Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Grace v Grace [2014] NSWCA 86 Hearing dates: 3 March 2014 Decision date: 03 March 2014 Before: McColl JA at [1]; Meagher JA at [2]; Barrett JA at [28] Decision: (1) Dismiss the appeal for want of jurisdiction. (2) Appellants pay the respondents' costs of the proceedings in this Court. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PRACTICE AND PROCEDURE - APPEAL - JURISDICTION - whether appeal within s 7(5) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) - subject-matter of appeal includes proper exercise of discretion as to costs - underlying proceedings involved exercise by State Court of federal jurisdiction under the Family Law Act 1975 (Cth) - s 117 of Family Law Act 1975 confers and describes discretion as to costs - whether an appeal seeking relief by way of re-exercise of that costs discretion involves a matter arising under the Family Law Act 1975 Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Family Law Act 1975 (Cth), ss 79, 79A, 94(1)(b)(ii), 117 Family Provision Act 1982 (NSW), s 7 Judiciary Act 1903 (Cth), s 79 Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), ss 4(1)(c), 7 Supreme Court Act 1970 (NSW), s 75A(10) Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Bakarich v Commonwealth Bank of Australia (No 2) [2012] NSWCA 390 Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd [2013] NSWCA 392 David Grace v Deborah Grace [2007] NSWSC 6 Grace v Grace (No 4) [2013] NSWSC 385 Hazeldell Ltd v Commonwealth [1924] HCA 36; 34 CLR 442 LNC Industries Ltd v BMW (Australia) Pty Ltd [1983] HCA 31; 151 CLR 575 R v Lewis (1988) 165 CLR 12 Willocks v Anderson [1971] HCA 28; 124 CLR 293 Young v Lalic [2006] NSWSC 18; 197 FLR 27 Zhang v Zemin [2010] NSWCA 255; 79 NSWLR 513 Category: Principal judgment Parties: Deborah Sharon Grace (First Appellant) Julienne Grace (Second Appellant) Phoenix Rising Investments Pty Ltd (Third Appellant) David Alexander Grace (First Respondent) Nevilda Holdings Pty Ltd (Second Respondent) Nevilda Investments Pty Ltd (Third Respondent) Dutchie Pty Ltd (Fourth Respondent) Representation: Counsel: A Moses SC, D Stewart (Appellants) DL Williams SC, SA Goodman (Respondents) Solicitors: Clinch Long Letherbarrow (Appellants) James Tuite & Associates (Respondents) File Number(s): 2013/123747 Decision under appeal Jurisdiction: 9111 Citation: Grace v Grace [2012] NSWSC 976 Date of Decision: 2013-03-28 00:00:00 Before: Brereton J File Number(s): 2006/259566 Judgment 1McCOLL JA: I agree with Meagher JA's reasons. 2MEAGHER JA: In the week before the date fixed for the hearing of the appeal in this proceeding there was raised with the parties the question whether a matter for determination in the appeal arose under the Family Law Act 1975 (Cth) with the result that, by the operation of s 7(5) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth), the appeal should have been instituted in and could be determined only by the Full Court of the Family Court. Directions were made for the exchange of written submissions concerning that question. After receiving those written submissions and hearing further argument from the parties, the Court made the following orders: (1) Dismiss the appeal for want of jurisdiction. (2) Appellants pay the respondents' costs of the proceedings in this Court. 3These are my reasons for joining in the making of those orders. The underlying proceedings 4The underlying proceedings concern a dispute between the respondent, David Grace, on the one hand and his sister, Deborah Grace, and mother, Julienne Grace, who are the first and second appellants, on the other. It is convenient to refer to these members of the Grace family by their first names. The remaining respondents are three family companies, Nevilda Holdings Pty Ltd, the second respondent, Nevilda Investments Pty Ltd, the third respondent, and Dutchie Pty Ltd, the fourth respondent. Nevilda Holdings was the original trustee of the Nevilda Investments Superannuation Fund (NISF). The third appellant, Phoenix Rising Investments Pty Ltd, is the trustee of a new superannuation fund of which Deborah and Julienne alone were members and to which proceeds of the realisation of assets of NISF were transferred in 2007. David's father, Dr Colin Grace, and Julienne were divorced in June 1988. Dr Colin Grace died in September 1992. 5Those proceedings were commenced in November 2006. Their subject matter and the claims made are conveniently summarised by the primary judge (Brereton J) in the following paragraphs of his principal judgment delivered in August 2012: Grace v Grace [2012] NSWSC 976: "2 At the time of his death, Colin held or was beneficially entitled to 2,003 cumulative preference (CUMP) shares, and 300 of 600 ordinary shares, in the third defendant Nevilda Holdings Pty Ltd; Grace Securities Pty Ltd, in which he and Julienne each held one of the two issued shares, held the other 300 ordinary shares. Colin also held 12 of 112 ordinary shares in the fourth defendant Nevilda Investments Pty Ltd, in which Nevilda Holdings held the other 100 ordinary shares. 