Carrington and Carrington (No 2)

[2010] FamCA 982

FAMILY COURT OF AUSTRALIA

CARRINGTON & CARRINGTON (NO. 2) [2010] FamCA 982

FAMILY LAW – PROPERTY – Application under s79A to set aside orders – respondent’s application for summary dismissal of that application

Family Law Act 1975 (Cth) ss 79A (1)(a), (b) and (c)

In the marriage of Holland (1982) FLC 91-243; 8 FAM LR 233
In the marriage of Clifton and Stuart [1991] FLC 92-194; 101 FLR 24
La Rocca and La Rocca (1991) FLC 92-222
Cawthorn and Cawthorn (1998) FLC 92-805
Gitane v Velacruz (N.o 3) [2007] FamCA 1277

APPLICANT: Mr Carrington

RESPONDENT: Ms Carrington

FILE NUMBER: HBC 70 of 2008

DATE DELIVERED: 5 November 2010

PLACE DELIVERED: Hobart

PLACE HEARD: Hobart

JUDGMENT OF: Benjamin J

HEARING DATE: 10 September 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr D Lewis

SOLICITOR FOR THE APPLICANT: Levis Stace & Cooper (a division of Rae & Partners)

COUNSEL FOR THE RESPONDENT: Mr P Tree S.C.

SOLICITOR FOR THE RESPONDENT: Simmons Wolfhagen

Orders

1. The application for final orders filed on behalf of the husband on 4 May 2010 is dismissed.

2. The wife’s enforcement application is stood over generally with liberty to restore before a Registrar within 90 days from the date of this order.

3. With the exception of any application for costs and subject to order 2, all other extant applications are dismissed.

4. Any application for costs, by either party, are to be made in accordance with the Rules of Court.

5. This matter be removed from the list of cases requiring determination.

6. Pursuant to Rule 19.50 of the Family Law Act it was reasonable to engage Counsel and Senior Counsel to attend on behalf of the respective parties.

IT IS NOTED that publication of this judgment under the pseudonym Carrington & Carrington is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT HOBART

FILE NUMBER: HBC 70 of 2008

MR CARRINGTON

Applicant

And

MS CARRINGTON

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. In May 2010 Mr Carrington (“the husband”) made an application (pursuant to s 79A of the Family Law Act 1975 (Cth)) for a variation of property orders made by this Court after judgment and following a five day hearing.

2. Orders were made on 14 January 2010.  Those orders were amended with the consent of both parties on 24 March 2010 as a debt of $150,000 was omitted from the liabilities of the parties’ agricultural business and both the parties agreed that it ought to have been included as a liability.  The parties sought that the Court rectify that omission by amending the orders under the slip rule.[1]  I adopted that course.

   [1] Rule 17.02 of the Family Law Rules 2004 (Cth).

3. The consequence of that approach was that the parties’ property was $3,984,340.50.  The division of that property was 52.5 per cent to the wife and 45.5 per cent to the husband.  The husband sought to retain the bulk of the matrimonial property and to pay out the wife.  That course was adopted and the Court ordered the husband to pay $1,981,074.76 to the wife.

4. The husband now seeks to set aside or vary those orders.  In addition he seeks interlocutory orders staying the operation of some of the final orders and the appointment of an expert to value the assets of the parties.

5. The wife filed a response to that application on 6 September 2010, seeking a summary dismissal of the husband’s applications and enforcement of the final property orders.

6. The husband’s application to set aside or vary the property orders falls under three areas:-

   1.Pursuant to s 79A(1)(a) that there had been a miscarriage of justice by reason of another circumstance, namely that the agricultural business currently has a tax debt of $172,973 and that such debt was not known to the parties at the time of hearing nor was it a debt reasonably anticipated by the parties at the time of hearing. (The “tax question”.)

   2.An application under s 79A(1)(c) in that the wife has commenced proceedings for enforcement of the orders. The consequences of those enforcement proceedings would mean the sale of property and division of the parties’ overall property at other than the percentage determined by the Court in the order.

