Madden v Madden

Court of Appeal (NSW)|2014-12-09|Before: Emmett JA, Leeming JA, Mr J, Stevenson J

Judgment 1EMMETT JA: By summons filed on 23 September 2014, Mr Alexander William Madden (Mr Madden) has applied for leave to appeal from orders made by a judge of the Equity Division refusing leave to Mr Madden to reopen his case in proceedings brought in the Equity Division against three defendants. On 5 June 2014, Mr Madden had applied for leave to reopen in circumstances where the evidence in the proceedings had closed, the parties had made final submissions to the primary judge and the primary judge had given judgment on 14 June 2012, having made findings on the basis of the evidence and the submissions. However, his Honour had not yet made final orders in the proceedings. 2In the proceedings in the Equity Division, Mr Madden had claimed declaratory relief in relation to an alleged equitable interest in the assets of the estate of the his late wife, Mrs Margaret Falloon (the Deceased). The first defendant in the proceedings was Mr Michael Madden (the Executor), who is Mr Madden's son and is the executor of the will of the Deceased. The second and third defendants, Eve and Chad Falloon (together, the Beneficiaries), are children of the Deceased by an earlier marriage.

Factual Background 3Mr Madden claimed that he had contributed the entirety of the purchase price of a property situated in Woolooware (the Woolooware Property), the legal title to which was vested in the Deceased at the time of her death. Secondly, Mr Madden claimed that he had contributed the sum of $542,212.96 towards the discharge, during her lifetime, of a debt owed by the Deceased in respect of a loan (the Radcliffe loan) secured by a mortgage over the Woolooware Property. Finally, Mr Madden claimed that he had paid stamp duty and legal fees in the sum of $34,900 on behalf of the Deceased in connection with the purchase of the Woolooware Property. 4The primary judge concluded that Mr Madden and the Deceased had contributed very nearly equally to the purchase price of the Woolooware Property, Mr Madden having contributed $408,953.28. His Honour was not persuaded that the Deceased was indebted to Mr Madden in an amount equal to the payout of the Radcliffe loan (though he was entitled to a lesser amount) and was not persuaded that Mr Madden had made any contribution to stamp duty and legal costs associated with the purchase of the Woolooware Property. 5The Beneficiaries had previously commenced proceedings against the Executor seeking a declaration that he holds the Woolooware Property on trust for them as tenants in common in equal shares. In the alternative, they claimed an order for provision under the Family Provision Act 1982 (NSW) (as it then was). On 18 November 2011, an order was made that the claim by the Beneficiaries for family provision be heard separately and after their claim for declaratory relief concerning the Woolooware Property. 6The Deceased had been married to Mr Russell Falloon and they had two children, being the Beneficiaries. Mr Falloon died on 6 November 1988. By his will made on 5 October 1988, Mr Falloon devised to the Deceased all his interest in a property situated at Kareela (the Kareela Property). On 2 December 1994, the Deceased contracted to sell the Kareela Property. Prior to completion, the purchaser of the Kareela Property paid the Deceased $129,000 on account of the purchase price. The balance due on completion, of $200,355.50, was paid into the Deceased's bank account on 13 January 1995, when completion of the sale took place. 7On 4 November 1994, the Deceased had contracted to purchase the Woolooware Property. Completion of that purchase took place on 3 January 1995. 8The Deceased died on 31 July 2000. By her will made on or about 29 December 1999, she provided that the whole of her estate was "to be administered by the Woolooware Family Trust" until the death of Mr Madden, when the estate was to be divided equally amongst the Beneficiaries and the Executor.

