Property – Court lacked jurisdiction to hear non-federal aspects of justiciable dispute between husband and his former business associate – No common substratum of facts between matrimonial cause and husband’s civil suits

In Akbar & Gandega [2023] FedCFamC1A 174 (12 October 2023) the Full Court (McClelland DCJ, Austin & Wilson JJ) heard an appeal from a decision of Riethmuller J. The appellant was the husband’s former business partner.

In 2016 the husband and the appellant agreed to the husband’s withdrawal from their business in exchange for payment. The husband alleged that the appellant had breached their agreement, despite his having not previously pursued enforcement prior to the commencement of matrimonial proceedings between the husband and wife [9].

The wife joined the appellant as a party, “purporting to sue him on behalf of the husband for damages to compensate him for the appellant’s alleged breach of the contract” [10]. Both the husband and wife argued for the husband’s right to civil remedies against the appellant [11].

Following the trial, Riethmuller J ordered the appellant to pay the husband $2,456,002 [13].

The appeal did not raise jurisdiction, however when the question was raised by the Full Court, the appellant “eagerly embraced the proposition” [6].

Austin J (with whom McClelland DCJ and Wilson J agreed) said (from [18]):

“[Section] 78 of the Act empowers the Court to declare ‘existing title or rights’ in respect of ‘property’.

( … )

[20] The causes of action alleged by the husband against the appellant were ‘choses in action’ and hence ‘property’ in his hands …

[21] Yet s 78 of the Act only empowered the primary judge to declare the husband’s existing title or right in the chose in action, which title or right the wife certainly did not separately enjoy. The provision did not empower the primary judge to hear and adjudicate the causes of action by granting a compensatory remedy, thereby converting the husband’s ‘chose in action’ into a ‘chose in possession’.

[22] If the power afforded by s 78 of the Act was to extend so far there would be no limit to the extent of the jurisdiction to hear and decide common law, equitable and statutory causes of action against third parties concerning spouses’ entitlements to money and property merely because it is convenient to establish the ambit of the property interests which may then be divided between them in the exercise of discretionary power under Pt VIII of the Act.

( … )

[25] The existence of the husband’s chose in action was not contentious as between the spouses. They agreed he enjoyed that property interest. Only its value was liable to be controversial between them. But placing a value on that property interest for the purpose of resolving the spouses’ matrimonial dispute did not demand the determination of the causes of action brought against the appellant. Rather, the spouses bore an evidentiary burden to adduce evidence from which the primary judge could have at least impressionistically attributed a value to the husband’s chose in action when determining their matrimonial cause, since the assessment of any damages prospectively owed to him by the appellant was a matter of judgment, not mathematical calculation …

[26] If the available evidence lacked the necessary probative weight to reliably find the value of the husband’s chose in action, there was always the option of an order compelling the division of any damages eventually recovered by him from the appellant between the spouses in the same proportions as their other valued net assets were divided. Alternatively, the matrimonial cause could be adjourned until the non-matrimonial causes were litigated to finality in a forum seized of jurisdiction to hear them.”

Austin J continued (from [28]):

“Claims grounded solely in contract, tort, equity, or some other form of non-matrimonial relationship (such as partnership or corporation shareholdings) are not likely to attract jurisdiction as a matrimonial cause when the spouses’ marriage is purely coincidental to the dispute (Dougherty v Dougherty & Anor [1987] HCA 33… The connection of such common law, equity or statutory causes of action to matrimonial causes is even more tenuous when vested in and asserted by one spouse against third party strangers to the marriage or family unit.

( … )

[33] … [T]he relationship between the husband and appellant arose exclusively out of their mutual business activities and their commercial conduct affected only their individual rights and interests. The husband’s legal grievance with the appellant could easily have been litigated independently from his legal dispute with the wife. There was no common substratum of facts between the spouses’ matrimonial cause and the husband’s civil suits against the appellant at common law and in equity. … However, the common law and equity causes of action brought against the appellant in this case seem ‘distinct [from] and unrelated [to]’ the matrimonial cause between the spouses.

[34] Merely because the anterior determination of the non-federal causes of action between the husband and the appellant would influence the identity and value of the property owned by the husband, then amenable to adjustment orders within the matrimonial cause, does not bring the non-federal causes within the purview of the federal matter. The convenience of first determining whether or not the husband should have judgment for a certain sum of money entered in his favour against the appellant on any of the common law or equity causes of action is not the same as the essentiality of determining those causes for the purpose of then determining the matrimonial cause. … ”

The appeal was allowed and the causes of action at common law and in equity pleaded by the respondents against the applicants in the original proceedings were dismissed for want of jurisdiction. Costs certificates were ordered.

Property – Arbitration – Ordinary principles of procedural fairness apply to arbitrations – Orders made by arbitrator did not contemplate capital gains tax – Husband’s failure to adduce evidence as to capital gains tax did not relieve the arbitrator from making orders that were just and equitable – Arbitrator can make an order pursuant to s 106B

In Vida [2023] FedCFamC1A 175 (18 October 2023) the Full Court (Tree, Hartnett & Schonell JJ) considered an unsuccessful application to review an arbitral award, dismissed by Wilson J. The appeal challenged the dismissal and also Wilson J’s determination that the arbitrator did not have power to make an order under s106B [1].

