Xu and Phak

[2018] FamCA 898

FAMILY COURT OF AUSTRALIA

XU & PHAK [2018] FamCA 898

FAMILY LAW – PROPERTY – Order setting aside of financial agreement made after a contested hearing – where the husband was unsuccessful in endeavouring to maintain the financial agreement as the trial judge, on the wife’s application, finds that the parties had executed the agreement on the basis of a mistake and that the agreement was therefore void ab initio – where the husband subsequently finds that the wife had not been honest with the Court and had received money that she had not disclosed in circumstances where the trial judge understood that she was to get none from the asset that she was to receive under the financial agreement – where the husband seeks an order under rule 17.02 of the Family Law Rules 2004 (Cth) to set aside the order on the grounds of fraud – where the Court considers that the rule is not a stand-alone power but simply reflects the inherent power of the court to ensure that justice is done – whether fraud does not taint the judgement and in any event, justice can be done by an adjustment in proceedings under section 79 of the Family Law Act 1975 (Cth) which the trial judge had anticipated as a result of setting aside the financial agreement – where the wife’s conduct in not disclosing the amount she had received showed a lack of candour and her actions were to be decried – where the wife refuses to say what happened to the money she had received which was the subject of the fraud.

Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Breise & Breise (1986) FLC 91–713
Cameron v Cole [1944] HCA 5; 68 CLR 571
Hip Foong Hong v H Neotia & Co [1918] A.C 888
Magill v Magill [2006] HCA 51; (2006) 231 ALR 277
McCann v Parsons [1954] HCA 70; 93 CLR 418
McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529
Oriolo & Oriolo (1985) FLC 91–653
Phak & Xu [2015] FamCA 939

APPLICANT: Mr Xu

RESPONDENT: Ms Phak

FILE NUMBER: MLC 9662 of 2012

DATE DELIVERED: 7 November 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 30 October 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr MacFarlane

SOLICITOR FOR THE APPLICANT: Oakfair Lawyers

THE RESPONDENT: In Person

Orders

1. That paragraph 1 the orders sought by the husband in the response filed 5 July 2018 is dismissed. 

2. That paragraph 2 of the proposed orders of the husband in the said response is dismissed.

3. That paragraphs 3 – 10 of the said response and paragraphs 1 – 10 of the wife’s initiating application filed 3 October 2017 are adjourned to be heard before the Docket Registrar on 12 December 2018 at 9:30 am for the purposes of:

   (a)       Determining issues of discovery sought against the husband by the wife;

   (b)       Determining, if at all, whether the husband intends to pursue the non-compliance by the wife with the orders of Registrar George made on 21 September 2018;

   (c) Whether the wife’s substantive application under s 79 of the Family Law Act 1975 (Cth) is otherwise ready to proceed.

4. That there be general liberty to apply.

5. That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 16 November 2018 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 23 November 2018 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Xu & Phak has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9662  of 2012

Mr Xu

Applicant

And

Ms Phak

Respondent

REASONS FOR JUDGMENT

1. On 30 October 2015 by an order of the Court, Benjamin J set aside a financial agreement executed on two different dates but found by his Honour to have become effective on 13 February 2012.  That financial agreement was between Mr Xu (“the husband”) and Ms Phak (“the wife”).

2. The hearing culminating in the order on 30 October 2015 took place over the four days of 24 August 2015 to 27 August 2015. In that hearing it was the wife’s application to set aside the financial agreement. That was opposed by the husband who wanted to retain the outcome of the agreement. Under the agreement, which had been partly completed when the parties separated, it has been their original intention that the wife retain a property development which had not been built when the agreement was signed whilst the husband was to keep a number of real properties. The basis of the wife’s application to set the agreement aside was that, as the development failed, she received nothing. She wanted to “renegotiate” the division of the assets. Benjamin J agreed with the wife’s position.

3. Having set aside the financial agreement, his Honour ordered a hearing of the wife’s application under s 79 of the Family Law Act 1975 (Cth) (“the Act”) for a property settlement. It is regrettable, as it is remarkable, that three years later, the trial has not taken place, but there are reasons for that.