Application to Re-Open 9By his notice of motion dated 5 June 2014, Mr Madden sought to reopen his case on the issue of the extent of his beneficial interest in the Woolooware Property. He sought to rely on affidavits sworn by himself, his current solicitor, Mr Daniel Abraham, and his former solicitor, Mr Christopher Jurd, together with various documents annexed or exhibited to those affidavits. He also foreshadowed further oral evidence from himself. The application to reopen was not opposed by the Executor. However, it is opposed by the Beneficiaries. 10Mr Madden said that, in 2005, he instructed his then solicitors, Willis & Bowring, to transfer "this matter" to a new solicitor, Mr Sid Hawach. That appears to be a reference to the matter of ownership of the Woolooware Property. Mr Hawach then referred the matter to Mr Jurd, who began working on it. Mr Jurd commenced acting for Mr Madden in 2005 and was acting for him at the commencement of the proceedings in the Equity Division in 2010 or 2011. 11For some years prior to 2011, Mr Jurd had had a co-operative relationship with Mr Hawach. Mr Jurd used an office within the suite of offices in Parramatta occupied by Mr Hawach. Sometimes Mr Hawach would refer clients to Mr Jurd and vice versa. Mr Jurd would handle Mr Hawach's clients in the sense that he would see them as his consultant if they had litigation matters or matters involving litigation. 12After the proceedings were commenced on 25 January 2011, while Mr Jurd was acting for him, Mr Madden swore an affidavit in support of his case on 1 June 2011. He swore a second affidavit in reply on 10 August 2011. Thus, at that stage, there had been an exchange of testimonial evidence between the parties. 13In October 2011, Mr Jurd was diagnosed with a serious illness. He continued working on a reduced basis until his health deteriorated and, in March 2012, he gave up work altogether. In about the week prior to 8 March 2012, when Mr Jurd came to the view that he could not continue to act for Mr Madden in the proceedings, he spoke to Mr Madden and then spoke to Mr Hawach, who suggested that Ms Jacqueline Saldaneri take over the conduct of the proceedings. Ms Saldaneri assumed conduct of the proceedings on behalf of Mr Madden in late March 2012. She filed an appearance on behalf of Mr Madden on 16 April 2012, the day on which the hearing commenced. Ms Saldaneri was in court during the hearing, instructing Mr MB Evans of counsel. 14Mr Jurd said that, in March 2012, all of the files that he held for Mr Madden were in the office he occupied in Mr Hawach's suite. The files included files for work done for Mr Madden by his former solicitors, Willis & Bowring, and by Mr Hawach, as well as the materials relating to the proceedings in the Equity Division. Mr Jurd said that, before he left the office in March 2012, he placed all of the files that he held for Mr Madden on the front right-hand corner of his desk. He said that there were two piles of files, each about two feet high, plus a box with various loose papers and small files. He said that he told Mr Hawach that all of Mr Madden's files were together on the front right-hand corner of his desk. 15Mr Jurd said that he told Mr Hawach that, when he had the new solicitor, the new solicitor would have to take over those files. Ms Saldaneri had been mentioned as a person who could take over Mr Madden's matter, but other names had also been mentioned and no final decision had been made. Mr Jurd does not know what Mr Hawach did with the files that Mr Jurd had left in his office. 16Mr Jurd was not present when Ms Saldaneri took Mr Madden's files from Mr Hawach's office. Since March 2012, apart from a few telephone calls from Mr Madden and perhaps one or two telephone conversations with Ms Saldaneri, Mr Jurd has not been involved in the proceedings, until he was asked to swear an affidavit in May 2014 in connection with the proposed application for leave to reopen. 17Mr Jurd said that the files in question included original bank statements for accounts conducted by Mr Madden or by companies associated with Mr Madden "or his wife or the trust". The files that Mr Jurd had in the office that he used in Mr Hawach's suite included files that did not relate to Mr Madden. Of the files that related to Mr Madden, there was one relating to the proceedings in the Equity Division and other files relating to the Woolooware Property and the estate of the Deceased. There were also further files that, at that stage, were dormant, but that might have contained banking or financial records that may have become relevant to the matters in issue in the proceedings. 18Mr Jurd said that he only had two conversations with Ms Saldaneri, by telephone, before the hearing of the proceedings commenced. One of those took place when it had been decided that she was to take over the matter. In the later conversation, she said that she had spoken to Mr Hawach about the matter. Mr Jurd assumed from those conversations that the matter was progressing and that no assistance was required from him. In fact, no assistance was requested of him until May 2014. 19On 20 April 2011, the solicitor for the Beneficiaries arranged for the issue of a subpoena to Mr Madden to produce certain documents. Mr Jurd received the subpoena. Mr Jurd had discussions with Mr Madden on a number of occasions about what documents he had that supported his claims in respect of the Woolooware Property, although he could not recall whether those discussions occurred in relation to the subpoena. Having received the subpoena, Mr Jurd searched through the boxes of papers that he held for Mr Madden. Amongst the papers that he held were bank statements for the Deceased. He did not think, at that time, that they had anything to do with the claim being made by Mr Madden in the proceedings in the Equity Division, in the sense that they did not have anything to do with the source of money allegedly used by Mr Madden to make payments in connection with the Woolooware Property. Mr Jurd could not recall forming the view, or making the decision, that the Deceased's bank statements did not fall within the list of documents sought by the subpoena. 20Mr Madden gave no evidence about giving instructions to Mr Jurd concerning the preparation of the proceedings for hearing, which began on 16 April 2012 and continued on 17 April 2012 and 3 May 2012. However, at some time in May 2012, Mr Madden sustained a major fracture to his lower right leg, which required extensive surgery and rehabilitation. While he was in hospital, he received a telephone call from Mr Hawach advising that he would contact him within the next couple of months. Mr Hawach did not do so. Mr Madden gave no other evidence about his involvement in the preparation of the proceedings for hearing. 21In July 2012, a month after the primary judge had published his reasons for the factual conclusions that he had reached, Mr Madden decided that he wanted the matter to be transferred to Mr Abraham. He instructed Mr Abraham that he was still recovering from his surgery, and, as an apparent consequence of that recovery, Mr Madden did not make inquiries about the files for almost 12 months. Mr Abraham advised that Mr Madden would need to obtain his files from his previous solicitor, Ms Saldaneri, and bring them to him. In mid-2013, Mr Abraham asked Mr Madden if he had obtained his files from his previous solicitor. In June 2013, Mr Madden contacted Ms Saldaneri and asked her for his file. Ms Saldaneri provided him with one box of material which he delivered to Mr Abraham's office. Ms Saldaneri said that they were all of the documents that she had been given by Mr Hawach when she took over the carriage of the matter. 22When he inspected the documents in the box, Mr Madden doubted that it was his entire file. Mr Abraham also advised Mr Madden that he did not understand how that could be the entire file. 23In late 2013, Mr Madden spoke to Mr Jurd and told him that Ms Saldaneri had provided him with a box of documents, but that he was concerned as he expected more documents. Mr Jurd said that there were a number of files that he had worked on and that he had left them all with Mr Hawach. He asked Mr Madden if they had checked "the secure room" where Mr Hawach stored documents. Mr Madden said that it was only after that conversation that he became aware that there were other files that had not been collected by Ms Saldaneri. 24Mr Madden then spoke to Ms Saldaneri who said that she was not aware that any other files existed. She said that she had given to him all of the documents that Mr Hawach had provided to her. Several days later, Ms Saldaneri told Mr Madden that she had now gained access to a locked filing room and managed to retrieve a large box of files. Mr Madden then collected the files from Ms Saldaneri and delivered the files to Mr Abraham's office in about January 2014. More than four further months elapsed before the notice of motion of 5 June 2014 was filed.