3 By his will, made on 25 May 1988, Colin left his share in Grace Securities - and his 200 (of 1,400) shares in Sharander Pty Ltd - to Deborah, and the rest and residue of his estate (which included the 2,003 CUMP shares in Nevilda Holdings, and a property at 272 Birrell Street, Bondi) to David. However, on 16 January 1995, contemporaneously with the transmission to him of 2,001 CUMP shares in Nevilda Holdings, David transferred 667 of them to each of Deborah and Julienne. Then, on 18 May 1995 in the Family Court of Australia, in proceedings that had been initiated by Julienne against Colin before his death, orders were made by consent of Julienne and Deborah (as Colin's legal personal representative), for the transfer to Julienne by way of property settlement of 667 CUMP shares in Nevilda Holdings, and of 272 Birrell Street. 4 In these proceedings, David: ● Seeks to have set aside the transfer to Deborah and Julienne of 667 each of the cumulative preference shares in Nevilda Holdings, and the transfer to Julienne of 272 Birrell Street, upon grounds that the transfers of 16 January 1995 were procured by fraud, unconscionable dealing or undue influence, and that the Family Court consent orders of 18 May 1995 were a miscarriage of justice and liable to be set aside under (CTH) Family Law Act 1975, s 79A ("the administration case"); ● Claims orders for repayment by Deborah and Julienne to Nevilda Investments of moneys received by them during the period between 1995 and 2006, and other relief, on the grounds that the affairs of the Nevilda companies have been conducted by Deborah and Julienne in a manner oppressive of him ("the oppression case"); and ● Claims an account in respect of the Nevilda Investment Superannuation fund (NISF) on the wilful default basis, in particular by reason of payments out of the fund in 2007 after the appointment of a provisional liquidator to Nevilda Holdings, the trustee of that fund ("the NISF case"). 5 Against the possibility that those claims or any of them might succeed, Deborah and Julienne have brought cross-claims, for adjustive property orders under (CTH) Family Law Act 1975, s 79(8), and alternatively for provision out of Colin's estate under (NSW) Family Provision Act 198[2]. They also contend that the Nevilda companies should be wound up on the just and equitable ground, as it is no longer realistic to expect the parties to co-operate in their management." 6In December 2006, David applied for the appointment of a provisional liquidator to Nevilda Holdings and Nevilda Investments. On 18 January 2007 the primary judge appointed Mr Geoffrey Reidy provisional liquidator of each of those companies upon David giving the usual undertaking as to damages: David Grace v Deborah Grace [2007] NSWSC 6 at [67]. 7In what follows it is convenient to adopt the labels used by the primary judge to describe the various claims made. David was successful in the administration case but unsuccessful in the oppression case and the NISF case. He was also successful in relation to the cross-claims. Having set aside the consent orders made by the Family Court on 18 May 1995, the primary judge declined to make any order under s 79(8) of the Family Law Act, adjusting property interests as between Julienne and Dr Grace's estate. He also declined to make any provision in favour of Deborah or Julienne under s 7 of the Family Provision Act 1982 (NSW). Finally, he declined to make any order for the winding-up of Nevilda Holdings or Nevilda Investments. 8The orders giving effect to that principal judgment were made on 9 November 2012. The orders dealing with the claims to relief under the Family Law Act were orders numbered 34 to 40 and 45. Orders 34 and 45 provided: "34 ORDER pursuant to (Cth) Family Law Act, s 79A THAT the orders made by the Family Court of Australia on 18 May 1995 in the proceeding No. 1920 of 1988 in that Court be set aside." "45 ORDER THAT the First Cross-Claim be dismissed." The relief sought by the First Cross-Claim included, in the event that the consent orders were set aside, an order under s 79 of the Family Law Act in substitution for the order so set aside. 9The orders made on 9 November 2012 included directions for the determination of the remaining questions as to costs and as to whether there should be any inquiry arising from David's undertaking as to damages. Each of those matters was listed for hearing on 28 March 2013. Following argument on that day, the primary judge delivered judgment: Grace v Grace (No 4) [2013] NSWSC 385. In accordance with those reasons, he made orders which included the following: "(1) Order that First and Second Defendant pay 62.5% of the Plaintiffs costs of the proceedings, including of the cross-claim, as assessed. ... (5) Order that the first and second defendants' application for an inquiry arising from the plaintiffs undertaking as to damages be dismissed." The appeals to the Family Court and to this Court 10On 30 November 2012 Julienne appealed to the Full Court of the Family