4. On 3 October 2017, in anticipation of this proposed “s 79” trial the wife filed an amended application seeking a variety of property settlement orders. The husband responded to that application but the significant document here is his amended response filed 5 July 2018. Relevantly, he sought[1]:

   (1)That the orders made by Justice Benjamin on 30^th October 2015 be set aside pursuant to Rule 17.02(1)(b) of the Family Law Rules 2004.

   (2)That the Binding Financial Agreement entered into between the parties dated 13 February 2012 be declared valid and enforceable.

   (3)That the Wife pay the Husband’s costs on an indemnity basis fixed at $104,486.65 for the final hearing listed for 24, 25, 26 and 27 August 2015.

   (4)That the Wife pay the Husband’s costs of these proceedings from 30 October 2015 to June 2018, on an indemnity basis.

   (original emphasis)

   [1] Final Orders as sought in the Further Amended Response to Initiating Application filed on 5 July 2018

5. He then sought a variety of ancillary orders, but his underlying intention was that the 2015 order be set aside and the financial agreement be reinstated by declaration (even though that was not part of what a Registrar was to order as the bifurcated hearing).

6. The first order sought by the husband is based upon an allegation of fraud by the wife; that is, fraud on the husband and fraud upon the Court. Remarkably again, the facts of what happened were not difficult to discern although both parties shrouded those facts with all sorts of other disputes.

7. To understand this allegation of fraud, it is necessary to explain the factual circumstances. Despite her protestations to the contrary, I find the wife misled the Court and more importantly, misled the husband. I find that her conduct was fraudulent but not sufficient for the husband to succeed in his proposed outcome.

8. Before turning to the facts, it is necessary to understand the following background:

   a)On 30 October 2017, I ordered by consent of both parties, they being represented by counsel, that both comply with disclosure obligations;

   b)On 13 July 2018, Registrar George (but this time with the wife no longer being represented) ordered that the husband’s pursuit of the setting aside of the orders of 30 October 2015 be heard separately; that is, a bifurcation  order;

   c)On 13 July 2018, Registrar George also ordered:

   (2)The wife forthwith make full and frank disclosure of the $375,000 received by her, particularly where the monies are deposited and how she has applied these funds, and the identity of [RR].

   (my emphasis)

   As I understand the wife’s argument, there was no sum of $375,000 but in reality, $357,000. The wife’s argument was that despite the obvious error in the amount, she did not have to disclose anything.  I consider that disingenuous.

   Despite her protestations to the contrary, I am satisfied the wife has not complied with that order because she well knew from the hearing what money was being discussed. Further, when cross-examined in this hearing, she refused to provide any details of where that money went other than to RR whom she refused to identify except as an “advisor”. Her non-compliance adds to the seriousness of her conduct in failing to make proper disclosure;

   d)On 24 August 2018, Registrar George referred the matter to the Case Management Judge for consideration of it being given priority and ultimately it was; and

   e)On 21 September 2018, Registrar George followed up her earlier orders of 13 July 2018 and ordered:

   (2)That within 7 days, the Wife provide full and frank disclosure/discovery of:

   b)The bank account details of where she deposited two cheques of $178,500 each and (dated 23/11/2015 and 2/9/2015), made out to “[RR]”, annexed at “Xu – 2” of the Husband’s Affidavit filed 5 July 2018;

   c)The identity of “[RR]”

   d)Bank statements for the bank account(s) referred to in paragraph 1(a) for the period 1 January 2015 to date.

   I am satisfied the wife has not complied with that order.

9. On 30 October 2018, the bifurcated issue was listed before Gill J, but as his Honour was part heard in a trial, the matter was transferred to me. The husband was represented by Mr MacFarlane of counsel and the wife represented herself. Each had filed what purported to be an outline of their case.

10. The husband’s case outline asserted fraud based on non-disclosure. He listed a number of documents said to be relied upon, but counsel conceded the evidence was contained in an affidavit filed on 5 July 2018. That affidavit addressed much more than the bifurcated issue but that is understandable because it was filed before the bifurcation order was made.

11. Counsel for the husband agreed that the relevant evidence was contained in the first 32 paragraphs of the husband’s affidavit.

