Maintenance – Combined effect of facts supported a finding that the husband was unable to support himself adequately – Court erred when ordering a partial property settlement by failing to consider whether it was capable of being taken into account in final property settlement

In Jabara & Gaber [2021] FedCFamC1A 26 (5 October 2021), Ainslie-Wallace J heard a wife’s appeal from interim orders made by Judge Obradovic that ordered her to pay the husband interim spousal maintenance of $500 per week and $100,000 by way of partial property settlement for anticipated legal costs.

The parties married in 1997 in Country D and immigrated to Australia in 2008. The wife worked as a health care professional and the husband was the primary homemaker but worked as a driver post separation. There were 4 children of the relationship, the youngest was 16 years old. Following separation in 2017, the four children remained living with the husband. One of the children lived with the wife from 2018.

The husband argued that he was primarily dependent on the wife for support and could not work outside the home due to his care of the children. The wife contended that the husband was able to adequately maintain himself and was not entitled to maintenance.

The Court said (at [32]):

“The primary judge’s determination that the husband was not able adequately to support himself was a conclusion which rested on the evidence … [T]he submissions on this ground take each of the matters on which the primary judge relied, and in relation to each, contend that that matter, of itself … is insufficient to prove the point. To do so fails to understand the process by which conclusions based on the facts are drawn. It might properly be said that none of the individual matters referred to in the particulars alone would support a finding that the husband was unable to support himself adequately, however it is their combined effect on which the primary judge relied in coming to that conclusion (see Shepherd v The Queen [1990] HCA 56 … )”

As to the partial property settlement, the Court said (from [41]):

“… It was argued that the primary judge failed to assess the parties’ ultimate entitlements on a final hearing and whether the order sought was capable of being taken into account in the final property settlement.

[42] There appears to be dispute between the parties as to their respective initial financial contributions and the extent of the husband’s financial contributions during the relationship. … [T]he husband purchased a property in Sydney in 2001 which is registered in his name. … [I]n his financial statement, the husband asserts that he holds that property on trust for himself, his mother and his five siblings. … The values attributed to the husband’s … properties is in dispute.…

( … )

[52] … [H]er Honour made no assessment of the nature and quality of the husband’s claim to an order for property, she made no assessment of the various contributions whether financial or otherwise, nor did she turn her mind to what adjustment, if any, might be made pursuant to s 75. … [T]he primary judge had no basis or reference point by which she could be satisfied that the amount sought by the husband was within what he will likely receive by way of final property settlement.

[53] Aligned to that argument was the contention that the primary judge erred in failing to give consideration to if the husband’s assertion that he does not hold the whole of the beneficial interest in the Sydney property, is established. This is especially acute where, as here, the order is to pay legal costs and once paid are gone and the court would have to look to other sources or entitlements of from which there could be an adjustment or payment back of some or all of those funds if it is necessary when the final property orders are made.

[54] … [I]f the husband did hold the legal and beneficial interest in the Sydney property, it would provide him with a means by which the contemplated order could be reversed or otherwise taken into account. If, on the other hand, he, as he assert[s], holds only a 1/6 interest in that property, there is no source of funds or other entitlement from which that necessary adjustment could be made.”

The Court dismissed the wife’s appeal of the maintenance order but allowed her appeal against the partial property order and remitted that application for rehearing.

Children – Interim return of children to mother after her unilateral relocation – Paucity of evidence of father’s work hours indicative of the children being in the primary care of their paternal grandparents

In Leandra & Randles [2021] FedCFamC1A 51 (5 November 2021), Ainslie-Wallace J heard a mother’s appeal against interim parenting orders providing for 6 and 3 year old children to live with the father in Town D. The mother had unilaterally relocated with the children from Town D to Suburb F, two and a half hours away. Judge Terry ordered that the children return to live with the father in Town D and if the mother returned to live in Town D, the children live with her. The mother returned the children to the father in March 2021 and the children had lived with the father ever since.

As the appeal was allowed by consent, the parties asked the Court to determine the interim parenting arrangements.

As to the father’s availability to care for the children, the Court said (from [38]):

“The father’s working arrangements and his availability to care for the children has been a matter in issue between the parties since the proceedings commenced … There was no challenge to the mother’s account of the father’s working pattern before they separated, that is, he would be away a week or perhaps more at a time.

( … )

[46] The mother’s evidence was that since the children have lived with the father they have in fact lived with their paternal grandparents during the week and spent the weekends with the father. …

( … )

[50] The father’s hours of work and the care arrangements he has put in place for the children while he is working are clearly relevant.  …  The sum total of the father’s evidence about his hours of work is … opaque at best, and one can only conclude deliberately so …  The father’s failure to either respond to the letters from the mother’s solicitor and to give detailed evidence on this issue is inexplicable …

[51] There is sufficient doubt and insufficient evidence on which I could … accept the submission of the father’s counsel that he is the children’s primary carer and is attending to all of their daily needs. … [T]his is not to suggest that working parents do not or should not rely on family members to support their care of children. The father’s family, it was agreed, had been extremely supportive of the parties and their efforts to work and care for the children both before and after separation. Neither paternal grandparent gave evidence as to the arrangements for the children. Counsel for the father submitted that it would be ‘unusual’ in an interim hearing to adduce third party evidence ( … )

[52] … [T]he mother contends that it is the children’s paternal grandmother who is primarily caring for them, not the father and the father’s deliberate refusal to provide full details of his employment commitments lends support for that contention. The evidence as it stands supports for her assertion.”

