Cantoni & Cantoni (No 2)

[2023] FedCFamC1F 887

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Cantoni & Cantoni (No 2) [2023] FedCFamC1F 887

File number(s):

SYC 4456 of 2023

Judgment of:

JARRETT J

Date of judgment:

19 October 2023

Catchwords:

FAMILY LAW – PRACTICE AND PROCEDURE –Where dispute arose relating to interpretation of final orders – Where the literal interpretation of the orders supported by the first and fourth respondents prioritised the interests of caveators over the applicant – Where the reasons for judgment stated the first respondent should be solely responsible for the liabilities subject of caveats – Orders made did not reflect the intention of the Court – Variation of orders pursuant to r 10.13(e)

Legislation:

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 rr 10.13(1)(e), 10.13(1)(g)

Cases cited:

Cantoni & Cantoni [2022] FedCFamC1F 1051

Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425

Wright v Gibbons (1949) 78 CLR 313

Division:

Division 1 First Instance

Number of paragraphs:

27

Date of hearing:

12 September 2023

Place:

Brisbane

Solicitor for the Applicant:

Khalil Family Lawyers Pty Ltd

Counsel for the First Respondent:

Mr McCormick

Solicitors for the First Respondent:

Goldsmiths Lawyers

Solicitors for the Second Respondent:

Q Pty Ltd

Counsel for the Third Respondent:

Mr Black

Solicitors for the Third Respondent:

Wisewould Mahony Lawyers

Counsel for the Fourth Respondent:

Mr McCormick

Solicitors for the Fourth Respondent:

Goldsmiths Lawyers

Solicitors for the Fifth Respondent:

Keogh & Co.

ORDERS

SYC 4456 of 2023

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS CANTONI

Applicant

AND:

MR CANTONI

First Respondent

Q PTY LTD

Second Respondent

R PTY LTD (and others named in the Schedule)

Third Respondent

ORDER MADE BY:	JARRETT J
DATE OF ORDER:	19 OCTOBER 2023

THE COURT ORDERS THAT:

1.Pursuant to r 10.13(1)(e) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, the orders of 22 December, 2022 be amended as follows:

(a)paragraph 1: Orders 8(d), 8(f) and 8(g) of the orders made on 2 September, 2022 be discharged;

(b)paragraph 2: Upon the sale of the real property situated at D Street, Suburb E, Victoria in accordance with the orders made on 2 September, 2022 the nett proceeds of sale be disbursed as follows:;

(c)paragraph 2(a): to the applicant or at her direction, the sum calculated according to the following formula:

((B-C-D) + $39,144+$50,973) *70%)-$59,000

(d)insertion of a new paragraph 2(b): in payment of any amounts required to discharge any remaining liabilities notified by caveats that had been lodged against the title to the property, in order of their priority; and

(e)renumbering of old paragraph 2(b) to 2(c): the balance, if any to the respondent or at his direction.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

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

REASONS FOR JUDGMENT

JARRETT J:

1. This application arises out of a dispute about the interpretation of orders I made on 22 December, 2022 for the final disposition of property adjustment proceedings between the applicant and the first respondent. Those orders relevantly provided:

   1.        Orders 8(f) and 8(g) of the orders made on 2 September, 2022 be discharged.

   2.Upon the sale of the real property situated at [D Street] [Suburb E], Victoria in accordance with the orders made on 2 September, 2022 the nett proceeds of sale be disbursed as follows:

   (a)to the applicant or at her direction, the sum calculated according to the following formula:

   ((B-C-D) + $39,144+$50,973*70%)-$59,000

   Where:

   (a)B is the sale price of the property less adjustments paid or made pursuant to order 8(b) of the orders made on 2 September, 2022;

   (ii)       C is the combined value of the amounts paid to:

   A.the Westpac Bank to discharge its security over the property;

   B.        [Mr G] or at his direction; and

   C.[R Pty Ltd] in respect of caveat … lodged on […]/2018 on the title to the property.

   (iii)D is the total amount paid pursuant to order 8(a) of the orders made on 2 September, 2022

   (b)       the balance, if any to the respondent or at his direction.

