Billingsly and Billingsly

[2017] FamCA 574

FAMILY COURT OF AUSTRALIA

BILLINGSLY & BILLINGSLY [2017] FamCA 574

FAMILY LAW – SUMMARY DISMISSAL – where husband is respondent to wife’s application for summary dismissal of his application under s 79A of the Act – where wife challenges husband to provide proper evidence and he fails to do so – where there is no prospect of success on husband’s own material.
FAMILY LAW – ADJOURNMENT – where husband changes lawyers just before hearing and then remains overseas – nothing proposed by husband will be assisted by adjournment.

Family Law Act 1975 (Cth)

AON Risk Services Australia Limited v Australian National University [2009] HCA 27
Barker v Barker [2007] FamCA 13; (2007) 36 Fam LR 650
Cawthorn and Cawthorn [1998] FamCA 37
In the marriage ofClifton and Stuart (1991) FLC 92-194
La Rocca and La Rocca (1991) FLC 92-222
Lane & Lane [2016] FamCAFC 243
Lindon v Commonwealth of Australia (No 2) [1996] HCA 14; 70 ALJR 541
Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd [1998] ACLC 304
Parkinson and Co Limited v Triplan Pty Limited [1973] 1 QB609
Rohde and Rohde [1984] FamCA 41; (1984) FLC 91-592
Sali v SPC Limited (1993) 67 ALJR 848
Stapleton and Bryant [2009] FamCAFC 63

APPLICANT: Ms Billingsly

RESPONDENT: Mr Billingsly

FILE NUMBER: MLC 745 of 2014

DATE DELIVERED: 8 August 2017

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 2 August 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Puckey

SOLICITOR FOR THE APPLICANT: Barry Nilsson Lawyers

COUNSEL FOR THE RESPONDENT: Mr Baume

SOLICITOR FOR THE RESPONDENT: David Joseph & Co

Orders

1. That the husband’s application under s 79A of the Family Law Act 1975 (Cth) filed 27 October 2016 (otherwise referred to as 17 October 2016 elsewhere) is summarily dismissed.

2. That the wife’s response thereto is dismissed subject to any order for costs.

3. That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 7 September 2017 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 21 September 2017 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend on 2 August 2017.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Billingsly & Billingsly has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 745  of 2014

Ms Billingsly

Applicant

And

Mr Billingsly

Respondent

REASONS FOR JUDGMENT

1. In this matter, the husband and the wife agreed upon a property settlement in February 2014.  At that time both had legal representation.  The orders were made by a registrar, and to satisfy her that they were just and equitable, the parties under the guidance of their lawyers, filed the comprehensive financial documentation usually required to make the relevant determination.  I shall return to the details of that below.

2. In October 2016, the husband filed an application initiating proceedings relying upon s 79A of the Family Law Act 1975 (Cth) (“the Act”) seeking to set aside the 2014 orders. Insofar as detail of the relevant grounds under s 79A would have been necessary to be pleaded so as to enable the wife to know the case she had to meet, all that the husband set out was his intention to rely upon s 79A(1)(a) and (1)(b) of the Act.

3. On 1 June 2017, the wife filed an application in a case seeking (in essence):

   (a)      summary dismissal of the husband’s claim; and

   (b)in the alternative, security for her costs which she fixed at $70,000.

4. The husband did not file a response to the wife’s application in a case but he did engage new solicitors only 48 hours or so prior to the hearing.  Those solicitors briefed counsel.  Counsel was instructed to apply for an adjournment. For reasons that follow, that application was refused.

Background

1. The details of a number of steps taken by the husband are significant in relation to the adjournment application.  In filing his application in October 2016, on any view, the wife and the court could not work out the basis of his claim for relief.  He did not file an affidavit nor was he required to do so but he would have been sensible to have set out the basis of his claim. 

2. Ultimately, the wife sought an explanation from the husband’s then solicitors.  The response was evasive and, in my view, inappropriate.  It was asserted that the husband’s application was clear; it was not.  It was said that as there was a case assessment conference listed for 30 November 2016, “if” deemed by the registrar necessary, the husband would file a Notice of Contentions and Facts.  That was unresponsive and failed to address the relevant rules of court (see Rule 1.08(1)(h)).  Because of the obligations of the lawyers under the rules, I have concluded that the husband gave instructions to so respond.  That was inappropriate for no other reason than that it required the wife to attend a hearing without knowing what the husband’s position could be to enable her to adequately respond.  That approach could not have achieved any number of the purposes outlined in Rule 1.07.