The appellant husband (“husband”) and cross appellant wife (“wife”) commenced cohabitation in 2001, married in 2002 and the arbitrator found they separated in July 2018. They divorced in January 2020. [7]

The husband established N Pty Ltd prior to cohabitation (“N Company”). The husband owned one third of issued shares and his mother (“the husband’s mother”) owned the remaining two thirds. The mother had sold her shares to a trust, M Company Pty Ltd as trustee for the V Family Trust (“the Trust”), with the purchase price of $1,206,939 borrowed from N Company [9]. The Corpus of the Trust was subsequently transferred to the husband’s mother [10].

The wife sought orders pursuant to s 106B setting aside the distribution of the corpus of the Trust [11].

Finding the Trust was controlled by the husband, the arbitrator found that the intention of the distribution of the corpus of the Trust was to defeat an anticipated order [16]. The arbitrator ordered that the husband pay the wife $1,920,043 within a period of four months, acknowledging that the husband proposed to draw down on or sell property to effect the payment required [17].

The husband identified that a sale of real estate would give rise to “significant tax implications” but did not adduce evidence from his accountant of capital gains tax calculations [18]. The arbitral award did not factor in the potential capital gains tax liability.

Wilson J dismissed the husband’s review application, but ordered that the s 106B order in the arbitral award be set aside, finding the arbitrator had no power to make orders under s 106B [26].

The Full Court said (from [31]):

“Before the primary judge, the [husband] contended that the arbitrator failed to accord [him] procedural fairness by not seeking further submissions and evidence (if necessary) as to the effect of the impost of capital gains tax on the [husband] by reason of the sum he was required to pay the [wife], which would compel the sale of real estate and give rise to a payment of capital gains tax. The [husband] also asserted that the failure to take account of capital gains tax resulted in the award being contrary to justice and equity within the meaning of s 79(2) of the Act.

[32] The primary judge concluded that no error of law was occasioned by the arbitrator failing to take capital gains tax into account, particularly where the [husband] had adduced no evidence about the tax implication arising from the sale of the properties. ( … )

[33] …The primary judge rejected the propositions advanced by the [husband] that a failure to have regard to the capital gains tax issue meant that the orders were not just and equitable.

( … )

[37] … [F]or the [husband] to satisfy the award by paying the [wife] $1,920,043 … he had to either borrow money or realise assets, the latter leading inevitably to realisation costs including capital gains tax. …

[38] … [T]he capital gains tax was calculated to be approximately $829,000.

( … )

[41] We are satisfied that a sale of real estate was a natural product of the award … [T]he result of the award is that the [husband] is not left with the property identified by the arbitrator … after payment of the $1,920,043 but something considerably less because of capital gains tax.

( … )

[52] The mandate is to make an order that is just and equitable. It is not just the underlying percentage but the order that must also be just and equitable … At that stage, knowing what net property a party is to be left with must satisfy the requirement of justice and equity. Here the arbitrator knew from the unchallenged evidence of the [husband] that a sale of real estate would give rise to capital gains, that the size of the capital gains tax, albeit unknown, was ‘significant’, that there was no evidence that the [husband] had the capacity to borrow such a sum and that consequently, there was an inevitability about a sale … ”

Considering the arguments in relation to s 106B, the Full Court continued (from [85]):

“Both the [husband] and the [husband’s mother] sought to contend that … the s 106B application could not be ‘part of’ or ‘arising’ in Pt VIII proceedings as it was inconsistent with the legislative intent. They also contended that as s 106B is coercive, such a power is only reserved to the Court and not an arbitrator.

[86] These submissions are rejected for the following reasons:

( … )

(4) This construction is … inconsistent with the powers available to an arbitrator in determining Pt VIII proceedings … Section 80 lists the powers available under Pt VIII. ( … )

(5) Section 80(1)(k) permits an arbitrator to make an order which is necessary to do justice. They are clear words of wide and expansive meaning and not words of limitation.

(6) Section 80(1)(l) enables the making of a Pt VIII order before or after the making of a decree under another part, such as under Pt XIII which includes an order under s 106B. A decree is defined in s 4 as meaning a ‘decree, judgment or order’.

(7) Section 10L contains no words of limitation restricting the powers of an arbitrator in a property or financial arbitration to some parts of s 80 and not others.

( … )

(10) When s 10L(2)(b) is read with s 80 as a whole, the meaning of the section is clear; it enables the making of an order under s 106B.”

The appeal was allowed, the orders of Wilson J set aside and the review application was remitted for rehearing.  Costs certificates were ordered.

Children – Order for relocation failed to follow statutory requirements – Finding that relocation was in the best interests of the children prior to consideration of ss 65DAA and 60CC(3) in error

In Tanev & Baumann [2023] FedCFamC1A 182 (25 October 2023) the Full Court (Tree, Kari & Campton JJ) heard a father’s appeal from a decision of McNab J in a property and parenting case relating to children aged 8, 6 and 4.  The father was born in Australia and was 50 years of age. The mother was born in Country B and was 35 years of age. She came to Australia for university in 2008.

McNab J permitted the mother to relocate to Country B from 30 December 2024 and that pending relocation, the parents have equal shared parental responsibility with the children to spend time with the father Wednesday nights and alternate weekends. Following relocation, the mother was to have sole parental responsibility and the children spend not less than two weeks per year in Australia with the father, together with time in Country B if he travelled there [11].

The father’s grounds of appeal covered three categories: the parenting orders; the property orders and spousal maintenance [14].

