Property – Injunctive relief to preserve the integrity of a family business where the respondent and son set up a business in direct competition

In Grimmond & Hartin [2021] FedCFamC1F 107 (7 October 2021) Berman J heard an application by a de facto wife for injunctive relief against the de facto  husband and one of the adult children of the relationship.

The parties were in a de facto relationship from 1988 to 15 June 2020 and had two adult children of the relationship, “X” and “Y”.

The parties were the owners and operators of a successful business C Pty Ltd (“CPL”). The adult child X was an employee of CPL.

In 2020, after the wife refused a request to transfer her shares in CPL to X, the husband and X incorporated a company “B Pty Ltd”. Concerned that B Pty Ltd would be in direct competition with CPL, the wife instructed her solicitor to write to the husband’s solicitor raising her concern. The husband was removed as a director and shareholder of B Pty Ltd in late February/early March 2021.

The wife amended her Initiating Application joining X as second respondent and B Pty Ltd as third respondent. She sought various interim restraints against the three respondents in relation to the operation, property and clients of CPL, competition with CPL and orders for discovery. She did not seek final orders against the second and third respondents but sought to retain as much of the customer base as possible to enable the current state of the business to maintained before it was sold.

The Court said (from [67]):

“In considering the nature of injunctive relief sought by the applicant, it is important to be aware of the general principle that ‘equity intervenes to the minimum extent necessary to do justice’ [ed. Norton & Lock (2013) FLC 39-567]

[68] In the context of family law proceedings, in Sieling & Sieling [1979] FamCA 23; …  the Full Court said:

‘The power to grant injunctions is, of course, a discretionary power, not to be exercised lightly. The Court must balance the hardship to each party of granting or refusing an order, and frame its order in such a way as to impose no further restriction that is necessary to achieve the protection of the applicant’s interest. It will not lightly interfere with the rights of an owner of property on the basis of a vague or uncertain claim.’

( … )

[80] It was not argued that the Court does not have power to make an order of injunction directed to a third party but rather that the Court should decline to do so in circumstances where the second respondent was a mere uncontracted employee of CPL.

[81] I consider that I have power to make an order against the second and third respondents pursuant to s 114(2A)(c) and s 114(3) of the Act.

[82] I have also considered whether a common law restraint might apply to information that an employee can access after leaving a business.

[83] If there is no contract or expressed term of confidentiality in an existing contract, a duty of confidentiality may be implied. The Court in Faccenda Chicken Ltd v Fowler [1985] 1 All ER 724 categorised information that an employee may come across in their employment as trivial information, knowhow or trade secrets.

[84] Trivial or well-known information cannot be protected.

[85] It is likely that knowhow can only be protected through a reasonable restrictive covenant that restrains the employee from competing with the employer for a period of time that in all the circumstances is considered reasonable and not onerous.

[86] The question therefore is what information could be considered a trade secret. The test is whether the information can be regarded as part of an ‘employee’s stock of knowledge’ (Printers and Finishers Ltd v Holloway [1965] 1 WLR 1) or whether it would be considered property of the employer. … [A] trade secret may include information to which a high degree of confidentiality would apply.

[87] In the decision of Ormonoid Roofing & Asphalts Ltd v Bitumenoids Ltd [1930] NSWStRp 88; (1930) 31 SR (NSW) 347 at 354 Harvey CJ considered the status of an attempt to use a client list of an employer or to entice a customer of the employer to transfer their business to another entity in the following terms:

‘… [W]here an employee has in the course of his employment and for the purposes of his employment has obtained particular information with regard to his employer’s business such as knowledge of processes, details of management or particulars of customers which have been stored up in his mind as a necessary consequence of the way in which his master employed him, there is no justification in the absence of express contract, for preventing him from making use of that knowledge.’

[88] In … Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979; … Young J considered that the proposition of John Dyson Heydon in The Restraint of Trade Doctrine (Butterworths, 2nd edition, 1999) at 80 was correct law:

‘The … employee can approach a particular customer or client whom that employee can recall without a list or deliberate memorisation.’

[89] [X] denies that it was his intention or plan to make use of confidential information including client lists, company processes and trade secrets.

[90] The evidence relied upon by the applicant presents an arguable case that [X] initially with the assistance of [the husband] but then apparently on his own, utilised information with an employee’s assistance to set up B Pty Ltd, obtain credit and indicate a position that B Pty Ltd was to be in direct competition to the business of CPL either in whole or in part.

[91] The communication passing between [X] and [the wife] demonstrates a clear mindset that he holds her in low regard and would be unconcerned if her interest in CPL was significantly diminished in value.

[92] Irrespective of what ultimately may be determined as to the motivation of [X] a summary of his evidence is that he did not need to utilise CPL information or trade secrets because the intention is that B Pty Ltd will trade upon the knowledge of the second respondent in respect of the design and development of specialist switchboards.

( … )

[94] … [I]t would be an unreasonable restraint on the ability of [the husband] and [X] to restrain them from approaching existing clients of CPL given the potential clients were memorised by [X] and not obtained from client lists, client documents or personal files. …

[95] I do not consider that there is any justification for an order restraining [X] and [B Pty Ltd] from setting up any company business or trading in competition with CPL in the Northern Territory.

( … )

[97] It would be an unnecessary incursion into the financial affairs of B Pty Ltd to require it to account to CPL for profits received by the use of company information and any clients that have transferred their business to CPL.