2. Order 8, apart from 8(f) and 8(g) of the orders made on 2 September, 2022 is still operative as a result of the orders of 22 December, 2022. That order provides:

   8.Following the sale of the [Suburb E] Property, the proceeds of sale are to be distributed in the following manner and priority:

   (a)In payment of the costs associated with the sale, including the real estate agent’s fees, conveyancing fees and auctioneer’s fees (if any);

   (b)In payment of any rate and utility adjustments as at the date of settlement of the sale;

   (c)In payment of any outstanding mortgages registered against the [Suburb E] Property;

   (d)In payment of any amounts required to discharge caveats lodged against the property, in order of their priority;

   (e)In payment of the building costs owed to [K Company] in the amount of $711,040;

   (f)In payment of the amount of $408,000 to the Wife by way of interim property settlement; and

   (g)The balance of funds to be held in an interest-bearing trust account of the conveyancing solicitor in the names of both the Husband and Wife pending further order of the Court.

3. My reasons for judgment (Cantoni & Cantoni [2022] FedCFamC1F 1051) set out the following:

   69When the [Suburb E] property is sold, the interests secured or notified over the property will have to be paid out.  There will also be realisation costs that have not been quantified in the evidence before me.  However, what is clear is that the following amounts will be disbursed:

   (a)       Westpac mortgage for the benefit of both parties;

   (b)       Debt to [Mr G] for the benefit of both parties;

   (c)Applicant’s [R Pty Ltd] loan which I have found was applied by her to the parties’ benefit.

   Each of these amounts should be borne proportionately by the parties by deducting them from the proceeds of sale of the real property.

   70Assuming a sale price of $4,500,000 and adopting sale costs speculated upon by Counsel for the respondent in submissions, (commission of $80,240 and conveyancing costs of $5,000) that would leave an approximate balance of $1,647,547.

   71       The balance of the amounts to be disbursed are:

   (a)       Legal Fees – [Q Pty Ltd];

   (b)       Legal Fees - Goldsmith Lawyers;

   (c)       Debt to [T Pty Ltd];

   (d)       Applicant’s [R Pty Ltd] Loan.

   Each of these liabilities should be borne solely by the respondent but they would be paid from the proceeds of sale reducing it to approximately $993,351.

   72The orders I have drawn take account of these matters and divide the parties’ property in the proportion I have determined, namely 70% to the applicant and 30% to the respondent.

   73By those orders, the amounts for which the respondent should be solely responsible are added to the nett proceeds of sale of the real property so as to identify the nett proceeds for division between the parties.  The value of the parties’ other property ($39,144.00) and their superannuation ($50,973) is added to reveal the total nett value of the parties’ property available for distribution.  The applicant’s 70% share should take up the property she presently holds (which, including superannuation, has a value of $59,000).  After taking into account property retained by her, the balance (70% of the parties’ nett property as found by me less $59,000) is the amount to which the applicant is entitled.  The respondent is entitled to the residuary. 

   74The orders made on 2 September, 2022 provide for the applicant to receive $408, 000 by way of interim property settlement.  I have ignored that in these reasons in judgment given that the property has not sold and the amount has not been paid to her.  Consistently with that, I will discharge orders 8(f) and 8(g) of the orders made on 2 September, 2022 so as to better give effect to the orders made consequent upon these reasons.

   75On the basis of my reasoning, the applicant is likely to receive the whole of the nett proceeds of sale.  Assuming the costs speculated upon by counsel for the respondent in submissions are reasonably accurate, it will only be in the event that the property sells for approximately $5.05m or more that an amount will become payable to the respondent.  The orders I have set out at the commencement of these reasons will see a return to the respondent in the event that the sale price of the property is sufficiently high.

4. There were a number of liabilities of the parties I needed to consider at the trial of the principal proceedings. A Westpac loan was secured by a mortgage over the Suburb E property. There was a large liability to a builder, Mr G. There were liabilities to R Pty Ltd which were the subject of caveats over the Suburb E property. There were several other liabilities of the first respondent for legal costs that were subject to caveats over the property.

5. The caveators are the second to fifth respondents to this application.

6. The second respondent’s position was that the funds owed to it and secured by its caveat on the Suburb E property are a liability of the first respondent alone and not the applicant. The second respondent argued that it should be paid from “the husband’s share”. When asked whether that meant his share of the property before the effect of the property adjustment order or afterwards, its position was clarified to be “his share is the 30 per cent, after the adjustment”.

7. The third respondent’s position was to “happily abide by whatever decision is made”.

8. The fifth respondent’s position adopted that of the second respondent and otherwise to abide the order of the court.

9. Before going on to deal with the arguments for the first and fourth respondents, it is worth noting that there is an error in the 22 December, 2022 orders. That error arises by order of operations. The reasons for judgment make clear that the nett property of the parties should be calculated by subtracting the Westpac loan value, amount owing to Mr G, amount owing to R Pty Ltd and any costs associated with the sale of the property from the settlement value of the property, then adding the value of the extraneous assets of the parties. The applicant’s entitlement was to be 70% of that pool. The formula set out in order 2(a) does not give exact effect to that as the 70% is only multiplied by the amount of $50,973. The correct formula should change the location of the parenthesis: ((B-C-D+$39,144+$50,973)*70%)-$59,000.

