his Honour erred in failing to vary the Award so that the remaining paragraphs were just and equitable.
(As per the original)
The first respondent filed a Notice of Cross Appeal on 15 May 2023 in the following terms:
1. His Honour erred in the statutory construction of Section 13E of the Family Law Act (the Act) in holding that an Arbitrator does not have power to determine issues under Section 106B of the Act.
2. His Honour erred in the statutory construction of Section 10L(2)(b) of the Act in holding that an Arbitrator does not have power to determine issues under Section 106B of the Act.
3. His Honour erred in failing to find that the Arbitrator correctly relied upon section 10(L)(2)(b) of the Act to establish the jurisdiction to make an Order pursuant to Section 106B of the Act.
4. His Honour erred in not finding that the Section 106B aspect of the dispute was part of the proceedings within the meaning of section 10L(2)(b)(ii) of the Act.
5. His Honour erred in not finding that the Section 106B aspect of the dispute was a matter arising in the proceedings within the meaning of Section 10L(2)(b)(iii).
(As per the original)
GROUNDS 1, 2 AND 3
By these grounds, the appellant’s Summary of Argument contended:
15. The arbitrator was required to make an order pursuant to s 79 that was just and equitable. It was incumbent on the arbitrator to consider the taxation impact of the final decision, and in the absence of evidence in this respect the arbitrator could not have properly decided whether the orders were just and equitable (Elgin & Elgin [2015] FamCAFC 155 (Elgin) at [44]-[46]).
(Appellant’s Summary of Argument filed 22 March 2023) (Footnote omitted)
Before the primary judge, the appellant contended that the arbitrator failed to accord the appellant procedural fairness by not seeking further submissions and evidence (if necessary) as to the effect of the impost of capital gains tax on the appellant by reason of the sum he was required to pay the first respondent, which would compel the sale of real estate and give rise to a payment of capital gains tax. The appellant also asserted that the failure to take account of capital gains tax resulted in the award being contrary to justice and equity within the meaning of s 79(2) of the Act.
The primary judge concluded that no error of law was occasioned by the arbitrator failing to take capital gains tax into account, particularly where the appellant had adduced no evidence about the tax implication arising from the sale of the properties. The primary judge described it in the following terms:
49.… It fell to the [appellant] to have done so. It is common in cases in this court where tax issues (or even potential tax issues) are involved for parties to obtain advice on the point and to lead sophisticated evidence on those taxation issues.
(Footnote omitted)
Further, the primary judge found that “[i]t was not for the arbitrator to ‘create an opportunity’” for the appellant to adduce such evidence, noting that the “arbitration was adversarial” (at [51]). The primary judge rejected the propositions advanced by the appellant that a failure to have regard to the capital gains tax issue meant that the orders were not just and equitable.
Discussion
Pursuant to the award, the appellant was to pay the first respondent the sum of $1,920,043. The effect of the award was to leave the appellant with the following property from which to meet the payment:
297. …
[H Street, Suburb J] $ 1,000,000 [K Street, Suburb L] 625,000 [F Street, Suburb G] 580,000 [N Company] 596,667 [The Trust] 1,457,000 Bank accounts 14,290 Listed shares 5,537 [The Trust] – beneficiary account 5,164 Paid legal fees (add-back) 570,727 [Motor Vehicles] (2) (add-back) 101,400 [K Street] mortgage (add-back) 65,360 [K Street] mortgage (300,000) Loan owing to [N Company] (75,830) Superannuation 1,266,641 $ 5,911,956
Excluding addbacks, it basically comprised of real estate having a net value of $1,905,000, superannuation of $1,266,641 (which given the appellant’s age was not immediately accessible), shares in N Company having a value of $596,667 and the Trust having a value of $1,457,000.
The first respondent’s Summary of Argument recorded the makeup of the Trust to be as follows:
9.4 The summary of the 2020 Balance Sheet reveals that the assets of the [Trust] were almost entirely made up of:
(1) Loans;
(2) Plant and equipment;
(3) Shares in [N] Pty Limited (‘[N Company]’), being the company within which the [appellant] operated a [commercial business]; and
(4) Real estate in [FF Town] NSW, which was revalued to $950,000.
9.5 Both of the significant assets held by the [Trust], being [FF Town] and the [N Company] shares, would be subject to [capital gains tax] if they were sold to create cash in the [Trust].
(First respondent’s Summary of Argument filed 19 April 2023)
The inescapable reality was that for the appellant to satisfy the award by paying the first respondent $1,920,043 within four months, he had to either borrow money or realise assets, the latter leading inevitably to realisation costs including capital gains tax. The appellant’s evidence that there would be capital gains tax payable on the sale of real estate was not in contest. It was unchallenged evidence.