3. Indeed, a hearing by way of a case assessment conference was convened on 30 November 2016 at which the registrar ordered the husband to do what should have already been done. 

4. Assisted by the same lawyers, on 28 February 2017, the husband filed two affidavits.  The first affidavit was by himself and the second was from an accountant Mr H. 

5. The husband’s case which was then apparent was that for the purposes of the s 79A application, the grounds were that Mr H had found calculation errors such that there had been a “double counting” for the purposes of the property that was to be divided in 2014. Secondly, the husband had ended his employment and disposed of shares which had been referred to in the 2014 orders and which the wife had (perhaps in hindsight, unwisely) considered were a form of security for the money sum owed to her by the husband.

6. The husband’s response brought about the wife’s application filed on 1 June 2017 that came before Registrar Field on 2 June 2017.  The registrar had no power to deal with the pleaded issues for relief sought by the wife and adjourned the matter to the Judicial Duty List on 2 August 2016.  The husband was present at the hearing on 2 June.  The registrar ordered him to respond to the wife’s application by 12 July 2017.

7. On 22 June 2017, the husband who by that time seems to have had the assistance of a lawyer who was not on the record of the court, filed an affidavit.  It is alleged by counsel for the wife that the affidavit was not served albeit it was filed.  No prejudice was claimed by the wife because her solicitors found the document on the court’s portal.  It remains unclear whether the solicitor who was assisting the husband had some involvement in the affidavit but if he did, the assistance was unhelpful.

8. The solicitor for the wife then wrote to the husband saying that the affidavit did not satisfy the registrar’s order.  The husband replied that in his view, it was “sufficient”.  I agree with the wife’s position.

9. In the correspondence tendered in evidence, it is apparent that after the orders of 2 June 2017 by which date, the hearing in the Judicial Duty List on 2 August 2017 had been fixed, the husband indicated that he would dispute the insufficiency of his response.  He made clear that he would do that at the court hearing.  I infer he intended the 2 August hearing to proceed.

10. For whatever reason, the husband then sought new legal advice and on 31 July 2017, those solicitors requested an adjournment which the wife’s solicitors rejected. 

11. Counsel for the husband made submissions that the matter should be adjourned because, he and his instructor, were short on instructions, and in any event, the husband was working in a new employment position in Country J.  Counsel for the husband quite properly conceded he was embarrassed because he had no documents to assist him and his instructor’s attempts to obtain instructions from Country J had been unsuccessful that morning.  Indeed, were it not for the cooperation of counsel for the wife in providing his counterpart documentation, the husband’s case would have been even more vague than it ultimately was.

12. There can be no doubt that the husband knew of the hearing date and that he had two months to prepare.  His attempt to comply with the orders in such a way as to indicate what the issues were, failed.

13. For the reasons set out below, there are already documents in the court, as there were at the time that the registrar made the orders, to show that the first of the two grounds pleaded by the husband, has no foundation.  The second ground of the husband asserting that it is impracticable to carry out the orders is also puzzlingly wrong even if  it is accepted that the husband might currently be insolvent or impecunious.

14. Thus, the husband’s blunt approach that his material was sufficient enables the court to assume that not only was there nothing further to elicit by way of evidence but that he was also ready to proceed to defend the wife’s application for summary dismissal.

15. An application to adjourn proceedings on the basis of new solicitors being engaged when the husband was undoubtedly aware that he would be in Country J, could not be a ground for an adjournment in this case.

16. The cavalier approach of the husband could not be explained let alone justified.  Counsel for the husband valiantly endeavoured to argue that, given an opportunity, the problems (presumably those foreshadowed by the wife) would be fixed but absent any instructions, let alone evidence, that submission had no merit.  Counsel could not say how an adjournment would assist.

17. All courts, and the Family Court of Australia in particular, has to be conscious of the conflict between access to justice in which the litigant has a right to a just determination as against the responsibility of the court to the community to use its resources efficiently and wisely.  As the High Court of Australia said in Sali v SPC Limited (1993) 67 ALJR 848 the court is entitled to consider the effect of an adjournment on court resources because of the competing claims by other litigants awaiting a hearing in addition to the interests of the parties themselves. The court is entitled to take into account the knowledge of its own list of pending cases in that exercise. That enables the court to then focus, as in this case, whether justice would really be served to other litigants in circumstances where the husband had well known of the hearing and taken the course of action that he did, placing his new lawyers in an invidious position.