Decision of the Primary Judge 25The primary judge approached the application on the basis that the question of whether leave should be granted was one that must be exercised with great caution, having regard to the public interest in maintaining the finality of litigation. His Honour considered that a case may only be reopened where a party has, without fault on his or her part, not had the opportunity to be heard. His Honour cited authority for the proposition that the jurisdiction to permit reopening is not to be exercised for the purpose of re-agitating arguments already considered by the Court; nor is it to be exercised simply because the party seeking a rehearing has failed to present the argument in all its aspects or as well as it might have been put. What must emerge, his Honour considered, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that that misapprehension cannot be attributed solely to the neglect or the fault of the party seeking the rehearing (see Autodesk Inc v Dyason (No 2) [1993] HCA 6; 176 CLR 300 at 303 and 309). 26The primary judge found that each of the documents now sought to be tendered was available to Mr Madden at the time of the hearing. Although it was clear that the documents had not come to the attention of Mr Evans (Mr Madden's counsel), each of the documents was in the possession of Mr Jurd in March 2012, evidently in the box with various loose papers about which Mr Jurd gave evidence. Thus, they were available to be tendered by Mr Madden at the hearing that commenced in April 2012. His Honour observed that the evidence did not reveal how sight of the relevant documents had been lost, such that they were not adverted to and drawn to the attention of Mr Evans. The evidence did not reveal how the relevant documents ultimately came to be stored in "the secure room" to which Mr Jurd referred. Ms Saldaneri did not give evidence and her absence was not explained. 27The primary judge concluded that, if there was any misapprehension as to the facts on his part, by reason of the documents now sought to be adduced not having been tendered at the trial, that misapprehension was attributable solely to the neglect or the fault of Mr Madden, the party now seeking to reopen. The Beneficiaries, his Honour said, had conducted the hearing on the basis that Mr Madden had deployed all of the evidence available to him and, while final orders have not yet been made, the Beneficiaries were entitled to regard the issues litigated as having been finally determined. For those reasons, his Honour concluded that the application should be dismissed. 28In addition, the primary judge concluded that the documents that were the subject of the application cast no light or no significant light on the issues that his Honour was called upon to determine. Moreover, his Honour found that some of the documents contradicted evidence already given by Mr Madden on those questions. For those further reasons, his Honour would not have been prepared to grant leave to reopen. 29The primary judge then considered the question of the delay of almost two years after the delivery of his Honour's reasons on 14 June 2012. His Honour observed that, while no final orders had been entered, those reasons represented a final determination of the issues in respect of which the documents that are the subject of the application are said to be relevant. His Honour accepted that, having regard to the terms of the will of the Deceased, the delay in making the application had not delayed the time at which the Beneficiaries might ultimately enjoy the fruits of their legacy under the will of the Deceased. 30The primary judge also accepted that Mr Madden and his advisers had been obliged to spend time and resources in proceedings in the Federal Court, which had only recently been resolved. At the relevant time, Mr Madden was a bankrupt. Any interest that he had in the assets of the Deceased had therefore vested in his trustee in bankruptcy. However, on 8 May 2014, Farrell J concluded that Mr Madden's interest in the assets of the deceased had re-vested in him pursuant to s 127 of the Bankruptcy Act 1966 (Cth) (see Madden v Official Trustee in Bankruptcy [2014] FCA 446). Section 127 provides that after the expiration of 20 years from the date on which a person becomes bankrupt, a claim is not to be made by the trustee in bankruptcy to any property of the bankrupt and that property is to be deemed to be vested in the bankrupt. Mr Madden was made bankrupt on 10 April 1990, more than 20 years before the commencement of the proceedings in the Equity Division.