12. The wife’s case outline ran to 20 pages. It noted a variety of documents upon which the wife relied, most of which were related to the hearing before Benjamin J and upon which his Honour had made findings. When pressed to explain their relevance, the wife maintained that these were the annexures or exhibits that would prove her case. I accepted these documents, but even a cursory examination will show they are of no assistance to the bifurcated issue; they may be relevant to the ultimate application under s 79 of the Act.

13. Ultimately, I accepted the wife’s two affidavits filed 19 March 2018 (which was an affidavit responding to specific questions) and her affidavit of 13 July 2018 which was her evidence. An examination of that evidence however explains what occurred but does not justify it.

14. The outline by the wife sought a dismissal of the husband’s application and then what the wife described as her “16 reasons” for opposing the husband’s application. Even a cursory look at those will indicate they relate to issues outside of the discrete bifurcated question.

15. As a self-represented litigant, the wife seemed to understand the process. She is an experienced litigant having been before this Court (and others) on a number of occasions. In respect of the cross examination of the husband, she had come will prepared.

16. To understand the context of this dispute, the following judgment excerpts are a good starting point.  They are taken from the judgment of Benjamin J of 30 October 2015.  In Phak & Xu [2015] FamCA 939, his Honour said:

    [10]After a long period of negotiation over 2011, the wife and husband entered into the Agreement on 13 February 2012.  As part of that Agreement the wife was to retain entitlement to two home units at Suburb E, Victoria, (‘Suburb E’).  Each of the parties warranted to the other that these entitlements had a value estimated at $1,000,000.

    [11]The Suburb E property deal involved various agreements with developers which the parties believed had created valuable legal rights in respect of two unbuilt home units.  At the hearing the wife asserted, amongst other things, that there was common mistake as to the nature of this property, and that it was in essence a mirage. 

17. Benjamin J then noted that not only was the development not done, it was a complete loss. His Honour then said:

    [13]This ‘substantial loss’ came to light in late 2013 and early 2014 that in turn led to these proceedings, and to which is the primary issue in this case.  The wife’s case was that when the Suburb E dealings were carefully and objectively examined, and that it is clear that the parties were at all times the victims of a fraud or a ruse, which meant that instead of being entitled to valuable property their substantial deposit was, at all relevant times, worthless.

    (my emphasis)

18. As will be seen below, the wife’s mantra was that the husband had not made adequate discovery and if anything, that explains, perhaps justified, her action in not disclosing what she was pursuing at the time of the hearing in 2015. That argument has no merit because his Honour said:

    [14]The wife asserted there was a significant breach of the Agreement by the husband as a consequence of his alleged fraudulent non-disclosure so as to render the Agreement void.  That non-disclosure was asserted to be the value of a house and land package at F Street in Suburb G (‘the Suburb G Property’) as at the date of the Agreement.  The husband said it had a value of $190,000 and the wife said it had a value of $325,000.  Was this alleged non-disclosure by the husband such as would enable the exercise of the court’s discretion to set the Agreement aside?

    …

    [16]The wife asserted that the husband failed to make full and frank disclosure as on the date of the Agreement that he had an undisclosed ANZ Bank account with a credit balance of $30,235.

    [17]The wife also asserted that the husband failed to make full and frank disclosure in that the husband represented he had an income of some $15,000 whereas the wife asserts he had a far greater income. 

19. Benjamin J ultimately found both parties poor witnesses whose evidence need corroboration.

20. It was the wife’s case before his Honour that there was a failure of what his Honour described as the “Suburb E entitlements”. It was the husband’s case that the wife took a commercial risk which failed and as such there was no basis to set aside the agreement. The wife however submitted that what occurred from the surrounding Suburb E circumstances gave rise to the agreement being void by reason of common mistake and some other grounds which are not relevant. His Honour noted that the wife claimed that the agreement was void ab initio and therefore the Court should set it aside.

21. His Honour set out the background in 2008 and 2009 when together, the parties purchased a property to develop but then the marriage broke down. The breakdown of the marriage led to the parties endeavouring to resolve their financial issues by binding financial agreement. The wife wanted to retain any entitlement to the Suburb E development which of course at that time, had not been built. His Honour then said:

    [45]I am satisfied that each of the parties believed that Suburb E had a value of about $1,000,000 at the time of the negotiations and executing the Agreement.  At one stage the husband proposed a ‘swap’ and that he would end up with Suburb E.