18. As French CJ said in AON Risk Services Australia Limited v Australian National University [2009] HCA 27, case management principles should not supplant the objective of doing justice between the parties but by the same token, the court must be conscious not to waste public resources and create undue delay for other litigants. Delay for other litigants creates strain and uncertainty none of which seems to have troubled the husband here. The underlying principle for that philosophy is that unless the court deals with its business efficaciously, there will be potential for a loss of public confidence in the legal system where the court accedes to applications which are made without adequate explanation or justification. Counsel for the husband, with extraordinarily limited instructions, was faced with that very dilemma.

19. In my view, the husband’s cavalier attitude caused the problem and I am not for a moment suggesting that he should be punished for his approach, but absent some clear indication as to the reasoning behind the adjournment application, I find that putting the case off would prejudice other litigants and produce no obvious result because the documentation upon which the husband desired to rely, was already before the court.  The absence of the husband was of his own doing.

20. The adjournment application therefore was rejected.

The summary dismissal application

1. The wife had always made it clear that she was proceeding with the summary dismissal application and from the husband’s perspective, he said that the material upon which he intended to rely was sufficient to defend that application.  Counsel for the wife acknowledged that the bar was set very high in summary dismissal case. 

The relevant legislative framework

1. The husband relies upon s 79A. The relevant provisions upon which he has sought relief are as follows:

   (1)      Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:

   (a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or

   (b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out;…

Summary Dismissal

1. Rule 10.12 of the Family Law Rules 2004 provides that a party may apply for summary dismissal in relation to an application for which there is no reasonable likelihood of success. The rules do not set out any more than that to guide the determination.

2. In Lindon v Commonwealth of Australia (No 2) [1996] HCA 14; 70 ALJR 541, Kirby J made observations about the approach to such a question saying that he preferred to deal with the attempt by the litigant to obtain relief from the court by examining whether or not it was doomed to fail. His Honour observed that he had contemplated giving the litigant an opportunity to amend his pleading because if that occurred, there might be a plausible cause of action and his Honour questioned in that particular case whether reframing of the statement of claim could save it without completing altering its character and presenting a different case. That is relevant here.

3. Counsel for the husband indicated that given an opportunity, the husband might be given legal advice to alter his position.  As can be seen from what I have earlier set out, his grounds were that there was an error made by the expert witness upon which both parties relied and secondly, in any event, the order could not be carried into effect because he had disposed of assets subsequent to the orders.  I return to both of those subjects below but when I do, it will be seen that first, it is difficult to see how the reframing of the claim could be made where the husband had made his position very clear as to the evidence that he relied upon.  Secondly, counsel conceded that he had no instructions as to how that reframing could occur.  In my view, any change of direction by the husband would have been altering the character of the claim that had been extant since October 2016.  Such a change would require the wife to change direction as well.

4. Kirby J also observed that even a weak case was entitled to the time of the court and that experience taught that the concentration of attention, elaborated evidence and an argument sometimes turned an apparently unpromising cause into a successful judgment.  Nothing that counsel for the husband could say pointed to that prospect.  Significantly, the absence of the husband in Country J at a time when the hearing was unashamedly to be heard, is a glaring unexplained position.

5. Thus, absent some indication that an amendment to the claim would not create a new cause of action in circumstances where the wife was entitled to the fruits of her judgment in 2014, the court is entitled to proceed on the basis of the material provided to it.  That is particularly so here where the order was made for the husband to file material to defend his assertion in the initial application and he did so with the assistance of solicitors.  It must also then be taken into account that having been challenged, he considered his position sound.  The question therefore is whether there is any reasonable prospect of success rather than whether it is a weak case.

The 2014 orders

1. I turn in a moment to the documentation that was presented to the registrar on 4 February 2014 that gave rise to these orders.  The relevant orders were:

   1.That on or before the expiration of seven (7) days of these Orders the husband:

   (a)pay to the wife the sum of $431,350 (“the First Payment”);

   (b)…

   (c)transfer to the wife the [German] motor vehicle Registration … at her expense.