Before the primary judge, the capital gains tax was calculated to be approximately $829,000.
Before us the first respondent sought to argue that a sale was not inevitable. She submitted that it was the appellant’s evidence that he would borrow the amount that he said should be paid to the first respondent (approximately $304,000) and his evidence was that he intended to repay the second respondent the money he said he owed her (approximately $1,300,000) and so all he had to find was another $300,000. The submission was that a sale on the appellant’s own evidence was not inevitable, and that the arbitrator was not in error in ignoring the impost of capital gains tax.
We are not persuaded by the first respondent’s submissions. Even accepting momentarily the mathematics, the appellant still had to source a not insubstantial sum of $300,000 to comply with the orders. There was no evidence of the terms and conditions of any payment to the second respondent, no evidence of any capacity to borrow monies of the magnitude necessary to comply with the order and the tenor of the submissions was contrary to the case presented by the first respondent which provided for the sale of real estate in default.
We are satisfied that a sale of real estate was a natural product of the award. Concomitantly, the result of the award is that the appellant is not left with the property identified by the arbitrator at [297] after payment of the $1,920,043 but something considerably less because of capital gains tax.
The appellant submitted that consistent with the Full Court’s observations in Elgin v Elgin (2015) 54 Fam LR 31 (“Elgin”) and Lacey & Lacey [2020] FamCAFC 73 (“Lacey”) the failure by the arbitrator to have regard to the consequences of the award gives rise to an error of law.
In Elgin, the Full Court observed:
197. It was submitted on behalf of the wife that the trial judge had no obligation to consider the tax consequences of his orders unless asked to do so, since otherwise his Honour would be “intruding upon or making assumptions about decisions made by the parties and their representatives with respect to how their respective cases are to be conducted”. It was argued that as counsel had not referred to the issue, and as the husband had not sought orders about tax, it was not open to him to criticise the trial judge for overlooking the issue.
…
203. In the absence of evidence about the amount of the tax; in the absence of submissions relating to the tax; and in the absence of any reason for leaving the husband responsible for all the tax, we consider it was impossible for his Honour to be satisfied that his orders were just and equitable. Given the unfortunate way the matter had been conducted, we consider it was essential for the parties to have been given an opportunity to make submissions about the proposed form of orders, and the way in which the taxation burden would be shared, in order to bring about the intended equal division of the assets.
Separately, May J in Elgin held:
156.Despite the well-articulated arguments on behalf of the wife, and the apparent failures of the husband to conduct his case, it cannot be regarded as just and equitable to uphold orders that do not take into account such a serious misstep as failing to allow for taxation consequences of a significant sum and ordering the husband to be responsible for the payment. Such an order cannot be said to be just and equitable. …
While in Lacey, the Full Court observed:
46. However, the confluence of the respective financial circumstances of the husband and the company necessarily meant that the payment of the cash adjustment to the wife by the company would create liabilities of an unknown quantum which, at the very least, would reduce the value of the husband’s shareholding, and hence devalue his share of the parties’ property interests. Implementation of the order in that form would mean the husband would not receive the overall proportional share of the parties’ assets, to which the primary judge found he was entitled. For that reason alone, that necessarily meant the primary judge could not be satisfied that the appealed order was just and equitable, and thus the primary judge’s contrary finding – that the orders were just and equitable in those particular terms (at [301]) – was not open, and the orders are thereby vitiated.
In his Summary of Argument, the appellant submitted:
27. In circumstances where the arbitrator was on notice of the potential tax liability, it was essential (for the reason explained in Elgin) for the parties to have been given an opportunity to make submissions about the proposed form of orders, and the way in which the taxation burden would be shared (including further evidence where appropriate). In the absence of that opportunity, the arbitrator made an error of law by making orders that could not have been just and equitable. The arbitrator making orders that could not be just and equitable was an error of law leaving the award liable to review pursuant to section 13J of the Act. His Honour’s [sic] erroneously failed to vary or reverse the award in light of the arbitrator’s error of law.
(Appellant’s Summary of Argument filed 22 March 2023) (Footnote omitted)
The first respondent submitted that the factual circumstances in Elgin and Lacey are such as to make them distinguishable from the present facts. Whatever may be the factual differences, the mandate remains, the determination must be just and equitable.
The fourth stage in a property adjustment determination is that “the Court should consider the effect of [the] findings and determination and resolve what order is just and equitable in all the circumstances of the case” (Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143 at [39]).
In Russell v Russell (1999) FLC 92-877, the Full Court observed:
80.… Furthermore, it must be remembered in this regard that under s 79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties’ assets. Indeed we take the opportunity to emphasise that in what his Honour has termed “the fourth stage”, that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.