In relation to the appeal from the parenting orders, the Full Court said (from [17]):

“… [W]e are satisfied that the appeal as to parenting must succeed because the parenting determination failed to follow the statutory requirements mandated by s 60CC and s 65DAA of the Act. ( … )

( … )

[21] The primary judge correctly set out the legislative pathway and the legal principles to be applied in making any parenting order and additionally when considering the question of relocation … However, the structure of the reasons do not bear out the same. Rather, the primary judge determined that it was in the children’s best interest to relocate with the respondent to Country B after a consideration only of the s 60CC(2) primary considerations, and prior to any consideration of the statutory imperative in s 65DAA and the mandatory additional considerations in s 60CC(3) … ( … )

[22] The reasons then record:

For the reasons outlined above, in my view, a relocation to Country B with the [respondent] is in the best interests of these children.

…

( … )

[24] In Starr & Duggan [2009] FamCAFC 115, the Full Court observed:

Section 65DAA will provide a useful framework to consider the advantages and disadvantages, not only of the equal time and substantial and significant time scenarios, but also other outcomes which may be in the child’s best interests, including the proposal to relocate.

( … )

[26] The primary judge next in sequence considers and makes determinations in relation to one child’s attendance at a psychologist, the change of name issue, and the issue of Country N passports for the children …

[27] It is only after the determination that it is in the children’s best interests to relocate with the respondent to Country B is foreclosed that the primary judge considers the s 60CC(3) factors … ( … )

( … )

[29] In determining the question of relocation first, the primary judge inhibited any capacity to engage with the statutory imperative in s 65DAA of considering whether substantial and significant time with the [father] was in the children’s best interests, or to engage with the mandatory additional considerations in s 60CC(3).

[30] The reality of the primary judge’s considerations of the s 60CC(3) factors involved scarce and deficient evaluation of the [father’s] proposal for the children to remain living in Australia. Indeed, the entire focus of the s 60CC considerations was viewed through the prism of relocation and the advantages that it posed for the children and the respondent, as well as the disadvantages to the respondent and the children of remaining in Australia. There was no material consideration by the primary judge of the appellant’s proposal for the children to remain in Australia and its advantages to the children.

( … )

[32] We are not satisfied that the structure nor content of the reasons adequately demonstrate that justice is seen to have been done in the form of an adequate consideration of prescribed relevant matters being undertaken before determination of the children’s best interests were made.”

The appeal was allowed and the case was remitted for rehearing. Costs certificates were ordered for both parties.

Property – Court’s dismissal of summary judgment application upheld – Fraudulent transfers of the husband could be set aside pursuant to s 106B to increase the property vested in the husband’s trustee in bankruptcy

In Jess (No 4) [2023] FedCFamC1A 189 (3 November 2023) the Full Court (Aldridge, Riethmuller & Schonell JJ) heard an appeal against Wilson J’s refusal to summarily dismiss a trustee in bankruptcy’s application under s 106B.

The husband and wife settled their property proceedings in 2009 via consent orders. Those orders were based on a deed of trust signed in 2002, to the effect that the husband’s interest in a unit trust was held on trust for the husband’s adult son. In 2010, the husband confessed to the wife that the trust deed was fraudulent and the husband and wife applied to set aside the trust deed and the 2009 settlement.

The husband was declared bankrupt in 2016 and his trustee in bankruptcy was joined to the proceedings in 2016. The husband died in 2018. The 2009 property settlement was set aside pursuant to s 79A with the consent of the husband’s estate and the bankruptcy trustee [3].

The wife and the bankruptcy trustee sought orders pursuant to s 106B to set aside the 2002 trust deed, the 2009 settlement and the transfer of the units to the son. They sought the restoration of the units to the husband’s estate. The trustee sought orders that the transactions be set aside at the time they were made to ensure that the husband held his units at the time of his bankruptcy [4].

The son’s application for the summary dismissal of the s 106B applications was dismissed. The son and related parties appealed.

The Full Court said (from [12]):

“The applicants argue that the Units do not fall within the definition of ‘vested bankruptcy property’ as neither the trust deed, nor the settlement deed have yet been set aside pursuant to s 106B … . The argument commences with the proposition that any order made pursuant to s 106B could only take effect on the date the order is made, and thus, the Units could only become property of the husband (now the husband’s deceased estate) on the date of the order pursuant to s 106B. As a result, the property would be ‘acquired’ by the husband after the date of discharge from bankruptcy and would not vest in the bankruptcy trustee … Thus, it is argued by the applicants, the claim by the bankruptcy trustee pursuant to s 106B of the FLA is not a ‘matrimonial cause’ as defined in s 4 (definition of ‘matrimonial cause’ para (cb)), as that part of the definition provides for ‘proceedings … with respect to any vested bankruptcy property’.

[13] … [T]he applicants say that the application by the bankruptcy trustee pursuant to s 106B … is a separate cause of action and not an incident of the ‘matrimonial cause’ that is pending between the wife and the bankruptcy trustee with respect to property that has already vested in the bankruptcy trustee. … [T]his argument has a number of difficulties. First, a claim pursuant to s 106B is not an independent cause of action that may be pursued otherwise than as an incident of a matrimonial cause: see the opening words of s 106B(1) and the discussion in Porter & Porter [2022] FedCFamC1F 102 … Secondly, an order under s 106B will be relevant to the exercise of the discretion to make any order pursuant to s 79 of the FLA that may affect vested bankruptcy property (other than the property the subject of the s 106B order) as it will affect the overall value of the property of the parties that must be identified in order to properly consider whether orders should be made pursuant to s 79: see Stanford v Stanford [2012] HCA 52 … Thirdly, if the applicants’ reading of s 106B were correct, then the specific right of a bankruptcy trustee to bring an application, as set out in s 106B(4AA)(a) … would be pointless as any property already divested would no longer be ‘vested bankruptcy property’.