   2.That contemporaneously with the husband making the First Payment the wife do all acts and things and sign all such documents as are necessary to:

   (a)Resign as a director and secretary of [Billencorp] Pty Ltd CAN … (“[Billencorp]”);

   (b)Transfer all of her shares in [Billencorp] to the husband at his expense;

   (c)Refinance the … Hire Purchase Agreement in relation to the [German] motor vehicle Registration … into her sole name and indemnify the husband in respect of same as and from the date of these Orders: and

   (d)Relinquish her interest in the [Billingsly] Family Trust.

   3.That the husband pay to the wife the further sum of $209,072 (“the deferred payment”) payable in 16 equal quarterly instalments of $13,067 with the first payment to be made 3 months after the Frist Payment is made to pursuant to order 1(a) and then quarterly thereafter.

   4.That interest will accrue on so much of the deferred payment as remains unpaid in accordance with the case rate such interest to be paid quarterly together with the instalment.

   5.That if the husband defaults in the payment of any of the instalments pursuant to paragraph 3 interest will accrue on the overdue amount at the rate prescribed in the Family Law Rules 2004 from time to time in addition to the interests provided in paragraph 4 of these Orders.

   6.If the husband defaults in the payment any instalments of the deferred payment pursuant to paragraph 3 and remains in default for a period of 30 days the husband immediately do all such acts and sign all such documents as are necessary to sell the interest in [B] Architects held by [Billencorp] and the proceeds of sale be applied as follows:

   (a)First to pay any costs associated with the sale of his shares;

   (b)Second to pay to the wife such amount of the deferred payment as remains then outstanding together with interest accruing in accordance with paragraphs 4 and 5 of these Orders;

   (c)Finally the balance to the husband.

2. In the affidavit filed by the husband in February 2017, and relevantly to the immediate issue, he said the following:

   [22]…I relied upon (the wife) to present to me the facts pertaining to our financial affairs in order to determine our joint asset pool for the purposes of completing a Consent Application Form…

   [23]I did not engage an independent accountant for the purposes of scrutinising the figures presented by (the wife) as she had…

   [24](the wife) and I relied upon a valuation by [K] Pty Ltd in 2012 to place a value on my interest in (his company). On the basis of that valuation and figures provided by (the wife) I instructed my solicitors to proceed with a joint application for consent orders.

1. A number of observations can be made about those matters. The husband knew of the assets but chose not to investigate their value, adopting what the single valuer provided. Paragraphs [23] and [24] do not sit comfortably together. The husband says he relied upon the figures provided by the wife but then on the valuation by the expert; he chose not to investigate further. He gave no indication of what the wife had done to provide inaccurate details to the expert if that is what he meant. It is also unclear whether he is asserting that the expert missed something or took at face value what the wife gave them. However, that issue becomes clearer when Mr H’s affidavit is considered below.

2. It is also important to observe that it was the husband’s own solicitors who drew the consent order documents and indeed, the same solicitors who drew the current affidavit. It is not suggested that he resisted their advice to obtain independent accounting advice. This all addresses the first of the husband’s grounds which is that there was a miscarriage of justice by virtue of false evidence being presented to him and the Court.

3. His affidavit asserts:

   [94]I have been informed that there are irregularities and an incorrect application of principles in the valuation.

4. That is a reference to double counting of retained earnings.

5. The husband asserts that in respect of this first of his two grounds, the interest in the family trust declared as $732,250 was demonstrably wrong. His second assertion as can be seen from his affidavit is that dividends of $380,000 were incorporated in the assets for division and therefore there had been a double counting.

6. The husband set out [93] that the “asset pool” consisted of shares owned by Billencorp Pty Ltd in its capacity of the family trust. The husband retained, and the wife relinquished any interest in, that trust by the final orders. The husband made reference to the fact that both he and the wife had engaged forensic accountants for a valuation of that interest.

7. The wife annexed the relevant K Pty Ltd 2012 report. This showed the purpose of the report was to assist with the potential sale of shares by the shareholders (that is, the husband) to new or existing shareholders.

8. K Pty Ltd observed (and no-one in the company was then or is now heard to say that this was incorrect):

   …historically the company has not paid out dividends in accordance with their proportionate shareholdings…..firstly a certain amount is paid to some shareholders from a profit pool, with the balance then distributed in accordance with their proportionate interests….a schedule is maintained of the amounts owing to each shareholder….