[98] In any event, it must be remembered that the proceedings as between the parties do not include a cross vested or accrued jurisdiction claim for damages against [X and B Pty Ltd]. The issue is one of value of CPL, either were it to have been retained by [the husband] or, more likely, its value if sold.

[99] I do not ignore the [wife’s] belief that the [husband] remains highly supportive of [X] and has an allegiance to [X] that transcends his loyalty and duties to the applicant and CPL. …

[100] The issue for [the wife] and [the husband] may not be the actions of [X] but rather the value of which CPL may be brought to account depending upon the conduct of the parties.”

The Court made various injunctive orders against husband, X and B Pty Ltd albeit on a more limited basis than those sought by the wife, and there was no order as to costs.

Child support – Child support departure application summarily dismissed – Court proceedings regarding child support assessments should be the exception rather than the rule

In Panagi [2021] FedCFamC1F 135 (15 October 2021) Harper J heard a father’s application for summary dismissal of a mother’s application for orders under s 117 of the Child Support (Assessment) Act 1989 (“CSAA”) which was made in her Amended Reply.

The parties’ 11 year marriage ended in 2020 and produced two children. The mother commenced property proceedings and the father’s Response sought both property and parenting orders. After the parties’ property matters were finalised by consent and interim parenting orders were made, the mother filed an Amended Reply seeking a departure order for periodic and non-periodic child support.

Registrar Aitken made a range of orders in relation to the mother’s child support application, including requiring the father to file an Amended Response and a Financial Statement and for the exchange of discoverable documents.

The father sought a review of those orders and that the mother’s child support application be heard summarily or separately.

After reviewing the relevant rules, the Court said (from [31]):

“ … [T]he question of the mother’s evidence has been squarely raised. It is trite law that on an application for summary disposal of a claim, the respondent’s evidence should be taken at its highest, unless inherently incredible or unreliable …

[32] … I am satisfied the mother’s application should be dismissed because she failed to adhere to the 2004 Rules in material respects, with the consequence that she has provided no evidence or factual basis upon which her claim to child support departure orders could be arguably sustained or her prospects assessed.

( … )

[34] … Rule 4.17 required an application under the [CSAA] to be made in accordance with an Initiating Application (Family Law). Rule 4.18 required the applicant to file an affidavit setting out the facts relied upon in support of the application. The mother did not do any of these things. Rather she used the tactic of amending a Reply which also sought parenting orders. … [S]he argues this was permissible.

[35] The Reply itself was a Reply to the father’s Response to an Initiating Application which raised parenting orders in response to property orders sought by the mother in her Initiating Application. Therefore the mother opposed the Father’s parenting orders, and sought ‘different orders in the cause of action mentioned in the Response’ which was the criterion for a Reply in r 9.04 of the 2004 Rules. Therefore I am satisfied the Reply was filed in accordance with r 9.04. … [T]he Amended Reply was not.

( … )

[37] … The mother’s application under the [CSAA] was … a different cause of action brought under an entirely different statute. … This was not authorised by the 2004 Rules. … It was open to the mother to apply to the Court for leave to do so … But she did not take such a course.

[38] Even if the mother could justify not employing an Initiating Application … and even if I am wrong in my conclusion about the Amended Reply raising an entirely different cause of action … her claim to child support departure orders was not supported by any affidavit as required by r 4.18. …

( … )

[41] The father contended that the mother had failed to establish jurisdiction by way of Division IV of the [CSAA] as she did not satisfy s 116(1)(b)(i) and (ii) ( … )

( … )

[42] The Full Court has made clear that without a finding by the Court that s 116(1)(b) is fully satisfied, the Court would not have jurisdiction to hear and determine an application under s 117 of the [CSAA] ( … )

[43] … Numerous decisions under the [CSAA] have held court proceedings regarding child support assessments should be the exception rather than the rule because the [CSAA] establishes a detailed administrative framework to deal with child support applications. The circumstances in which departure applications are to be heard by the Court are limited, given the desirability of such issues being determined in a manner characterised as being less adversarial, whilst, at the same time, remaining fair ( … )

[44] The mother provided no evidence, and made no submissions, as to why the circumstances of the present matter are ‘special’ nor why it would be in the interests of both parties for the Court to consider making child support departure orders …

[45] The mother maintained that a determination that considers s 116(b)(ii) of the [CSAA] can only be made upon complete consideration of the evidence adduced by each party at a trial. … [T]his cannot be correct. If this submission was accepted, any claim for child support departure orders would be maintainable to final hearing. ( … ) If the mother had complied with those rule and filed an affidavit setting out the facts which she contends would support her departure orders, there would be some factual basis to assess her prospects of success. But there is none. A claim does not have reasonable prospects of success just because it is made.

[46] … I am not satisfied the mother’s [child support] claims … have any reasonable prospects of success. …”

Property – Leave to proceed out of time refused – Hardship established, but unsatisfactory explanation for delay where de facto wife was advised to start proceedings on multiple occasions

In Welland & Hawthorn [2021] FedCFamC1A 43 (28 October 2021), the Full Court (Austin, Rees and Wilson JJ) heard an appeal from Judge Boyle’s dismissal of an application for leave to bring property settlement proceedings out of time.

The duration of the parties’ de facto relationship was in dispute, the Court finding that separation occurred in February 2016. As the de facto wife filed her application in November 2019, it was 20 months out of time. There were two children of the relationship, who lived with the de facto wife while the de facto husband was incarcerated, but lived with the de facto husband upon his release.