The Court concluded (from [80]):

“I am thus of the view that these children’s best interests are served by their being returned to their mother’s care pending the final hearing. In coming to that decision I am conscious that it will necessarily involve another move for these two very little children whose residence has already changed twice and, all things being equal might have weighed heavily against a further change.  However … I am of the view that a return to the primary care of the mother will best serve the children’s best interests as opposed to stability in their present living arrangement.

[81] … [G]iven the paucity of evidence of the father’s working hours and the arrangements made for the children in his absence, it seems likely that children are more likely than not spending substantial time in their grandparents care, which coupled with their observed distress at the loss of the close contact with their mother, fortifies my conclusion that a change of residence should take place.

[82] … I will order that within seven days of the date of these orders, the children be returned to the mother’s care in Suburb F and I will make further orders for time between the children and the father as sought in the mother’s minute of order.”

Property – Error to exclude latent CGT liability where evidence indicated sale of investment property would occur in near future

In Shnell & Frey [2021] FedCFamC1A 55 (5 November 2021), the Full Court (Watts, Austin and Tree JJ) heard an appeal from a decision of Carew J (Shnell & Frey [2020] FamCA 631, summarised in our archived case notes – property under “inheritance”).

After a 35 year marriage that produced two children, the wife sought an order that the husband pay her $1,860,000 plus a superannuation split of $200,000 and the husband sought an order that she pay him $162,000. Carew J ordered that the parties each retain their respective property, resulting in the husband retaining 48 per cent of the asset pool and the wife 52 per cent.

The wife appealed, arguing that it was not possible to discern how the decision was reached and that the rejection of the capital gains tax (CGT) on the possible sale of a property owned by her as a liability was in error.

The Full Court said (from [35]):

“Having determined that a property settlement order should be made, the primary judge first identified and valued the property, liabilities and financial resources of the parties at the date of the trial; secondly discussed contributions; thirdly discussed prospective considerations; and lastly, reached a conclusion as to what order was just and equitable in this case. … [A]t the end of the second stage, the primary judge at [69] concluded:

‘69. Overall, I consider that the myriad of contributions made by each party should be assessed as largely equal although slightly favouring the wife because of the disparity in the inheritances/gifts and the timing of the wife’s inheritance.’

[36] The disparity referred to was a difference of $534,388 with the wife bringing in $2,550,026 and the husband $2,015,638 by way of inheritances/gifts. It is unclear what ‘slightly favouring’ means. …

[37] There is also ambiguity about what the primary judge meant about the ‘timing of the wife’s inheritance’. …

[38] The primary judge has not, as recommended in Hickey and Hickey and Attorney-General (Cth) (Intervener) [2003] FamCA 395, expressed the result of her assessment of the parties’ contributions as a percentage of the net value of the property of the parties. Had the primary judge done so, what her Honour intended … may have been more adequately explained.

[39] … [A]lthough the primary judge poses the question as to what adjustment should be made for prospective considerations, her Honour does not answer it.

[40] The parties are left to guess what the primary judge concluded at the third stage. At the fourth stage, the wife received about a two per cent adjustment overall. If the words in [69] ‘as largely equal although slightly favouring the wife’ mean a two per cent adjustment to the wife based on contributions, then the primary judge has likely made no adjustment at the third stage.

( … )

[42] … [T]here is the reference by the primary judge to two matters which were the subject of focus at the trial. Firstly the latent CGT on the wife’s property (which had an assessment at the date of hearing in the sum of $290,029) and secondly, the advantages the husband obtained, together with his two siblings, from the Trust (which the wife asserted had net assets of $4,683,297). Both of these considerations favoured the wife. The primary judge’s reasons do not make clear how those considerations have been taken into account …

[43] … [W]e conclude that the … reasons do not adequately enable the parties to ascertain how the primary judge reached her ultimate conclusion. …”

As to the treatment of the wife’s latent CGT liability, the Court said (from [64]):

“The primary judge placed the value of the wife’s Suburb L property on the balance sheet at its current value but rejected the wife’s submission that the latent CGT on that property also be included. … [T]he primary judge indicates … that she took the latent CGT into account when adjusting prospective factors.

[65] There was no controversy that if the wife’s Suburb L property was sold today then the CGT payable upon the distribution of the property would be $290,029 based on the gain that the wife had achieved on the property, her current level of income and the fact that it had never been her principal place of residence.

( … )

[76] … [T]he primary judge erred in failing to find that the sale of the property ‘would probably occur in the near future’. … [and] failed to recognise the undisputed evidence that this was an investment property held by the wife and had always been rented out.

( … )

[79] … [A]lthough it is true that the ultimate selling price might not be known, the value of the property was placed on the balance sheet at the date of the hearing and the latent CGT at that date was known. The property has been always rented and there was no evidence to indicate that the wife might occupy the property before sale.

[80] … [T]he primary judge’s finding that the wife had made a concession in cross-examination which precluded the wife from relying upon the second limb of Rosati, was erroneous. Had the primary judge not made that error, it would have been appropriate for the primary judge to have included the latent CGT onto the balance sheet, so that the wife received full value for that liability.”

The appeal was allowed and the discretion was re-exercised to reduce the asset pool by the wife’s latent CGT liability and to divide the asset pool 55 per cent to the wife and 45 per cent to the husband, requiring a payment from the husband to the wife of $399,412. The husband was ordered to pay the wife’s costs in the sum of $51,000.