(Emphasis in original)
While in Teal & Teal [2010] FamCAFC 120, the Full Court observed:
70.By implication however s 79(2) requires if the Court is to make an order under s 79(1) altering the interests of the parties to the marriage in property, such an order must be just and equitable. This legislative imperative is often described as the requirement that a judicial officer “stand back” and look at the reality of the percentage division at which she or he has arrived. That requirement requires consideration of the actual assets to be retained by each party, and may include consideration of the effect when one party is to retain the greater proportion of his or her entitlement in superannuation of the nature, form and characteristics of the superannuation. It is also relevant when assets included for division are “notional” assets or “add backs”, including paid legal fees, or when a business which requires retention of business premises or re-financing is to be retained as part of one party’s entitlement (see Loude & Loude [2009] FamCAFC 52).
(Emphasis in original)
The failure to call evidence from the appellant’s accountant is entirely the fault of the appellant as is the failure to provide a Minute of Order that would provide a mechanism to make allowance for capital gains tax on a sale of the properties. While recognising that these are adversarial proceedings, that each party has a case to prove and that each party has a responsibility to place before the Court (or the arbitrator) all the evidence they maintain is relevant to the issues, it nevertheless remains incumbent on the decision maker to give effect to a just and equitable result.
The mandate is to make an order that is just and equitable. It is not just the underlying percentage but the order that must also be just and equitable. It is at the fourth stage where the transposition of percentages into an order is perfected. At that stage, knowing what net property a party is to be left with must satisfy the requirement of justice and equity. Here the arbitrator knew from the unchallenged evidence of the appellant that a sale of real estate would give rise to capital gains, that the size of the capital gains tax, albeit unknown, was “significant”, that there was no evidence that the appellant had the capacity to borrow such a sum and that consequently, there was an inevitability about a sale. The fact that this had been brought about by the failure of the appellant to adduce the evidence did not relieve the decision maker from making a just and equitable order. As the Full Court said in Elgin, where the decision maker knew all that the arbitrator did, “it was impossible for [the decision maker] to be satisfied that his orders were just and equitable” (at [203]).
The simple fact was that the award as it stood did not leave the appellant with the assets that the arbitrator had determined a just and equitable result achieved but something less given that he alone was to bear the capital gains tax. Once it became something materially less, then by simple process of logic it could not be just and equitable.
What was required, considering the unchallenged evidence and the mix of assets retained by the appellant, was for the arbitrator to give the parties the opportunity to make further submissions. Only by doing that could he be satisfied that the result was just and equitable. While before the primary judge there was only passing reference to the Full Court’s determination in Elgin and Lacey, we are satisfied for the above reasons that the primary judge erred in dismissing the review.
We are satisfied that there is merit to Grounds 1, 2 and 3.
GROUND 4
Before the primary judge, the appellant argued that the ordinary principles of procedural fairness that apply in judicial disputes apply to arbitrations under the Act. Accordingly, the arbitrator should have afforded the parties an opportunity to make submissions where the orders as made were not contemplated by either party and would deprive a party of a right.
The primary judge rejected such a proposition, observing that an arbitrator is not exercising judicial power and that the arbitrator’s powers are embodied in the arbitration agreement (at [54]). The primary judge concluded that the arbitration regime under the Act makes no general stipulation that substantive law principles of procedural fairness apply to arbitrations (at [56]) and:
58. In those circumstances I am unable to see how it could be argued as the [appellant] attempted to argue, that somehow the arbitrator failed to accord the [appellant] procedural fairness. The [appellant] did not point to or rely on any non-compliance with s 13K(2)(d) of the Family Law Act. In a family law arbitration, the arbitrator is not exercising judicial powers and instead is exercising powers conferred upon the arbitrator by agreement. The general principles of substantive law concerning procedural fairness recorded by the High Court in Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd apply to courts. An enormous body of jurisprudence in administrative law in relation to procedural fairness has arisen largely by reason of the terms of the specific statute under consideration mostly in respect of seminal cases under the Migration Act which enshrines specific wording about procedural fairness. That is to be contrasted with the provisions of s 13K(2)(d) of the Family Law Act, the stipulations of which are very precise, making provision for procedural fairness in a highly circumscribed context.
(Footnote omitted)
The appellant submitted that the approach of the primary judge was erroneous and that the question for consideration was whether the legislature had by clear and unambiguous language intended to exclude ordinary principles of procedural fairness. The appellant’s Summary of Argument submitted there was nothing in the Act to indicate that the legislature had such an intention and that to the contrary, there was a clear intent to incorporate notions of procedural fairness.
In that respect, the appellant referred to reg 67I(2) of the Family Law Regulations 1984 (Cth) (“the Regulations”), which is to the following effect:
(2)An arbitrator must conduct an arbitration with procedural fairness (for example, giving each party to the arbitration a reasonable opportunity to be heard and to respond to anything raised by another party).
