Basis of the proceeding: arises out of the marital relationship?
42 Section 4(1)(ca)(i) of the Family Law Act is concerned with "proceedings … arising out of the marital relationship". It is not sufficient to establish that the subject of the proceedings arose out of the marital relationship. It is the proceedings that must have so arisen. Bate v Priestley (1989) 97 FLR 310 at 327 (Hope AJA).
43 In determining whether the Fair Work Proceeding arises out of the marital relationship between Mr Testart and Ms Testart, it is necessary to have regard to the decided cases. It is convenient to start with the decision of Demack J in In the Marriage of Mills (1976) 25 FLR 433.
44 In that case, Mr and Mrs Mills were the joint owners of a farm, upon which their former matrimonial home was located. Mr Mills began to sell soil from the property. His wife, who had not yet applied for divorce, sought an injunction from the Family Court restraining him from doing so. Mr Mills did not resist the injunction. The sole question was whether the Family Court had jurisdiction to make the orders.
45 Section 114 of the Family Law Act provided that:
Injunctions.
(1) In proceedings of the kind referred to in paragraph (e) of the definition of "matrimonial cause" in sub-section 4 (1), the court may make such order or grant such injunction as it thinks proper with respect to the matter to which the proceedings relate, including an injunction for the personal protection of a party to the marriage or of a child of the marriage or for the protection of the marital relationship or in relation to the property of a party to the marriage or relating to the use or occupancy of the matrimonial home.
46 Paragraph (e) of the definition of matrimonial cause in s 4(1) was in the following terms: "proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship".
47 As Demack J explained at 434, "the definition of 'matrimonial cause' includes 'proceedings between the parties to a marriage for an order or injunction arising out of a marital relationship'. Thus injunctions are no longer matters which are ancillary to 'matrimonial causes', but are defined as 'matrimonial causes' themselves".
48 It was in that context that his Honour, having referred to a number of passages from various judgments in Russell v Russell (1976) 134 CLR 495 (a case which concerned the question whether s 39(1) of the Family Law Act as it then stood was a valid law of the Commonwealth), continued at 435-6:
Against that background, in my view the words "marital relationship" refer to that body of law which defines the nature and extent of that relationship. They do not define an area of fact which may be explored to determine the jurisdiction of the court. In other words the mere fact that something happens between a husband and wife does not mean that it involves "circumstances arising out of the marital relationship". The event must be one which raises issues of law that are within the body of law defining marital relationships. … Thus, events which raise issues of criminal law, industrial law or fiscal law cannot be brought within the "marital relationship" simply because the circumstances involve a husband and wife and their children.
(Emphasis added).
49 His Honour concluded at 436:
The case before me does not involve proceedings for principal relief. It does not arise out of the mutual liability to maintain or out of the joint liability to maintain the children of the marriage. It solely concerns the rights of joint tenants to the use and enjoyment of their land. As such it does not involve "circumstances arising out of the marital relationship". It is therefore, not a matrimonial cause and therefore is not properly within the jurisdiction of this Court.
50 In R v Dovey (1979) 141 CLR 526 at 532-3, Gibbs J (as he then was), with whom Barwick CJ and Mason J (as he then was) agreed, considered what Demack J said in In the Marriage of Mills in the passage quoted at [48] above, as follows:
The words "circumstances arising out of the marital relationship" appear to be wide, but it is not necessary in the present case to attempt to give a comprehensive statement of their meaning. It is, I think, true to say, as Demack J said in In the Marriage of Mills, that "the mere fact that something happens between a husband and wife does not mean that it involves 'circumstances arising out of the marital relationship'" and that "events which raise issues of criminal law, industrial law or fiscal law cannot be brought within the 'marital relationship' simply because the circumstances involve a husband and wife and their children". However, the occupation by a wife of the matrimonial home is clearly a consequence of the act of marriage between the parties, and can be regarded as an exercise of the rights and a performance of the duties to which the marriage has given rise.
51 It followed in that case that their Honours held that the Family Court had power under s 114(1) of the Family Law Act to grant an injunction to restrain a party to a marriage who was a director and shareholder of a family company that owned the matrimonial home from exercising their voting rights as a director or shareholder in favour of a proposed resolution for the sale of that home.