Child support – Retrospective discharge and variation of overseas spousal maintenance and child support orders – International conventions and treaties not a bar to relief under the Family Law Act 1975

In Parris [2021] FedCFamC2F 13 (8 September 2021) Judge A Kelly heard a father’s application for the discharge of child support and spousal maintenance orders made in the Superior Court of California (“the Californian orders”).

The parties were in a relationship from 1992 to 2010 and had three children together. The father remarried in 2010 and had two children with his new partner. In 2013 he moved to Australia with his new partner, their children and one of his children from his previous relationship.

The Californian orders, made in 2014, required the father to pay child support for two children of the relationship and spousal maintenance for the mother. The mother, who lived in California, was to support the third child, born in 1996 and living in Australia with the father.

The father brought his application in February 2021 after about $1,375 of his monthly earnings were remitted by his employer to the Child Support Registrar. He sought that the Californian orders for child support and spousal maintenance be discharged, along with any arrears. He also sought that child support payable for the elder child, now aged 21, be reassessed to take into account his liability for two other children from the subsequent relationship.

The self-represented mother sought dismissal of the father’s application on the basis of the Californian equivalent of the child support agency having an “open case” ([227]) and that both the Commonwealth of Australia and the United States of America had each joined the “Hague Child Support Convention”. ([144])

After reviewing the relevant legislation, the Court said (from [228]):

“For the purposes of the Registration & Collections Act, the 2014 order constituted a registrable overseas maintenance liability. That is because it created a liability in the applicant to pay, periodically, an amount for the maintenance of both the subject children and the respondent and arose under a maintenance order made by the Superior Court of California being a judicial authority of a reciprocating jurisdiction. Each liability created by the 2014 order was a registrable maintenance liability both in respect of child and spousal support and each became a registered maintenance liability upon the respondent’s application to the Registrar. The liabilities so registered, including the arrears … are enforceable and being enforced under the Registration & Collection Act as debts due to the Commonwealth which are collectible, and presently being collected, by the Registrar by way of deduction from the applicant’s salary or wages.

[229] By operation of reg 36, the applicant was entitled to apply to this Court for an order to discharge, suspend, revive or vary the 2014 order. In the determination of that application, the law to be applied is the law in force in Australia under the Family Law Act, being laws which confer power to discharge, suspend or vary orders for child maintenance or spousal maintenance: reg 36(4); Pitney & Pitney [2018] FamCA 996, [15]-[16]. As Forrest J observed in Pitney, the powers conferred to discharge, suspend or vary such orders are found in ss 66S and 83 of the Family Law Act respectively.”

Considering the merits of the spousal maintenance application, the Court said (from [235]):

“The power to modify such orders is constrained by the requirement that ‘there is just cause for so doing’: par 83(1)(c). The scope of that concept was usefully examined by the Full Court in Wreford v Caley (2010) 43 Fam LR 1, [58]-[77]; … An order which decreases the amount of a periodic sum payable under an order or discharges an order may be expressed to be retrospective to such date as the Court considers appropriate: s 83(6). Where an order decreases the amount of a periodic sum payable pursuant to an order, or discharges such order, with retrospective effect, provision is made by ss 83(6A)-(6B) for the recovery of monies payable after the specified date.  Otherwise, the discharge of an order does not affect the recovery of arrears due under the order at such time at which the discharge takes effect: s 83(8).  A specific order would be required to be made in respect of arrears.

( … )

[237] It is settled that “an applicant for discharge of a maintenance order can seek to satisfy the Court that the party in receipt of maintenance does not meet the requirement of s 72(1)”; namely, whether the recipient is unable to support herself or himself adequately: Hall v Hall (2016) 257 CLR 490, [10].  There, French CJ, Gageler, Keane and Nettle JJ emphasised the further requirement in par 83(1)(c) “that there be ‘just cause for so doing’ imports a need for the Court to be satisfied of circumstances which justify the Court considering that threshold requirement again.”  In the context of an application to discharge an overseas maintenance order those principles were applied by Forrest J in Pitney, [28].

[238] I have re-examined the parties’ affidavits and financial statements. In the terms in which the 2014 order is framed the applicant remains liable for spousal support until her death.

[239] It was not in contest that the respondent remains in full time employment … and is in receipt of her own income. Nor was it in contest that as part of the parties’ property settlement, the respondent received the parties’ matrimonial home together with two blocks of land. The respondent deposes that she accepts these three properties were received by her as part of the parties’ property settlement. Although the 2014 order and transcript of proceedings of the Further Case Settlement Conferences before the Superior Court do not appear to address the transfer of those properties, the transfer of those properties is at least common ground.  …

( … )

[241] The applicant deposes that CSA now pays to the respondent the majority of the monies which are withheld from his Australian income and that a further result of this action is that he is accruing a debt for child support for his two younger children which, as at February 2021 amounted to $4,000. In the combined result of all of these circumstances, no child support is being paid, or perhaps applied by CSA in satisfaction of the applicant’s liability for child support for his younger children, E and F, now aged 10 and 9 years respectively.

( … )

[247] A difficulty in the case arises from the application of s 83(2) and whether there has been a change in circumstances, however, that provision is conditioned by s 83(3). Applied here, the particular difficulty presented by the 2014 Order is that it creates a liability for spousal support that continues until the respondent’s death. Having regard to the principles confirmed in Hall v Hall, my conclusion in this application is grounded upon s 72(1). While the financial position of each party is difficult, at a threshold level, I am not satisfied the applicant is reasonably able to maintain the respondent and I am satisfied the respondent has a demonstrated ability to support herself. She has in fact done so largely without the receipt of spousal support from 2015 until late 2020. I have had regard to the matters in s 75(2) and 83.”