    …

    [56]At or shortly after that time it became clear that the development would not go ahead and eventually the development failed.  The $420,000 was lost.

22. In April 2012, some two months after the execution of the agreement, transfers of land were executed in favour of the husband under which he became the registered proprietor of the real properties in accordance with the agreement.  There was no need for a transfer of the development land to be executed in favour of the wife, because it was already in the name of a corporate entity and as trustee she had control.

23. In examining the agreement, his Honour noted that the husband had, when signing the agreement, regarded the general terms of the agreement as of an equal division of property, but he also acknowledged that the wife no longer had the benefit of the $1 million that both parties had attributed to it. The husband had conceded that that gave rise to an unfair circumstances but maintained it had nothing to do with him.

24. His Honour then found:

    [158]On the evidence I find that there has been common mistake by the parties as to the nature and value of an asset which made up a significant part of the parties’ property.  This mistake was made at the time of formation of the Agreement and in the context of the findings of fact elsewhere in these reasons.

    [159]There were submissions as to frustration of the contractual obligations arising from the Agreement.  If I am wrong in relation to the common mistake then the Agreement was frustrated as a result of the inability of the wife, as at the date of the Agreement, to receive the asset/assets for which she had bargained.

    [160]I am satisfied it would be unconscionable for the husband to assert his legal rights arising from the Agreement having regard to the mistake which had been made by both parties which would have such a profound impact on the wife given the size of this property and as against the pool of the property. 

    [161]As between these parties the Suburb E transaction was not a commercial risk which failed.  It was a common mistake.  As a consequence I am satisfied that the Agreement is void ab initio.  It is not possible to rectify it as the home units were not built and are not going to be built.  If, in the alternative it was frustrated, and as such the contract should be set aside on that equitable basis.

    …

    [166]I find that the parties each believed that Suburb E was valuable property at the time of the Agreement and during the negotiations that led to the Agreement. 

25. His Honour canvassed the issue of how the parties were misled by the developer; he inferred that it was part of a confidence trick. His Honour acknowledged however, that both parties had entered into the agreement believing it was worth $1 million but in reality, it was always a mirage. His Honour then said:

    [198]As such the Agreement was void ab initio and consequently ought to be set aside pursuant to s 90K of the Act or was frustrated by reason of the same circumstances and ought to be set aside both in equity and pursuant to s 90K.

    …

    [258]As a consequence of that common mistake the Agreement entered into between the parties is void ab initio at common law and renders the performance of the contract impossible.

26. There was no appeal from his Honour’s orders.

27. In respect of this bifurcated issue, the husband’s evidence was not seriously challenged by the wife, albeit she asked a number of questions to show that he could have obtained an advantage (as she did) by lodging a caveat on the title to effectively force any future purchaser of the development to pay her or him money.  That argument has no merit as the husband had no caveatable interest.  As Benjamin J mentioned, the title to the property was owned by a corporate entity.

28. The husband’s evidence therefore, was that at the hearing before Benjamin J, both parties had conveyed to his Honour that the investment in the property had been lost and could not be recovered. He quoted the specific words of the wife in an affidavit and mentioned that the contracted developer, K Proprietary Limited, went into liquidation in or around 2014 and neither unit was ever constructed. It is apparent from the way the wife cross-examined the husband, and indeed the submissions put to the Court, that her view was that the developer, K Proprietary Limited, having gone into liquidation, meant that there was nothing by her to disclose. As will become apparent, the wife’s view was that any money she got had nothing to do with the development company in liquidation but rather, a new speculator came along wanting the land and as such, the money she received was a windfall and therefore not relevant. I reject that submission.

1. There was no doubt that the confidence trick to which Benjamin J referred was complicated by the liquidation of the developer. A Mr OO stepped in to take advantage of the situation but was faced with the dilemma of caveats on the title including from the wife. It is significant that whilst the hearing was proceeding before Benjamin J, the wife was pursuing the windfall but not telling the husband who thought that everything had been lost.

