BAINBRIDGE & BAINBRIDGE
[2016] FamCA 1049
•7 December 2016
FAMILY COURT OF AUSTRALIA
| BAINBRIDGE & BAINBRIDGE | [2016] FamCA 1049 |
| FAMILY LAW – PROPERTY – UNDERTAKINGS – where husband seeks to be released from undertakings – where wife seeks undertakings be suspended – where subsequent events have overtaken the undertaking – where obligations are impossible to perform in the future – where husband no longer has control of company – where company is in liquidation – where the car has been repossessed – where both husband and wife face bankruptcy – where husband has been released from undertaking – grounds for discharge and proof of injustice FAMILY LAW – COSTS – where husband seeks wife pays costs of these proceedings on an indemnity basis – where wife is ordered to pay the husbands costs |
| Family Law Act 1975 (Cth) ss 79, 117(2A) |
| Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 AMP Investments Pty Ltd v Trade Practices Commission (1983) 49 ALR 475 Marello & Marello [2011] FamCA 799 |
| APPLICANT: | Mr Bainbridge |
| RESPONDENT: | Ms Bainbridge |
| FILE NUMBER: | BRC | 8527 | of | 2015 |
| DATE DELIVERED: | 7 December 2016 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | In Chambers |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | Last submissions 28 October 2016 |
REPRESENTATION
| SOLICITORS FOR THE APPLICANT: | Barry Nilsson Lawyers |
| SOLICITORS FOR THE RESPONDENT: | Peter J Sheehy Solicitor |
Orders
The applicant be released from the Undertaking provided to the Court by him on 7 March 2016 with effect from 31 July 2016.
The respondent pay the applicant’s costs of his Application in a Case filed 16 September 2016 incurred on and from 17 September 2016, in any event.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bainbridge & Bainbridge has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT CAIRNS |
FILE NUMBER: BRC8527/2015
| Mr Bainbridge |
Applicant
And
| Ms Bainbridge |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
On 30 October 2015 Ms Bainbridge (“the wife”) commenced proceedings against Mr Bainbridge (“the husband”) seeking a division of the parties’ matrimonial property. On 7 March 2016, the parties entered into an interim property settlement pursuant to which the husband undertook to either meet the payment of, or cause payment of, four specific expenses of the wife. By Application in a Case filed 16 September 2016, he seeks to be released from those undertakings with effect from 31 July 2016. By her response filed 6 October 2016, the wife opposes that release, but rather seeks that the husband’s obligations under the undertakings be suspended with effect from 16 September 2016.
When the husband’s Application in a Case came on for hearing before me on 28 September 2016, by consent a timetable was made for the filing of further material by the parties, and written submissions. Those orders provided that at the conclusion of the exchange of the relevant submissions, the matter would stand reserved for determination in chambers.
This is that determination and the reasons for it.
THE FACTS
The wife was born in 1967, and hence is presently 49 years of age. The husband was born in 1968, and hence is presently 48 years of age. They commenced co-habitation in 1984, married in 1990, and separated on a final basis on 9 November 2013. At the time of separation it appears as though the parties had extensive business interests in Northern Australia, centred upon B Town. Their businesses primarily related to mining industry. A significant part of the latter operations centred around a contract which the parties’ main corporate entity, C Pty Ltd (“CPL”) enjoyed with Company D. In the 2014-15 financial year, 73 per cent of the gross income of the parties’ corporate interests was derived from that contract. However on 26 October 2015, the Company D contract was suspended, with, it seems, little prospect of it ever thereafter being revived. Inevitably the parties tried to restructure their affairs, and obtained an alternate contract at E Town in Western Australia. That was a much smaller job than the Company D contract, and although anticipated to be profitable, in fact, as it transpired, was not.
The parties consent interim property settlement of 7 March 2016, including an undertaking by the husband that he would cause the following amounts to be paid to, or on behalf of, the wife:
·Rental expenses of the wife up to a maximum of $2,400.00 per month;
·Wages in the sum of $2,200.00 per month gross plus superannuation from CPL;
·The income tax liability occasioned as a result of the wages paid to the wife;
·Lease and other running costs of a motor vehicle in the wife’s possession.
It is not in contest that at that time the husband was in possession of a cash flow spreadsheet for CPL prepared by his accountants, which estimated that although the business would have a negative cash flow of $210,522.00 for the 2015-16 financial year, that was a loss which it was anticipated the company could bear.
However as I have indicated, subsequently, the anticipated profitable job at E Town proved to be unprofitable, which caused a cascading financial crisis. Particularly the parties’ companies were unable to meet their obligations to the Australian Taxation Office, or to continue to maintain equipment finance repayments. The latter lead to a successive repossession of many items of equipment from about mid-May 2016, including the wife’s motor vehicle the subject of the undertaking.