The Court concluded (from [259]):

“( … ) As to the application for final relief, I have found some assistance in the cautionary approach commended in Ganter v Grimshaw (1998) 23 FamLR 39 …  There, the Full Court considered an equitable solution available to be adopted where further children had been born was to divide the income equally.”

The Court varied the spousal maintenance order, ordering that it cease on 17 March 2022 and it varied the retrospective and future child support amounts.

Property – Husband’s transfer of $1.9 million to his sister’s account warranted an injunction, but order for repayment set aside where there was no of evidence of his ability to return the funds

In Zamir [2021] FedCFamC1F 9 (2 September 2021) Hannam J heard a husband’s application for a review of injunctive orders made by a Senior Registrar.

The husband lived and worked overseas and had two of the parties’ five children living with him. The wife lived in Australia with the parties’ two adult children and one minor child.

The wife sought injunctive relief to restrain the husband from withdrawing or transferring funds from any facility or account that was associated with the family home; and upon learning of the husband’s transfer of $1.879 million, she sought orders that the husband return those monies to an Australian account. A Senior Registrar made those orders, the husband then filing an application for review.

The Court said (from [54]):

“The significant issue in this dispute relates to the requirement that the wife must demonstrate the danger or risk of dissipation or dealing with assets which will frustrate any judgment in her favour. In this regard, the Full Court in Tsiang [ed full citation Tsiang & Wu and Ors [2019] FamCAFC 128] at [22] referred to the NSW Court of Appeal decision in Patterson v BTR Engineer (Aust) Ltd (1989) NSWLR 319 where Gleeson CJ said after discussing the discretionary nature of the remedy at 321-325:

‘As a general rule a plaintiff will need to establish, first a prima facie cause of action against the defendant, and secondly a danger that, by reason of the defendant’s absconding, assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied…

It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipations of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not.’

[55] The Full Court in Tsiang went on to say:

( … )

‘27.    As to the determination of the existence of the risk and its magnitude, in Palmer v Parbery [2019] QCA 27 [“Palmer”] McMurdo JA (with whom Fraser and Gotterson JJA agreed) said:

“119.  The determination of whether there exists a sufficiently serious risk of the dissipation of assets involves the evaluation of future possibilities, rather than the ascertainment of historical facts. The risk of dissipation might justify an order although the probability of the risk eventuating is less than 50 per cent. But, as the risk of dissipation must be a real and not merely a theoretical one, it must have an evidentiary basis. ( … )”’

[56] As was explained in Palmer as extracted by the Full Court in Tsiang the question of serious risk of dissipation of assets involves the evaluation of future possibilities, rather than the ascertainment of historical facts. The risk of dissipation must be a real and not merely theoretical one, and must have an evidentiary basis.

[57] The evidentiary basis for the risk of dissipation is based to a large extent on matters which are in dispute between the parties. First, significant focus in the submissions made on the wife’s behalf is on the husband’s conduct related to the transactions undertaken between November 2021 and July 2021 whereby he withdrew around $1.9 million from a loan account secured by a mortgage over the family home and which he ultimately deposited into an account held overseas in the name of his sister.

( … )

[59] Particular submissions made on behalf of the wife in relation to the risk of dissipation include the timing of the various transactions in which funds were moved from accounts in the husband’s sole name given the events in the proceedings. In particular, as outlined earlier in this judgment, the wife first became aware of the husband’s drawdown of $1.88 million from the home loan offset account (which occurred in November 2020) when a response was given by way of financial disclosure to the wife’s request for the same on 1 July 2021.

( … )

[84] In the circumstances of this case, where the wife contends that the husband has other property interests overseas including real property and bank balances, the wife has also established the danger that her claim may be defeated or prejudiced unless a further injunction is granted.

( … )

[85] In all of the foregoing circumstances, I am satisfied that it is proper to make the injunctions made by the wife subject to these last mentioned variations.”

As to the order sought for the husband to repay funds he previously withdrew, the Court said (from [88]):

“The husband submits that the Court cannot make the second of the injunctions sought by the wife, that the husband effectively return the $1.9 million removed from the offset account on the basis that there is no evidence upon which the court could be satisfied he has the ability to comply with such an order.

[90] The wife accepts that the only basis upon which such an order may be made is if the court is satisfied that the husband controls the funds in the account in which they are now deposited. Otherwise she concedes that the husband has no capacity to comply with the order she seeks that those funds be transferred to the nominated account held in Australia.

[91] There is in my view no basis upon which I could be satisfied, especially at this interim stage when no findings about disputed matters may be made, that the husband does now have control over the $1.9 million. The account in which the funds are held is in the name of the husband’s sister who is not a party to these proceedings. There are no identified funds from which this payment could be otherwise made and the wife’s counsel conceded … that if the court is not satisfied about her contentions concerning the husband’s control over these funds then it would not be proper for the court to make such an order. In these circumstances, I am not satisfied that such an order is proper and for this reason the application for such an order is dismissed.”

Property – Indemnity costs ordered against solicitor where appeals were “incompetent” and had “absolutely no chance of success”

In Cansdall [2021] FamCAFC 162 (26 August 2021) Strickland J heard a wife’s application for indemnity costs against the husband’s solicitors after the husband’s solicitor advised part way through an appeal that they were instructed to abandon the appeals.