2. In the present proceedings, the husband had sent the wife some specific questions to answer, trying to find out about a company called SS Proprietary Limited. Try as he might, nothing in any of the material disclosed the windfall to the wife of $357,000 for her withdrawal of the caveats on the Suburb E properties. As it transpires, it is the timing of her actions that is concerning.

3. The husband issued a subpoena to the lawyers acting for the vendors of the sale of LL Street, Suburb E on 1 June 2018. The documents produced showed that on 11 August 2015, the wife was advised that Mr OO had sold LL Street to a developer, but that the sale was conditional on Mr OO delivering clear title which he could not because the wife, and presumably others, had caveats on the title.

4. The letter advised that that the developer, SS Proprietary Limited, had agreed to make a payment to Mr OO who, under the terms of a deed of release, was to make a “further” payment to the wife.

5. The deed of release to which the letter referred was in evidence before me but it was not dated. Adding to the intrigue and my concern about the candour of the wife, she altered the deed (presumably without objection from the developer) so that the windfall money was to be paid in the form of a direct transfer into an account nominated by her. That release was executed in anticipation of the settlement so on any view, before the hearing began in front of Benjamin J, the wife was negotiating to get money from the development. That sinister connotation of the direct transfer is that, if enquiry was made of the wife’s financial position, it would not be found.

6. The subpoenaed material also showed that on 26 August 2015 at 11.13 am, the same lawyers emailed to the wife to confirm that settlement had been set for Friday, 28 August.  26 August 2015 was the third day of the hearing before Benjamin J. On the same day, the wife responded to the solicitors email indicating that she would attend the settlement and she asked that a bank cheque be made out to “RR”. As it transpired, the settlement was delayed but on 31 August 2015, the wife again confirmed she would attend settlement, but this time on 2 September 2015. 

7. The subpoenaed file of the lawyers also produced copies of two cheques of $178,500 each. The first cheque was dated 2 September 2015 and the second cheque 23 November 2015 along with the two documents showing the wife was withdrawing her caveats. It is significant that the first of those two cheques was received after Benjamin J adjourned the proceedings to consider what order should be made and his Honour reserved judgment. 

8. On any view therefore, the wife was negotiating to obtain money from the failed development before the trial began. She was arranging settlement of an agreed amount during the trial, and received the money prior to the delivery of judgment. 

9. Counsel for the husband pressed the wife about the release document which makes reference to a “further” payment suggesting that prior to the first payment of $178,500, payment had already been made. It is the husband’s case that the wife received much more but has refused to disclose the details.  It seems unlikely to me that that would be the case, bearing in mind that the whole of the correspondence revolves around payment being made upon the production of withdrawal of caveats. In any event, discovery in the future will clear up that point.

10. The wife’s trial affidavits were curious for the avoidance of the issue about her receipt of any funds. She said she withdrew the caveat on LL Street but she noted that the husband had no such caveat although he could have lodged one. This was a reference to the fact that she was astute and the husband not and therefore, her windfall did not have to be disclosed. She confirmed what Benjamin J had said, namely that she had been advised in 2013 that the project “was sunk”.

11. Importantly, in the evidence upon which she relied for the purposes of this discrete hearing, she set out the various findings of the hearing in 2015. She then accused the husband and (his lawyers acting for him) of causing “a dramatic change in his financial circumstances prior to and during” the hearing before Benjamin J. In what I consider a breathtaking statement, she accused the lawyers of failing to notify his Honour of the husband’s conduct whilst the judgment was under deliberation.  That was during the same period that she received the first of the two payments to which I have already referred. She did not tell His Honour about that at all. 

12. The next part of the wife’s evidence was about the husband’s non-disclosure that will no doubt be the subject of the next hearing having regard to the orders I intend to make. 

13. The wife’s mantra was that the original developer, K Proprietary Limited with whom both she and the husband had contracted, had gone into liquidation and therefore “all contracts and agreements that had been entered into were made void and unenforceable”.  That was also disingenuous because the wife well knew that, as a caveator on the real property which was the subject of the development, and to which Benjamin J referred, she was negotiating to get a large amount of money.

14. When tested in cross-examination about all of this, the wife’s explanation was that there was no guarantee that her negotiations would come to fruition because at least one other caveator was holding out. Even so, when the facts are considered, the sequence of events shows that even on a windfall basis, the project which was “sunk” had ultimately produced a return of money to her, even if not a profit, and that was money she did not disclose.