The appellant submitted that the arbitrator was bound to afford the parties procedural fairness consistent with the Regulations. Further, he submitted that because the orders were not as contemplated by the parties and would deprive them of a right or interest, then ordinary principles of procedural fairness mandated that they be given an opportunity to make submissions (appellant’s Summary of Argument filed 22 March 2023, paragraph 44).
The first respondent did not engage with the arguments advanced by the appellant in the Summary of Argument and in general terms submitted that no issue of procedural fairness arose on the evidence.
Discussion
We are satisfied that the primary judge erred in determining that “the arbitration regime under the Family Law Act makes no general stipulation to the effect that substantive law principles concerning procedural fairness apply to family law arbitrations” (at [56]).
This statement is inconsistent with the clear language in the Regulations which imposes a mandatory duty on an arbitrator. The legislature has by clear and unambiguous language in the Regulations intended that those ordinary notions of procedural fairness apply to arbitrations under the Act (Wentworth v NSW Bar Association (1992) 176 CLR 239 at 252; Disorganized Developments Pty Ltd v South Australia (2023) 97 ALJR 575 at [33]).
We are satisfied that appealable error by way of Ground 4 has been established.
THE CROSS APPEAL
Before the primary judge, the second respondent argued in what were described by the primary judge as “elaborate written submissions” that the arbitrator lacked jurisdiction to make an order pursuant to s 106B (at [173]).
Consistent with the second respondent’s submissions, the primary judge noted that when the provisions dealing with arbitration were first enacted, s 106B did not exist albeit its precursor, s 85, was in largely similar though not exactly the same terms. Prior to its repeal, s 85 was located in Pt VIII and thus an arbitration of Pt VIII proceedings by necessity included, by incorporation, s 85 proceedings.
The primary judge noted that s 85 was repealed on 27 December 2000 and replaced by s 106B, which was removed from Pt VIII and relocated to Pt XIII. The primary judge recorded the second respondent’s submissions as follows:
190. In those circumstances [King’s Counsel for the second respondent] put forward a strident submission about the consequences of that legislative regime on the arbitrator’s consideration of s 106B in this case. It was as follows –
19. It is therefore submitted that on any construction of the legislation, the arbitrator does not have jurisdiction to make an order under s. 106B. The legislature changed the Act to remove the jurisdiction from Part VIII and then it reinstated jurisdiction in respect of s. 106A only. The legislative intention cannot be clearer.
The primary judge concluded:
194. I take the view that an arbitrator appointed in pursuance of either s 13E or s 10L does not have power to determine issues under s 106B. I so hold because –
…
(c) the application of principles of statutory construction set out above that guide courts on the proper construction of legislation do not allow for a s 13E arbitration or a private arbitration to incorporate a s 106B component as neither s 13E nor a s 10L(2) makes reference to either Part XIII or to s 106B; and
(d) the statutory jurisdiction of a family law arbitration having been defined by s 13E and s 10L, parties are not permitted to purportedly invoke jurisdiction by agreement where no such jurisdiction exists.
On appeal, the first respondent’s solicitor argued that the path to a proper construction of the powers of an arbitrator conducting a s 10L(2) arbitration involves consideration of the provisions in conjunction with the definition of ‘proceedings’ in s 4.
He submitted that the words in s 10L(2)(b)(ii) and (iii) of “any part of such proceedings; or any matter arising in such proceedings” are enabling words and should be given a generous rather than narrow interpretation. He submitted that by reference to the definition of ‘proceedings’ in s 4, being “a proceeding in a court, whether between parties or not, and includes cross-proceedings or an incidental proceeding in the course of or in connexion with a proceeding”, clearly contemplates as part of the proceedings an application, for example under s 106B. Such an application, so it was submitted, “is incidental to the proceedings as a whole [and] ‘part of such proceedings’” (first respondent’s Summary of Argument filed 15 May 2023, paragraph 8.3), and that in this arbitration, the s 106B relief was part of the proceedings the subject of the arbitration.
The first respondent rejected the suggestion that the December 2000 amendments to the Act reflected a legislative intention to exclude s 106B from the purview of arbitration, noting that the words in s 10L(2)(b) provide for the arbitrator to have jurisdiction over “any part” or “any matter arising” in the proceedings and that the matters which gave rise to the s 106B issues in this particular case arose during or were part of the proceedings (first respondent’s Summary of Argument filed 15 May 2023, paragraph 11).
The second respondent’s submissions followed the approach adopted before the primary judge in arguing that there was a clear legislative intention to exclude s 106B from Pt VIII and in doing so limiting the powers of an arbitrator in Pt VIII proceedings. King’s Counsel for the second respondent submitted that Pt VIII proceedings are specifically defined in s 4 and that the definition contains words of specific application to arbitrations only.
