Lynn v White

1 This appeal from a judgment of Ryan J, given on 19 November 1999, raises difficult issues consequent upon the judgment of the High Court of Australia in Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 163 ALR 270. 2 The following history of this appeal can be gleaned from the court files. On 24 June 1996, a sequestration order was made against the estate of the second appellant, Kathleen Lynn, upon her own petition. The first respondent, the trustee in bankruptcy of Mrs Lynn, then applied to the Federal Court of Australia (the Court) for a declaration that an earlier transfer of the second appellant's undivided joint interest in a house and land at 9 Lower Dandenong Road, Mentone (the property) was void. The transfer was to the first appellant, who is the husband of the second appellant and the owner of the other undivided joint interest in the property. The property is their matrimonial home. On 28 May 1997, Marshall J made an order declaring void the transfer of that interest. His Honour also made a declaration that the first respondent was entitled to be registered as the proprietor of a one half interest in the property as a tenant in common with the first appellant. 3 The first respondent then applied to the Court for an order for partition and sale of the property. On 15 July 1998, Heerey J made a number of orders. They included an order that the property be sold pursuant to the provisions of Part IV of the Property Law Act 1958 (Vic) and an order appointing the second respondent, the Official Trustee in Bankruptcy, to be trustee of the sale of the property. Heerey J made an order staying the operation of the order for sale for a period of six months. 4 On 16 March 1999, Heerey J made further orders to facilitate the sale of the property. They included an order authorising the second respondent to apply to the Court for orders and directions with respect to the conduct of the sale of the property, including orders and directions with respect to vacant possession of the property or to enforce any order of the Court. 5 On 3 June 1999, competing applications came before Finkelstein J. The second respondent sought an order for possession of the property to enable it to be sold pursuant to the orders made by Heerey J. The first appellant sought an order staying the operation of the order for the sale of the property until 3 June 2004. Finkelstein J dismissed the application for a stay of the sale order. His Honour ordered that possession be given to the second respondent on the basis that the appellants could remain in the property until February 2000. His Honour also gave directions for the sale of the property, appointing times and dates for inspection by the second respondent and potential buyers. The orders restrained the second appellant from interfering with, disrupting or obstructing the sale or inspection of the property and from deliberately damaging the property. These orders were made in part on an undertaking given by the first appellant that he would not disrupt or obstruct the sale of the property or the inspection of the property and would not damage the property. These undertakings were sought, and the restraining orders were made, because it appeared to his Honour that the appellants would attempt to frustrate preparations for the sale of the property and the sale itself. 6 The appellants did not comply with the undertakings and the restraining orders respectively. The second respondent, by his servants and agents, made a number of efforts to gain access to the property. The appellants indicated that they would not permit access, either for the purposes of inspection or for the purposes of preparing the property for sale. 7 The second respondent made a further application for possession of the property. This was resolved by consent orders, including an order that the second respondent recover possession of the property. Finkelstein J stayed the operation of this order until further order. He varied the orders made on 3 June 1999 by substituting new dates for inspection. 8 Again, the agent of the second respondent was unsuccessful in obtaining access to the property for inspection. The second appellant made it perfectly clear that she would not cooperate with any sale of the property and would not permit any inspection to take place. The second respondent therefore applied for the stay of the order for possession to be lifted. On 24 September 1999, Finkelstein J lifted the stay. 9 A warrant for possession of the property was then issued. The appellants made an application to the Court for an injunction restraining the second respondent from recovering possession of the property. That application came before Ryan J on 19 November 1999. His Honour ordered that the execution of the warrant for possession be stayed until 28 November 1999 and that the application be otherwise dismissed. His Honour took into account the leniency previously extended to the appellants by both Heerey J and Finkelstein J and made a finding that the appellants had no intention whatsoever of leaving the property voluntarily. 