The de facto wife said that she relied upon assurances from the respondent in 2017 and 2018 that he would make some form of financial provision for her. She engaged multiple solicitors between 2017 and 2019 for the purpose of bringing proceedings but failed to do so.

Judge Boyle was not satisfied with the applicant’s reasons for the delay and dismissed the application for leave to extend time under s 44(6) of the Family Law Act 1975.

As to the proposed appeal, the Full Court said (from [16]):

“The Full Court recently had occasion to affirm that the application of s 44(6) of the Act entails satisfaction of its criteria by sequential steps (Arcand & Boen [2021] FamCAFC 155. First, the applicant must demonstrate hardship and, if that hurdle is surmounted, must still persuade the exercise of discretion in his or her favour to extend time. ( … )

( … )

[19] The applicant’s point in the appeal was that the primary judge thereby erred by failing, at the second discretionary step, to consider any other factors which would influence the exercise of discretion aside from her explanation for the delay. The submission must be rejected. While other factors may indeed affect the exercise of discretion, there were none that did in the specific circumstances of this case.

( … )

[21] In the absence of any actual prejudice to the respondent, it was only the explanation proffered for the delay which could conceivably influence the exercise of discretion against the applicant. The applicant did not submit otherwise.

( … )

[24] Her Honour concluded this in relation to the hardship alleged by the applicant:

47. The costs of proceedings would not be insignificant, and are a matter that must be weighed into the hardship argument. I accept there would be some financial hardship to the applicant were she not granted leave, but it is not clear that it would be to the extent argued by her.

(Emphasis added)

[25] Having so found in the applicant’s favour, the primary judge moved on to then consider the delay and how it might affect the ultimate exercise of discretion. Her Honour pertinently made this finding in relation to the inadequacy of the applicant’s explanation for the delay:

61. There is no satisfactory explanation of why she did not commence proceedings within the required time frame. …

(Emphasis added)

[26] Whether the primary judge erred by reaching that finding and then determining to dismiss the application is an entirely different question, but the contention under these grounds of appeal of her Honour misdirecting herself as to the essential issues is without merit. The primary judge correctly identified the issues joined between the parties and then decided them.

( … )

[33] It must follow that the applicant cannot sensibly maintain that the evidence obliged the primary judge to contrarily find that her explanation for the delay was adequate … So much was implicitly acknowledged by the applicant in the appeal, because she merely submitted it was ‘open’ to find that her explanation was satisfactory. ( … )”

The Court continued (at [52]):

“The primary judge explicitly accepted the applicant’s evidence about the number of times she was advised to start proceedings but did not do so. The material finding is that the applicant could not have reasonably expected for as long as she did that the respondent would still voluntarily settle the dispute with her. That was an inference permissibly drawn from the available evidence about the reasonableness of her belief, not the repudiation of her subjective belief. The primary judge did not purport to reject any evidence adduced by the applicant about her honest belief in the respondent’s intentions, but the unreasonableness of the applicant’s belief bore upon the inadequacy of her explanation for why she waited so long to start proceedings and whether the discretion to extend time should be exercised in her favour.”

Leave to appeal was refused and the respondent’s application for costs was dismissed.

Children – Conflation of best interests and reasonable practicability considerations – Failure to make a finding as to the reasonable practicability of a substantial and significant time arrangement before ordering return of child to Western Australia from Victoria

In Miley [2021] FedCFamC1A 62 (12 November 2021), Strickland J heard a mother’s appeal against a decision of a magistrate of the Family Court of Western Australia that ordered the return of a child from Victoria to Western Australia.

Following separation in May 2017, the child and parents lived in Western Australia, but the father spent limited time with the child. On 7 January 2021, the mother relocated with the child to Victoria without notice to the father. The father was advised of the relocation on 21 January and on 25 January 2021, he filed an application in the Family Court of Western Australia seeking the child’s return. The mother sought to remain in Victoria but that if the child was ordered to return, that not occur until 24 December 2021. The magistrate ordered the return of the child not before 24 December 2021.

The mother appealed.

Strickland J said (from [23]):

“In simple terms, it is said that before his Honour could make the order that he did, [he] … was obliged to make an affirmative finding that a substantial and significant time arrangement in Western Australia was reasonably practicable, and his Honour failed to make that finding.

[24] … [H]is Honour was alert to the issues raised by the [mother’s submissions] as to the impact of an order for substantial and significant time with the child returning to Western Australia. ( … )

[25] Those submissions were based on matters deposed to in the [mother’s] affidavit … as to her previous difficulties in finding suitable employment in Western Australia, the termination of her employment in [Victoria] if the child was ordered to return to [Western Australia], the need to find suitable accommodation in [Western Australia], the need to break the lease of her accommodation in [Victoria], and her financial circumstances generally. I pause to note that there was no question that if the child was ordered to return to [Western Australia], then the [mother] would return with him …

( … )

[28] However, nowhere in his Honour’s reasons is there a specific consideration of whether the child spending substantial and significant time with each of the parties in Western Australia, is reasonably practicable.

[29] There is no doubt that his Honour considered that the child spending substantial and significant time with each of the parties in Western Australia would be in the best interests of the child, and that finding is not challenged in this appeal, but that is only one of two questions that needs to be asked, and without affirmative answers to both, as the High Court said in MRR v GR [2010] HCA 4, a court is not able to consider making the order.