   3.An application under s 79A(1)(b) that circumstances have arisen since the order was made that make it impracticable for the order to be carried out or impracticable for part of the order to be carried out in that a public company, EF Pty Ltd, initially had its stock suspended in early 2010. Then some months later in 2010 receivers were appointed to that public company and as a consequence the value of the husband’s interest in timber companies of $2,414,700 is likely to be significantly diminished. The husband says that is a circumstance to which the provisions of s 79(A)(1)(b) apply and as such would entitle the Court, in its discretion, to vary or set aside the orders.

BACKGROUND

1. The background to the final orders up to December 2009 is set out in paragraphs 8 to 19 of the reasons delivered 14 January 2010, these record:-

   8.The husband is aged 57 and the wife is aged 54.  The parties commenced living together in 1976 and married in March 1977.  They established the agriculture business in about 1985/1986 and the distribution business at about the same time. They started the Forestry business in about 1990 when HD Pty Ltd was established.  The parties separated in November 2004

   9.The parties’ agriculture business involves growing products and selling them, including through a local market.  There is a wholesale component to that business.

   10.The second business is a distribution business to the Huon Valley and Tasman Peninsula.  There is no issue as to the valuation of that business. 

   11.The third business is the forestry investments.  The structure of the forestry business is relatively complex, and as such I have invited the parties’ legal representatives to draft the orders to give effect to the transfer of the businesses to the husband.  The orders made reflect that assistance.

   12.One of the forestry companies is LB Pty Ltd.  Its shares are held as to one half by the husband and wife and the other half by the O family. 

   13.LB Pty Ltd owns land and holds a two third interest in HD Pty Ltd.  As such the husband and wife effectively have a one third interest in HD Pty Ltd.  The remaining two thirds interest in HD Pty Ltd is held by the E family and the O family.  HD Pty Ltd owns the land upon which timber is produced.

   14.There was apparently some friction between the O family and the parties. As a result the husband, wife and E family set up a new company called L Forestry Pty Ltd.  The E family own half the shares in the company and the husband and wife own the other half of the shares.

   15.The various forestry companies own and use land in a number of ways.  They own some of the land subject to timber rights agreements (with major public companies) and some land without such agreements.

   16.On the land without timber rights agreements the various private companies, in which the husband and wife have interests, derive income from the harvesting and sale of timber.

   17.On the properties which are subject to timber rights agreements, the public companies establish, maintain and harvest trees and pay rent.  There is an issue as to the involvement of the land holders, in particular the husband.  This is in terms of the work he is or is not required to do and the amount of work he actually does.

   18.The wife asserted that this marriage broke up as a consequence of the husband being in a long standing relationship with DP and that there was a child of that relationship, W who is now aged about 16.  The husband provides financial support for W and sees him regularly. 

   19.The unchallenged evidence of the husband was that he was having an affair with DP and the relationship was neither ‘strong or lasting’.[2]  The evidence of both the husband and wife is that the husband has re-partnered with another person, JC since at least 2008.  There is unchallenged evidence of a long term sexual relationship between the husband and DP (26 years on the evidence of the wife[3]).  When I raised the issue of notice to a de facto partner with the husband’s counsel it was submitted that the evidence did not establish a de facto relationship.  Further the unchallenged evidence of both husband and wife was that the relationship between the husband and DP was terminated before March 2009 and as such any rights which DP may have would arise under State legislation.  As to the relationship between the husband and JC, that has been in place since 2008 and at the date of hearing it appears to be of less than 2 years duration.

   [2]Paragraph 39 of the husband’s affidavit filed the 2 November 2009.

   [3]Paragraph 78 of the wife’s affidavit filed the 13 November 2009.

2. Having regard to the law in respect of summary dismissal I must take the husband’s case at its best.  The husband relied upon four affidavits namely his affidavit filed 4 May 2010 and 9 September 2010 together with affidavits of Ms TR, one filed in Court on 10 September 2010 (sworn 1 April 2010) and the other filed and sworn 8 September 2010.

3. There was an initial objection to the second affidavit of Ms TR due to relevance, however nothing in respect of the issues to be determined on the summary application swings upon material contained in that affidavit and I was not addressed in respect of matters contained in that affidavit.  I read it and took it into account.