Court from orders 34 to 40 and 45 made on 9 November 2012. That appeal invoking the appellate jurisdiction of the Family Court was made to the Full Court of that Court pursuant to s 94(1)(b)(ii) of the Family Law Act. The grounds of appeal challenge the primary judge's decision not to make a property adjustment order under s 79(8) of that Act. The orders sought include that orders 34 and 45 be set aside and that orders be made reinstating the consent orders made on 18 May 1995. No consequential order or relief is sought in the Family Court appeal in relation to any part of the costs of the proceedings before the primary judge. That may be explained, at least in part, by the fact that the question of the costs of the proceedings before the primary judge had not been argued or determined at the time that appeal was commenced. 11On 28 June 2013 the appellants filed their appeal to this Court from orders 1 and 5 made on 28 March 2013. The grounds of appeal challenge the exercise of the power to order costs. The relief sought includes that order 1 be set aside, an order that this court re-exercise the discretion as to costs with respect to the costs of the administration case, the cross-claim, the oppression case and the NISF case and, in the alternative, that the question of costs be remitted to the Supreme Court for determination "in accordance with law". The question as to this Court's jurisdiction to hear and determine the appeal is raised 12The appeal to this Court was listed for hearing for one day on 3 March 2014. On 27 February 2014 the appellants filed a motion seeking an order that that hearing date be vacated. That application was made on the ground that the hearing of the appeal in this Court should await the determination of the appeal in the Family Court because the outcome of that appeal could be to require, as a consequential order, the reconsideration of the costs order made by the primary judge. On the return of that motion the parties were directed to exchange submissions addressing the question whether having regard to the provisions of s 7(5) of the Commonwealth Cross-vesting Act, this Court had jurisdiction to hear and determine the appeal. 13Section 7 of that Act relevantly provides: "(3) Where it appears that the only matters for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court of a State or Territory are matters other than matters arising under an Act specified in the Schedule, that proceeding shall be instituted only in, and shall be determined only by, the Full Court of the Supreme Court of that State or Territory. ... (5) Subject to subsections (7) and (8), where it appears that a matter for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court of a State or Territory (not being a proceeding to which subsection (6) applies) is a matter arising under an Act specified in the Schedule, that proceeding shall be instituted only in, and shall be determined only by: (a) the Full Court of the Federal Court or of the Family Court, as the case requires; or (b) with special leave of the High Court, the High Court. ... (7) Where: (a) the Full Court of the Supreme Court of a State or Territory commences to hear a proceeding by way of an appeal; and (b) before the Court determines the proceeding, it appears to the Court that the proceeding is a proceeding to which subsection (5) applies: the Court shall, unless the interests of justice require that the Court proceed to determine the proceeding, transfer the proceeding to the Full Court of the Federal Court or of the Family Court, as the case requires. (8) Where the Full Court of the Supreme Court of a State or Territory: (a) determines a proceeding to which subsection (5) applies as mentioned in subsection (7); or (b) through inadvertence, determines a proceeding to which subsection (5) applies; nothing in this section invalidates the decision of that court." The Acts specified in the Schedule to that Act include the Family Law Act. 14The appellants submitted that s 7(5) applied to the appeal in this Court because one matter for determination was the costs order which should be made in the event that the primary judge's order was set aside. That was said to be so because that question was governed, at least in relation to the costs of the applications for relief under ss 79(8) and 79A of the Family Law Act, by s 117 of that Act. The respondents took issue with that submission, principally upon the basis that the fact that the primary judge had not taken that provision into account was not relied upon in the appeal as constituting an error in the exercise of his discretion. For that reason it did not arise for consideration in the appeal. 