[30] … [H]is Honour did consider and make findings that would be necessary if he was considering reasonable practicability, but it is not apparent that those findings were made in the context of a consideration of that issue.”

The Court continued (from [37]):

“It is correct that there does not need to be a separate section of the judgment addressing reasonable practicability, but the reasons for judgment need to reveal, expressly or even impliedly, that that question has been considered via reference to the matters identified in s 65DAA(5) of the Act as a separate question to the issue of best interests, and an affirmative answer given (for example see Wainder & Wainder [2011] FamCAFC 155 at [28]–[32], Barone & Barone [2012] FamCAFC 108 at [44]–[45], and Collu & Rinaldo [2010] FamCAFC 53 at [375]).

[38] However, that is not the case here. … [H]is Honour did address one or two of the relevant issues when considering best interests, but it was not open to his Honour to conflate the issues of ‘best interests’ and ‘reasonable practicability’ (see Heaton & Heaton [2012] FamCAFC 139;  at [37]–[38] and Hamish & Brighton [2014] FamCAFC 242 at [38]).”

After finding the appeal must be allowed in part, Strickland J concluded (from [58]):

“ … [T]he question then is whether there should only be a partial remitter, namely of the question of reasonable practicability …

( … )

[63] Despite the submissions, I consider that it is clearly appropriate and necessary for there to be only a partial remitter. There is no basis for the presentation of any evidence beyond evidence relevant to the issue of reasonable practicability; that is the only issue that needs to be determined, and it would not be open to lead evidence beyond that. ( … )”

The appeal was allowed in part, the case was remitted for a partial rehearing as to whether the child spending substantial and significant time with each of the parties is reasonably practicable and costs certificates were ordered.

Children – After completion of appeal proceedings, Full Court unable to stay orders that were not the subject of any juridicial challenge

In Langley & Tarelli (No. 3) [2021] FedCFamC1A 67 (16 November 2021) Austin J heard a self-represented mother’s application in an appeal. She sought a stay of the Full Court’s orders, or alternatively, that they be set aside and that a further interim injunction be made.

Final parenting and property orders were made by Henderson J in December 2020 which included an order for the child to live with the mother and spend limited time with the father. On 5 July 2021, the father’s appeal from those orders was successful and the orders were temporarily stayed pending submissions as to the interim arrangements that would govern the children’s care pending a rehearing. On 6 October 2021, interim orders were made providing for the child to live with the father, for him to have sole parental responsibility and for the mother to have supervised time.

The mother made an application for special leave to the High Court to appeal the orders of 5 July 2021; and filed her application in an appeal that the interim orders be stayed pending the special leave application being addressed by the High Court ([7]).

The Court said (from [13]):

“While the mother filed with the High Court an application for special leave to appeal from the orders made by the Full Court on 5 July 2021, which is as yet undetermined, no application for special leave to appeal has been filed in respect of the orders made by the Full Court on 6 October 2021. ( … )

( … )

[15] The Full Court has the power to stay its own orders when an appeal or an application for special leave to appeal is pending before the High Court of Australia, but such power should usually be exercised in only extraordinary circumstances (Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) [1986] HCA 84 at 682–684; John Fairfax & Sons Ltd v Kelly (No 2) (1987) 8 NSWLR 510 at 511–512; Spencer & Spencer (No. 4) [2020] FamCAFC 254 at [7]–[11]).

[16] … [T]he mother was unable to refer to any authority for the proposition that such power extends so far as to enable the stay of operative and binding orders which are not the subject of any application or appeal to the High Court, as is the case for the orders made on 6 October 2021, particularly when the time for filing of such has expired and no application for an extension of time has been made. Absent authority for the proposition, I am not satisfied such power exists.

[17] Even if the power does exist, the extraordinary circumstances which are required to invoke it apparently do not. The mother admitted she would not accrue any tangible benefit from the orders being stayed, but abstained from explaining why she was then motivated to apply for the stay. ( … )

[18] Nor is the remainder of the mother’s application competent. There is no power to set aside the Full Court’s orders or to make supplementary orders, as she wants. Once the Full Court’s orders were perfected and the proceedings were remitted, appellate jurisdiction was exhausted. Use of the slip rule aside, there is no power to re-open the Full Court’s final orders after their entry (DJL v Central Authority [2000] HCA 17 at 249, 263–264 and 291).

( … )

[20] Since there is no power to grant the relief sought by the mother, the Application in an Appeal filed on 3 November 2021 is incompetent and should be dismissed.

Property – Bankrupt appellant lacked sufficient interest to prosecute appeal

In Glover & Webster [2021] FedCFamC1A 69 (19 November 2021) the Full Court (Strickland, Ainslie-Wallace and Aldridge JJ) heard an appeal from a decision of Baumann J relating to a binding financial agreement (“BFA”).

The parties were in a relationship from 2010 to 2015. They entered into a BFA in July 2010. Following separation, the de facto husband sought a declaration that the BFA was binding. The de facto wife sought a declaration that the BFA was not binding or in the alternative, that there was property not captured by the terms of the BFA and she sought orders in relation to that property.

At a discrete hearing, the Court declared the BFA as binding and made trial directions, including orders for the appointment of an expert to forensically analyse the respondent’s business – the Court ultimately finding that the BFA covered all assets of the parties and there were no assets not covered by the BFA. The de facto wife appealed, but was then made bankrupt.