9. This advice by K Pty Ltd then appears:

   ...we consider it appropriate to amend the …valuation to exclude any retained earnings …in arriving at the equity value…

10. K Pty Ltd then opined:

    The value to each of the existing shareholders is therefore equal to their proportionate interest in the ..equity, plus any undeclared dividends owing to them individually…..

11. In his affidavit at [95], the husband said that the unpaid dividends were retained by the company for working capital and their declaration depended upon viability of the business and cash flow. There does not seem to be a significant dispute about that but it does not change the fact that the undistributed profit was an entitlement of the shareholders in the relevant years.

12. The husband not only had that advice but so too did the other shareholders and the husband’s lawyers. The husband’s evidence is therefore that he relied on others but specifically the wife. In that regard, at [108], his evidence was that he relied upon the wife knowledge of the financial affairs “and trusted that the value she ascribed to the shares was correct”. That statement ignores the fact that the calculations were of his entity even if the wife was an accountant. It ignored the fact that there was an expert engaged to undertake the valuation process not for the court but, as can be seen above, for the company itself and for the specific purpose of raising capital by the sale of shares. It ignores the fact that even if he trusted the wife’s financial acumen, he had the opportunity to investigate his own company’s views of the K Pty Ltd’s advice.

13. Mr H is a CPA accountant. For the purposes of the discrete hearing, counsel for the wife did not raise issues of his expertise or whether the evidence was of an expert nature. Counsel challenged the accuracy of its basis.

14. Mr H’s evidence by affidavit was relied upon by the husband. His evidence was that:

    The valuation figure….(had) been prepared on both an enterprise and equity value basis. The major reason for this is for valuers to properly remove any retained earnings or unpaid undeclared dividends ………..As such, it is our contention that Valuers (sic) prepare the valuation excluding any retained earnings.

    The asset pool calculation has ignored this concept completely and added a figure of $380,000 as retained earnings or unpaid dividends to the asset pool (to which we might add we are uncertain as to how this number was derived). This is a significantly material overstatement of the asset pool base…..(my emphasis)

15. When the K Pty Ltd report of 2012 is examined, it is evident that it excluded the retained earnings. It was the husband who added the $380,000 into the list of his assets shown in the document filed with the registrar, that is, the undeclared dividends. This document was prepared by his lawyers.

16. Mr H said that the reason why the undeclared dividends should be so removed was because of the “notion” that they were already taken into account in the valuation. Even if that were so, it was the husband who provided the court and indeed, the wife, with that information by separating out the undeclared dividends over and above the valuation of K Pty Ltd upon which he relied.

17. In Lane & Lane [2016] FamCAFC 243, in respect of a similar issue, Ainslie-Wallace and Ryan JJ referred to Barker v Barker [2007] FamCA 13; (2007) 36 Fam LR 650 and said:

    (T)he Full Court explained at 675:

    [120]A miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which “for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process (original emphasis)” (Bigg v Suzi (supra) at 84,982). See also Suiker (supra); Public Trustee (as executor of the estate of Gilbert) v Gilbert (supra)). While cases such as Suiker; In the marriage of Holland [1982] FamCA 31; (1982) 8 Fam LR 233; (1982) FLC 91-243; and In the Marriage of Gebert (1990) 14 Fam LR 62; (1990) FLC 92-137 indicate that the words “miscarriage of justice” should not be construed narrowly and the phrase “integrity of the judicial process” should not be taken only to refer to the hearing in the court, the circumstances creating the miscarriage must nevertheless have been such as to have had an influence on the outcome of the litigation. As the Full Court said in Holland (above at 239):

    To succeed in an application under s 79A, the wife must show some circumstance leading to a miscarriage of justice. Agreement to a consent order which may not adequately reflect a party’s entitlements under s 79 does not, of itself, show that there has been a miscarriage of justice. There may be cases where the order consented to is so far outside the ambit of what is just and equitable that the Court may infer that a party has acted under duress, in ignorance or as a result of incompetent advice.

    (See also In the marriage ofClifton and Stuart (1991) FLC 92-194).

18. Murphy J in Lane (supra) took a different approach but came to the same result as the other two judges in appeal. Relevantly to this present case, his Honour said:

    [128]It is fundamentally important to understand that the wife’s case for suppression of evidence was not at all based on an assertion that the husband had hidden or undisclosed assets or resources but, rather, solely on an asserted failure to disclose documents or information relating to the value of the trust.