The husband and wife entered into consent orders in November 2018. The husband failed to comply with the order for a property at “Suburb D” to be sold and in June 2019 the wife filed an application in a case seeking orders in relation to that sale. The husband sought orders pursuant to section 79A of the Family Law Act 1975 which were ultimately dismissed and the property was sold in April 2020. The husband subsequently filed a further application seeking the contract of sale to be set aside and injunctive relief against settlement of the sale proceeding. That application was dismissed and a costs order was made against the husband for $14,605. The husband filed appeals against the dismissal of his application and the costs order and an application in a case seeking the stay of the appealed orders.

Part way through the hearing of the appeals, the husband “abandoned both appeals” ([22]) and the wife made an application for costs against the solicitors.

Strickland J said (from [29]):

“ … [T]here can be no doubt that an order for costs is justified here pursuant to s 117(2) of the Act. Both appeals were incompetent and had absolutely no chance of success. They should never have been filed, or been pursued to the point where they were both abandoned midway through the hearing … and dismissed as a result.

[30] The relevant circumstances to be found in s 117(2A) of the Act that justify an order for costs are first, the fact that the husband was wholly unsuccessful in the proceedings (s 117(2A)(e)), and secondly, the conduct of either the husband and/or the solicitors in bringing the appeals and pursuing them (s 117(2A)(c) and/or (g)).

( … )

[32] As for how the costs should be calculated, the ordinary rule is that it is done on a party/party basis, but if there are exceptional circumstances which warrant the court departing from that approach, they can be calculated on an indemnity basis (Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536 … ; Kohan and Kohan [1992] FamCA 116;  and Munday v Bowman (1997) 22 FamLR 321.

[33] Here there are such circumstances. … [T]he appeals were commenced and continued in circumstances where the husband properly advised, and the husband’s solicitors, should have known that the husband had no chance of success. Further, the contentions in both appeals as authored by the husband’s solicitors and his solicitor-advocate, purportedly on behalf of the husband, were baseless and had absolutely no merit (Colgate-Palmolive Co v Cussons Pty Ltd per Shepherd J at 256).

( … )

[35] … (T)he appeals as drawn were incompetent, the written summaries of argument were baseless, and the oral submissions made at the hearing were devoid of all merit.

( … )

[43] … [T]he orders sought in the appeal … were equally deficient. For example, the husband sought to join the purchasers of the property to the appeal, and how that could be an order sought in this appeal is a complete mystery. The husband had filed a separate Application in a Case seeking joinder of these third parties, and a stay of the orders the subject of the appeal. However, that application was dismissed on 24 August 2020, and there was no appeal against that dismissal. Thus, there could be no basis for seeking an order to the same effect in this appeal, and attempting to justify it by the bare assertion in the summary of argument that ‘[t]he Court has power and jurisdiction to make orders binding third parties’ (paragraph 54 of the amended summary of argument filed on 18 November 2020).

[44] Further, despite the sale already having taken place, another order sought by the husband in the appeal was an injunction restraining the sale and settlement of the property, and the removal of the real estate agent.”

After reviewing the leading authorities on costs orders against solicitors, the Court continued (from [88]):

“ …  [R]ecalling what I have outlined above as to the initiation of the appeals and the progressing of the same until part-way through the hearing on 19 November 2020, when both appeals were abandoned, enlivens the jurisdiction to order costs against the husband’s solicitors. To adopt the phraseology of Goldberg J, they have ‘unreasonably initiated [and] continued [the appeals] when [they] had no prospect of success’ and that unreasonableness relates ‘to a serious dereliction of duty or serious misconduct’. As his Honour also said, and which applies here, ‘it is a relevant serious dereliction of duty or misconduct not to give reasonable or proper attention to the relevant law and facts in circumstances where if such attention had been given it would have been apparent that there were no worthwhile prospects of success’. In other words, there was a significant breach of duty by the husband’s solicitors here.

( … )

[90] … [I]ndemnity costs are warranted, given the extraordinary conduct of the husband’s solicitors, and I note that when asked, the husband’s solicitor-advocate indicated that he had no comment to make as to the reasonableness or otherwise of the amount of costs sought.

The Court ordered that the husband’s solicitor pay the wife’s costs in a fixed sum of $31,105.50.

Children – Parental responsibility – No error in vesting solicitor with parental responsibility for the limited purpose of a tort claim against the mother

In Agambar [2021] FedCFamC1A 1 (2 September 2021) the Full Court (Strickland, Austin and Baumann JJ) heard a father’s appeal from a decision of Judge Vasta that vested a solicitor with parental responsibility for the limited purpose of instructing lawyers to act on behalf the children in tort claims against their mother.

The parties separated in 2019 and, weeks after the separation, the mother lost control of her car and crashed while driving the parties’ three children. One child was killed and the other two were injured. Final parenting orders were made in December 2019 providing for the parents to have equal shared parental responsibility.

The children had causes of action in tort for personal injury damages against the mother for negligence. Following the mandatory mediation, a litigation guardian was appointed to prosecute their claims and under the Uniform Civil Procedure Rules 1999 (Qld) that guardian did not need to be a solicitor but could only act through a solicitor.

The mother conceded that she could not act as litigation guardian and sought “Mr B” to be given parental responsibility for the limited purpose of instructing lawyers to act in the tort claims. The father sought sole parental responsibility in relation to the tort claim and that he be appointed as litigation guardian in the state proceedings. Judge Vasta made the orders sought by the mother. The father appealed.