( … )

[14] Whether orders pursuant to s 106B can take effect on the date of the impugned transaction is a question that has not been authoritatively determined and is clearly a matter appropriately considered after findings as to the actual facts of the case: see Loder v Aysom (1988) FLC 91-955 … Whether such a result flows in this case will depend upon questions of fact and law that are yet to be determined.

[15] The applicants also argue that the bankruptcy trustee does not have the right to seek orders to ‘enlarge the vested bankruptcy property’ …

[16] … [Section] 79(1) of the FLA makes provision for the solvent spouse to seek an alteration of the property interests of the bankruptcy trustee with respect to vested bankruptcy property but does not make provision for the bankruptcy trustee to seek orders altering the property interests of the solvent spouse. There is nothing in s 79 that would prevent the bankruptcy trustee from seeking orders (other than pursuant to s 79(1) of the FLA) to restore or enlarge the property of the solvent spouse or the property of the bankruptcy trustee as an incident of determining what orders, if any, should be made in favour of the solvent spouse with respect to vested bankruptcy property. If orders pursuant to s 106B … resulted in the Units being within the definition of ‘vested bankruptcy property’ … thus protecting creditors from the husband’s fraud, such an effect would not be the result of property orders against the wife pursuant to s 79(1) of the FLA.

[17] The bankruptcy trustee argues that the husband’s rights to pursue orders under s 106B of the FLA (which the husband had exercised by filing an application in 2013 in the proceedings, prior to being declared bankrupt) are a chose in action which vested in the trustee in bankruptcy and is therefore within the definition of ‘vested bankruptcy property’. … The applicants (who have benefited from the husband’s fraud) argue that the husband should not be permitted to seek relief from his own fraud, yet no such limitation appears in the words of s 106B, nor would public policy necessarily demand such a result when it is the bankruptcy trustee who seeks the relief for the benefit of the creditors. This question, together with the argument as to whether the rights of the husband to seek orders pursuant to s 106B (already the subject of an application prior to his sequestration) are a chose in action that vests in the bankruptcy trustee, are best determined once findings are made as to the facts.

( … )

[22] … [W]e are not persuaded that the decision of the primary judge refusing to summarily dismiss the claims of the bankruptcy trustee for orders pursuant to s 106B of the FLA is attended by sufficient doubt as to warrant its reconsideration. Nor are we persuaded that there is any significant injustice to the applicants if the application for leave to appeal is refused … as substantially the same claims pursuant to s 106B are being pursued by the wife in the proceedings of which the bankruptcy trustee and applicants would remain parties in any event.”

The applications for leave to appeal were refused and the appeals were dismissed. The applicants were ordered to pay the wife’s costs fixed at $30,000 and the costs of trustee in bankruptcy of the husband’s estate fixed at $30,000.

Children – Trial judge unnecessarily interrupted and curtailed cross examination via a “five minute warning” to counsel – Unfounded and unfair findings as to family violence

In Edinger & Duy [2023] FedCFamC1A 194 (10 November 2023) the Full Court (Aldridge, Schonell & Carter JJ) heard a father’s appeal from parenting orders for a child (born in 2015) to spend no time with him [2].

The parties separated on 31 August 2020 after an 8 year marriage. Both parties alleged serious family violence by the other. Interim orders had firstly provided for paternal time to be supervised but later provided for unsupervised overnight time [12]. The mother alleged that the child witnessed sexual activity in the father’s house, was subject to sexual abuse by the father’s girlfriend as well as physical abuse, and neglect by the father and paternal grandfather [13].

The trial judge found that the least detrimental outcome for the child was to remain in the mother’s care and spend no time with the father [19]. The father appealed, arguing he was denied procedural fairness due to the manner that the trial judge conducted the proceedings [5].

The Full Court said (from [24]):

“It was submitted that the proceedings were ‘characterised by the regular … interference by the Trial Judge’ and that the transcript demonstrated few pages where the primary judge did not correct counsel or a witness, disallow a question, interrupt cross-examination, or raise an issue with counsel …

( … )

[27] … [I]n this hearing there was a significant departure from that permitted for proper trial management such as to give rise to a miscarriage of justice. The interventions were excessive, including needlessly interrupting the flow of the evidence and cross-examination of witnesses … Many of those interventions were lengthy, with the primary judge putting multiple questions to witnesses that went well beyond clarification.

( … )

[32] The father submitted the primary judge denied counsel the opportunity to test the mother in any meaningful way on her allegations of family violence. He said in the circumstances, it was unfair for the primary judge to have made the findings she did in relation to family violence.

( … )

[49] Section 69ZX(2)(d) of the Act sets out that the court’s general duties and powers relating to evidence includes permitting the court to give directions limiting the time for the giving of evidence. That must … be tempered by the primary duty of a judge, namely to ensure a fair hearing – which will be undermined by arbitrary time limits or unreasonable restrictions that, as here, compromise the integrity of the hearing.

[50] … [I]t was procedurally unfair and unreasonable for [the father’s] counsel to be given … a five minute warning when a significant part of the evidence regarding family violence had not yet been put to the [mother]. That is particularly problematic in circumstances where it is readily apparent from the reasons that the mother’s experiences of family violence were central to the Court’s determination.