15. The windfall is explained in the wife’s own words as follows:

    [40]Also confirmed and quite separate to the above and whether by an act of God or complete luck, any Caveat Holders of [LL Street, Suburb E] were each provided with a windfall opportunity to receive funds on behalf of [Mr OO] who was no longer a director of [K Pty Ltd] (in liquidation) for a withdrawal of caveat that was required by a specific time and date and that if the caveat was not removed a contract with a Developer (unknown to me) would be terminated.[2]

    (original emphasis)

    [2] Respondent’s affidavit filed 13 July 2018

16. She went on to say that because she had been forced to incur an expense in excess of $465,000 by the time of the 2015 hearing which had drained her savings, she had no choice but to accept the proposal of the $357,000.  She said she had no knowledge of how that proposal came about in the light of the liquidation of K Proprietary Limited. She said she did not know what might eventuate in the future and so she preserved the funds received “to secure my ongoing and associated legal costs and any potential adverse outcomes”. That last statement flies in the face of the obligations of all litigants in all financial matters to be frank and candid in relation to disclosure, both to the Court and to the other party.

17. As if to further justify her position, the wife said that upon his Honour handing down the judgment and reserving costs, she was disappointed. That meant she was required to fund further legal costs and another trial (in relation to the costs).  She then said:

    [43] …there were no guarantees of success, even though my legal representation at the time had previously served a Calderbank Offer on the husband seeking Indemnity Costs if I was successful at the August 2015 Trial but nothing was certain as the reserving of costs by his Honour indicate. Almost 3 years later and this matter has still not concluded.[3]

    [3] Respondent’s affidavit filed 13 July 2018

18. I reject the wife’s justification for what she did. She permitted both the husband and Benjamin J to work on the basis that the development was worthless. Her logic was that she did not have to disclose this windfall because there may be a need for her to spend money again associated with the litigation including legal costs.

19. I am satisfied his Honour and the husband were misled.

20. It is also important to observe that the wife confirmed that when she gave evidence to Benjamin J, her trial affidavit was some weeks old. Whether she confirmed that affidavit as still being true without change is a matter about which I am unable to make a finding as I have not seen the transcript. However, having regard to her evidence and in particular her cross-examination, I suspect she did not advise of the changes that were then occurring as she gave evidence.  Others may look carefully at that issue if and when this matter is retried.

21. A second concerning issue is that the wife refused to say what happened to the money including responding in cross-examination that the information was
    “privileged”. She could not explain to me what she meant by “privileged”. Regardless of her view about the husband’s disclosure, the Court cannot be used that way. The Court in the foreseeable future may decide that the wife is not permitted to continue with her application under s 79 of the Act without proper disclosure first being made.

22. The issue then arises as to what to do.

23. Counsel for the husband relied upon r 17.02 of the Family Law Rules 2004 (Cth) (“the Rules”). In particular, it provides that the Court may at any time vary or set aside an order if it was obtained by fraud. “Fraud” is not defined.

24. I have doubts as to whether that rule is a stand-alone power to set aside a final order. This rule has not been the subject of authoritative consideration. Generally, when a court determines a matter such as Benjamin J did, the court is functus officio and there is no specific provision in the Act to set aside an order of the nature made by Benjamin J. Normally, one would expect there to be an appeal based upon fresh evidence that was not available at the time of the trial. In this case, the husband has chosen to rely upon r 17.02 of the Rules. In my view, the Court has an inherent power in circumstances such as this where the Court is misled and those inherent powers are indeed reflected in r 17.02 of the Rules.

25. In Magill v Magill [2006] HCA 51; (2006) 231 ALR 277, the High Court of Australia considered words such as “deceit” and “paternity fraud.”

26. At [17], Gleeson CJ described the concept of fraud as being “wider in some legal contexts than others.” Like the duty of care to avoid damaging or injuring others, Gleeson CJ noted at [21] that “false representations about paternity could be the result of carelessness rather than deliberate fraud”. That distinction does not apply here because there is no suggestion of lack of care by the wife.  This was a deliberate decision to achieve a windfall without the husband being told. It was her application to set aside the financial agreement based on her entitlement being valueless and as such, disclosing the money may have affected the exercise of the discretion by Benjamin J if his Honour had known what had occurred. I am satisfied in the circumstances that the wife’s conduct amounted to fraud.

