Zhao & Fernsby
[2022] FedCFamC1A 10
•3 February 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Zhao & Fernsby [2022] FedCFamC1A 10
Appeal from: Orders made on 28 July 2021 (amended on 3 August 2021) Appeal number(s): NOA 51 of 2021 File number(s): BRC 11937 of 2020 Judgment of: ALDRIDGE, HOGAN & HARPER JJ Date of judgment: 3 February 2022 Catchwords: FAMILY LAW – LEAVE TO APPEAL – APPEAL – Appeal from interim property orders – Where the respondent concedes that the appeal ought be allowed – Error of law – Where the appellant was denied procedural fairness – Where the primary judge’s reasons were inadequate – Where the primary judge did not identify the source of power when ordering the sale of property or payments of lump sums to the parties – Leave to appeal granted – Appeal allowed – Orders set aside and interim applications remitted for rehearing – Costs certificate granted to the appellant – Respondent’s application for a costs certificate refused. Legislation: Family Law Act 1975 (Cth) ss 79, 94AA
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 28
Federal Proceedings (Costs) Act 1981 (Cth) ss 6, 9
Cases cited: B and B (Cost Certificates) (2007) FLC 93-339; [2007] FamCA 1177
Cramer v Davies (1997) 72 ALJR 146
House v The King (1936) 55 CLR 499; [1936] HCA 40
Keehan & Keehan(No. 2) [2018] FamCAFC 139
Medlow& Medlow (2016) FLC 93-692; [2016] FamCAFC 34
Strahan & Strahan (Interim property orders) (2011) FLC 93-466; [2009] FamCAFC 166
Zschokke & Zschokke (1996) FLC 92-693; [1996] FamCA 79
Number of paragraphs: 25 Date of hearing: 3 February 2022 Place: Brisbane (by video link) Counsel for the Appellant: Dr Brasch QC Solicitor for the Appellant: Cooper Grace Ward Lawyers Counsel for the Respondent: Mr Galloway Solicitor for the Respondent: Michelle Porcheron Lawyers ORDERS
NOA 51 of 2021
BRC 11937 of 2020FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS ZHAO
Appellant
AND: MR FERNSBY
Respondent
ORDER MADE BY:
ALDRIDGE, HOGAN & HARPER JJ
DATE OF ORDER:
3 FEBRUARY 2022
IT IS ORDERED THAT:
1.The appellant has leave to appeal.
2.The appeal is allowed.
3.Orders 4, 5, 7 to 11 inclusive, 16(d) and 18(c) of the orders made on 28 July 2021, as amended on 3 August 2021, are set aside.
IT IS ORDERED BY CONSENT THAT:
4.As to the real property located at … , Town W, Queensland (more particularly described as … , title reference …), the respondent (at his expense, if any) take all steps necessary:
4.1.to have his name, as Trustee for Sale (as recorded under Titles Registry dealing number …), removed from the title so as to reinstate the wife as the registered owner;
4.2.to register a withdrawal of the caveat registered under Titles Registry dealing number … from the title; and
4.3.to discharge all orders sought in support or furtherance of that caveat (including those set out in Titles Registry dealing number …).
5.There be no orders as to costs as between the parties.
IT IS ORDERED THAT:
6.The outstanding interim applications be remitted to a judge of the Federal Circuit and Family Court of Australia (Division 2) other than the primary judge.
7.The Court grants to the appellant a costs certificate pursuant to the provisions of 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 her in relation to the appeal.
8.The respondent’s application for a costs certificate under the Federal Proceedings (Costs) Act 1981 (Cth) is dismissed.
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).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zhao & Fernsby has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
HOGAN J:
By Notice of Appeal filed 23 August 2021, the appellant sought leave to appeal and, if leave was granted, to appeal certain interim orders made by the primary judge on 28 July 2021 (amended 3 August 2021).