[51] … [T]he primary judge identified the lack of cross-examination on many aspects of the mother’s allegations regarding family violence as relevant to her fact-finding process. It was not a topic that counsel overlooked or made a forensic decision not to cover in cross-examination. It was a matter identified by the primary judge in her reasons as being of fundamental importance. Yet she permitted only about 20 minutes in total for counsel for the father to complete his cross-examination on the topic – during which time the primary judge continued to interrupt counsel.”

Considering the evidence of the Family Report Writer, the Full Court continued (from [69]):

“ … [T]he Family Report Writer reversed her recommendations after being asked a series of questions put to her solely by the primary judge, in which the Family Report Writer was repeatedly asked whether her recommendation had changed in response to the matters that were so put.

( … )

[71] We cannot discount the risk that the concession made by the Family Report Writer was a consequence of the primary judge’s questions which put inappropriate pressure on the expert. As a result, the integrity of the expert’s evidence was impugned, and consequently, the entire process.”

The appeal was allowed, the orders set aside and the proceedings were remitted for rehearing. Costs certificates were granted.

Property – Husband and wife unsuccessfully appeal s 79A order to repay third party creditor from proceeds of sale – Creditor remained a “person affected” despite husband’s discharge from bankruptcy

In Saklani & Valder [2023] FedCFamC1A 163 (22 September 2023) the Full Court (Aldridge, Jarrett & Strum JJ) heard an appeal against property orders made by Christie J.

A third party creditor commenced NSW Supreme Court proceedings against the husband in June 2013 and was ultimately awarded equitable compensation of $594,028.25.

The husband and wife entered into consent orders in November 2013. Neither the third party’s claim nor the Supreme Court order was mentioned in the application. The husband’s interest in a property (“the F town property”) was transferred to the wife in accordance with the orders. In 2015 the husband became a bankrupt upon his own petition. He was discharged in 2018 ([12]).

In 2016, the third party was granted leave to commence proceedings against the husband under s 79A. The wife was joined to the proceedings.

In December 2018 the wife transferred her interest in the F town property to her son and daughter in law for $1,484,881.20. She retained a life interest in the property ([11]). The son and daughter in law were joined to the family law proceedings. Both filed submitting notices and did not participate.

At first instance, Rees J dismissed the third party’s s79A application, finding that the third party ceased to be a creditor upon the husband’s discharge from bankruptcy and that the third party “was no longer a ‘person affected’ for the purpose of s 79A”([13]). The third party successfully appealed that decision in 2021 ([14]).

The consent orders were set aside in February 2023 on the basis of non-disclosure ([8]). The transfer of the F town property to the son and daughter in law was set aside. Ordering a sale of the property, the mortgage and costs of sale were to be paid and $594,258.25 was to be paid to the third party, subject to earlier orders that required the creditor to pay any money she received from the s 79A proceedings to the husband’s trustee for the benefit of his creditors ([10]).

On appeal, the husband and wife’s arguments included that the husband’s bankruptcy and subsequent discharge terminated the creditor’s rights under ss 79A and 106B ([4]).

Aldridge J said (from [170]):

“The essential point of these grounds is that the [husband’s] discharge from bankruptcy had the effect of releasing him from all debts provable in the bankruptcy and that ‘accordingly all causes of action founded upon those provable debts ceased to exist’ … This is said to include the claim brought by the [third party creditor] … under s 79A.

( … )

[179] … [T]he [husband’s] point is that the [third party creditor’s] … claim under s 79A was a claim in respect of a provable debt which was released on … [his] discharge from bankruptcy. …

( … )

[182] … [T]he claim under s 79A is not a claim to enforce a remedy against the person or property of a bankrupt in respect of a provable debt. The claim is a legal proceeding in respect of a provable debt (s 58(3)(b) of the Bankruptcy Act).

( … )

[186] By enacting s 58(3), the Commonwealth Legislature empowered and permitted creditors who had obtained the necessary leave to enforce a remedy against the person or property of a bankrupt or to commence or continue a legal proceeding in respect of a provable debt. … [A] creditor’s rights in a bankruptcy can extend beyond proving in the bankruptcy and extend to pursuing claims under s 79A of the Act …

( … )

[199] … [S]enior counsel for the [husband] referred to the effect of s 153(1) of the Bankruptcy Act as the debt disappearing or being extinguished. There is no warrant in the section or the authorities relied upon by the [husband] for such a description being applied to the release of the bankrupt. Whilst proceedings against him or his property are no longer tenable, the debt continues to exist with the obvious example of it being relied upon to found a proof of debt (Tarea Management (North Shore) Pty Ltd (In liquidation) v Glass [1991] FCA 73 …

( … )

[209] The [third party creditor] … then remained a claimant with a right to prove in the estate as a creditor, that right had been impugned by the consent order and therefore she remained a person affected for the purpose of s 79A. She was seeking to augment the dividend she was to receive.”

Jarrett and Strum J agreed with the reasons for judgement and orders proposed by Aldrige J in the substantive appeal

Amendments were made to the final orders with the consent of the parties and the appeal and cross appeal were otherwise dismissed. The husband and wife were ordered pay the third party creditor’s costs.

Children – Trial judge relied upon information given at mediation, where such evidence was inadmissible pursuant to s 10J of the Act – Error was material to outcome of trial

In Rubra & Potter [2023] FedCFamC1A 159 (18 September 2023) the Full Court (Aldridge, Baumann & Riethmuller JJ) heard a mother’s appeal from parenting orders made by Judge Vasta in relation to a child born in 2018.