10 On 8 December 1999, the appellants filed a notice of appeal from the judgment of Ryan J. The notice of appeal is handwritten and obviously has not been prepared by a legal practitioner. It makes reference to the circumstances in which the appellants apparently find themselves. Some of the references are cryptic. It appears that an arrangement has been made to move the appellants to a home unit in Murrumbeena, so that the property can be prepared for sale and sold. The appellants do not wish to be moved to this unit. They plead ill health and old age and the presence of many possessions in the property. The notice of appeal seeks orders that the appeal be allowed and the warrant for possession be stayed permanently. The only respondent named in the notice of appeal was the first respondent. 11 The appeal came before us on an urgent basis on 13 December 1999. The appellants appeared in person. Each of them addressed the Court. Their case was that they deserved sympathy for a number of reasons. These included their allegations that the legal system had failed them in many instances, and that they were old and in poor health. The Court raised with the representatives of the respondents the question whether the orders made by Heerey J on 15 July 1998 might have been made without jurisdiction. Because the respondents were not ready to argue that question, it was necessary to adjourn the further hearing of the appeal. The Court therefore ordered that the second respondent be added as a respondent to the appeal, adjourned the further hearing of the appeal until 18 February 2000, and gave directions as to the filing and service of written submissions by the first respondent. The Court also ordered that the execution of the warrant for possession be stayed until the hearing and determination of the appeal. It reserved the costs of the respondents. 12 When the hearing resumed, counsel for each of the respondents conceded that the orders made by Heerey J on 15 July 1998 were made without jurisdiction. Those orders were made in reliance upon provisions of the Property Law Act 1958 (Vic) and the Transfer of Land Act 1958 (Vic). Heerey J purported to exercise jurisdiction to make orders under those Victorian Acts pursuant to s 4(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). That provision purported to confer on the Court jurisdiction that would otherwise have been available only to courts of the state. The relevant provisions of the Property Law Act 1958 (Vic) and the Transfer of Land Act 1958 (Vic) confer jurisdiction on "the Court". Section 3(1) of the former Act and s 4(1) of the latter define the word "Court" in terms restricted to courts of the State of Victoria. 13 At the time when Heerey J made his orders, he was entitled to assume that s 4(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) operated validly to confer on the Court jurisdiction under those Victorian Acts. See Gould v Brown [1998] HCA 6; (1998) 193 CLR 346. When Finkelstein J dealt with the matter on 3 June 1999, he was entitled to make the same assumption. On 17 June 1999, in Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 163 ALR 270, the High Court of Australia held that a provision of the Corporations Act 1989 (Cth), similar to s 4(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), was not a valid enactment of the Parliament of the Commonwealth of Australia. By parity of reasoning, it must be accepted that s 4(2) is invalid. It was not suggested by any party that the Court was otherwise capable of exercising the jurisdiction of the courts of the State of Victoria pursuant to the relevant provisions of the Property Law Act 1958 (Vic) and the Transfer of Land Act 1958 (Vic). 14 The orders made by Heerey J, and the subsequent orders made by Finkelstein J, directed to their enforcement, were orders made by the Court, which is a superior court of record. It is axiomatic that a judgment or order of a superior court of record stands, and must be treated as valid and obeyed, unless and until it is set aside. The orders the appellants sought from Ryan J were not directed towards the enforcement of the orders of Heerey J. Rather, they were directed towards preventing the enforcement of Heerey J's orders. It might have been possible for the appellants to have argued before Ryan J that the second respondent ought to be restrained by injunction from taking steps to sell the property pursuant to the orders of Heerey J, or that those orders ought to be stayed, on the ground that they were made without jurisdiction. The appellants, not being lawyers, did not put these arguments to Ryan J. The issues were not raised at all. The point having been raised by the Court in this appeal, it is impossible for us to ignore the fact that the orders made by Heerey J were made without jurisdiction. Simply to accept that they were valid orders, because they were made by a superior court of record, would be an abdication of the Court's responsibility. 15 To deal with the appeal as it stood when we first heard it on 13 December 1999 would have been difficult. Either to have dismissed it or to have allowed it without making any further order would have been to leave the appellants subject to the effect of orders made without jurisdiction. Those orders themselves were not the subject of the appeal. It was suggested that we ought to treat the appellants as having made an application for an enlargement of the time within which they could appeal against the orders made by Heerey J and the orders made by Finkelstein J. No such application was in fact made. It would undoubtedly have been possible for the Court to consider by way of appeal whether Heerey J lacked jurisdiction to make the orders he made. It is always open to the Court to consider whether it has jurisdiction to deal with a proceeding and want of jurisdiction must always be a proper ground of appeal. 