52 In In the Marriage of Murkin (1980) 5 Fam LR 782, Nygh J had to decide whether the Family Court had jurisdiction to grant an injunction under s 114(1) to restrain the former husband from disposing of the superannuation benefit to which he would become entitled in the future, and no later than June 1983. Relevantly, his Honour held at 786:
I accept the definition offered by Demack J in In the Marriage of Mills … namely: "The event must be one which raises issues of law that are within the body of law defining marital relationships." I take that as meaning that the claim must be one which a spouse brings as a spouse and which is not a claim arising out of the general law of tort, contracts or property which happens to be between spouses. In this case, if the wife has any claim against the superannuation funds it can only arise because of s 79 of the Family Law Act. We are therefore dealing with proceedings arising out of the marital relationship and not arising out of the general law of contract, tort or property.
(Emphasis added).
53 In Perlman v Perlman (1984) 155 CLR 474, the High Court again considered the meaning of the phrase "arising out of the marital relationship". The Court unanimously rejected a former husband's claim that a proceeding brought by his former wife in the Supreme Court of New South Wales to enforce a deed, being a maintenance agreement as defined in s 4(1) of the Family Law Act, was a matrimonial cause. In that case, the deed recited that it was intended to operate in relation to the whole of the financial matters between the parties in substitution for any rights of either of the parties under Pt VIII of the Family Law Act. The deed was approved by the Family Court pursuant to s 87 of the Act. The former wife sought orders for specific performance of the deed, payment of arrears of income and damages for breach.
54 Chief Justice Gibbs said at 486-7 that "[t]he proceedings in the present case clearly do not arise out of a marital relationship; they arise from the fact that the divorced husband has failed to fulfil his obligations under the deed".
55 Similarly, Deane J (with whom Brennan J (as he then was) agreed) said at 507 that "[t]he agreement itself may properly be regarded as 'arising out of the marital relationship'. In my view, however, the Supreme Court proceedings for the enforcement of that completed and approved agreement cannot properly be regarded as so arising".
56 Justice Wilson said at 500:
It is sufficient for me to express the opinion that on no reasonable construction of the paragraph could it be said that the wife's claims focus on circumstances arising out of the marital relationship. The marriage was dissolved in 1978 and the financial relationships of the parties were finally determined by the approved agreement. The husband's failure to respect his obligations under the agreement has nothing whatever to do with the marital relationship.
57 And at 511-12, Dawson J said that "[t]he dissolution of the marriage was the occasion for the contract but the circumstances in which relief was sought arose out of the contract and its breach and not the marital relationship".
58 In Dougherty v Dougherty (1987) 163 CLR 278, the High Court considered a case where the intervention of an adult son in his mother's property application gave rise to the question whether the son's application was a "matrimonial cause". In relation to s 4(1)(ca)(i), Mason CJ, Wilson and Dawson JJ said at 286:
This paragraph requires that proceedings between the parties to a marriage with respect to property should arise out of the marital relationship. By this means a limit is imposed upon the jurisdiction of the Family Court to make an order under s 79 where the parties are parties to a marriage. Proceedings of that kind which do not arise out of the marital relationship do not constitute a matrimonial cause in relation to which jurisdiction is vested in the Family Court. It may be that this limitation sufficiently confines the operation of s 79 in relation to proceedings between the parties to a marriage with respect to property and obviates the need to read the section down in its application to such cases. In any event, whether the exercise is undertaken for the purpose of applying par (ca) or reading down s 79, it should be comparatively easy to ascertain whether or not a claim by a party to a marriage for an alteration of property interests is based upon circumstances arising out of the marital relationship. Claims grounded solely in contract or tort or equity or otherwise arising by reason of a relationship, eg of partnership, where the marriage relationship is purely coincidental are not likely to attract the power. But leaving aside matters such as those there will not be wanting occasions where the Family Court may find it just and equitable to alter the respective property interests of the parties inter se for reasons associated with and finding their source in the marriage relationship.
(Emphasis added).
59 In Bate v Priestley, the parties to District Court of New South Wales proceedings for recovery of a debt had formerly been married to each other. In 1984, the Family Court made consent orders, including an order that the former husband pay $50,000 to the former wife by way of property settlement and/or lump sum maintenance. As part of the settlement and the orders, the parties executed a deed in which the former husband acknowledged a debt to the former wife in the sum of $50,000 which "could be used to found a claim in the District Court of New South Wales …" In its consent orders, the Family Court noted the existence of that acknowledgment.