The trustee in bankruptcy advised the Court that pursuant to s 60(2) of the Bankruptcy Act 1966, he would not prosecute the appeal but that he did not oppose or consent to the appellate continuing the action.

The Court said (from [25]):

“Counsel for the … respondent reiterated his submissions … that the right to appeal vests with the Trustee, the Trustee has elected not to pursue the appeal and thus, the … appellant had no standing to prosecute the appeal.

[26] It was further submitted … that ‘if there is property which was not covered by the [BFA], [the appellant] does not have sufficient interest in the outcome to maintain the Appeal’ …

[27] The … appellant … submitted that “[the Trustee] has simply opted not to litigate on behalf of the trust himself, rather he left it open to the court to decide ( … )”

Considering the question of the bankrupt’s interest in the order that was subject of appeal, the Court said (from [28]):

“The answer to [that] question … depends on the characterisation of the order from which this appeal is brought and the interest in that order (O’Neill & O’Neill and Ors [1998] FamCA 67 …

[29] Where a person is made bankrupt, the effect of the order is that on one hand, all of the divisible property of the bankrupt vests in the Trustee and, on the other, the bankrupt’s creditors’ rights and remedies against him or her are converted into rights to prove in the bankruptcy.

[30] Fundamental to the bankrupt being relieved of both his property for the benefit of his creditors is that the bankrupt has no financial interest in an appeal such that he may continue it in his own name after being made bankrupt.

( … )

[33] This concept has been applied in the family law context. Whilst a bankrupt party can commence property settlement proceedings, in Guirguis & Guirguis [1997] FamCA 6 … the Full Court accepted that a bankrupt party cannot appeal property orders where the subject of the orders vests or will vest in the trustee in bankruptcy, because the bankrupt lacks sufficient interest.

( … )

[38] If the appeal from the declaration in this matter was successful, and the declaration set aside, then there would either be the re-exercise of the discretion, or a rehearing of the question of whether there was property not covered by the BFA, and if there was, then the … appellant could pursue an application pursuant to s 90SM of the Act seeking an entitlement to some or all of that property. However, as an undischarged bankrupt, any property that she thereby became entitled to would then vest in her trustee in bankruptcy as after-acquired property pursuant to s 58(1)(b) of the Bankruptcy Act.

[39] It follows … that the appellant does not have sufficient interest in the order the subject of the appeal to give her standing to prosecute the appeal. As the trustee does not wish to pursue it, the appeal must be dismissed.”

Children – Maternal aunt considered inappropriate as mother’s litigation guardian, despite her existing appointment as mother’s guardian by the South Australian Civil and Administrative Tribunal

In Remington [2021] FedCFamC2F 99 (27 September 2021), Judge Kari heard an application for the appointment of a litigation guardian for the respondent mother in parenting proceedings in relation to an 11 month old child “X”.

The 27 year old mother had been diagnosed with a number of cognitive impairments and was the subject of a state guardianship and administration orders appointing the maternal grandmother and the maternal aunt as guardians and limited administrators of the mother. There had been numerous police interventions involving the mother’s behaviour towards the maternal grandmother and aunt.

The maternal grandmother sought orders providing for X to live with her and for her to have sole parental responsibility. The presumed father was not party to the proceedings and his whereabouts were unknown. The maternal aunt (“Ms E”) initially participated in the proceedings as the “legal guardian” of the mother.

After reviewing the report prepared by the State Welfare authority, Judge Kari said (from [52]):

“On any view of the evidence that is before the court, there must be significant concerns about the mother and her ability to conduct these proceedings as a consequence of:

(a) The successive orders that have been made by SACAT confirming the mother’s need for a Guardianship and an Administration order, and particularly that an Administration order has been made specifically relating to the conduct of legal proceedings;

(b) The mother’s significant cognitive impairment; and

(c) The mother’s deeply concerning presentation when she was assessed on 7 April 2021.

[53] … I am satisfied:

(a) That the mother does not understand the nature of these proceedings nor the possible consequences of these proceedings; and

(b) That the mother is not capable of adequately conducting, or giving adequate instructions for the conduct of these proceedings.

( … )

[56] While there is not an affidavit from the maternal aunt Ms E, the court can be satisfied that as a consequence of the orders that have been made by SACAT appointing her (together with the maternal grandmother) both a guardian and an administrator of the mother’s affairs, that she is both an adult and that she can ‘fairly and competently conduct the proceedings’ for the mother.

[57] The issue however is that for the reasons that have already been discussed the maternal aunt appears to have an interest in the litigation that is adverse to that of the mother … I have come to this conclusion for two reasons, firstly because Ms E has advised the court at the two hearings that she has appeared, that she supports the application of the maternal grandmother. Secondly, as a consequence of the information contained in the report from the Department for Child Protection dated 31 August 2021 which makes it clear that Ms E and the maternal grandmother work together to manage the competing obligations that they have towards the mother and the care of the child.

[58] It is for all of these reasons that I do not consider it appropriate that the maternal aunt, Ms E be appointed as the litigation guardian of the mother.

[59] Moreover, as there has been no compliance with Rule 3.15(3) which requires Ms E to file an affidavit confirming her willingness to undertake that role, the court can not in any event appoint the maternal aunt, Ms E as the mother’s litigation guardian, even if inclined to do so.