10. The above change is largely immaterial as the parties did not raise it and appear to have interpreted that order in accordance with the reasons for judgment. However, in the application now before me, it is appropriate that I correct the order pursuant to r 10.13(g) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021.

11. The first and fourth respondents were represented by the same solicitors and counsel. The arguments were advanced principally upon the fourth respondent’s behalf. These respondents contended that the orders of 22 December, 2022 were to be read in conjunction with the orders of 2 September, 2022 and that the result was all the caveators should be paid prior to the applicant receiving her payment in accordance with order 2(a) of the 22 December, 2022 orders, and the balance, if any, to be paid to the respondent.

12. This interpretation risks that the respondent’s share will be insufficient to satisfy his creditors and the applicant will end up subsidising those debts in circumstances where it was found that she should not.

13. The applicant argued that the amount to which she was entitled was to be calculated on the nett proceeds of sale before payment of the debts that I had identified the first respondent was to be solely liable. The applicant contended that from the sale price of the property, first, the Westpac loan, liability to Mr G and liability to R Pty Ltd should be paid out. Next she said she should be paid out in accordance with order 2(a) of 22 December, 2022, and finally the balance should be paid to the first respondent who would be responsible for paying off the remaining caveators.

14. Such an approach risks that the balance paid to the first respondent would be insufficient to fully satisfy the liabilities to the remaining caveators but would see the applicant receive the full 70% of the parties’ nett property.

15. The applicant’s interpretation of the intent of the orders is correct. My reasons make it clear that it is for the first respondent to satisfy the identified creditors who had lodged the relevant caveats. The first and fourth respondent’s interpretation of the text of the December, 2022 order and its interaction with the September, 2022 order is also correct, but that was not what was intended.

16. The orders of 22 December, 2022 refer to the Westpac loan and the debts to Mr G and R Pty Ltd for the purpose of calculating the sum payable to the applicant. That order, however, does not provide for the payment of those liabilities. The orders of 22 December, 2022 must be read in conjunction with the orders of 2 September, 2022 (subject to the discharge of orders 8(f) and 8(g)) which are the orders that provide for the payment of those liabilities, as well as the debts of the caveators. The difficulty is created by my failure to also discharge order 8(d) of the orders of September, 2022 and then make provision to preserve the caveators’ interests.

17. Whilst in my reasons for judgment, at [71] I state that while the first respondent should be solely responsible for the other caveators and they should be paid out of the proceeds of sale, that could only be a reference to the first respondent’s share of the proceeds of sale after the property adjustment has been effected. Otherwise, in the event that the sale proceeds were insufficient to meet the sum of the applicant’s entitlement calculated without reference to the first respondent’s sole liabilities and those liabilities, the applicant would be contributing to the payment of those debts.

18. In correspondence to the applicant’s solicitors, the first and fourth respondent’s solicitors said:

    We also point out that paragraph 2 of the orders dated 22 December 2022, provides a mechanism for the nett proceeds of sale to be disbursed to the parties. Thus all debts secured against the property must be paid from the proceeds of sale first and will take priority. Any surplus funds can then be distributed in accordance with paragraph 2 of the orders dated 22 December 2023.

19. This argument has no merit. In circumstances where my reasons made it clear that the first respondent was to be solely responsible for the debts that founded the caveats on the property, the calculation of any “nett proceeds of sale” must necessarily exclude such amounts. In each instance, the caveators, save for the fourth respondent accepted that their interest notified by their caveat was over the interest held by the first respondent only.

20. The fourth respondent sought to argue that notwithstanding that the applicant was not a party to the underlying agreements that created the interests that supported the caveats, her interest in the Suburb E property was nonetheless charged with payment of those debts. This came about, it was argued, because the applicant and the first respondent were joint tenants of the Suburb E property and they enjoyed a single insoluble interest in that real property. The fourth respondent sought to derive support for that proposition from Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425 although I was not directed to any particular part of that authority. In my view, however, that case is authority against the proposition argued for by the fourth respondent. The salient facts in that case and the issue for decision are succinctly summarised by the majority (French CJ, Hayne, Bell and Gageler JJ) at [1]:

    The registered proprietor of Torrens system land, a company, transferred the land to husband and wife as joint tenants for consideration to be satisfied by debiting the husband's loan account with the company.  The husband knew that the company did not owe him the amount recorded in the loan account.  The debit was not recorded in the company's books until after the transfer had been registered.  The husband subsequently transferred his interest in the land to his wife for a nominal consideration.  Is the wife's title, first as joint proprietor with her husband, or second deriving from or through her husband under the subsequent transfer, defeasible by the company?