Dealing with the father’s complaint as to the interference with the parents’ parental responsibility, the Full Court said (from [38]):

“( … ) In VR & RR [2002] FamCA 320 (‘VR & RR’) the Full Court … dismissed the aspect of the appeal which concerned the trespass upon parental autonomy by the appealed orders …

( … )

[39] The Full Court … recognised how the circumstances which are peculiar to a specific case might justify judicial interference with the parental responsibility vested in parents either by law or former court order. … [T]he primary judge’s interference with the allocation of parental responsibility was warranted because both parents desired it to resolve their impasse so the children’s welfare could be clearly advanced. Both parents sought an order interfering with their existing equal shared parental responsibility for the children.

[40] The application of the general rule of which the Full Court spoke in VR & RR (at [29]) does not impugn the primary judge’s decision here … because any parental responsibility with which a parent is seized only exists so long as no contrary court order is made. The Act expressly envisages that parental responsibility can be vested in adults other than the child’s parents (ss 61D(1), 64B(2), 64C, 65C, 65G(1A) and 65P) and it is now well established that there is no presumption in favour of parents over non-parents in the determination of proper orders to resolve parenting disputes, including by orders allocating parental responsibility (Maldera & Orbel [2014] FamCAFC 135 at [79]–[81]; Valentine & Lacerra [2013] FamCAFC 53 at [42]–[43]; Aldridge & Keaton [2009] FamCAFC 229 … )

[41] Contrary to the father’s apparent expectation, his authority over the children is not inalienable. The parental responsibility for them with which he was originally imbued by law (s 61C(1)) was removed and replaced with his equal shared parental responsibility under the consent orders made in December 2019 (ss 61C(3) and 61D(2)). Before the primary judge, both parents sought different orders again.

[42] … [T]he primary judge was acutely aware of the significance of the decision to vest parental responsibility in Mr B in preference to the father, saying:

‘27.    … [I]t is a big leap to go from a Court ascertaining the attitude and motivation of one parent to a point where the Court should be contemplating handing sole parental responsibility – albeit for one very narrow issue – to a stranger.

( … )

While it is a matter that would seem to me to be totally counter to what the legislature was envisaging when giving the power to make a parenting order in favour of a person, it does seem to me that on a strict reading of s.64C of the Act, the Court is able to make a parenting order in favour of someone such as Mr B. The question is really should the Court do so for the reasons that I have already noted that he is not a ‘carer’ of the child.

(Emphasis in original)’

[43] Since the primary judge appreciated the gravamen of the decision he was invited to make and nevertheless decided to invest Mr B with the discrete portion of parental responsibility which was in dispute, the father’s complaint under this ground of appeal was all but exhausted because he was unable to contend the law necessarily precluded his Honour from giving the confined aspect of parental responsibility to Mr B instead of him.  ( … )”

The father’s appeal was dismissed and he was ordered to pay the mother’s costs of $10,000.

Property – Litigation funding order against third party – Irreversibility of order at the final hearing not fatal to application

In Lao & Zeng [2021] FedCFamC1A 17 (23 September 2021) the Full Court (Ainslie-Wallace, Ryan & Austin JJ) heard a third party’s appeal from a litigation funding order made by McEvoy J that required the wife’s mother (a third party) to pay $350,000 towards the husband’s legal fees.

During the marriage, the husband and wife developed a portfolio of assets held via various entities and trusts of which the wife had legal control and to which the wife’s mother made substantial financial contributions.

Following separation, the wife altered the control and ownership of several of the parties’ entities and trusts, the effect of which was to transfer control of the entities to her mother. The husband argued that these were assets in which the husband and wife had a beneficial interest, and sought section 106B orders to set aside those transfers and resignations. The wife’s mother contended that she was and had always been the beneficial owner of the property.

The wife’s legal fees were funded by her mother, McEvoy J ordering the mother to also pay $350,000 towards the husband’s fees. The wife’s mother appealed.

As to the reversibility of the litigation funding order, Ryan J, with whom Ainslie-Wallace J agreed, said (from [47]):

“( … ) The appellant contends that … Zschokke [1996] FamCA 79 (“Zschokke”) stands as authority for the proposition that an amount advanced pursuant to an interim litigation funding order, including under s 117(2) must be capable of being taken into account in the final property settlement proceeding and, if this cannot be done, the order cannot be made. ( … )

[48] ( … ) [I]t is the requirement of justice that is the basic principle to which Zschokke speaks and not, as the appellant suggests, reversibility. Reversibility and the ability to take the payment into account in the final hearing are considerations of fluctuating relevance having regard to the source of power under which the payment is sought. So much is clear from Zschokke itself as it is only in relation to the application of s 79 and s 80(1)(h) of the Act that this issue ‘must … be an integral part’ … of such an order. Thus, although in Zschokke the Full Court was not satisfied that the wife would receive a property settlement greater than the sums already advanced by the husband, that was not the end of the matter and their Honours continued … :

‘ … [W]hile the conclusion in relation to the uncertainty of the amount of the wife’s eventual property settlement award may be fatal to an application under s.80(1)(h), it is not necessarily so to an application under s.117(2). It is just one of the matters to be balanced in the exercise of the discretion under the latter sub-section.’

[49] It is also significant that in Zschokke the Full Court said that there must be a question about whether it is possible to make a litigation funding order under s 117(2) even though the order could not be taken into account in a final hearing. For example in parenting proceedings or where no right of action exists under s 79. If their Honours considered that reversibility and the ability to take the amount into account in a final property hearing was an essential element to the exercise of power under s 117(2) it follows that in the examples given such an order could not be made. Their Honours’ conclusion that in relation to those examples the ‘position is less clear’ demonstrates that they were not satisfied that an order of the type under discussion here must be able to be reversed or taken into account at the final hearing.