( … )

[61] It is at the forefront of my mind that the mother is the subject of an order in the State of South Australia appointing the maternal grandmother and the maternal aunt, Ms E as the manager of her affairs.

[62] In particular, the administration order that has been made relates specifically to the conduct of legal proceedings, being a personal injury claim in the Adelaide Magistrates Court on behalf of the mother.

[63] While the orders made by SACAT would entitle either the maternal grandmother or the maternal aunt, Ms E to be appointed as the mother’s litigation guardian, for the reasons that I have already given, it is my firm view that either of those persons are inappropriate given their conflicting interests.

[64] As a result, the court, and indeed the maternal grandmother and maternal aunt, Ms E are left in an invidious position.

[65] The court accordingly sees no other option but to request that the Attorney General appoint a manger of the affairs of the mother, and that thereafter that person be appointed as the litigation guardian of the mother for the purposes of these proceedings.”

Property – Amended versions of arbitral award invalid and incapable of registration – Arbitrator became functus officio upon making the first award under regulation 67P of the Family Law Regulations

In Wright & Rebane [2021] FedCFamC1F 154 (21 October 2021), Wilson J heard an application where the parties had attended arbitration and an arbitral award had been made.

After the arbitration, the arbitrator published his award at 10.06am on 27 July 2021. At 2.39pm the arbitrator published a “revised” version of the award and at 10.16am on 28 July 2021 the arbitrator published a further revised version of the award. The husband sought the registration of the third version of the award. The wife argued that pursuant to regulation 67P of the Family Law Regulations the arbitrator was required to “make an award” and the provision of the first award brought the arbitration to an end.

The Court said (from [28]):

“Clause 8.2 of the arbitration agreement provided that the arbitration came to an end in any one of the circumstances set out in the eight subparagraphs to that clause, one of which was the delivery of the award. The wording of that clause was different to yet it broadly encompassed the theme of the provisions of regulation 67P of the Family Law Regulations.  ( … )

[29] Early in the debate before me [counsel for the husband] argued that the arbitrator’s award was a document of three numbered paragraphs constituted by the orders made by the arbitrator. When I pointed out to [counsel] that the provisions of Regulation 67P(2) required the award to include reasons – not merely orders – [counsel] stated that the applicable version of the award his client wished to register was the third version, called the further amended award. I took from that statement that [counsel] placed no reliance upon the earlier two versions of the award.

[30] … On behalf of the respondent, [senior counsel] contended that the first award made by the arbitrator was the only award that satisfied the requirement of Regulation 67P and that all later iterations of the award were nullities. … [Senior counsel] submitted that in this case the arbitration came to an end within the meaning of Regulation 67P once the arbitrator made ‘an award’ which he did in this case when he produced the first iteration of the award. Thereafter, subsequent iterations of the award, including the third version of the award on which the applicant relied, were nullities.

[31] [Senior Counsel] contended that in the absence … a supplementary award within the contemplation of … the arbitration agreement, upon the arbitrator making the award under Regulation 67P the arbitrator was functus officio.  ( … )”

As to the argument that the revised versions of the award were pursuant to the slip rule, the Court continued (from [34]):

“[Counsel for the husband] contended that all three versions of the award were valid because the second and third iterations did no more than effect inconsequential minor corrections of little moment, each correction being properly made pursuant to what is colloquially called ‘the slip rule’. [He] argued that each amendment made by the arbitrator was a ‘minor mathematical or other mistake’.

[35] It became necessary to examine whether the amendments made by the second and third awards were, in fact and in law, amendments properly characterised as being made in pursuance of the slip rule. In my view, they were not.

( … )

[42] Aside from the arbitrator not hearing the parties on the proposed alterations to the second and third awards, and aside from the genesis of the alterations made in the second and third awards emanating from the arbitrator himself rather than the parties, the amendments themselves are not mere clerical errors, minor arithmetical issues or other mistakes. They altered the percentages by which property interest were to be divided, quintessentially the exercise of a discretionary power conferred under the Family Law Act. I do not accept that the applicant can so readily slough off the significance of the amendments by arguing that they amount to little more than substituting one number for another. The effect of the alterations translated to a large amount of money. That was no simple slip. Nor was it an amendment raised by a party. Nor were the parties given an opportunity of being heard before the awards were purportedly altered. Instead, without notice to the parties the arbitrator took it upon himself to make the changes over two iterations of the award.

[43] It seemed to me that the arbitrator in producing the second and third awards, not only acted in disconformity with the procedure agreed in [the Arbitration Agreement] but he made substantive alterations that were not in the purported exercise of the slip rule.”

The Court concluded (at [44]):

“ … [T]he second and third iterations of the award are invalid in my view. The only operative award was the first. However neither party sought registration of the first award. It seems to me that the parties should have an opportunity of considering these reasons and that a further mention should be fixed for submissions.”

The husband’s application for registration was dismissed and the wife’s costs application was adjourned.

Property – Kennon – Wife fails to establish that a contribution based adjustment for “systematic family violence” ought then be quarantined from consideration for the purpose of s 75(2)

In Loncar [2021] FedCFamC1A 14 (21 September 2021), the Full Court (Strickland, Ainslie-Wallace & Watts JJ) heard a wife’s appeal from final property orders made by Judge Kemp.