15The appellants argued that if s 7(5) applied, the present case was one in which this Court had commenced to hear the appeal and in which the interests of justice required that it proceed to determine the appeal as permitted by s 7(7). The respondents maintained that if s 7(5) applied, the appeal had to be dismissed because this Court had not commenced to hear it and, that being the position, did not have jurisdiction to determine it. The application of s 7(5) 16A matter may properly be said to arise under a federal law if the right or duty in question owes its existence to federal law or depends upon federal law for its enforcement. That remains so irrespective of the form of the relief sought and whether that relief depends on federal law: LNC Industries Ltd v BMW (Australia) Pty Ltd [1983] HCA 31; 151 CLR 575 at 581. The question raised by s 7(5) in this case is whether a matter for determination in the appeal arises under the Family Law Act. 17One matter for determination in the appeal is whether the primary judge erred in exercising the discretion as to costs. The subject matter of the exercise of that discretion included the costs of the claims to relief under ss 79A and 79(8) of the Family Law Act. Those claims were proceedings under the Family Law Act. The jurisdiction of the Supreme Court to hear and determine them was conferred by s 4(1)(c) of the Commonwealth Cross-vesting Act: see Young v Lalic [2006] NSWSC 18; 197 FLR 27. In exercising that jurisdiction the Supreme Court was required to apply the laws of New South Wales relating to procedure "except as otherwise provided by the Constitution or the laws of the Commonwealth": Judiciary Act 1903 (Cth), s 79. The former included the Civil Procedure Act 2005 (NSW), s 98 which provides that, subject to the rules, costs are in the discretion of the Court. By Uniform Civil Procedure Rules 2005 (NSW), r 42.1, the general rule is that costs follow the event "unless it appears to the Court that some other order should be made as to the whole or any part of the costs". 18The laws of the Commonwealth included s 117 of the Family Law Act which relevantly provides: "117 (1) Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs. (2) If, in proceedings under this Act, the Court is of the opinion that there are circumstances that justify it in doing so, the Court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court make such order as to costs and security for costs whether by way of interlocutory order or otherwise, as the Court considers just." 19Section 117(2A) also provides that in "considering what order (if any) should be made under subsection (2), the court shall have regard to" several specific matters as well as "such other matters as the court considers relevant". 20The primary judge's attention was not drawn to the application of s 117 with respect to the order for costs which might be made concerning that part of the proceedings involving relief under the Family Law Act. As I have already noted, the grounds of appeal as presently formulated do not include that the primary judge erred in failing to do so. The relief sought does provide, however, for the re-exercise by this Court of the power to make the order for costs if there was error by the primary judge. In that event the appellants submit that this Court would be required, when re-exercising that power in accordance with s 75A(10) of the Supreme Court Act 1970 (NSW) (which permits the Court to make "any order or give any direction which ought to have been given or made"), to have regard to and apply s 117 in relation to the costs of that part of the proceedings. 21That argument raises as a matter for determination whether the power to make a further order as to the costs of that part of the underlying proceedings is conferred and governed by s 117 of the Family Law Act. That is a matter arising under that Act because the "right or duty" relied upon by the appellants as governing an aspect of the exercise of the discretion as to costs owes its existence to that federal law. This conclusion makes it unnecessary to consider the effect of the appellants' indication, during oral argument, that they would seek to amend their notice of appeal to include as an additional ground the failure of the primary judge to have regard to and apply s 117. On the face of it, that indication was not to be taken as sufficient to raise that as an issue in relation to the earlier question as to whether there was error in the exercise of the discretion. Did the Court commence to hear the appeal? 22Section 7 draws a distinction between the institution, hearing and determination of a "proceeding by way of an appeal". In this context the reference to a "proceeding" has been held to include steps in the appellate process including a summons, application or motion for leave to appeal. The relevant authorities are referred to in Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd [2013] NSWCA 392 at [49] (Barrett JA). 