Whilst the respondent initially opposed the application for leave to appeal and, if leave was granted, the appeal, it is now agreed by the parties that the application for leave to appeal should be granted, the appeal should be allowed and the interim orders the subject of the appeal should be set aside.
The interim orders the subject of appeal and some of the circumstances in which they were made
The orders the subject of the appeal – which it is now agreed should be set aside – provide, in summary, for:
(a)the appointment of the respondent as the trustee for sale of the real property at Town W, Queensland (“the Town W property”) in respect of which the appellant is the registered proprietor and where she and her daughter live;[1] and
[1] Order 4.
(b)the appellant to vacate the Town W property within 30 days;[2] and
[2] Order 5.
(c)the appellant to pay, pending the sale of the Town W property, the mortgage instalments to X Trust as and when the same fall due and the rates and outgoings on the property, and for her to maintain the same in good condition until she vacated the property;[3] and
[3] Order 6.
(d)the respondent to be entitled to sell the Town W property by private treaty or auction, at such listing price and on such terms as he deems appropriate;[4] and
[4] Order 7.
(e)the respondent to be empowered to sign specified documents on the appellant’s behalf;[5] and
[5] Order 8.
(f)a caveat registered by the respondent over the title to the Town W property be declared non-lapsing until he signs a withdrawal of caveat to effect the sale of the same;[6] and
(g)the net proceeds received on settlement of the sale of the Town W property to be applied:
(i)in payment of $200,000 to the respondent, payable to the trust account of his solicitors; and
(ii)in payment of $50,000 to the appellant, payable to the trust account of her solicitors; and
(iii)in payment of the balance then remaining to the respondent’s solicitor’s trust account, to be held in trust until further order;[7] and
(h)the payment of the funds to the respondent and the appellant to be characterised by the primary judge;[8] and
(i)the appellant to meet the fees of the valuation of real property situated in Australia and Hong Kong;[9] and
(j)the appellant to be restrained from increasing any encumbrance over any asset or incurring any liabilities, including the overdraft facility with T Bank currently in the amount of $650,000.[10]
[6] Order 9.
[7] Order 10.
[8] Order 11.
[9] Order 16(d).
[10] Order 18 (c).
These interim orders were made in the context of the parties’ competing positions in relation to those final orders which are just and equitable in the circumstances of these parties’ seven year cohabitation, which was not productive of children.
The material relied on in the appeal makes it clear to me that, at the time the interim orders were made on 28 July 2021:
(a)the appellant’s case, on a final basis, was that no orders should be made to adjust the interests of the parties in property and that each should retain the property and entitlement to superannuation that each currently has; that is, that the Court would not be satisfied, in all the circumstances of the case, that it was just and equitable to make any order adjusting the interests of the parties in property; and
(b)the respondent’s case, on a final basis, was that orders should be made to alter the interests of the parties in property so as to cause each to receive property and superannuation of equal value; and
(c)there was substantial disagreement between the parties about a number of issues, including:
(i)whether real property situated in Hong Kong and registered in the appellant’s father’s name (and asserted by the respondent – without the benefit of any expert evidence before her Honour – to have a combined net value estimated at $2,932,592.54,[11] representing about 61.18 per cent of the total value of the property then contended for by the respondent, albeit on the basis that the value of the appellant’s business was unknown) should be regarded as “property of the parties to the marriage” for the purpose of s 79 of the Family Law Act 1975 (Cth) (“the Act”); and
[11]Having regard to the asserted total gross value of $4,050,000 and the asserted associated liability of $1,117,407.46.