60 The former husband did not pay the amount owing by the due date, so the former wife brought a debt recovery proceeding in the District Court. The trial judge rejected the challenge to jurisdiction and entered judgment in the former wife's favour.
61 The former husband appealed on the basis that the proceedings were a "matrimonial cause" and hence within the exclusive jurisdiction of the Family Court.
62 One of his primary submissions was that the proceedings brought in the District Court fell within those parts of the definition of "matrimonial cause" in ss 4(1)(ca)(i) or (ii) of the Family Law Act - that is, they were proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings "arising out of the marital relationship" or "in relation to … completed proceedings between those parties for principal relief".
63 The appeal was dismissed. In rejecting each of the grounds relied on, Hope AJA (with whom Mahoney JA agreed) relevantly held that the District Court proceeding in which the wife sought to recover the debt owing under the terms of the deed did not arise out of the matrimonial relationship and was not a "matrimonial cause" within the meaning of s 4(1) of the Family Law Act. His Honour reasoned as follows at 329:
In my opinion, these expressions of opinion are to be applied to the words "arising out of the marital relationship" in para (ca)(i). As it seems to me, what the High Court emphasised in Perlman was that the proceedings in the Supreme Court did not arise out of the marital relationship; the fact that the deed arose out of the marital relationship which had previously existed did not mean that the proceedings arose out of that relationship. The proceedings arose out of the deed and the failure by the defendant to carry out its terms.
It has been submitted for the defendant that there is a much closer relationship in the present case between the deed upon which the plaintiff sued and the orders of the Family Court, and hence it can be properly said that the proceedings arose out of the marital relationship. Counsel for the defendant put every argument before the court to support this submission, but in my opinion it cannot succeed. Indeed one would have thought that a deed of maintenance approved by a Family Court under s 87 would have had a much closer tie to the marital relationship than a deed such as that now sued on. It is true that in the present case the Family Court ordered the payment of the sum of $50,000 on or before 1 July 1985 by way of property settlement and/or lump sum maintenance, that the plaintiff can still enforce that order by the various means available under the Family Law Act and Regulations, and that the deed was expressly entered into to provide additional remedies for the plaintiff to ensure that payment of that sum. Nonetheless the proceedings arose out of the deed and not otherwise. They did not arise out of the marital relationship which led to proceedings in the Family Court and to the execution of the deed.
64 Justice Mahoney's reasons at 325-26 clearly and succinctly demonstrate the distinction that, as I shall endeavour to explain, is critical to the resolution of the issue in this case:
The principal argument for Mr Bate was, I think, to the effect that the proceeding to enforce the deed was a "matrimonial cause" because the proceeding arose out of the deed and the deed arose out of the (former) marital relationship and accordingly the proceeding arose out of the marital relationship. Philosophically, the argument is irrefutable. But the claim of A arising from B arising from C … may be traced back to the Creation without philosophical error. In deciding whether, for the particular purpose before it, A is to be seen as arising from C, the test applied by the court is not philosophical but functional: cf State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (1982) 150 CLR 29 at 40-41. In Perlman v Perlman (1984) 155 CLR 474 the High Court indicated how, for the purposes of this legislation, the sequence is to be terminated. I agree with Hope AJA that, upon the approach adopted in that case, the present proceeding does not arise out of the marital relationship and so is not a matrimonial cause.
65 The final case that warrants mention (although the facts of it are far removed from this case) is the decision of Court of Appeal of Western Australia in Sewell v Wilson (2010) 242 FLR 402.
66 In that case, the Court held that a proceeding for the enforcement of an alleged oral contract between parties to a marriage was a matrimonial cause.
67 The relevant facts were as follows.
68 The appellant and the respondent were married in 1986. On 15 November 1990, the matrimonial home was purchased and registered solely in the appellant's name. The property was the matrimonial home until about January 2001 when the marriage broke down. The parties divorced in 2003.