He further submitted that the Act is deliberate in specifying which matters can be arbitrated and that the legislative intention is reflected in limiting powers available to an arbitrator. King’s Counsel for the second respondent repeated the submission that the historical development of family law arbitration is important to an understanding of the intention of the legislature. He rejected the notion that reliance can be placed upon the definition in s 4 of ‘proceedings’ by virtue of there being a separate definition for ‘Pt VIII proceedings’.
The second respondent’s Summary of Argument filed 5 June 2023 recorded:
17.… Therefore any reliance upon the expression “proceedings” as including incidental proceeding in the course of or in connexion with a proceeding is an inappropriate interpretation of the statute.
King’s Counsel for the second respondent submitted that because the award provided for the s 106B order by way of default and that contingency has not yet occurred (namely, the default by the appellant), the order is in effect an enforcement order and thus cannot be said to form part of the Pt VIII proceedings. King’s Counsel further submitted that the terms of s 106B make it clear that the power is reserved to the Court and not an arbitrator.
The appellant’s Summary of Argument adopted in many respects the submissions of the second respondent. The appellant also submitted that “[t]he general words in s 10L(2)(b)(ii)–(iii) are to be read ejusdem generis” and that a causal connection between the Pt VIII proceedings and a matter arising in those proceedings is required, such as a question of foreign law, a trustee’s powers or a loan to a third party. The latter, it was submitted, would fall within s 10L(2)(b)(iii) (appellant’s Summary of Argument filed 5 June 2023, paragraph 36).
Discussion
It is not contentious that parties cannot vest the Court (or the arbitrator for that matter) by agreement with jurisdiction. The Court either has jurisdiction or it does not. For the same reason, the fact that jurisdictional error was only raised for the first time before the primary judge is irrelevant.
The plurality in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 observed:
47.… the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. …
(Footnotes omitted)
Section 10L(2) is to the following effect:
(2) Arbitration may be either:
(a) section 13E arbitration — which is arbitration of Part VIII proceedings, or Part VIIIAB proceedings (other than proceedings relating to a Part VIIIAB financial agreement), carried out as a result of an order made under section 13E; or
(b) relevant property or financial arbitration — which is arbitration (other than section 13E arbitration) of:
(i) Part VIII proceedings, Part VIIIA proceedings, Part VIIIAB proceedings, Part VIIIB proceedings, proceedings for an order under Part VIIIC or section 106A proceedings; or
(ii) any part of such proceedings; or
(iii) any matter arising in such proceedings; or
(iv) a dispute about a matter with respect to which such proceedings could be instituted.
Part VIII proceedings are defined in s 4 to be:
Part VIII proceedings means proceedings under Part VIII for orders with respect to spousal maintenance or the property of parties to a marriage, but does not include any proceedings specified in the regulations for the purposes of this definition.
The words “Part VIII proceedings” are only found in s 10L and s 13E, dealing specifically with arbitrations, and nowhere else in the Act. Accordingly, resort to the definition of ‘proceedings’ in s 4 for the purpose of interpreting s 10L detracts from a proper understanding of the section. It has no role to play in an interpretation of the section. To construe otherwise is to render the definition of ‘Pt VIII proceedings’ in s 4 redundant.
The proceedings the subject of the arbitration were Pt VIII proceedings with respect to the property of the parties to the marriage, part of which included the property of the Trust. Part of the relief that the first respondent sought included orders pursuant to s 106B. Such relief unquestionably formed “part of such proceedings” (s 10L(2)(b)(ii)) or alternatively, was a “matter arising in such proceedings” (s 10L(2)(b)(iii)), namely the Pt VIII proceedings.
The text of the statute is unambiguous; it could not be more transparent or clearly ascertainable. To construe otherwise would be to depart from the clear language of the statute. There is no ambiguity.
In this appeal, the submissions of the appellant and the second respondent focus on the legislative history and what is said to be a clear legislative intent arising from extrinsic materials. The significance of context in the task of statutory interpretation was helpfully addressed recently in Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1 where the New South Wales Court of Appeal observed:
27.The modern approach to statutory interpretation, as Sir Anthony Mason observed more than 35 years ago in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 315; [1985] HCA 48, “insists that the context be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity might be thought to arise” (emphasis added). The importance of context has routinely been emphasised by the High Court in cases concerned with statutory interpretation: see, for example, Project Blue Sky at [69]; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273; [2004] HCA 14 at [11]; Independent Commission Against Corruption v Cunneen (2015) 256 CLR 1; [2015] HCA 14 at [57]; and SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14].