27. Accepting that the Court has an inherent jurisdiction, and now confirmed by chapter 17 of the Rules, this Court has a discretionary power to rectify such an issue as fraud which discretion, has not been displaced by the Act (Cameron v Cole [1944] HCA 5; 68 CLR 571 at [5886])

28. In Cameron, Rich J said that this discretionary power was to ensure that trials were conducted according to principles of natural justice. In this Court, there is, and always has been, a fundamental obligation to make full and frank disclosure (see Oriolo & Oriolo (1985) FLC 91–653 and Breise & Breise (1986) FLC 91–713).

29. In McCann v Parsons [1954] HCA 70; 93 CLR 418 Dixon CJ, Fullagar, Kitto, Taylor JJ at [427–428] said:

    So clear is it that fraud may be comprised in the ground consisting in the discovery of fresh evidence that a distinction is taken, depending on its presence, on the degree of probative force which the fresh evidence may have upon the relevant facts in issue.

30. Their Honours quoted Williams LJ in Warham v. Selfridge & Co. (Ltd.)  expressing the criterion in such a case as follows:

    In order to justify the granting of a new trial on the ground that fresh evidence had been discovered, the evidence must be of such a character as to justify one in saying that the verdict could not in the interests of justice be relied on, because it was based on mistake, surprise, or fraud.

31. Their Honours went on to say that the case must be made out (in this case by the husband) so as to satisfy the Court that the interests of justice demand that the matter in question should be tried afresh. Another way of putting that is to say that the case put by the husband must satisfy the Court that the interests of justice demand that the parties revert to the financial agreement, and that any other alteration of their property interests by the Court under the Act is denied to them by virtue of the loss of jurisdiction under s 71A the Act.

32. Two significant considerations apply in this case.  Benjamin J considered that both parties had agreed that there was to be an equality of their assets at the time they executed the agreement. Even allowing for the wife retaining the $357,000, that objective would not be achieved.  The second consideration is that Benjamin J found that the parties were mistaken about the value which justified the finding that there never was a contract because they were anticipating different things. While I have some discomfort about that view, I consider myself bound by the findings of Benjamin J as there was no appeal.  In other words, even had his Honour known about the $357,000, he would still have found that the parties did not achieve consensus at the time that the agreement was executed such that that they were contracting about an entirely different concept and that the receipt of the money in this case could make little or no difference. 

33. In Hip Foong Hong v H Neotia & Co [1918] A.C 888, Lord Buckmaster said that a judgment that was tainted and affected by fraudulent conduct, was tainted throughout and the whole must fail. In this case, I could not say that the same result would not have been ordered even if the new evidence was known because of the basis upon which his Honour set aside the financial agreement ab initio. As such, I am not satisfied that the judgment is tainted.

34. In McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529, Menzies J had to deal with the consequences of fraud in a trial and his Honour said at [12]:

    If it is…shown that this evidence was not available at the original trial notwithstanding the exercise of reasonable diligence, then a new trial will be ordered if the case made out is such as to satisfy the Court that, in the interests of justice, the matter in question should be tried afresh. 

35. His Honour went on to say that “if by any means it be affirmatively proved that the earlier judgment was tainted by fraud, it will, without more, be set aside”. The basis of that principle is that the judgement is fundamentally flawed but also that justice requires the intervention of equity. In respect of the former, having analysed the reasoning of Benjamin J, I could not be satisfied that the judgment is tainted by fraud and more importantly, the interests of justice can be served by a proper adjustment of the finances of the parties under s 79 of the Act which is what His Honour intended.

36. I find in the circumstances that, appalling as the approach of the wife was, her fraud can be ameliorated by an adjustment at trial.

37. Because of the peculiar nature of the application, I did not seek the respective parties attitudes in relation to costs and accordingly, I shall give each party an opportunity to do a written submission as to why an order for costs ought not be made having regard to the reasons set out above. 

I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 7 November 2018.

Acting Associate:

Date:  7 November 2018