    [129]It will be observed that the sworn basis of the wife’s claim earlier referred to makes no mention of the value of the trust as an issue, much less as the central plank upon which her case as to suppression of evidence was based.

    [13]The authorities shortly to be referred to make it clear that in order for the wife to succeed in the case which she ultimately sought to advance, it was necessary for her to establish that, at the time the orders were made and/or their antecedent negotiations, the husband had information as to the value of the trust which was peculiarly within his knowledge or means of knowledge and the information was not within the knowledge, or means of knowledge, of the wife.

19. It was the husband’s disclosure that occurred here. He chose not to investigate his own figures. Even if he relied upon the wife, it was his shareholding and he knew of the company’s advice that was prepared for a potential sale of the shares from which, if it had occurred, he would have benefited.

20. Thus, even if Mr H meant that the inclusion by the husband of the undeclared dividends was double dipping by the wife, it has to also be seen in the context of the company saying that these undeclared dividends were payable subject to cash flow and other considerations. That evidence was provided to the wife in the form of a letter dated 1 October 2013 from the relevant company director (Annexure TLB-35 to the affidavit of the wife). The husband should be seen to have anticipated one of those events but why should not the wife have anticipated the same concept?

21. Ultimately, as Murphy J in Lane (supra) observed, what is the evidence by which it could be concluded that any failure on the part of the wife caused of any miscarriage of justice in circumstances where the husband was the one agitating that position? S 79A ultimately has a requirement that the asserted miscarriage of justice occur “by reason of” the ground pleaded which again emphasises the importance of setting out from the outset where the miscarriage of justice lies.

22. The absence of any material on the part of the husband and the lack of response to the wife’s application, entitles the Court to find that there is no reasonable likelihood of the substantive application succeeding. This is not a weak case; it is one that has no basis in the evidence.

23. I am satisfied that the husband relied upon K Pty Ltd for the purpose of the calculation of the value of his interest and that any error (and I find none) could not be the doing of the wife. In relation to the undeclared dividend issue, I find the husband cannot blame the wife for any issue arising from his disclosure.

The impracticability point

1. The husband then referred to his current financial position. He had paid the wife various tranches of the debt set out in the order. He said he could not borrow from lending institutions on the strength of the security of the shares so he borrowed from family and friends. Eventually, his then friend and later wife, from whom he is now separated, lent him money. He deposed to signing a loan agreement with her on 10 February 2014.  That was 10 days after the orders were made. He could not meet his obligations under the loan agreement so he arranged to sell the shares to a trust controlled by his new wife. This sale meant that to the extent there was any security for the wife in the shares, it was gone. I do not stay to consider whether he made a conscious choice between satisfying his indebtedness to the wife first before satisfying his obligation to his second wife. In my view, it matters not here.

2. In my view, the husband confuses enforceability with impracticability. Impracticability is not defined in the Act.

3. In Rohde and Rohde [1984] FamCA 41; (1984) FLC 91-592, Gee J at [87] said:

   Impracticability is a conception different from that of impossibility; the latter is absolute; the former introduces at all events some degree of reasons and involves some regard for practice.

4. In La Rocca and La Rocca (1991) FLC 92-222, Kay J observed that s 79A(1)(b) should be narrowly interpreted. He said:

   My own view is that the concept of impracticability…is akin to the application of the doctrine of frustration in contractual matters.  What the parliament is concerned with and what ought to be concerning the court is the happening of events which cannot be reasonably foreseen, which will have the effect of causing an injustice to one of the parties if the happening of such events is not given effect to.

5. The Full Court in Cawthorn and Cawthorn [1998] FamCA 37 agreed with the analysis of Kay J and in particular his approach and the use of the analogy of the frustration in contract. In Cawthorn (supra), the husband’s financial circumstances deteriorated after the orders.  The Full Court said:

   Financial problems, such as have arisen in respect of the appellant, have never given rise to the successful invocation of the doctrine of frustration.

6. It must also be borne in mind that relief under s 79A of the Act is still discretionary even if the circumstances of the case might fit within the formal ground in s 79A. The exercise of discretion applies to many provisions of the Act so it might be said by the husband (although it was not) that he could put something else other than that which he had and then would plead for the exercise of discretion in his favour. That argument could not assist him here because of what follows.