16 As it has turned out, the significance of these issues has been overtaken by subsequent events. On 15 December 1999, two days after we had adjourned the hearing of the appeal, the Federal Courts (State Jurisdiction) Act 1999 (Vic) came into operation. That Act is designed to overcome as far as practicable the effect of invalidities resulting from the decision of the High Court of Australia in Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 163 ALR 270. Section 4(1) of that Act defines an "ineffective judgment" as a judgment of a federal court (which expression is defined by s 3 to include the Federal Court of Australia) in a State matter (which expression is similarly defined to include a matter in which the Supreme Court of Victoria has jurisdiction otherwise than by reason of a law of the Commonwealth or of another State or a Territory) given or recorded, before the commencement of the section, in the purported exercise of jurisdiction purporting to have been conferred on the federal court by a relevant State Act. The expression "relevant State Act", as defined in s 3, includes the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic), which purported to confer on the Court jurisdiction with respect to the law of the State of Victoria, pursuant to s 4(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth). By s 6 of the Federal Courts (State Jurisdiction) Act 1999 (Vic), the rights and liabilities of all persons are, by force of that Act, declared to be, and always to have been the same as if the ineffective judgment of the Federal Court of Australia had been a valid judgment of the Supreme Court of Victoria. The word "judgment" is defined by s 3 to mean a judgment, decree or order, whether final or interlocutory, or a sentence. The effect of s 6 is to validate retrospectively, as a matter of the law of the State of Victoria, the orders of Heerey J and the consequential orders made by Finkelstein J. This validating effect has occurred without any action being taken on the part of the Court. Enforcement of the orders of Heerey J can now continue as if those orders had been validly made by the Supreme Court of Victoria. 17 The appellants have not made out any case for overturning the orders made by Ryan J on 19 November 1999. They have not made any attempt to suggest that his Honour made any incorrect finding of fact or any error of law, or that any exercise of his discretion miscarried. They have, instead, thrown themselves on the mercy of the Court, in a last-ditch attempt to remain in their home. In that respect, both Heerey J and Finkelstein J have previously given them great leeway. The appellants have shown themselves to be people who are prepared to avail themselves of the law when it suits their purposes, but to defy it when it operates against them. They have been aware for a considerable time that their house was to be sold in consequence of the bankruptcy of the second appellant, but have attempted to thwart the processes of the law in that regard. As a result of the way in which the appeal has been dealt with, they have managed to remain in possession of the property for longer than might have been expected. In the circumstances, we see no alternative but to leave questions of the execution of the warrant of possession to be resolved in accordance with the law of the State of Victoria. Arrangements have been made to ensure that the appellants will not be homeless. Those arrangements are not to the liking of the appellants; obviously, they will be less satisfactory to the appellants than if the appellants had been able to continue in what has been their home. 18 In the circumstances, we are of the view that we should take the unusual step of exercising the power given to the Court in its appellate jurisdiction by s 28(1)(b) of the Federal Court of Australia Act 1976 (Cth) to refuse to make an order in relation to the appeal. Although the appellants have failed to challenge the judgment of Ryan J successfully, for the reasons we have given it would be inappropriate to dismiss the appeal. Similarly, it would be inappropriate to allow the appeal and to make any other orders when such orders have become unnecessary by reason of changes to the law of Victoria. 19 Counsel for the first respondent submitted that the first respondent's costs of the appeal will in the ordinary course be part of the costs and expenses of the bankruptcy for which the first respondent is entitled to indemnify himself from the bankrupt's estate. It is not so clear that the second respondent would be entitled to indemnify himself in respect of his costs of the appeal out of the proceeds of sale of the property. It is obviously pointless to make any order that the appellants pay the second respondent's costs of the appeal. We therefore propose to order that the second respondent be entitled to indemnity for those costs out of the proceeds of sale of the property. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.