28.More recent statements to the effect that the process of statutory interpretation must start and end with a consideration of the text of the statute (see, for example, Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160; [2007] HCA 1 at [116]; Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39]; Maloney v The Queen (2013) 252 CLR 168; [2013] HCA 28 at [324]; and Alphapharm Pty Ltd v H Lundbeck A/S (2014) 254 CLR 247; [2014] HCA 42 at [85]) were not intended to and did not demote or relegate the importance of context in the process of statutory interpretation: see, for example, Jackmain (a pseudonym) v R (2020) 102 NSWLR 847; [2020] NSWCCA 150 at [13]–[15]. As was said in Consolidated Media at [39]:
“[39] … The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text.”
29. In SZTAL, Kiefel CJ, Nettle and Gordon JJ observed at [14] that:
“[14] … Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.”
30.It has also been emphasised that “context” is to be understood in a broad sense and not confined to the immediate context supplied by other provisions in a statute of which one or more provisions are the subject of the immediate inquiry by the court. Context extends to include the existing state of the law, legislative purpose and any mischief which the statute was intended to remedy: see, for example, CIC at 408; Maloney at [324]; SZTAL at [14].
31. Words, whether used in a statute or more generally, always exist in and take their meaning from the particular context in which they are used. That context may expose any mischief which a statute is directed towards redressing and may reveal the purpose underpinning the enactment. That purpose, in turn, guides the preferred meaning to be given to the words being construed. The process of statutory interpretation may thus be seen as a holistic one or, as Campbell JA has identified both judicially and extra-judicially, as one involving something akin to hermeneutic reasoning: see Thomas v State of New South Wales (2008) 74 NSWLR 34; [2008] NSWCA 316 at [22]; Waugh Hotel Management Pty Ltd v Marrickville Council (2009) 171 LGERA 112; [2009] NSWCA 390 at [118]; AVS Group of Companies Pty Ltd v Commissioner of Police (2010) 78 NSWLR 302; [2010] NSWCA 81 at [133]–[137]; and J Campbell and R Campbell, “Why statutory interpretation is done as it is done” (2014) 39 Australian Bar Review 1.
32.In SAS Trustee Corporation v Miles (2018) 265 CLR 137; [2018] HCA 55 at [20], citing Gageler and Keane JJ in Taylor v Owners — Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9 at [66] and Gageler J in SZTAL at [38], the plurality said:
“[20] … Where the text read in context permits of more than one potential meaning, the choice between those meanings may ultimately turn on an evaluation of the relative coherence of each with the scheme of the statute and its identified objects or policies.” (Emphasis added)
33.Emphasis on the importance of context in statutory interpretation at least overlaps with and reinforces the need for purposive construction. This is not so much a matter of “constructional choice” as legislative fiat because, by s 33 of the Interpretation Act 1987 (NSW), and its Commonwealth analogue (s 15AA of the Acts Interpretation Act 1901 (Cth)), it is provided that:
“33 Regard to be had to purposes or objects of Acts and statutory rules
In the interpretation of a provision of an Act or statutory rule, a construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object.”
34.Section 33 recognises that a statutory purpose or object may not always be found in the express terms of the statute being construed. As McHugh J observed in Saraswati v The Queen (1991) 172 CLR 1 at 21; [1991] HCA 21:
“Sometimes the purpose of the legislation is expressly stated; sometimes it can be discerned only by inference after an examination of the legislation as a whole; and sometimes it can be discerned only by reference to the history of the legislation and the state of the law when it was enacted. It need hardly be said that a particular Act may have many purposes.”
35.Some statutes will identify the “Objects of the Act” or of a Part or Division of the Act. Others will explicitly spell out the purpose of the Act. These are not “exercise[s] in apologetics” but may give practical content to particular terms used in a statute which may otherwise be elastic in their meaning: Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53 at [5].
36.It will not, however, always be easy to identify or discern the purpose of any given statute or statutory provision, and care must be taken against ascribing an overly broad purpose based upon a priori assumptions as to the legislation’s intended reach: Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249; [2005] HCA 28 at [28]. Furthermore, a statute may have multiple purposes and, as enacted, may (and often will) give effect to political and policy compromises such that the legislative purpose, whatever may have been intended originally, is obscured: see, for example, Australian Rail Track Corporation Ltd v Dollisson [2020] NSWCA 58 at [31]. As AM Gleeson observed soon after his retirement from the bench (“Statutory interpretation”, Justice Hill Memorial Lecture, Taxation Institute of Australia, Sydney, 11 March 2009):
“Much legislation, including revenue legislation, involves compromise. Parliaments rarely pursue a single purpose at all costs. The problem of interpretation may be to decide how far Parliament has gone. Its general purpose may be clear enough, but the dispute may be as to the extent to which it has pursued that purpose. In such a case, to identify the general purpose may not be of assistance in finding the point at which a balance has been struck or a political compromise reached.”