[50] … [T]here will be cases where even though the amount paid may not be able to be made subject to an order as discussed or be taken into account in the final hearing, the interests of justice may nevertheless justify an order under s 117(2) for interim funding or security for costs. ( … )”

Ryan J continued (from [80]):

“According to the appellant, the primary judge should have recognised that the husband was required to demonstrate exceptional circumstances before an order pursuant to s 117(2) for litigation funding could be made against a third party. The appellant then analysed cases where such orders have been made but none of these imposes a test of exceptional circumstances nor say anything which would cast doubt over his Honour’s decision (S & S [1997] FamCA 19; … Mullins and Ors & Mullins and Ors [2017] FamCA 786; Kyriakos [[2013] FamCAFC 22]).

[81] I can see no reason to require exceptional circumstances as a precondition for this type of order … ”

The majority granted leave to appeal, dismissed the appeal and the appellant was ordered to pay the husband’s costs on a party/party basis.

Austin J agreed that if leave were granted, the appeal should be dismissed, but found that leave should not be granted ([85]).

Property – Application to vary consent orders – Sale of real properties for less than was anticipated did not result in a miscarriage of justice or impracticability

In Demeny & Ogden [2021] FedCFamC1A 21 (27 September 2021) Strickland, Ainslie-Wallace and Aldridge JJ heard an appeal from a decision of Judge Kari to vary property consent orders which the parties entered into in 2014.

The orders required the sale of four properties to discharge loans, the balance then to be divided equally between the parties. Mr Ogden was to retain a property in South Australia, but pay Ms Demeny $15,455 upon the issue of the orders and $210,877 following one of the sales.

The properties sold for unexpected amounts, which resulted in the South Australian property remaining encumbered to the sum of $110,223.  Mr Odgen sought the final orders be varied so that he retained the liability; but that the cash adjustment amount be reduced so that an equal division would be achieved.

At first instance, Judge Kari varied the original orders to reduce the amount payable to Ms Demeny on the basis that the orders were impracticable and that the orders had not achieved the intended division of property such that a miscarriage of justice had occurred. Ms Demeny appealed, arguing that any shortfall in repayments was to be borne by Mr Odgen.

The Full Court said (from [26]):

“This case is an example of the difficulties that arise when orders require property to be sold and where the orders divide the proceeds not by way of percentage entitlements, but by payment of a fixed sum. In Noetel and Quealey [2005] FamCA 677 the Full Court said:

‘143.  The practice of drafting orders based on a percentage entitlement rather than a fixed sum to achieve fairness between parties in the event of a sale is subject of many authorities.  Those authorities were subject of comprehensive review in Sinclair and Sinclair [2000] FamCA 262.  We take this opportunity to … emphasise the importance of the established principle:

“108.  A long line of authority in this Court … establishes as a clear guideline for the exercise of discretion under s 79 of the Act, that, absent some special consideration (such as a desire by one spouse to retain a particular piece of property, in specie), and particularly where the value of an asset is contentious, or even where it is not but the market for the property is volatile, or there is likely to be a significant time lapse between judgment and sale, and where the value of the asset is to be divided between the parties, the Court should order its sale and the apportionment of the proceeds between the parties rather than order one party to pay to the other a fixed sum representing a notional proportion of its assessed value.

( … )”’

[45] In order to derive the parties’ true intention from the consent orders, they must be looked at as a whole and terms not taken in isolation.

[46] It is telling that there was an express agreement that any surplus on the sale of the four properties to be sold, after payments of the loans …, was to be shared equally … If the agreement was, however, that there be an equal division of property and that any surplus after repayment of the loans was to be shared equally, but that any shortfall was to be borne by the respondent alone, that needed to be clearly spelt out. Such a departure from what otherwise appears to be orders designed to achieve an equal division should be obvious. …

( … )

[48] We are comfortably satisfied that the intention of the parties … was for an equal division of their property. Whilst the parties turned their minds to how that would be achieved if the properties sold for more than what was expected, they did not, in the consent orders at least, address the issue of a shortfall.

( … )

[60] Due to the clear intention of the consent orders to achieve an appropriately equal division of property, we consider that in considering whether any miscarriage of justice occurred because the Australian properties decreased in value, the increase of value of [the South Australian property] cannot be ignored.”

The Court concluded (from [69]):

“It remains the position that the orders can be carried out because either the respondent can pay the appellant the agreed sum of $210,877.63 or [the South Australian property] can be sold so as to realise the funds in order to make the payment. All that has occurred is that the burden of the outstanding mortgages has fallen onto [the South Australian property]. The orders are still capable of being carried out.

[70] It is well established that orders which can be put into effect are not rendered impracticable simply because they produce a different outcome to that which was intended (Rohde and Rohde [1984] FamCA 41…; La Rocca and La Rocca [1991] FamCA 97; Cawthorn v Cawthorn [1998] FamCA 37 and Sanger & Sanger [2011] FamCAFC 210).

[71] It follows that a finding that it was impracticable to carry out the consent orders could not have been made.”

The Full Court allowed the appeal, remitted the enforcement application for rehearing and ordered costs certificates.

Property – Private communication between barrister and trial judge while case under way and while judgment reserved gives rise to apprehended bias

In Charisteas [2021] HCA 29 (6 October 2021) the High Court of Australia (Kiefel CJ, Gageler, Keane, Gordon and Gleeson JJ) considered a recusal application on the ground of apprehended bias.

The husband had unsuccessfully sought recusal of Walters J of the Family Court of Western Australia, his appeal being dismissed by the Full Court.