21. When considering whether the wife was infected with the husband’s fraud and her title to the relevant property therefore defeasible, the majority considered the effect of them being joint tenants of the property. At [44] the majority noted that in the court below (footnotes omitted):

    … Macfarlan JA held that "Felicity was infected with Claude's fraud because she and Claude took title from [GC&Co] as joint tenants ... [and] joint tenants are treated by the law as in effect one person only" (emphasis added).  Basten JA held[46] that it was "preferable in principle to treat the shares of the joint tenants, holding title under the [RPA], prior to any severance, as differentially affected by the fraud of one, to which the other was not party".

22. The majority rejected the approach taken by Macfarlan JA and that [45] said (again, footnotes omitted):

    The conclusion reached by Basten JA is right.  As his Honour said, "[t]he contrary view would impute fraud to a party who was not herself fraudulent". That observation is reason enough to reject the contrary view. But it is important to demonstrate that the contrary view cannot be supported by general assertions that "the law" treats joint tenants as "in effect" one person. That demonstration must begin in the text of the RPA.

23. The majority went on to consider an earlier decision of the High Court in Wright v Gibbons (1949) 78 CLR 313. Their Honours remarks when discussing Wright v Gibbons seem entirely apt to the present case and demonstrate the fallacy of the first and fourth respondent’s argument (footnotes omitted):

    [47]In Wright v Gibbons, Dixon J described joint tenancy as "a form of ownership bearing many traces of the scholasticism of the times in which its principles were developed".  And as his Honour's discussion of the writers shows, the "pedantic, needlessly subtle" thinking of that time was often compressed into maxims:  especially "nihil tenet et totum tenet" (he holds nothing and he holds the whole) and "per my et per tout" (for nothing and for everything).  But, as Wright v Gibbons demonstrates, those maxims cannot and must not be treated as constituting a complete or wholly accurate description of the legal nature of a joint tenancy.

    [48]The hinge about which the reasoning of Dixon J turned in Wright v Gibbons was that the maxims (and similar statements by later writers to the effect that joint tenants are "considered by the law as one person for most purposes") cannot be taken as the premise for deductive reasoning about the effect of a joint tenancy.  As Dixon J pointed out, by reference to Coke on Littleton, "[f]or purposes of alienation each [joint tenant] is conceived as entitled to dispose of an aliquot share".  That is because, as Dixon J also said:

    "Logical as may seem the deduction that joint tenants have not interests which in contemplation of law are sufficiently distinct to assure mutually one to another, there are many considerations which show that, to say the least, the consequence cannot be called an unqualified truth.  The fact is that the principle upon which the deduction is based must itself be very much qualified."  (emphasis added)

    Only by recognising the necessity to qualify those statements of principle is it possible to account for the cases of forfeiture suffered by, and execution against, one of several joint tenants referred to by Dixon J.

1. The stance taken by the second, third and fifth respondents is entirely consistent with the proposition that it is only the first respondent’s interest in the Suburb E property that has been charged by him with payment of their debts. Their stance is consistent with the principles claimed in the two cases to which I have just referred.

2. I reject the first and fourth respondent’s argument that the first respondent charged the applicant’s interest in the Suburb E property with payment of the debts for which only he is responsible. In the absence of any authority to act on the applicant’s behalf, there is no basis upon which he could charge anything but his aliquot share of that property.

   CONCLUSION

3. I am satisfied that it is entirely appropriate to exercise the power provided in rule 10.13(1)(e) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 to vary the order I made on 22 December, 2022 to properly reflect my intention is expressed in the reasons for judgement delivered on that day. To properly reflect that intention, it is necessary to:

   (a)in order 1, insert “8(d),” immediately after the word “Orders” and immediately before”8(f)”;

   (b)in order 2, delete the word “nett” where it first appears;

   (c)Insert a new order 2(b) in these terms, “In payment of any amounts required to discharge any remaining liabilities notified by caveats that had been lodged against the title to the property, in order of their priority; and”; and

   (d)Renumber the existing order 2(b) as order 2(c).

4. There will be orders accordingly.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jarrett.

Associate:

Dated:       19 October 2023

SCHEDULE OF PARTIES

SYC 4456 of 2023
Respondents
Fourth Respondent:	S PTY LTD
Fifth Respondent:	T PTY LTD