Concluding that the mother had fabricated allegations of sexual assault on the child by the father, Judge Vasta ordered that the father have sole parental responsibility and that the child live with the father. The child was not to see the mother again until 2 September 2023 ([2]-[3]). The mother appealed.

The Full Court said (from [9]):

“On the material before the Court … a finding that there had been no sexual abuse was justified. The mother did not seek a finding that there had been such abuse.

[10] However, the primary judge went further than that and found that the allegations were fabricated by the mother. It is difficult to understand precisely what is meant by that given that the child repeated the allegations to a number of witnesses, including the Family Consultant, who were not challenged on that evidence. Perhaps his Honour meant that the mother had coached the child to make the allegations. If so, there was no evidence as to that. The Family Consultant did not suggest that coaching of a child of that age was likely or possible. The mother was not cross-examined to suggest such behaviour by her.”

Considering a mediation that took place in October 2021, the Full Court continued (from [12]):

“It was not disputed … that the mediation was conducted by a ‘family dispute resolution practitioner’ as defined by s 10G(1) of the Act. Section 10J(1) then operated to prevent anything said in the company of that practitioner whilst conducting family dispute resolution from being admissible in any court. The exceptions in s 10J(2) are very limited and do not extend to consent (unlike s 131 of the Evidence Act 1995 (Cth)). The bar imposed is absolute and not subject to the exercise of any discretion. Thus, the fact that both parties, acting for themselves, raised what occurred at the mediation in their affidavits, does not assist.

[13] His Honour therefore, incorrectly said:

For obvious reasons, the Court never receives information about what happened at the mediation. However, in these proceedings, because of the way in which this fits into the narrative, the Court made an exception and received some information about the mediation.

[14] The primary judge then went on to record that during the mediation the mother said that recently the child had told her that the father had growled at her and smacked her. His Honour found that to ameliorate this and to provide an independent assessment of any risk, the mediator and the Independent Children’s Lawyer (‘the ICL’) suggested that changeovers could take place at a contact centre.

( … )

[20] The primary judge therefore used the information given at the mediation, the orders proposed by the mediator and the mother’s refusal to agree to them in a very significant way. In effect, his Honour found that the mother invented the allegation of sexual abuse because the mediation was not going her way.

[21] The primary judge was not entitled to have regard to the material in connection with the mediation and should have informed the parties, who were acting for themselves, that he could not do so.

[22] The error in using that information was clearly material to the outcome.

( … )

[24] We note with considerable concern that the effect of s 10J was not raised with the primary judge by counsel for the ICL (who was not the counsel who appeared on the appeal). Had s 10J been raised with the primary judge at the appropriate time, the appealable error was unlikely to have occurred.”

The orders were set aside. Further parenting orders were made by consent. Costs certificates were ordered.

Property – Increase in value of real estate was not a windfall or an equal contribution – Contributions not required to have positive financial effect – Renovations that “came to nothing” were still contributions

In MacKinnon & Talbot [2023] FedCFamC1A 156 (19 September 2023) Riethmuller J, sitting in the appellate jurisdiction of the Federal Circuit and Family Court of Australia, heard a de facto husband’s appeal from property orders made by Morley J.

The appellant and the de facto wife (“respondent”) commenced cohabitation in the respondent’s home in 2009 and separated in July 2015 after a de facto relationship of 6 years ([2]).

At the commencement of the relationship, the appellant owned little property and $12,000 in superannuation. He was employed as a construction worker ([3]).

The respondent owned two properties worth $484,699 (a strata unit in Suburb Q and her home in Suburb E) and $74,621 of superannuation ([5]). She had a son from a previous relationship and was employed as a medical professional ([4]).

The Suburb Q property was sold for $431,000 in November 2009 and the proceeds applied towards another property in Suburb C for $709,000, which became the parties’ home. The Suburb E property was sold in November 2010 and the net proceeds of sale were $262,000 ([6]).

The appellant undertook renovations on the Suburb C property for over 10 months and ceased paid employment during that time. The renovations undertaken by the appellant were unsuccessful and subsequently removed by a builder employed by the respondent ([7]). The extent of the appellant’s contributions were a disputed issue ([9]).

Morley J identified the net asset pool at trial at $1,372,449 and contributions 12.5:87.5 in the respondent’s favour. An adjustment of 5 per cent was made to the appellant for s 90SF(3), resulting in an overall division of the asset pool of 17.5:82.5 in favour of the respondent. This resulted in the respondent being required to pay the appellant $159,742.

Riethmuller J said (from [29]):

“The appellant alleges the increase in the value of the Suburb C property, from $709,000 at the time of purchase to $1,725,000 at the time of trial, should be treated as a windfall and considered to be a contribution made equally by each of the parties. …

( … )

[31] To approach the matter on the limited basis argued by the solicitor for the appellant would be to quarantine one particular contribution and fail to consider the matter holistically. Such an approach runs the risk of undervaluing other contributions and indeed, completely overlooking the real value of the contribution by way of the initial purchase of the property: it is obvious that only those who owned property in the area benefited from an increase in its value, thus the initial purchase or contribution of the property must be a relevant consideration. The appellant’s argument incorrectly attempts to convert the principle that increases in value should not simply be attributed to the title holding spouse as a contribution solely by them (as opposed to it being one of the many relevant considerations) and convert it to some form of community property principle requiring the entire increase in value of an asset to be quarantined as an equal contribution of each party. It was clearly not a ‘windfall’ in the sense of a lottery win, or an unexpected increase in value due to a rezoning or the like … ”

Considering the renovations and the appellant’s contributions, Riethmuller J continued (from [33]):

“ … [T]he appellant did not produce expert evidence showing that his work added value to any of the properties, nor was expert evidence produced as to the adequacy of his work … This left the primary judge without evidence that the work led to any increase in the market value of the properties.