Application for Leave to Appeal 31Mr Madden contends that there would have been no utility in pursuing the application for leave to reopen if he had no standing to do so because of the operation of his bankruptcy in relation to his assets. He said that there was no point in taking any further step in the proceedings in the Equity Division pending the resolution of the proceedings in the Federal Court because, had the Federal Court held that his interest in assets of the deceased had not reverted to him upon his discharge from bankruptcy, there would have been no point in reopening the Equity Division proceedings. He says that it was only once the Federal Court found that he had retained his equitable interest that there was any point in seeking leave to reopen his case and that he did so promptly within less than one month after the Federal Court had made its orders. On the other hand, that consideration did not appear to deter Mr Madden from pursuing his claims in the first place. 32Mr Madden contends that a grant of leave to appeal is appropriate where what is at stake is a manifest, and not merely an arguable, injustice, or where an injustice is reasonably clear, in the sense of going beyond what is merely arguable. He contends that the primary judge made an error of legal principle, a material error of fact, took into account irrelevant considerations, failed to take into account or to give sufficient weight to relevant matters or arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred (see Young v Hones (No 2) [2014] NSWCA 338 at [14]-[15]). Hones (No 2) [2014] NSWCA 338). 33Mr Madden contends that the proposed evidence demonstrates that the primary judge plainly made material errors of fact in finding that:

the Deceased had contributed $401,046.72 to the purchase price of the Woolooware Property;
Mr Madden had not provided $542,212.96 to discharge the Radcliffe loan;
the Deceased had contributed stamp duty and legal costs in connection with the purchase of the Woolooware Property. Those matters are, of course, the matters in issue. 34In addition, Mr Madden contends that the refusal of the primary judge to permit reopening was so unreasonable or unjust as to suggest that he fell into error, having regard to the following matters:
There were reasonable explanations as to why the documents did not come to light earlier and for the delay in making the application, which were not solely attributable to the neglect or default of Mr Madden;
The admission of the material would not have unduly prolonged the length of the hearing or increased its expense;
The Executor did not oppose the admission of the additional evidence;
The Beneficiaries have only a "general and inchoate" interest in the proceedings and their interest in the Estate will not crystallise until the death of Mr Madden. 35The real question so far as delay is concerned is the delay in making the application after reasons were delivered on 14 June 2012. It has not been suggested that Mr Madden raised with the Beneficiaries the possibility of making an application before 5 June 2014 or that he indicated to them that he was awaiting the outcome of his proceedings in the Federal Court before deciding to make an application for leave to reopen. 36There is no basis for doubting the correctness of the conclusion of the primary judge that the documents in question were within the possession of Mr Madden and his advisers. There has been no satisfactory explanation as to how it came about that the relevant documents were overlooked. It is significant that the solicitor who failed to arrange for the documents to be tendered, Ms Saldaneri, gave no explanation for her failure to collect all of the relevant papers from Mr Jurd. 37The fact that the Executor did not oppose reopening is of no relevance. The Beneficiaries were joined as parties in the proceedings. They clearly have an interest in the estate of the Deceased. If they had not been joined as parties, it would have been incumbent upon the Executor to defend the proceedings on behalf of the estate. Indeed, it may be that his failure to do so would have been a breach of his obligations as executor. 38The decision of the primary judge was a discretionary one made in an interlocutory application. Mr Madden has not shown any error of legal principle or any error of fact in dealing with the application to reopen. His Honour did not proceed with the application on the basis of a misunderstanding of any of the relevant facts and circumstances. His Honour did not take into account any irrelevant consideration and did not fail to take into account or give sufficient weight to any relevant matter, particularly in light of the circumstances that Ms Saldaneri gave no evidence in support of Mr Madden's application. 39I do not consider that there is any real prospect that an appeal would be upheld if leave were to be granted. Leave to appeal should be refused with costs. 40LEEMING JA: I agree with the reasons and conclusions of Emmett JA. At [22]-[27] of his reasons, the primary judge regarded as determinative that the documents now sought to be tendered were available to be tendered at the hearing, and that no evidence was given by the solicitor on the record, nor explanation for her absence. In those circumstances, I agree that an appeal would have no real prospect of success.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 December 2014

Family Provision Act 1982(NSW)

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