Grainger & Bloomfield and Anor [2015] FamCAFC 221 (18 November 2015)

1. The second question for our determination relates to the extent of the power under s 90K(3) of the Family Law Act. The terms of that sub-section, which for convenience we here repeat, are:

(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.

1. Put simply, the appellant contends that the power in s 90K(3) "is consequential on the setting aside of a financial agreement, in order to reverse transactions affected under that agreement, or to make adjustments to achieve a restoration in substance"; it "does not permit a creditor to prosecute other causes of action as between the husband and wife or third parties" (Appellant's summary of argument in reply [20]).
2. Again put simply, the respondent contends that the power in s 90K(3) is a power "to make such orders as it considers just and equitable for the purpose of preserving or adjusting the rights of the parties to the financial agreement or other interested persons" and "is not limited in the way the appellant contends" (Respondent's Summary of Argument [25]).
3. In support of the more restrictive interpretation of s 90K(3), the appellant

relies on the decision of Burnett FM (as his Honour then was) in

Reamy & Milne [2012] FMCAfam 143; (2012) 47 Fam LR 470. In that case certain judgment creditors of a party to a de facto relationship sought to set aside a financial agreement between the parties to the de facto relationship (entered into at the time of the trial which resulted in the judgment debt) pursuant to the provisions of

s 90UM(1)(b) of the Family Law Act. As we have earlier explained

s 90UM(1)(b) is in virtually identical terms to s 90K(1)(aa) save that the latter provision concerns parties to a marriage, or a former marriage. Similarly,

s 90UM(6) is in virtually identical terms to s 90K(3) in that it provides:

(6) A court may, on an application by a person who was a party to the Part VIIIAB financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.

1. The appellant contends that his Honour can be read (at [21]-[23] of his reasons), as holding, correctly in the appellant's opinion, that the power in

s 90UM(6) is a "discretionary power for restoring the parties to the former status quo", while the respondent contends that if his Honour did so hold, he was wrong in law and his decision should be overturned. 2. The relevant paragraphs ([18] - [24]) from Burnett FM's decision are set out in [34] of Judge Cassidy's reasons for judgment in the present case, and it is not necessary for us to repeat them in these reasons. It is, however, necessary that we set out her Honour's reasons for apparently departing from the approach taken by Burnett FM in Reamy. Her Honour's reasons were: 1. The first respondent [Mr Grainger] submits that setting aside this agreement would return the parties to a status quo where the wife's trustee in bankruptcy would take the [E] property encumbered with a mortgage and that the utility of proceeding is not obvious in terms of a remedy for the creditor. 2. The creditor [Ms Bloomfield] argues, through her counsel, that s.90K(3) is of a broader nature. I consider, while Burnett FM's reasoning is attractive and, unless it was clearly wrong it is likely to be applied by other judges in relation to s.90UM(6), the section that is now under consideration is s.90K(3). The analysis set out in

Reamy (supra) is not determinative of the matter in this case. It is a trial-able issue that, in my view, should be taken to a hearing to fully explore submissions on the extent of the power under s.90K(3). 3. The first respondent argues that the applicant has no prospects of obtaining the relief sought at paragraphs 3, 4 and 5 of the final orders sought in the initiating application:

"[3] An order pursuant to section 90K(3) of the Family Law Act 1975 that [Mr Grainger] transfer to the estate of

[Mrs Grainger] (a bankrupt) the real property located at..., [E property] in the State of Queensland, ... free from mortgage or other encumbrance.

[4] In the alternative, an order prusuant (sic) to section 90K(3) of the Family Law Act 1975 that [Mr Grainger] pay to the estate of [Mrs Grainger] (a bankrupt) an amount of money being the market value of the [E] Property as at the date of transfer of that property, in an amount to be assessed.

[5] Further, or in the alternative, a declaration that [Mr Grainger] is liable to exonerate the estate of [Mrs Grainger] (a bankrupt) in respect of any mortgage, encumbrance, lien or other charge or liability secured over or connected to the [E] Property."