The “long and tortured history” ([1]) of the parties’ matrimonial litigation had gone on since their separation in 2005.

In August 2016 a second trial proceeded but was adjourned for the parties to make submissions on interim orders pending final judgment. Third parties then sought that Walters J recuse himself based on statements made during the trial, which application the husband supported. Walters J delivered judgment on 12 February 2018, dismissing the recusal application (before retiring three days later).

In May 2018 the husband’s solicitor wrote to the barrister for the wife, raising “gossip” that the barrister and judge had engaged out of court in a manner inconsistent with her obligations and those of the judge ([7]). The barrister confirmed that she and Walters J had met for a coffee or drink; spoken by telephone; and had exchanged text messages. The barrister said that the communications did not concern “the substance of the … case” ([8]).

The High Court said (from [13]):

“Ordinary judicial practice …  was relevantly and clearly stated by Gibbs CJ and Mason J in Re JRL; Ex parte CJL [1986] HCA 39 … by adopting what was said … in R v Magistrates’ Court at Lilydale; Ex parte Ciccone [1973] VicRp 10 (‘Magistrates’ Court at Lilydale’) … :

‘The sound instinct of the legal profession … has always been that, save in the most exceptional cases, there should be no communication or association between the judge and one of the parties (or the legal advisers or witnesses of such a party), otherwise than in the presence of or with the previous knowledge and consent of the other party. Once the case is under way, or about to get under way, the judicial officer keeps aloof from the parties (and from their legal advisers and witnesses) and neither he nor they should so act as to expose the judicial officer to a suspicion of having had communications with one party behind the back of or without the previous knowledge and consent of the other party. …’

[14] In this matter, what is said might have led the trial judge to decide the case other than on its legal and factual merits was identified. It comprised the various communications between the trial judge and the wife’s barrister ‘otherwise than in the presence of or with the previous knowledge and consent of’ [cf Magistrates’ Court at Lilydale [1973] VR 122 at 127] the other parties to the litigation. Indeed, given the timing and frequency of the communications between the trial judge and the wife’s barrister, it cannot be imagined that the other parties to the litigation would have given informed consent to the communications even if consent had been sought, and it was not. The communications should not have taken place. There were no exceptional circumstances.

[15] A fair‑minded lay observer … would reasonably apprehend that the trial judge might not bring an impartial mind to the resolution of the questions his Honour was required to decide. The trial judge’s impartiality might have been compromised by something said in the course of the communications with the wife’s barrister, or by some aspect of the personal relationship exemplified by the communications. Accordingly, there is a logical and direct connection between the communications and the feared departure from the trial judge deciding the case on its merits.

[16] ( … )  Nothing … limits the period necessary to avoid communication to after the commencement of the trial. In any event, whilst communication here was halted while evidence was taken, it was resumed before final submissions and continued over the lengthy period of 17 months when the written reasons for the judgment on the question of recusal and the judgment on the settlement of property were reserved.

[17] Focusing on this latter period, the majority in the Full Court reasoned that the trial judge and the wife’s barrister were aware of some of their obligations, by not communicating during the course of the trial, and the trial judge may be taken to have failed to appreciate that the same strictness applied at other times. According to the majority, the hypothetical observer would understand that the trial judge mistakenly held such a view but would not consider his lack of disclosure to be sinister.

[18] This reasoning is erroneous. The apprehension of bias principle is so important to perceptions of independence and impartiality ‘that even the appearance of departure from it is prohibited lest the integrity of the judicial system be undermined’ (emphasis added) Ebner [2000] HCA 63 (‘Ebner’). No prediction by the court is involved in deciding whether a judge might not bring an impartial mind to bear … No question as to the understanding or motivation of the particular judge arises.

[19] The lack of disclosure in this case is particularly troubling. It is difficult to comprehend how the trial judge could have failed to appreciate the need to disclose the communications, particularly when he was dealing with the application to recuse himself on other grounds. It may give the hypothetical observer reason to doubt the correctness of the claim by the wife’s barrister that their communications did not concern ‘the substance’ of the case, if the ambiguity inherent in that statement is not itself of sufficient concern.

[20] The majority also reasoned that the second limb in Ebner was not made out by reference to what the fair-minded lay observer, properly informed as to the judiciary and the Bar, would think. The information included that barristers are professional members of an independent Bar who do not identify with the client; that judges are usually appointed from the senior ranks of the Bar; and that it may be expected they will have personal or professional associations with many counsel appearing before them … Informed by such matters, the majority reasoned, the hypothetical observer would be ‘able to tolerate’ some degree of private communication between a judge and the legal representative of only one party, even if undisclosed. The majority considered that the hypothetical observer would accept in this case that the judge and the wife’s barrister would adhere to professional restraint in what was discussed and would accept that a professional judge who has taken an oath of office would not discuss the case at hand.

[21] … [T]his reasoning is erroneous. The alignment of the fair-minded lay observer with the judiciary and the legal profession is inconsistent with the apprehension of bias principle and its operation and purpose. … The hypothetical observer is not conceived of as a lawyer but a member of the public served by the courts. It would defy logic and render nugatory the principle to imbue the hypothetical observer with professional self‑appreciation of this kind.

[22] It may be accepted that many judges and lawyers, barristers in particular, may have continuing professional and personal connections. The means by which their contact may be resumed is by a judge making orders and publishing reasons, thereby bringing the litigation to an end. It is obviously in everyone’s interests, the litigants in particular, that this is done in a timely way.”

The High Court allowed the appeal, remitted the matter for rehearing and made a costs order against the wife.