69 No application had been made by either party under the Family Law Act for a property settlement. In 2008, the former husband commenced proceedings against his former wife in the District Court of Western Australia based on an alleged oral contract. He pleaded in substance that in August 2007 they had orally agreed that he would undertake certain maintenance and improvement work on the property at his expense; that upon completion of the work the appellant would sell the property, and that the respondent would receive 18% of the net proceeds of sale. He further pleaded that he undertook the work in the latter part of 2007 and completed it by the end of December 2007; that they were unsuccessful in their attempts to sell the property on a private basis between January and April 2008, and agreed to postpone the sale until after the winter months; and that in September 2008, his former wife, in breach of the oral contract, informed him that she would not sell the house or pay him an amount equal to 18% of its value, which conduct he treated as a repudiation of the contract founding a claim for damages.
70 The former wife applied to strike out the proceedings on the ground that the District Court did not have jurisdiction to determine the claim because it was a "matrimonial cause" within the meaning of s 4(1)(ca)(i) of the Family Law Act, and that as a result the proceedings lay within the exclusive jurisdiction of the Family Court of Western Australia. Further, she denied that she entered into the alleged contract with the respondent and claimed that he orally agreed to undertake some maintenance work on the property to assist the appellant in preparing it for sale.
71 The trial judge dismissed the strike out application, holding that the former husband's claim was not a "matrimonial cause" within the meaning of the Family Law Act, because his action did not arise out of the marital relationship but from his former wife's failure to fulfil her obligations under the alleged oral contract.
72 The Court allowed the former husband's appeal and set aside the decision of the trial judge. In relation to the question of whether the proceedings were proceedings "arising out of the marital relationship", Newnes JA (with whom Buss JA (as his Honour then was) and Murphy JA agreed) reasoned as follows at 413-14, [57]-[62]:
It was submitted by the respondent that the appellant's case failed to appreciate the distinction between proceedings which arise out of the marital relationship and proceedings for damages for breach of contract. It was not enough that the property which is the subject of the contract is owned by a party to the marriage. The question is whether the proceedings arise out of the marital relationship. In this case, they did not; they arose out of the appellant's breach of contract. It was not to the point that the contract "killed two birds with one stone" - it achieved a property settlement which would otherwise have required a successful application to the Family Court (WA) for leave under s 44(3) of the Family Law Act and it remunerated the respondent for the work done (albeit, he accepted in argument on the appeal that the amount recoverable for the work on a quantum meruit basis would have been "something relatively inconsequential" … Nor, he argued, was it to the point that it simply replaced the foreshadowed application to the Family Court (WA) - that it represented what he described in argument below as "a change of tack" … The appellant's objection to jurisdiction must fail, it was argued, because the proceedings did not arise out of the marital relationship but out of a breach of contract by the appellant.
I do not accept that contention. It may not be of any real assistance to describe the alleged contract as a "sham", although the respondent did not appear to take issue with the primary judge's description of it in those terms. … It is apparent, however, from the admissions made by the respondent that the alleged contract was not, in truth and substance, a contract for labour and materials as pleaded. In reality, the contract was a settlement of the respondent's claim to an interest in the property arising out of the marital relationship. The figure of 18% represented what the respondent considered would be approximately the amount he would be awarded on a property settlement under the Family Law Act. To that end, he apparently perceived it to be in his interest to carry out some improvements to the property to maximise its value. The contract was, as the respondent frankly admitted before the primary judge, simply a means of recovering the amount he considered he was entitled to arising out of the marital relationship, while at the same time avoiding what he perceived to be the vagaries and time involved in proceedings for a property settlement in the Family Court (WA).
It is plain, in my view, that the proceedings in the District Court are in substance proceedings with respect to the property to recover the benefit to which the respondent alleges he is entitled arising from the marital relationship. The proceedings have arisen because the appellant declined to sell the property and give the respondent the 18% of the proceeds which he considered constituted that entitlement.
In my respectful view, the primary judge erred in concluding that the decision in Perlman was decisive in this case. The circumstances in Perlman were quite different. In that case, the issue of the distribution of the marital property had come to an end in a final agreement approved by the Family Court and what was sued on was that final agreement. While the marital relationship had given rise to the issue of the distribution of the marital property and to the agreement, the marital relationship itself was no longer relevant to the proceedings in the Supreme Court to enforce the final agreement.