(ii)whether the business previously operated by the appellant, through a number of corporate entities, should be regarded as being valueless (as the appellant contended) or as having relatively significant, but yet to be quantified, value (as the respondent contended); and
(iii)whether the appellant had, as she asserted, in fact divested herself of her interest in the business to her business partner; and
(iv)whether the respondent had made any direct financial contributions to the acquisition, conservation or improvement of any of the property of the parties; and
(v)the actual source of any direct financial contribution to the acquisition, conservation or improvement of property ostensibly made by the respondent; and
(vi)whether the appellant financially supported the respondent during their cohabitation and, if so, the extent of the same; and
(vii)the contributions made by each party to the welfare of the family, including any contribution each made in the capacity of homemaker; and
(viii)the extent to which the respondent was involved in caring for the appellant’s teenage daughter; and
(d)the appellant and her then 17 year old daughter (who was, in 2021, completing her final year of secondary school) were living in the Town W property which, as the appellant disclosed in an affidavit filed in September 2020, she had bought in August 2020; and
(e)the appellant was unemployed and, according to the contents of her Amended Financial Statement filed 23 July 2021, had:
(i)weekly expenses that significantly exceeded her weekly income; and
(ii)liabilities that significantly exceeded the value of her property; and
(f)the respondent’s evidence included that:
(i)his liabilities (said to be in the amount of $59,800) exceeded the value of the property he owns (said to be valued at $20,077); and
(ii)whilst he was employed on a casual basis, he had received only $15,000 from the same in the period between 1 September 2020 and 15 April 2021 and otherwise relied, for his support, on financial assistance provided by others.
Reference to the material and the Transcript of the appearance on 28 July 2021 also makes it clear to me that until the morning of the hearing on 28 July 2021, the relevant interim relief sought by the respondent was that the appellant:
(a)be ordered to pay him lump sum spousal maintenance in the amount of $200,000 within seven days of the date of the order; and
(b)be the subject of an interim costs order payable on a dollar-for-dollar basis; and
(c)be ordered to pay for the valuations of real property and various corporate entities.
It was only after the matter was first before the primary judge that the respondent’s then counsel foreshadowed seeking relief in the terms ultimately ordered and, when the matter returned before her Honour on the afternoon of 28 July 2021, provided the Court with a minute of orders sought. Very soon thereafter, counsel who then appeared for the appellant applied for an adjournment of the hearing. This application was opposed by counsel who then appeared for the respondent and despite it, the hearing proceeded and her Honour ultimately made orders in terms sought by the respondent.
Her Honour did not publish reasons for judgment. Instead, the appeal was conducted on the basis that the Transcript of the appearance on 28 July 2021 was to be regarded as comprising her Honour’s reasons for making the orders she made. Whilst I appreciate the pressures on judges disposing of matters in which interim orders are sought, I express my agreement with the Full Court in Keehan & Keehan (No. 2) [2018] FamCAFC 139 that “formal reasons, however brief and suited to the proceedings at hand, are an essential part of transparent justice” (at [18]). Whilst it may well be that in some cases the reasons are apparent from the Transcript itself, that is not, it seems to me, the case here.
The joint submission
Having reached agreement as to the manner in which the application for leave to appeal and the appeal should be resolved, the parties clearly appreciated that they would need to satisfy this Court that the primary judge erred and that there is a proper basis for this Court to allow the appeal and set aside the orders the subject of the appeal because they presented an agreed statement, entitled “Joint submissions on compromise of appeal”.
The contents of the joint submission include the assertions that:
(a)“the parties agree that the appeal is to be allowed on the basis of an error of law, specifically, that the appellant was denied procedural fairness (Ground 2); that Her Honour’s reasons for making the orders she did were inadequate (Ground 1); that orders were made without evidence to support same (Ground 3); and that her Honour did not identify the source of power she engaged when ordering the sale of the property or payments of lump sums to the parties (Ground 4)” (paragraph 7); and
(b)the respondent “quite appropriately” concedes Grounds 1–4 and “in particular that the Division 2 judge failed to afford the appellant procedural fairness in not dealing with her application to adjourn, particularly where the husband sought orders to sell her property (which she wanted to keep on a final basis) only on the day of the hearing” (paragraph 8); and
(c)“[h]aving regard to the proposed orders, the Respondent’s consent to same, and the Appellant’s submissions filed 8 November 2021, the Court ought be satisfied that the appeal be allowed on the basis of an error of law” (paragraph 9).