1. In the present case the extent of the s.90K(3) power is not authoritively defined and the issue is a trial-able issue. Furthermore the trustee in bankruptcy is still a party to the proceeding even though he has elected not to participate in this part of the proceeding. He may decide that it is appropriate to participate in the hearing once the summary judgment matter has been finalised.
2. I do not consider that this is a matter where I can give summary judgment on the basis that s.90K(3) is a power limited to returning the parties to their positions prior to the agreement and therefore the orders the applicant seeks would not be available.
3. In relation to "Q2":

"... Does the power in s 90K(3) to make orders adjusting the rights of persons extend to adjustments other than for the purpose of substantially restoring the position existing before the financial agreement?"

1. I consider this is a matter where the applicant is entitled to argue the extent of the s.90K(3) power at the trial.

1. To the extent that her Honour considered that there was some difference between s 90UM(6) and s 90K(3), she was in error. Those sub-sections are in virtually identical terms save for their terms which indicate whether they have application to a financial agreement between parties to a marriage or to parties to a de facto relationship.
2. Apart from that matter, we do not consider that her Honour erred in the approach she took to s 90K(3). Earlier in her reasons, she had cited the following passage from the reasons of French CJ and Gummow J in Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118, where their Honours were considering s 31A(2) of the Federal Court of Australia Act 1976 (Cth), which is in similar terms to s 17A of the Federal Circuit Court of Australia Act 1999 (Cth), which her Honour was applying:

"[24] The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action (51) or on the basis that the action is frivolous or vexatious or an abuse of process (52). The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd [(1983) [1983] HCA 25; 154 CLR 87 at 99] said:

"The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried."

More recently, in Batistatos v Roads and Traffıc Authority (NSW) (54) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde (55) which included the following:

"Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways (56), but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way."

There would seem to be little distinction between those approaches and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A (57). That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions."

1. Having regard to these observations by members of the High Court, the primary judge could not be said to have been wrong in permitting, in the exercise of her discretion, the s 90K(3) issue to go to trial.
2. It may, however, be useful for us to make some further observations regarding

s 90K(3) (and its counterpart s 90UM(6)). 3. It will have been seen from the paragraph 21 of the Supplementary Explanatory Memorandum to the Family Law Amendment Bill 2003 (Cth) that s 90K(3) is described as being "based on" s 90J(3); that sub-section is concerned with the preservation or adjustment of rights on the termination of a financial agreement by parties to such an agreement. It appears that to date there has been no decision of any court in relation to the scope of the powers in s 90J(3). 4. However, it is also to be observed that the terms of s 90K(3) have some similarities to those of s 87(9)(b) of the Family Law Act; that sub-section is concerned with a court's powers when it revokes the previous approval by a court under s 87(3) of a maintenance agreement:

(9) Where the approval of a maintenance agreement under this section is revoked by a court:

(a) the agreement ceases, for all purposes, to be in force; and

(b) the court may, in proceedings for the revocation of the approval or on application by a party to the agreement or any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of the parties to the agreement and any other interested persons;

and, in exercising its powers under paragraph (b), the court shall have regard to the ground on which it revoked the approval of the agreement.

1. Again there has been little exploration of s 87(9), with the only authority of any assistance apparently being the decision of the Full Court of this Court (Fogarty, Nygh and Maxwell JJ) in Re Chemaisse; Federal Commissioner of Taxation (Intervener) (1990) FLC 92-133 where the following observations were made:

Before us senior counsel for the wife submitted that a Judge has a wide discretion under sec. 87(9)(b) to make such orders as are ''just and equitable'' and that the exercise was akin to the exercise of power under sec. 79. He submitted that although no formal application had been made by the wife under sec. 79 either such an application was implicit in the way in which the proceedings had been conducted or the discretion under sec. 87(9)(b) was wide enough to encompass such an exercise. Accordingly, in effect he sought orders which would have the effect of dividing in some way between the wife and the Commissioner this three-quarter interest in the home.

It appears to us that there are really two answers to these submissions.

Fundamental to the wife's case is the contention that a party to a marriage builds up over the duration of the marriage an interest in the property of the parties to that marriage. Counsel submitted that such a spouse has a presently vested interest of an ''inchoate'' kind which exists prior to the institution of proceedings under sec. 79 or the making of any order under that section and which is capable of recognition and enforcement in appropriate circumstances. Relevantly to this particular case he submitted that the wife, after 40 years of marriage and having regard to the significant contributions which she had made to the family, had a vested interest in this property which it was proper to take into account and evaluate against the rights of the Commissioner ...