Similarly, in Bate v Priestley the District Court proceedings were brought on a deed following the resolution of the entitlements of the parties in respect of the marital property in Family Court proceedings and, moreover, in making its orders pursuant to the settlement the Family Court had noted that the deed expressly providing for remedies outside the Family Court. As Hope AJA observed, in revoking the previous agreement the Family Court presumably accepted the right of the wife to enter into a deed which gave her remedies outside the Family Law Act (at [FLR] 329).
In the present case, on the other hand, the proceedings brought by the respondent are simply intended to circumvent the need for proceedings in the Family Court (WA) to resolve the respective rights of the parties to the property arising out of the marital relationship.
(Emphasis added).
73 In my view, the Fair Work Proceeding does not arise out of the marital relationship between Mr Testart and Ms Testart.
74 It seems to me quite clear that the Fair Work Proceeding arises out of, or is alleged to arise out of, Ms Testart's employment relationship with Mr Testart. The claims made do not arise out of the marital relationship which led to the Family Law Proceeding and to the consent orders made ending it. As Mahoney JA said in Bate v Priestley at 325, "the claim of A arising from B arising from C … may be traced back to the Creation without philosophical error. In deciding whether, for the particular purpose before it, A is to be seen as arising from C, the test applied by the court is not philosophical but functional". And it is in that functional sense that the Fair Work Proceeding does not arise out of the marital relationship.
75 It is, rather, the alleged failure to comply with the employment contract alleged by Ms Testart, a copy of which she produced in her affidavit in support of her Fair Work Act claims and the essential terms of which are summarised above at [7], that gives rise to the Fair Work Proceeding.
76 As the cases to which I refer above indicate, the mere fact that the employment contract happened to be between parties to a marriage, or even that the contract itself may have arisen during a marital relationship (which itself is questionable here, because the alleged contract of employment preceded the parties' marriage by some six months), does not involve by the application of a functional test, a conclusion that the Fair Work Proceeding arose out of that relationship.
77 Ms Sweet referred to the decision of Opas J in In the Marriage of Bak (1979) 46 FLR 271 at 274-75. In that case, a husband brought an application to restrain proceedings brought by the wife in the Supreme Court of New South Wales for declaratory orders relating to a partnership of the husband and wife in two "milk vending" or "milk run" businesses. Ms Sweet relied on this passage from his Honour's reasons:
In the present case, the relief sought by the applicant husband is clearly in relation to the property of a party which is clearly a matter of the nature indicated in s 114(1) by its very words. Not only that but the partnership of which there were no other members but the parties is ultimately connected to the fact that the parties are husband and wife. The evidence indicated that the parties were both involved in the business (to what degree I do not find it necessary to decide) and the business provided the funds necessary for their living together as husband and wife and financed the jointly-owned home at Wetherill Park. There is a connexion too between the fact of partnership in this case and the fact of marriage. The applicant husband had been a milk vendor for some years before marriage. The parties were married on 30 October 1976 and the partnership is expressed in the agreement to begin from 1 November 1976. It seems that the partnership was at least in part a result of the marriage.
78 The mostly undisputed facts, in summary, were as follows.
79 In about 1970 the applicant husband purchased a "milk vending" or "milk run" business. He borrowed $15,000 in order to do so. The loan was paid off two years before the marriage. At about the time the parties married, they purchased another milk vending interest in an adjacent suburb. The parties later purchased jointly a house, where they lived until separation, when the wife left. The husband continued to live in the home at the time of his application.
80 In November 1976 the parties entered into a partnership agreement in respect of the milk runs. The husband alleged, and the wife disputed, that the partnership had been dissolved by operation of the agreement.
81 The wife did not dispute that the business had financed and still financed the former matrimonial home and that the parties lived off the proceeds of the business.
82 It was on the basis of those facts that the judge held that the relief sought by the husband in the Family Court was in relation to the property of a party which was a matter within the ambit of s 114(1) of the Family Law Act, and made an order restraining the wife from continuing her proceedings in the Supreme Court of New South Wales in respect of their property.
83 But those facts are far removed from this case. Here there is no dispute about a matrimonial home; there is no suggestion that Ms Testart's wage was used to fund matrimonial property; Mr Testart and Ms Testart were not in partnership; and Ms Testart's employment was not said to be something that "resulted" from their marriage - on the contrary, her employment began before the marriage.
84 I turn now to the next question.