[34] In the absence of evidence as to the effect of the work on the value of the property, it was open to the primary judge to conclude that the renovation had ‘come to nothing’ …

[35] … [H]is Honour appears to have … concluded that the appellant’s efforts were not a contribution within the meaning of s 90SM of the Act. ( … )

[36] There is no question that the appellant undertook work on the home nor that his efforts were genuine. On the findings of the primary judge, this work did not lead to an increase in the value of the property. However, not all contributions by parties to marriages or de facto relationships lead to an increase in the wealth of the parties … There is no requirement that a contribution must result in a positive economic result before it can be taken into account … Whilst the lack of economic benefit may be relevant (Willmore and Willmore [1988] FamCA 45 … ), a party’s work and effort generally remains a contribution unless it is conduct of the type described in Kowaliw and Kowaliw [1981] FamCA 70 …

( … )

[45] The primary judge took into account the appellant’s role in the parenting and financial support of the respondent’s son pursuant to section 90SF(3)I of the Act … for the period of the parties’ de facto relationship.  ( … )

[46] As the appellant identifies, his contributions prior to the de facto relationship may also be taken into account … It is not appropriate to attempt to place a financial value upon everything done by extended family or friends for a child as families are not commercial enterprises … ”

Riethmuller J concluded (from [50]):

“ … [H]is Honour did not consider the post separation occupation of the Suburb C property by the respondent and her son to be a contribution by the appellant …

[51] … The fact that the interest of the appellant may be only an inchoate right at common law … does not restrict consideration of the use of the property pursuant to s 90SM of the Act as between the spouses.”

His Honour re-exercised the discretion and ordered a 72.5:27.5 division in favour of the respondent, requiring the respondent to pay the appellant $343,112.25. Costs certificates were ordered.

Property – Order contained material error as its effect saw the wife receive $149,000 less than the amount otherwise calculated as just and equitable – Discretion re-exercised to correct error

In Mellone [2023] FedCFamC1A 154 (14 September 2023) Schonell J, sitting in the appellate jurisdiction of the Federal Circuit and Family Court of Australia heard a wife’s appeal from property orders which divided the asset pool 42:58 in favour of the husband after a 17 year relationship which produced one child ([4]).

The parties separated a few months after the husband had received an inheritance of $204,426. The child had spent little to no time with the husband since March 2021.

Schonell J said (from [27]):

“… [T]he primary judge calculated the appellant would receive on a sale $1,014,720. He then made orders which provided that on the sale of the former matrimonial home the net proceeds be divided as to 35 per cent to the appellant and 65 per cent to the respondent.

[28] It is common ground on the appeal that the correct sum payable to the appellant was not $1,014,720 but either $865,278 or $865,273 (the difference does not matter), being at least some $149,000 less. That is not the only error; on the agreed values, 35 per cent of the sale proceeds to the appellant would give rise to a payment to her of $525,459. By any measure, the orders do not reflect the percentage division finding but, more importantly, they do not reflect what the primary judge thought the appellant would receive.

[29] These are not the only factual errors made by the primary judge. The appellant submitted that the primary judge did not include in determining the property to be retained by the respondent a liability of $80,047 and the contents of the home valued at $7,910. The respondent contended that the primary judge failed to include the appellant’s bank account balance of $6,244 which was included in the Balance Sheet filed on 1 March 2023, and that ‘there are general errors in the effect of the orders’ …

[30] Minor arithmetic errors do not necessarily mean the judgment cannot stand. Minor errors that are of no consequence are not sufficient to give rise to error (see Burke and Burke [1981] FamCA 44 … ). In some instances of arithmetic error, a Full Court may allow an appeal for the purposes of correcting the error (see King v Kemp [1996] FamCA 24 … ).

[31] At the heart of the issue is the materiality of the error and whether it is such as to impugn the result (see De Winter and De Winter (1979) FLC 90-605).

[32] I am satisfied that whilst there were some minor arithmetic errors … [they are] immaterial to the outcome. However, the over calculation of the payment to the appellant by at least $149,000 falls into a different category.

( … )

[36] It is clear that the primary judge found that 42 per cent of the assets to the appellant led to a dollar amount of over a million dollars when it plainly did not. It is a factual error of over $149,000 in a very modest pool of assets. In fact, the result was that the appellant was receiving approximately 15 per cent less than what the primary judge thought she was. I am satisfied that a 15 per cent error is of such magnitude as to comfortably fall within the rubric of materiality.

[37] If the primary judge thought that a million dollar payment gave effect to a just and equitable result, then plainly an amount that is 15 per cent less could not. The translation of percentages into figures created an error of fact. It is not simply a case of removing the erroneous figure and inserting another.

[38] It is the actual order which must be just and equitable. Where the order is erroneous to such a magnitude, then the just and equitable finding that underpins the order must also be erroneous.”