Conclusions in relation to leave to appeal and the appeal
Whilst s 94AA of the Act has been repealed and replaced by the substantially similar s 28 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), there is no reason to doubt the correctness or continued applicability of Medlow& Medlow (2016) FLC 93-692, where the Full Court said, at [57], that:
…the test to be applied in applications for leave to appeal under s 94AA of the Act is whether, in all of the circumstances, the decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and whether substantial injustice would result if leave were refused, supposing the decision to be wrong.
(Emphasis in original)
Having regard to the interim orders made, the Transcript of the appearance on 28 July 2021, the grounds of appeal particularised in the Notice of Appeal, the Summary of Argument and List of Authorities filed on behalf of the appellant on 8 November 2021 and the respondent’s acceptance of the contention that her Honour erred, I am easily satisfied that her Honour’s decision is attended by sufficient doubt to warrant it being reconsidered by the Full Court and that, supposing the decision to be wrong – as I have also easily concluded is the case – substantial injustice would result if leave were refused.
Having regard to the same matters, I am also easily satisfied that her Honour erred in the manner contended by the appellant. Consequently, I propose that the appeal should be allowed and the orders set aside. Given this conclusion, it is unnecessary to express my conclusions about all of the matters attendant on her Honour’s determination that give rise to concern.
However, I consider it appropriate to record my conclusion that, in excising the discretion to order that the appellant pay all of the costs of the valuation of real property, her Honour appeared to allow the extraneous or irrelevant matters[12] of:
(a)the appellant’s asserted failure to “come to the party”, given that the respondent had commenced proceedings nearly 12 months earlier; and
(b)the appellant previously having been “on the cusp” of facing a contempt application (which, as I understand it, was a reference to her previous failure to disclose the address of the house in which she was living, in circumstances where she had obtained a protection order against the respondent),
to affect her exercise of the same.[13] Such considerations also seem to have influenced, at least in part, her Honour’s decision to order that the appellant receive $50,000 rather than $200,000 from the net sale proceeds of the home.[14]
[12] House v The King (1936) 55 CLR 499 at 504-505.
[13] Transcript 28 July 2021, p.20 line 41 to p.36 line 2.
[14] Transcript 28 July 2021, p.27 lines 5–12.
I also consider it appropriate to record my conclusions that, in deciding to order that the appellant’s home be sold and that, following the sale of the same, the respondent be paid the sum of $200,000 (in the exercise of an unidentified source of power), her Honour:
(a)failed to take into account the material consideration[15] that, given her acceptance that the respondent “has no property”,[16] the consequences of her order could not be remediated or “clawed back”[17] if the appellant was ultimately successful on her contention that, on a final basis, no orders adjusting the interests of the parties in property should be made;[18] and
(b)erred by proceeding to consider the amount sought as a percentage of the total net value of the property of the parties given that the constitution and quantification of the same was the subject of significant dispute and amounted to a triable issue about which no interim finding could properly have been made; and
(c)failed properly to consider that more than the mere fact that, on a final hearing, the respondent would receive (a matter of significant contention in this case) an amount in excess of the funds being sought from the appellant is required in order to establish an appropriate case for an interim property settlement order (if that was, in fact, the source of power relied on for the making of the interim orders made).[19]
Applications for costs certificates pursuant to the Federal Proceedings (Costs) Act1981 (Cth)
[15] House v The King.
[16] Transcript 28 July 2021, p.28 lines 21–22.
[17] Zschokke & Zschokke (1996) FLC 92-693 at 83,220.
[18] See, for example: Strahan & Strahan (Interim property orders) (2011) FLC 93-466.
[19] Strahan at [139].