After a 12 year relationship which produced 4 children, the parties separated under the one roof in 2012. The husband vacated the family home in 2015 and the wife remained living there with the children aged 13, 12, 11 and 4. The non-superannuation asset pool was $1,124,594 and superannuation $232,623. Judge Kemp found that “the husband subjected the wife to a systematic pattern of family violence including being choked, cut, kicked, slapped, hit and having household items thrown at her … [and] the wife had been subjected to abusive language and … behaviour … directed not only to her but also at the children” ([16]).

Judge Kemp made a 7.5 per cent adjustment to the wife on the basis of her Kennon claim and a further 10 per cent based on 75(2) factors ([28]). The wife argued that given the contribution assessment was based on the violence by the husband towards her, Judge Kemp erred in not quarantining the contribution adjustment from consideration at the third stage.

The Court said (from [48]):

“In these two grounds, the wife argues a novel point by making three alternate arguments:

(a) that when making an assessment at the third step, the primary judge erred by not acknowledging, when considering s 75(2)(b) of the Act, that the capital provision to the wife, on a contribution based assessment, was 7.5 per cent more of pool one, as a result of the wife’s Kennon [ed full citation Kennon v Kennon [1997] FamCA 27 (‘Kennon’)] argument. The wife asserts that when considering s 75(2)(b) the 7.5 per cent uplift in the wife’s contribution based assessment created by Kennon should have been ignored because it was the result of family violence perpetrated by the husband upon her;

(b) alternatively, the primary judge should have taken into account as a further fact or circumstance under s 75(2)(o) of the Act, that 7.5 per cent of the wife’s capital allocated to her at the end of stage two from pool one was as a result of her Kennon argument; or

(c) alternatively, the primary judge should at the fourth stage have made an adjustment in the wife’s favour because part of what she was receiving as a result of the considerations at the second and third stages flowed from the family violence perpetrated upon her by the husband.

[49] Each of these alternate positions relies upon the notion that any financial advantage the wife has received from her Kennon argument should be quarantined when assessing what was an appropriate, just and equitable property settlement order.

[50] Counsel for the wife conceded before us that these arguments were not made to the primary judge. Ordinarily a party is bound by the conduct of their case (Metwally v University of Wollongong [1985] HCA 28 at [71]). However, ‘where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point’ (Water Board v Moustakas [1988] HCA 12). The facts and findings by the primary judge relevant to the argument are beyond controversy. The argument involves an interpretation of the construction of s 79(2)(b) of the Act. It is expedient and in the interests of justice to entertain the point.

[51] In pursuing the argument, counsel for the wife relies by analogy on a class of cases decided in this Court, at a time before the High Court’s decision in Re Wakim, Ex parte McNally [1999] HCA 27 when this Court on occasion was asked to assess claims in tort for common law damages arising out of assault within a family under the 1987 Jurisdiction of Courts (Cross Vesting) Acts of the States in which the case was heard.”

After reviewing the relevant case law, the Court continued (from [54]):

“ … [C]ounsel for the wife argues, by analogy that the 7.5 per cent ‘adjustment’ that the wife received because her contributions had been made significantly more arduous by the husband’s perpetration of systemic family violence, be disregarded when considering s 79(2)(b) of the Act and that the primary judge erred … when his Honour took into account the whole of the disparity in the parties’ capital positions as a result of the contribution based assessment.

( … )

[61] … [I]n our view the application of the principles articulated in Kennon does not fall within the same rubric as the approach applied in the cases relied upon by the wife, which are claims in tort.

[62] In 1975 the Act deliberately set out to exclude conduct from the assessment of financial adjustment between the parties. The Family Court in Kennon carved out an exception to that general proposition by acknowledging the effect that family violence in particular and conduct more generally might have upon the making of contributions by a party. Given that the acknowledgement is made in respect of contributions, the consideration of a Kennon claim axiomatically happens at the second step although the ongoing effects of family violence maybe a relevant prospective consideration at the third step.

[63] Absent statutory instruction, there is no warrant in s 75(2)(b) to discount the outcome of the analysis under s 79(4)(a)–(c) of the Act based on a Kennon argument. Nor in our view does s 75(2)(o) or s 79(2) create scope for the approach suggested by the wife.

[64] … [W]e find the primary judge did not err in failing to quarantine the 7.5 per cent the wife achieved as a result of her Kennon argument …”

The wife’s appeal was dismissed and no order was made as to costs.

Children – Order vesting the Minister for Families, Communities and Disability Services with parental responsibility preferred over mutual position of parents and independent children’s lawyer

In Secretary, Department of Communities and Justice & Opunui [2021] FedCFamC1A 41 (20 October 2021) the Full Court (Austin, Baumann and Williams JJ) heard an appeal by the Secretary of the NSW Department of Communities and Justice (“the Secretary”) from orders of Hannam J vesting the Minister with parental responsibility for three children of the relationship, aged 15, 14 and 10 years, despite a mutual proposal by the mother, father and the independent children’s lawyer (“ICL”) that the mother have sole parental responsibility.

At the trial, the Secretary sought orders that the mother have sole parental responsibility for the children and that the children live with her, subject to a coercive order compelling both parents to submit to his supervision and obey his direction for 12 months after the orders were made. Despite agreement to that order by the parties and the ICL, Hannam J found that the children were at an unacceptable risk of harm in the care of the mother or the father and therefore rejected the mutual proposal.

The Secretary appealed. The ICL supported the appeal and the parents did not participate.