Although after the repossession of that equipment the husband remained hopeful that he could still trade back into profitability, in early July 2016 he was advised by his accountant that the companies had a net negative equity of $4,747,530.00 as at 20 June 2016.
On 14 July 2016 the husband’s solicitors wrote to the wife seeking to be released from the undertaking. No reply was received.
Since then the position of the parties has markedly worsened. On 18 July 2016 the Australian Taxation Office issued a Statutory Demand to CPL for the sum of $1,913,498.29. The following day, two other creditors commenced proceedings against the company, with claims totalling about $850,000.00.
On 27 July 2016 the husband was advised that the wife did not consent to him being released from the undertaking.
On 19 August 2016 CPL went into voluntary administration, however in consequence of complaint about the identity of the administrators, on 8 September 2016 the administrators withdrew, which in due course saw the company ordered to be wound up in insolvency on 14 September 2016.
On 22 September 2016 proceedings were issued against the husband and wife pursuant to personal guarantees. The claims against them are in the sum of $712,667.30.
The husband, and it would seem also the wife, do not have sufficient assets presently available to meet the claims against them. The husband anticipates that he shall shortly be bankrupt. Presumably the wife is likely to similarly do so as well.
As at 16 September 2016, although the husband was in recept of income totalling $3,984.00 per week, from that he is obliged to meet expenses totalling $4,664.00 per week (including his obligation to pay the wife’s rent). He says, and the wife does not contradict, that he therefore has no surplus of personal income from which he can meet the payments to the wife required by the undertaking.
RELEVANT LEGAL PRINCIPLES
The following statements may be taken as uncontroversial:
·The court has a power to release a party from an interlocutory undertaking: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177-8; AMP Investments Pty Ltd v Trade Practices Commission (1983) 49 ALR 475 at 489 per Smithers J; Marello & Marello [2011] FamCA 799 at [26] per Kent J;
·The onus is upon the party seeking to be released from the undertaking to show that the enforcement of the undertaking would be unjust: AMP Investments Pty Ltd v Trade Practices Commission (supra) at 510-11 per Fitzgerald J;
·New facts that were not reasonably contemplated at the time of the undertaking may not be sufficient to discharge that onus: ibid.
·Even an absence of new facts may not preclude the onus being satisfied if substantial detriment which an order is causing to one party constitutes injustice: ibid;
·In the context of s 79 proceedings, the prospect of any injustice by continued compliance with the undertaking being able to be sufficiently accommodated by treating it as a post-separation contribution, should be considered: Marello & Marello (supra) at [29].
The husband appears to contend that there is no power in the court to suspend an undertaking, but rather the power is restricted to one of either releasing him from the undertaking or varying it. As shall be seen, in the circumstances of this case it is unnecessary to resolve that question, although it seems to me that common sense suggests that there must be a power to suspend an undertaking, if the asserted injustice could be adequately cured by its operation being so suspended, and hence the discharge of the undertaking would affect more than is needed to remedy the injustice.
EXERCISE OF THE DISCRETION
The husband correctly points to the fact that three of the four obligations he assumed by giving the undertaking are not only presently incapable of being performed by him, but will remain incapable of performance in the future. Particularly he says that because CPL is now in liquidation, he cannot control it so as to cause wages of $2,200.00 per month plus superannuation to be paid to the wife, as he undertook to do. Likewise he cannot cause that company to pay any income tax liability incurred by the wife as a result of any wage she may receive (accepting that now that the company is in liquidation, she will receive no wage in any event). Further, he points to the fact that the motor vehicle the subject of his undertaking has now been repossessed, and accordingly he cannot continue to make lease payments and to cover the running costs of that vehicle, as it has now left the wife’s possession. He therefore argues that subsequent events have overtaken the undertaking, and rendered three of its four obligations impossible to perform in the future.
As to the payment of the wife’s rental expenses of up to a maximum of $2,400.00 per month, he points to the fact that he presently does not have the financial capacity so to do, and in the future is unlikely to have that capacity, given that he will be bankrupt. As to the latter, there is no reasonable basis to think that the husband will not in fact become bankrupt, given the size of the liabilities he faces and the lack of any adequate assets from which to satisfy them.
He therefore says that the only sensible course is to release him from the obligations under the undertaking in toto, and leave it to the wife, should she see fit in the future so to do, to bring any fresh application for the payment of her rental expenses, presumably by way of interim spouse maintenance.
The wife’s argument is that the husband’s obligations should only be suspended “until the overall financial position of the husband and ability to meet his obligations under the undertaking becomes clearer.” She says that suspension of the undertaking will not cause injustice to the husband, because he will not be accruing arrears, and if ultimately “the husband is able to produce to the Court further evidence of deterioration of his financial circumstances .. then at any time during the suspension period, he can bring the matter back to court for a final discharge of his obligations under the undertaking.”