The parties agreed that there should be no order for costs as between them. They also agreed that each should be granted a costs certificate pursuant to the applicable provisions[20] of the Federal Proceedings (Costs) Act1981 (Cth) (“the Costs Act”).
[20] Section 9 insofar as the appellant is concerned and s 6 insofar as the respondent is concerned.
It is well-established that there are three preconditions for the grant of a costs certificate under the applicable sections of the Costs Act.[21] I accept that these preconditions – namely, that there is a “federal appeal”, that the appeal succeeded on a question of law and that the relevant court should have heard the appeal – are satisfied in this case.
[21] See: Cramer v Davies (1997) 72 ALJR 146 per Kirby J; B and B (Cost Certificates) (2007) FLC 93-339.
However, neither the satisfaction of the preconditions nor the parties’ agreement that each should be granted a costs certificate under the Costs Act fetters this Court’s discretion to determine whether it is of the opinion, in the circumstances of this case, that it would be appropriate for the Attorney-General to authorise a payment under the Costs Act to each of the parties in respect of the costs each have incurred in relation to the appeal.
Having regard to the interim orders made, the Transcript of the appearance on 28 July 2021, the grounds of appeal particularised in the Notice of Appeal, the Summary of Argument and List of Authorities filed on behalf of the appellant on 8 November 2021 and the conclusions I have expressed above, I am satisfied that the appellant should be granted a costs certificate pursuant to s 9 of the Costs Act.
However, I am not of the same view in respect of the respondent’s application for the grant of a certificate pursuant to s 6 of the Costs Act because I consider that the respondent (on whose instructions counsel who then appeared for him is presumed to have acted) contributed to the errors which he now accepts her Honour made by, for example, opposing the application to adjourn the matter when this was made by counsel who then appeared for the appellant. Further, I also consider that the respondent contributed to her Honour’s errors by failing to identify clearly the source of power relied on for the orders sought and by failing to address clearly those principles applicable for the exercise of the same.
In addition, given that the Notice of Appeal was filed on 23 August 2021 and the Transcript of the 28 July 2021 appearance was available to the parties no later than 3 November 2021 (when the Appeal Book was filed), I consider the decision to concede the appeal on the day before it was listed to be heard to be unreasonable. Had such decision been made earlier, then the respondent would have avoided much of whatever costs associated with the appeal he has incurred.
Give the matters outlined above, I consider it inappropriate to expect the public purse to meet any of the respondent’s costs associated with this appeal and, consequently, I would decline to grant a costs certificate for the respondent; I propose that his application for the same is refused.
Having regard to the above, I propose that the following orders are made:
1.The appellant has leave to appeal.
2.The appeal is allowed.
3.Orders 4, 5, 7 to 11 inclusive, 16(d) and 18(c) of the orders made on 28 July 2021, as amended on 3 August 2021, are set aside.
4. As to the real property located at …, Town W, Queensland (more particularly described as Lot … , title reference …), the respondent (at his expense, if any) take all steps necessary:
4.1.to have his name, as Trustee for Sale (as recorded under Titles Registry dealing number …), removed from the title so as to reinstate the wife as the registered owner;
4.2.to register a withdrawal of the caveat registered under Titles Registry dealing number … from the title; and
4.3.to discharge all orders sought in support or furtherance of that caveat (including those set out in Titles Registry dealing number …).
5.The outstanding interim applications be remitted to a judge of the Federal Circuit and Family Court of Australia (Division 2) other than the primary judge.
6.There be no orders as to costs as between the parties.
7.The appellant be granted a costs certificate pursuant to the provisions of 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 her in relation to the appeal.
8.The respondent’s application for a costs certificate under the Federal Proceedings (Costs) Act 1981 (Cth) is dismissed.
HARPER J:
I agree with the orders proposed for the reasons given by Hogan J.
ALDRIDGE J:
I also agree, and the orders of the Court will be as proposed by Hogan J.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justices Aldridge, Hogan & Harper. Associate:
Dated: 11 February 2022
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