37.The purpose of a statute may also be expressed with such generality that it is not a useful or completely satisfactory guide to a court seeking to construe a particular statutory provision: Victims Compensation Fund Corporation v Brown (2003) 77 ALJR 1797; [2003] HCA 54 at [33]. On the other hand, the nature and context of a particular statute’s enactment may reveal its purpose.
38.One example of this will be where a statute is passed in order to reverse, negate or accommodate the effect of a particular judicial decision. Examples of cases involving the interpretation of legislation which has been passed to reverse or accommodate dicta in judicial decisions can be multiplied but they include Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629; [2000] HCA 33 and Thiess v Collector of Customs (2014) 250 CLR 664; [2014] HCA 12 at [32], in which the High Court noted that amendments to s 167 of the Customs Act 1901 (Cth) under consideration in that case were an “immediate prophylactic statutory response to the spectre of widespread fiscal confusion raised by Isaacs J” in Sargood Brothers v Commonwealth of Australia (1910) 11 CLR 258 at 301–303; [1910] HCA 45.
39.The purpose of a statute or statutory provision, or the “mischief” which a statute is intended to address, may sometimes also be identified in an explanatory memorandum to a parliamentary Bill or in the second reading speech although these sources of potential enlightenment, particularly the explanatory memorandum, are frequently of limited utility in this regard, often being little more than summaries or paraphrases of provisions of the Bill. Although the occasions when such assistance will in fact be given have been said to be “rare”, they nevertheless sometimes present themselves: Lacey v Attorney-General for the State of Queensland (2011) 242 CLR 573 at 605; [2011] HCA 10 at [86].
40.Statutory purpose may also be identified in the long title to an enactment: Duncan v Theodore (1917) 23 CLR 510 at 530; [1917] HCA 38; Gibson & Howes Ltd v Lennon (Secretary for Agriculture and Stock for Queensland) (1917) 24 CLR 140 at 150; [1917] HCA 74; Birch v Allen (1942) 65 CLR 621 at 625–626; [1942] HCA 17; Clunies-Ross v Commonwealth of Australia (1984) 155 CLR 193 at 199; [1984] HCA 65; and Amatek Ltd v Googoorewon Pty Ltd (1993) 176 CLR 471 at 477; [1993] HCA 16. See also Roads and Maritime Services v Desane Properties Pty Ltd (2018) 98 NSWLR 820; [2018] NSWCA 196 at [194]–[195]; Fearnley v Finlay [2014] 2 Qd R 392; [2014] QCA 155 at [46]–[50]; Van Heerden v Hawkins [2016] WASCA 42 at [93]–[103]; and Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103].
41.Although s 34(1) of the Interpretation Act, which is in virtually identical terms to s 15AB of the Acts Interpretation Act, would appear to constrain the use of extrinsic materials such as explanatory memoranda and second reading speeches in the identification of statutory purpose and only permit recourse to them either to confirm the “ordinary meaning” of a statutory provision or in cases of ambiguity or obscurity or where giving effect to the ordinary meaning would lead “to a result that is manifestly absurd or is unreasonable”, the modern common law of statutory interpretation permits recourse to such extrinsic materials in the absence of ambiguity and has, perhaps somewhat surprisingly, been held to authorise such use even in circumstances where that use would not be permitted under the Acts Interpretation Act and, by parity of reasoning, the Interpretation Act: see Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 99, 112; [1997] HCA 53; Consolidated Media at [39], quoted in [28] above; and see P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Sydney, Lawbook Co) at [8.160], [8.200].
(Emphasis in original)
Both the appellant and the second respondent sought to contend that there was a clear legislative intention to exclude s 106B as evinced by the December 2000 amendments and then by the 2006 amendments to the Act, which included s 106A but not s 106B. Thus, so the argument went, the s 106B application could not be “part of” or “arising” in Pt VIII proceedings as it was inconsistent with the legislative intent. They also contended that as s 106B is coercive, such a power is only reserved to the Court and not an arbitrator.
These submissions are rejected for the following reasons:
(1)While legislative history can be an important aid to the task of statutory interpretation and context requires consideration of the extrinsic material in the first instance, the construction of a statute must be considered on its own terms. Here the extrinsic materials have been examined for the purpose of identifying (if any) the legislative intention. The extrinsic materials (the second reading speeches and the various Explanatory Memoranda) reveal no such intention.