The wife does not address, however, the impossibility of future performance of three of the four obligations under the undertaking. Further, she does not suggest that there should be a combination of release and suspension, such that the only suspended obligation would be that in relation to rental expenses.
Plainly the husband has discharged the onus of showing that the continued enforcement of his undertaking would be unjust. He no longer has control of CPL, the wife no longer has possession of the motor vehicle which the undertaking relates to, and he no longer has any financial capacity to pay the wife’s rent. Indeed, in fairness, the wife did not contend to the contrary.
In my view the current and continuing impossibility of the performance of three of the matters that the husband undertook to do tells in favour of his release from the undertaking in toto. When and if the husband’s financial circumstances improve, the wife may bring an application for interim spouse maintenance if she so desires. Viewed from the other perspective, there is insufficient reason to think, on the material presently before me, that the husband’s financial circumstances, which on any view are presently extremely bleak, are so opaque that he should be obliged to wait until they further clarify before seeking to be released from the obligations under the undertaking.
The husband will therefore be released from the undertaking provided by him on 7 March 2016.
The parties are not agreed as to the appropriate date for the release. The husband sought the release to be from 31 July 2016; the wife sought that the suspension be from 16 September 2016. The significance of the former date is that in fact that is when the husband ceased to comply with his obligations under the undertaking (accepting that in relation to the motor vehicle, that obligation ceased to be performed by him some months earlier). The significance of the latter date is that it was then that the husband filed this application and put on material in support of it.
The effect of a date later than 31 July 2016 would be to see the husband left with arrears of obligations under the undertaking. The husband points particularly to the fact that he first raised with the wife his desire to be released from the undertaking by correspondence of 14 July 2016, to which she did not respond until 27 July 2016.
Ultimately the question must be one of ascertaining at what point in time the enforcement of the husband’s obligations under the undertaking became unjust. In my view, that date was on 31 July 2016, because:
·By then, the financial calamity which has befallen the parties had crystallised;
·The wife had, by then, been in receipt of more than 14 days’ notice of the husband’s desire to be released from the undertaking;
·The fact that the wife was not then in possession of the detail which the husband’s affidavit afforded does not speak to questions of injustice, but may be relevant to questions of costs.
The husband’s release from the undertaking will therefore be with effect from 31 July 2016.
COSTS
The husband seeks an order that the wife pay his costs of and incidental to these proceedings on an indemnity basis. I assume that “these proceedings” only relates to the Application in a Case filed 16 September 2016. In the alternative, he seeks an order that the costs be reserved to the trial judge. The wife opposes any order for costs on the basis that “neither party are in financial circumstances that would justify an order being made at this stage…” However beyond that assertion, there is no material relied upon by the wife as to her financial circumstances. That is curious in that, in the husband’s affidavit of 16 September 2016, he deposed to the parties each having received, on 19 July 2016, net proceeds from the sale of a property in the sum of $15,606.56. He deposes to his share going to pay legal fees, such that he did not otherwise personally benefit from those funds.
The husband justifies the costs order that he seeks on the basis that, given his solicitor’s correspondence of 14 July 2016, he should not have been put the expense of bringing the application, and now having done so, those costs ought be borne by the wife. Further he says that the wife’s intimation on 27 July 2016 that she did not consent to the husband being released from the undertaking further necessitated the bringing of the application.
For her part, the wife says that it was only when she received the husband’s application and material in support of it, that she was in a position to take advice about, and make an informed decision on, what she should do about that application. Up until then, she was simply faced with general assertions by the husband’s solicitors as to the circumstances which they claimed justified a release of the husband from the undertaking.
By reference to the s 117(2A) consideration, I note as follows. The husband is in parlous financial circumstances, and although the wife may presently enjoy a somewhat better situation, it is likely that both will shortly become bankrupt, given the size of the guaranteed liabilities. The husband has been wholly successful in his application, and the wife wholly unsuccessful. The wife was aware from 16 September 2016 of the basis upon which the husband sought the release, and subsequently has not opposed it, save to seek suspension rather than release, and to select a later date for the effect of the release or suspension.
Weighing those matters in the balance, I am satisfied that there are circumstances which justifies an order for costs after 16 September 2016, and will order that the wife pay the husband’s costs of and incidental to Application in a Case incurred after 16 September 2016. There is no basis for making an indemnity costs order and I decline to make it. Further, I am satisfied that the recovery of those costs ought await the determination of the principal proceedings, and I will therefore condition the order for costs accordingly.
CONCLUSION
For these reasons there will be orders releasing the husband from the undertaking which he gave to the court on 7 March 2016 with effect from 31 July 2016, and a further order that the wife pay the husband’s costs incurred after 16 September 2016 in relation to his Application in a Case filed that day, in any event.
I certify that the preceding thirty five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 7 December 2016.
Associate:
Date: 7 December 2016
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