In our view that does not represent the law in Australia. Rights arising under sec. 79 come into existence when an order is made under that section. Neither that section nor any other provisions of the Family Law Act establish rights, however described, in a party to a marriage over the property of the other spouse either arising from the existence of the marriage or the activities of the parties during that marriage or the institution of proceedings under sec. 79, where those rights do not otherwise exist under the laws in Australia.

...

The second answer to the wife's overall submission lies in the application of sec. 87(9)(b) to the particular circumstances of this case. As counsel for the Commissioner of Taxation correctly submitted, whatever may be the appropriate exercise of the discretion under para. (b) in other cases, here, once the finding of fraud by the husband and the level of involvement of the wife referred to above were made, there was really no other proper exercise of discretion open to the trial Judge. The subsection specifically obliges the Court to have regard to the ground upon which the approval is revoked. Having regard to the findings which the trial Judge made and the ground upon which he acted he was clearly within the exercise of his discretion to make the orders which he did [being that the wife reconvey to the husband the three quarter interest in the property which he had transferred to her pursuant to the agreement]; indeed we think no other exercise of discretion would legitimately have been open to him on those facts.

Accordingly it is unnecessary to consider the wider questions raised by senior counsel for the wife relating to the interpretation of sec. 87(9)(b). Nor would it be appropriate for us to do so. The facts of this case are particular, arising as they do out of a fraud perpetrated upon the Court. Section 87(8) empowers the Court to revoke the approval on a number of quite diverse grounds including that the parties desire the approval to be revoked, that the agreement is void, voidable or unenforceable, or that subsequent circumstances have rendered it impractical to carry the agreement into effect. Obviously the way in which the discretion given under sec. 87(9)(b) will be exercised will be significantly influenced by those factors amongst others. The above comments should not be taken as any endorsement of the wide submissions made on behalf of the wife as to the correct interpretation of this provision; those issues do not arise in this case.

1. These observations of the Full Court in Chemaisse can be read as cautioning against an over-expansive application of a provision such as s 87(9)(b) or

s 90K(3). But they also suggest that the application of such a provision will depend on the particular facts of the case in which the provision is to be applied. 2. In the present case the facts have yet to be found, and therefore despite the urgings of the appellant to the contrary, we do not consider it appropriate to say more regarding the operation of s 90K(3) in the context of this appeal against a refusal of a summary dismissal order.

Conclusion in relation to Question 2 and the appeal

1. Thus we agree that the primary judge was correct in refusing in the context of a summary dismissal application, to determine the scope of the preservation and adjustment powers in s 90K(3).
2. Grounds 4, 5 and 6 being the remaining grounds of appeal do not therefore have merit, and thus the appeal will be dismissed.

Question 3: In seeking to set aside a financial agreement is a creditor limited to the s 90K(1)(aa) Ground?

1. Both before the primary judge and before this Court, the respondent/cross appellant, Ms Bloomfield, has contended that once she had invoked the court's jurisdiction pursuant to s 90K(1)(aa) to set aside the financial agreement, she was entitled to rely on other grounds in s 90K(1) as a basis for her application to set aside the agreement, in particular the ground contained in s 90K(1)(b), being that "the agreement is void, voidable or unenforceable".
2. The basis on which Ms Bloomfield claims that the agreement is "unenforceable" pursuant to the provisions of s 90K(1)(b), is that it allegedly does not comply with the requirement in s 90G(1)(b) of the Family Law Act for each party to the agreement to have had independent legal advice about certain matters before entering the agreement, because of an alleged lack of independence on the part of a solicitor, Mr P, who provided advice to Mrs Grainger before she entered into the agreement. Section 90G(1) is in the following terms:

(1) Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:

(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and

(c) either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and

(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and

(d) the agreement has not been terminated and has not been set aside by a court.

Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the

Evidence Act 1995.