As to the Secretary’s argument that there was an error at law, the Court said (from [34]):

“The ground is misconceived since it contends one particular finding is ‘unfair and/or manifestly unreasonable’, when that is a ground of appeal which only pertains to a judgment or decree resulting from an exercise of discretion (House v The King [1936] HCA 40).

[35] A finding is open and hence immune from appellate challenge if it is either premised upon or permissibly inferred from foundational evidence (Edwards v Noble [1971] HCA 54…). Consequently, if there was evidence to support the primary judge’s finding that the children were at unacceptable risk of harm in the mother’s care, the Secretary has no cause for complaint about the validity of the finding.

[36] The finding that the children were exposed to an unacceptable risk of harm in the mother’s care comprised two components of risk: first, their exposure to family violence committed by her domestic partners; and secondly, their subjection to sexual abuse by [the mother’s former partner]. ( … )

( … )

[38] Those findings were entirely consistent with the evidence adduced before the primary judge. … [T]he Secretary emphasised several pieces of evidence which it was submitted, in aggregate, should have led the primary judge to instead find the identified risk of harm had satisfactorily abated …

[39] The Secretary submitted that ‘having failed to traverse’ those pieces of evidence in the reasons for judgment, it was ‘unreasonable’ for her Honour to make the relevant finding about the risk of harm, but flaws in the argument are insuperable.

[40] … [S]ome of that evidence actually was canvassed in the reasons for judgment.

[41] … The primary judge’s conclusions were well open on the evidence discussed at great length in the reasons for judgment and so no question of the ‘reasonableness’ of alternate findings arises.

( … )

[47] … In effect, the Secretary contended the primary judge could have found otherwise, but that is not enough to sustain the appeal. Unless the evidence obliged the primary judge to find otherwise, this complaint about the finding of risk being ‘unfair and/or manifestly unreasonable’ must fail. The Secretary’s contentions certainly did not rise to that standard.”

The Court continued (from [57]):

“Having found the children were exposed to unacceptable risks of harm in the mother’s care, it was wholly unsurprising the primary judge refused to make orders requiring the children to live with her. The only alternative was to vest the Minister with parental responsibility.

[58] In effect, the Secretary’s submissions … amounted to criticism of the primary judge for conferring parental responsibility upon the Minister when it was known the Minister intended to use such authority to ensure the children continue to live with the mother anyway. But the criticism can be immediately rejected because the only other alternative was untenable. Her Honour’s finding that the mother poses an unacceptable risk of harm, the validity of which finding we have already addressed under the preceding grounds, was decisive.

[59] The choice confronting the primary judge cast into stark relief the statutory mandate that the children’s best interests must be the paramount consideration in determining the proceedings (ss 60CA and 65AA). Having rejected the Secretary’s case that the mother would be satisfactorily protective of the children and instead having found she posed an unacceptable risk of harm to the children, how could the primary judge, in good conscience, then make an order compelling the children to live with the mother? Such an outcome would have been an abrogation of the primary judge’s statutory duty to accord paramountcy to the children’s best interests and would absurdly contradict the findings of risk made against the mother.

[60] If the Minister chose to exercise the parental responsibility granted to him by leaving the children in the mother’s care, that was his prerogative, but it was not a decision the primary judge was willing to endorse by an order made under the Act.

[61] The Secretary could not be forced to submit to the jurisdiction exercised under the Act (Secretary of the Department of Health and Human Services & Ray & Ors [2010] FamCAFC 258 … but once the Secretary decided to participate in the federal proceedings and forsake any separate care proceedings under the State Protection Act in a State court, the orders which could be made by the primary judge were those available under the Act. By his voluntary intervention in the federal proceedings, the Secretary then had all the same rights, duties and liabilities as any other party (s 91B(2)(b)).

[62] There is no doubt the primary judge had power under the Act to make an order allocating parental responsibility for the children to the Minister (D-G of Department of Human Services (NSW) & Tran & Anor [2010] FamCAFC 151 … ; Faulkner & McPherson v Rugendyke; Department of Community Services (Intervener) [1995] FamCA 82). Rather, the issue was whether or not such order should have been made.

[63] Despite the Secretary being reluctant to accept the Minister’s conferral with parental responsibility, there is a clear distinction between reluctance to accept it and refusal to accept it. Had the Secretary steadfastly refused to accept an order conferring parental responsibility for the children upon the Minister, the order could not have been made (Ray at [81]–[83]). No litigant can be forced, against his or her will, to allow a child to live or spend time with him or her. Nor can a person be forced to accept the burden of parental responsibility for a child. Normally, orders made in respect of children under Pt VII of the Act confer obligations upon litigants who willingly and actively compete for such obligations. The Minister is no different.

[64] Significantly though, at no stage did the Secretary refuse to accept an order conferring parental responsibility on the Minister. It would have been quite extraordinary for the Secretary (as an instrument of executive government and a responsible litigant) to voluntarily engage in the litigation but then give the primary judge an ultimatum by demanding her Honour only make the orders for which he applied and refusing to submit to any others. Instead, the Secretary resisted the primary judge’s inclination to allocate parental responsibility to the Minister, but accepted such an outcome was open. At this juncture, it will be remembered that the Secretary opposed, but nonetheless accepted, the Minister’s conferral of parental responsibility for the children pursuant to the interim orders made on the ICL’s application in July 2018.”

The Appeal was dismissed and no order was made as to costs.