(2)If there was this clear legislative intention, one would expect it to be apparent. It is not either expressly or by implication apparent. The second reading speeches and the Explanatory Memoranda are completely silent as to an explanation or reason for the removal of the then s 85 and its renumbering as s 106B from Pt VIII to Pt XIII. The Further Revised Explanatory Memorandum to the Family Law Amendment Bill 2000 (Cth) only refers to the sections in the following ways at pages 49 and 51:
Item 74 – Sections 84 and 85
304. Item 74 repeals these sections, as they are effectively being moved into Part XIII.
…
Item 80 – After section 105
321. Item 80 inserts section 106. Section 106 removes any doubt that the court has the power to enforce maintenance orders regardless of whether they are more than 12 months in arrears. This will overturn the current common law in this regard.
322. Item 80 also inserts section 106A and section 106B. Sections 106A and 106B are being relocated, without amendment, from Part VIII into Part XIII, as noted in respect of item 74 above.
(3)An examination of the extrinsic material reveals the asserted clear legislative intention is absent. It speaks simply of relocation.
(4)This construction is also inconsistent with the powers available to an arbitrator in determining Pt VIII proceedings. These powers remained unaffected by the relocation of the relevant section from Pt VIII to Pt XIII. Section 80 lists the powers available under Pt VIII. Those powers include:
80 General powers of the court
(1) …
(k) make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
(l) subject to this Act and the applicable Rules of Court, make an order under this Part at any time before or after the making of a decree under another Part.
(5)Section 80(1)(k) permits an arbitrator to make an order which is necessary to do justice. They are clear words of wide and expansive meaning and not words of limitation.
(6)Section 80(1)(l) enables the making of a Pt VIII order before or after the making of a decree under another part, such as under Pt XIII which includes an order under s 106B. A decree is defined in s 4 as meaning a “decree, judgment or order”.
(7)Section 10L contains no words of limitation restricting the powers of an arbitrator in a property or financial arbitration to some parts of s 80 and not others.
(8)Sections 85 and 106B, whilst in similar terms, are not the same. One striking difference is that there was no equivalent s 106B(4A) in s 85. Section 106B(4A) is to the following effect:
(4A) In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).
(9)The Revised Explanatory Memorandum to the Family Law Amendment Bill 2003 (Cth), which introduced s 106B(4A), is to the following effect at page 30:
Item 25 – After subsection 106B(4)
192. Item 25 provides that the court may exercise the general powers available to it under section 80 when applying its power under section 106B to set aside transactions that are designed to defeat claims under this Act. This power was previously available to the court prior to the relocation of section 106B from its previous position in section 85 as a consequence of the Amendment Act.
(10)When s 10L(2)(b) is read with s 80 as a whole, the meaning of the section is clear; it enables the making of an order under s 106B.
(11)While Ground 1 of the cross appeal raised for consideration whether an arbitrator has power in a s 13E arbitration (as distinct from a s 10L(2)(b) arbitration) to make orders under s 106B, we have not had the benefit of any submissions directly on the issue. For that reason, we are of the view that it is a matter better addressed by another Full Court with the assistance of fulsome submissions.
(12)The appellant and second respondent also contended that a s 106B order is coercive and that the legislature did not intend to grant coercive powers to an arbitrator, instead reserving those powers solely to the Court. The answer to that submission lies with an examination of the powers in s 80, almost all of which have a coercive element but are nevertheless available to an arbitrator.
For the above reasons, we are satisfied that an arbitrator conducting an arbitration pursuant to s 10L(2)(b) has power to make an order under s 106B. In fairness to the primary judge, no one argued before his Honour the application of s 80. We are nevertheless satisfied for the reasons stated above that the primary judged erred.
Accordingly, the cross appeal will be allowed.
RE-EXERCISE OR REMIT
The appellant sought that if the appeal were allowed, the review be remitted for hearing before a judge of Division 1 other than the primary judge. It was submitted that the appellant sought to adduce further evidence as to the change in value of the real estate in circumstances where the values for the purpose of the arbitration were undertaken in 2021 and 2022.
The first respondent submitted that if we found error, we could re-exercise the discretion by ordering the sale of the real estate owned by the appellant, deducting the capital gains tax payable and dividing the proceeds in accordance with the percentages determined by the arbitrator.
The approach proposed by the first respondent is not available. Any re-exercise of discretion must be by reference to the circumstances as they currently exist (Allesch v Maunz (2000) 203 CLR 172). The proposal of the first respondent would see only part of the property of the parties the subject of a re-exercise on current values, leaving other parts based on values in 2021 and 2022.
The matter will be remitted for hearing before a judge of Division 1 other than the primary judge.
CONCLUSION
The appeal and cross appeal will be allowed.
The appeals have succeeded on a question of law. In those circumstances, we consider it appropriate to grant costs certificates to the appellant and the respondents.
I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Tree, Hartnett & Schonell. Associate:
Dated: 18 October 2023
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