The order

1. I have already set out the order but it is apparent that paragraphs 1(a) and 3 reflect an alteration of the husband’s interest in property he had in favour of the wife and that paragraph 2 reflects the alteration of the interests of the wife in the property she had.  Combined, they are an exercise of power in s 79. 

2. Paragraph 6 therefore is simply a machinery provision to which effect is to be given only if the husband defaults;  the wife has no equitable entitlement to the property she previously transferred.  As can be seen earlier, paragraph 2(b) and (d) were to be implemented immediately by the wife under which she transferred her legal and equitable entitlements in property retained by the husband.  In so doing, she gained a new asset namely a debt due by the husband to the extent of the quantum set out in paragraph 3 of the orders.

3. Paragraph 6 therefore has no relevance other than it entitles the wife an opportunity to execute against what had previously been partly her own property but as earlier observed, the husband was not restrained from disposing of his entitlements anyway.  As such, the critical paragraphs in the order are paragraphs 1, 2 and 3 but not 6.

4. Thus, the husband’s impecuniosity and indeed his disposal of the shares, is not, and could not be, an impracticability within the meaning of s 79A(1)(b). The debt of the husband to the wife therefore remains because of paragraphs 1 to 3.

5. In my view therefore the husband’s application could not succeed here.

Security for costs

1. Even if it could be argued to the contrary by the husband that his case was not doomed to fail, the wife has an alternative application for security of costs. 

2. The husband resists that application although on what basis, I am unsure.  He made no suggestion of how he would deal with it other than that he said that he opposed it “on the grounds” that he did not have the funds.

3. The wife’s position is that she would have to incur costs to defend the order in her favour and hence, with the husband raising impecuniosity, she pointed to her potential loss.  Counsel for the wife observed that the husband was working in employment, had engaged lawyers to act for him and had maintained in his earlier affidavit that he was borrowing from family and friends.  Thus, it was submitted, he had access to money.

4. Section 117 of the Act still governs the question of security for costs. That provision requires the court to apply a principle that in proceedings under the Act, each party shall bear their own costs unless there are circumstances that justify a departure from that principle. The husband’s impecuniosity which would be considered in s 117(2A) of the Act would not assist him here because he is working and has access to funds such as to enable him to fund legal representation. Thus, if a justifying circumstance in favour of the wife could be found, reference to s 117(2A) and in particular, reference to the financial circumstances of the parties, would not necessarily assist the husband here.

5. In Stapleton and Bryant [2009] FamCAFC 63, the Full Court referred to the power in s 117 as I have set it out and to the relevant principles as annunciated in Luadaka and Luadaka [1998] FamCA 1520; (1998) FLC 92-830. I do not intend to repeat all of those principles but it will be evident that I have taken those matters into account. The Full Court went on in Stapleton at [62] to observe that the purpose of such an order is to secure justice between the parties by ensuring that an unsuccessful party does not occasion injustice to the other.  That must go both ways.

6. The wife cannot stifle the litigation by such an order (Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd [1998] ACLC 304) but so too, the husband who is apparently endeavouring to have the whole of the property proceedings reconsidered (if his application is any indication) cannot be permitted to run up the wife’s costs in circumstances where, on the face of his current evidence, his case is unmeritorious (Parkinson and Co Limited v Triplan Pty Limited [1973] 1 QB609).

7. It may be suggested that appeal cases such as Stapleton (supra) may be seen differently to trial cases but s 79A cases are similar to an appeal, in that matters previously litigated are reviewed but with a much greater emphasis on the evidence rather than on principles relating to an error of law. I consider that as ultimately, this case would turn on discretionary principles, I am entitled to give great weight to the merits of the application of the husband. That is particularly so where part of his claim is based on his own inability to meet the instalment obligation because of his actions in disposing of the shares. Thus, if there was some basis (which I consider there is not) to permit the husband’s case under s 79A to proceed, I would certainly be making an order for security for costs. On the husband’s own evidence, he says that he could not meet such an order. An order for security of costs would act as a self-executing dismissal of his claim in those circumstances making it unlikely that the case could then proceed in any event.

8. Be that as it may, because of my earlier view, an order for security of costs here is unnecessary. 

9. In my view, the husband’s application fails and must be dismissed and I make that order.

10. I also make provision for submissions relating to costs arising out of the immediate application.

I certify that the preceding Seventy Seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 8 August 2017.

Associate: 

Date:  8 August 2017