1. Again both before the primary judge and before this Court, the appellant,

Mr Grainger, has contended that the challenge that a creditor can make to a financial agreement is restricted to the grounds set out in s 90K(1)(aa) because of the content of the definition of "third party proceedings" in s 4A of the Act and the reference to that definition in paragraph (eab) of the definition of "matrimonial cause" in s 4(1) of the Act. 2. We have earlier set out paragraph (eab) of the definition of "matrimonial cause" and also the definition of "third party proceedings" in s 4A, but it will be convenient to repeat those definition provisions here:

(eab) third party proceedings (as defined in section 4A) to set aside a financial agreement; or

...

(1) For the purposes of paragraph (eab) of the definition of

matrimonial cause in subsection 4(1), third party proceedings means proceedings between:

(ii) the legal personal representatives of any of those parties who have died;

(including a combination consisting solely of parties or consisting solely of representatives); and

(ii) if a creditor is an individual who has died - the legal personal representative of the creditor;

(iii) a government body acting in the interests of a creditor;

being proceedings for the setting aside of the financial agreement on the ground specified in paragraph 90K(1)(aa).

(a) a creditor of a party to the financial agreement; or

(b) a person who, at the commencement of the proceedings, could reasonably have been foreseen by the court as being reasonably likely to become a creditor of a party to the financial agreement.

(b) an official or authority of the Commonwealth, a State or a Territory.

1. It will be seen that an essential element of the definition of "third party proceedings" (which through the definition of "matrimonial cause" is the mechanism for the conferral of jurisdiction on courts in such proceedings as earlier explained at [24] of these reasons) is that the subject proceedings are "proceedings for the setting aside of the financial agreement on the ground specified in paragraph 90K(1)(aa)".
2. The primary judge (in [47] of her reasons) accepted the submission of Mr Grainger that:

...the scope of the Court's jurisdiction is circumscribed by the definition of "matrimonial cause" and the definition in s.4A of the Act restricts the challenge a creditor can make to the agreement to the grounds set out in s.90K(1)(aa) of the Act.

1. Thus, her Honour concluded (at [50]), correctly in our view, that the creditor was "only entitled to rely on s 90K(1)(aa) in seeking to set aside a financial agreement", and she accordingly, struck out the paragraph in Ms Bloomfield's initiating application seeking a declaration pursuant to s 90G of the Family Law Act as well as the relevant paragraphs of the statement of claim.
2. Before us, however, it was submitted for Ms Bloomfield that her Honour had erred in reaching her conclusion on this third question by failing to consider the availability of the accrued jurisdiction, which was apparently also relied on before her.
3. We can only say that we are at a loss to understand how it can be asserted in circumstances where the statute permits a creditor of a party to a financial agreement to apply to set aside the financial agreement on one specified ground, that the accrued jurisdiction (or indeed, the associated jurisdiction which was also pressed, albeit faintly, before us) would permit the creditor to apply to set aside the financial agreement on any other ground provided in the Act.
4. Put simply, the purpose of the accrued jurisdiction is to permit a party, or parties, to obtain all remedies available to that party, or parties, in the one proceeding in relation to a particular matter. It cannot confer on a party additional remedies under a statute that are not otherwise conferred by that statute on that party.

Conclusion in relation to Question 3 and the cross appeal

1. As we have earlier indicated, the primary judge did not err in concluding that Ms Bloomfield was only entitled to rely on the ground in s 90K(1)(aa) as the basis for her application to set aside the financial agreement, and in accordingly striking out those parts of the initiating application and of the supporting statement of claim, which she did.
2. The cross appeal must therefore also be dismissed.

1. At the conclusion of the hearing of the appeal and the cross appeal, we received brief oral submissions in relation to the costs of the appeal and the cross appeal.
2. It would be fair to say that counsel for neither party sought that the general rule in s 117(1) of the Family Law Act, being that each party should pay their own costs, should apply. Rather the consensus was that costs should follow the event in respect of both the appeal and the cross appeal.
3. Given that both the appeal and the cross appeal are to be dismissed, our orders will be that the appellant pay the respondent's costs of the appeal and that the cross appellant/ respondent pay the appellant's costs of the cross appeal.

I certify that the preceding ninety (90) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Strickland and Hogan JJ) delivered on 18 November 2015