Schonell J concluded (from [59]):

“The authorities dictate that I am to assess the parties’ contributions in a holistic way. The compartmentalising of contributions into categories such as initial contributions or post separation contributions is to be eschewed as it obscures the holistic assessment. Likewise, a focus on a direct financial contribution made at some historical point in time and measuring it as a percentage of the current pool is irrelevant to a contribution assessment other than to create a mathematical calculation that serves no purpose. It is the antithesis of a holistic assessment, contrary to longstanding authority, and is incapable of equitable application to other equally important non-financial contributions such as homemaking and parenting.

( … )

[62] Taking account of each of the parties’ respective contributions over this long relationship including up to now, leads me to the conclusion that they should be assessed at 40 per cent to the appellant and 60 per cent to the respondent.

[63] The parties both submitted that an appropriate adjustment under s 75(2) in favour of the appellant was 5 per cent.

[64] I am satisfied, having regard to the contribution finding, the disparity as to income between the parties where the respondent earns approximately $180,000 per annum and the appellant earns approximately $99,000 per annum, and the appellant’s obligation to continue to provide the majority of the physical care of X, that … 5 per cent represents an appropriate adjustment.

[65] Overall, the effect of the findings as referred to above is to divide the parties’ assets as to 45 per cent to the appellant and 55 per cent to the respondent.”

The appeal and cross appeal were upheld and the final property orders were set aside. Schonell J re-exercised the discretion to make fresh property orders. Cost certificates were granted.

Children – Mother’s application to adduce further evidence on appeal dismissed where majority of further evidence pre-dated trial

In Janco & Riordan (No 2) [2023] FedCFamC1A 153 (11 September 2023) Christie J, sitting in the appellate jurisdiction of the Federal Circuit and Family Court of Australia heard an appeal against orders of Judge Neville for the 5 year old child (“X”) to continue living with the father and spend time with the mother.

The parties never lived together. Until the parties’ separation in 2020, X lived with the mother in City J while the father lived 2 and a half hours away in Sydney ([16]). From July 2020, the child lived with the father pursuant to consent orders.

In May 2021 the mother filed an application seeking to discharge the consent orders and for X to live with her. There were mutual family violence orders and interim orders subsequently made, where X was to continue living with the father.

To support her appeal, the mother brought two separate applications seeking leave to adduce new evidence. The first tranche of new evidence consisted of 18 annexures including documents spanning 167 pages and videos ([19]). The second tranche of new evidence included an affidavit from the father’s mother and social media posts ([20]).

Christie J said (from [21]):

“[21] Both [applications for leave to adduce new evidence] … have been filed outside the time allowed for in the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). …  I accept that if the material sought to be adduced was capable of demonstrating the orders the subject of appeal were erroneous then it would be appropriate to extend time.

[22] Dealing with the [first tranche of new evidence] … Annexures 1-15 are all documents dated or originating prior to the final hearing … The mere fact that a document predates the orders from which the appeal lies will not determine the application to adduce further evidence. However, this will be relevant to the exercise of the discretion, with greater or lesser weight attached to the fact depending on the overall circumstances of the case. The annexures are primarily correspondence between the appellant and her lawyers or between the parties’ lawyers and illuminate the appellant’s dissatisfaction with the existing parenting orders. …

[23] Annexure 16 comprises journal entries written by the appellant since the final hearing. Annexure 18 is a document from a Dr T of Medical Practice U … titled ‘Medical Evaluation and Concerns for Ms. Janco’. Annexure 17 comprises various videos of the child which, on their face, appear to be from 2021. The appellant submitted the videos demonstrated the child’s distress on separating from her and hence were supportive of the orders which she sought at trial. To receive them on appeal I would have to be satisfied that they were capable of demonstrating error. The primary judge was aware that X had had difficulty transitioning from one parent to the other but this was in the context of a close relationship with each of them. The video evidence sought to be adduced in that context does not demonstrate the orders were erroneous and given the date range of the videos January 2021 to October 2021 all were available at the time of the hearing before the primary judge.

[26] The appellant’s affidavit fails to identify any correlation between the evidence and the grounds other than generalisations such as ‘the true nature of the circumstances surrounding this case’. Her application states that she ‘seeks to adduce this evidence in line with her grounds for appeal’. This does not satisfy r 13.39 of the Rules.

[27] A further deficiency is the significant volume of material that pre-dates the final hearing. This deficiency is amplified by the fact that such material … was available to the appellant at the original hearing but not tendered.

( … )

[35] I am satisfied that the evidence which the appellant asks me to receive is in the nature of that which the Court already had available at trial: the Court knew the appellant was unhappy about the existence of the interim orders and that X had trouble transitioning between the households.

[36] I have considered the evidence sought to be adduced both individually and collectively to assess whether those documents or the evidence when taken together ‘would have produced a different result if it had been available at trial’: CDJ v VAJ [1998] HCA 67 … I have concluded that it would not.”

Christie J continued (from [39]):

“The primary judge was dealing with a situation where the expert evidence was to the effect that there were no real risk issues for the child who had a good relationship with both his parents. Had the parents lived in reasonable proximity the primary judge noted ‘it would be more likely than not that there would be a shared care arrangement …’ …

( … )

[41]  In what the primary judge described as a ‘finely balanced’ case it was appropriate to have regard to the importance to the child of maintaining stability. It was not the existence of the interim orders which was key to the determination but the fact of there having been a number of changes in the child’s life to date, his having commenced school and the desire on the part of the primary judge to not impose a further change in those circumstances.”

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