23Ordinarily an appellate court "commences to hear" an appeal when, as constituted for that purpose, it begins to hear addresses from one or other of the parties directed to the determination of the issues in the appeal. It is at that point that the court may be said to embark on a hearing of the merits of the appeal. In R v Lewis (1988) 165 CLR 12 at 15-16, albeit on an application for special leave, a question arose as to whether the Court of Criminal Appeal of the Northern Territory had changed its membership in the course of the hearing of an appeal. Accepting that it was of "fundamental importance that a court which enters upon the exercise of jurisdiction should see the matter through to finality", the High Court drew a distinction between the giving of directions concerning interlocutory steps to be taken in an application for leave to appeal and the commencement of a hearing of the merits of that application. Although those statements were made in the course of the disposition of a special leave application, they remain of persuasive value. The authorities for this last proposition are cited in the judgment of this Court (Basten, Campbell and Macfarlan JJA) in Bakarich v Commonwealth Bank of Australia (No 2) [2012] NSWCA 390 at [60]. 24In this case the Court as constituted on 3 March 2014 did not commence to hear the appeal. After appearances were taken the presiding judge made clear that the Court wished to hear the parties on the question of jurisdiction. At the conclusion of that argument the Court adjourned for a short time and then returned and made the orders recorded at the commencement of these reasons. 25The appellants submit that the court commenced to hear the appeal because it was listed for hearing on 3 March 2014 before the Court as constituted and on that day the Court commenced to hear argument. That submission does not address the question whether the Court so constituted commenced the hearing of the appeal as distinct from some other question. Secondly, the appellants submit that hearing the jurisdictional question involved consideration of the substantive issues raised by the appeal and that for that reason the Court should be taken to have commenced to hear the appeal. It is correct that the Court had to consider the nature of those issues in order to determine whether there was a matter arising under the Family Law Act. However, it does not follow that the Court embarked on the hearing of the appeal. If the position was as contended for by the appellants, the Court could not, once the proceedings had been instituted, hear the parties on the question whether the appeal was one to which subsection 7(5) applied without thereby commencing to hear the appeal so as to enliven the power conferred by subsection 7(7). 26As Spigelman CJ notes in Zhang v Zemin [2010] NSWCA 255; 79 NSWLR 513 at [39]-[41], the "first duty" of a court is to determine whether or not it has jurisdiction. The statement of Isaacs ACJ to the same effect in Hazeldell Ltd v Commonwealth [1924] HCA 36; 34 CLR 442 at 446 may be added to those cited by the Chief Justice. It is consistent with the scheme of s 7 that the exercise of the implied or preliminary jurisdiction involved in addressing that question does not of itself constitute entering upon the exercise of appellate jurisdiction. The section contemplates that whether the appeal proceeding is one to which subsection (5) applies should be addressed after the appeal proceeding has been instituted and before the Court has commenced to hear the appeal. 27In this appeal the Court heard the parties on that preliminary question and determined that s 7(5) applied so as to require that the appeal be dismissed for want of jurisdiction. The court also ordered that the appellants pay the costs of the proceedings. (As to the Court's power to make such an order in relation to costs: see Willocks v Anderson [1971] HCA 28; 124 CLR 293 at 300.) 28BARRETT JA: As explained in the reasons of Meagher JA which I have had the advantage of reading in draft and with which I respectfully agree: (a) the costs order made by the primary judge was, of its very nature, an order made in exercise of power conferred by s 117(2) of the Family Law Act 1975 (Cth), one of the Commonwealth Acts specified in the Schedule to the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth); (b) any order made on appeal that varies that costs order or substitutes some different costs order will likewise be made in exercise of power conferred by s 117(2); (c) the appellate proceeding in which an order referred to in (b) is sought is a proceeding in which a matter arising under the Family Law Act is a matter for determination; (d) s 7(5) of the Jurisdiction of Courts (Cross-vesting) Act of the Commonwealth directs, subject to s 7(7), that the appellate proceeding be instituted only in and determined only by the Full Court of the Family Court of Australia or, with special leave, the High Court of Australia; (e) because this Court has not commenced to hear the appellate proceeding, s 7(7) creates neither the possibility that this Court should proceed to determine it nor an obligation on this Court to transfer it to the Full Court of the Family Court; and (f) this Court is accordingly precluded by s 7(5) from determining the appellate proceeding. ********** Amendments 03 September 2014 - Change year of Family Provision Act from 1984 to 1982 Amended paragraphs: [5] and [7] 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: 03 September 2014