4. In her affidavit sworn 1 April 2010, Ms TR, deposes that the husband applied for finance to fund the payments to be made pursuant to the final orders.  Since then she said there were a number of intervening events, namely the suspension of the stock of EF Pty Ltd in early 2010 and that the value attributed to the timber industries is significantly comprised in leases with EF Pty Ltd and that as a consequence of the suspension of stock the ANZ Bank withdrew its approval of finance to the husband.

5. Her evidence goes on to say that further applications were made to Elders Agricultural Bank and the National Australia Bank (and perhaps Westpac). 

6. Subsequent to Ms TR’s affidavit the parties agreed to a delay in the payment of the monies to the wife pursuant to the orders.

7. In his affidavit filed 4 May 2010, the husband deposes that he made an application to the National Australia Bank for funds and that was primarily based upon the assets in the timber enterprises.  He says the National Australia Bank had indicated they would provide funds but that after it was announced the receivers had been appointed to EF Pty Ltd the National Australia Bank withdrew the loan offer.

8. It is apposite at this stage to reflect upon the nature of these forestry investments.  The parties’ interest in timber companies was quite complex and it reflects property which is owned by various entities in which the parties have shareholdings or entities they own having shareholdings.  It is land which is owned by the parties upon which timber is grown by companies, such as EF Pty Ltd, over a long period of time. 

9. In excess of half of the income that the parties received on these investments relates to payment by tenants to grow trees on the land and the tenant’s maintenance of the land.

10. During the initial hearing there was an issue as to the amount of work undertaken by the husband on the timber properties.  The husband asserted that he undertook significant work, the wife nil. I accepted the husband’s evidence in regards to the forestry business[4]. 

    [4] At paragraph 72 of the Judgment delivered 14 January 2010.

11. I accept that there will be a reduction in the value of the timber assets as a consequence of the appointment of receivers to EF Pty Ltd.

12. The husband sought orders for provision of an updated valuation but did not provide a valuation.  I am satisfied that the underlying asset, that is the freehold land owned by the respective entities and the timber grown upon those entities, remain in place.  What has happened is that the regular cash flow has ceased.

13. For the purposes of the summary dismissal application I am satisfied that the husband has exhausted all relevant enquiries in relation to obtaining finance in respect of the payments to the wife.

14. I accept the evidence of the husband, for the purpose of the summary dismissal application, that he attended a creditors meeting and that whilst EF Pty Ltd paid lease payments to January 2010, there have been no payments in July 2010 and it is unlikely that there will be payments in January 2011.

15. On the same basis, I accept his evidence that EF Pty Ltd will walk away from the managed plantations under six years old and that all of the relevant plantations held by the timber entities in which the parties are involved are all managed plantations under six years.  I find that the trees on the land will continue to grow and will be able to be harvested although no income will be produced for ten to twelve years.  Further, that the owner of the properties would need to maintain the timber, including access ways, fire breaks and provisions of appropriate fertilisers in the plantation area.

16. The husband complains that the future market is uncertain and will depend on factors such as rainfall, harvesting costs and the price available for timber at that time.  In respect of that aspect of the husband’s claim, nothing has changed since the hearing of the substantive proceedings, except the flow of income.

17. I accept, for the purpose of the application, that the leases have comprised 56 per cent of the income received by the timber entities.

18. In terms of the taxation aspects, the husband asserts that there is a tax debt of $172,973 which comes as a surprise to him. 

19. When this application was before me I raised with counsel for the husband that there was an agreed asset namely “Agricultural Tax Credit owing $20,000.  There was an agreed tax liability of the agricultural business of $137,000 which I dealt with at paragraphs 56-62 of my reasons.  I asked whether the tax liabilities referred to in the application by the husband was a new tax of an off-set in respect of the original judgement.  I gave the husband seven days to clarify the situation if I was mistaken.  On 4 October 2010 the solicitor for the husband sought to rely on further affidavit material after the case had closed.  I had regard to that material.  

20. The evidence of Ms GS was that these were tax credits of $35,591 for the agriculture business ($20,000 was the agreed allowance) and $65,756 for M Trust.  It was not clear whether this was agreed and included in the value of M Trust.  This latest credit was reduced to $16,013. 

21. The parties had not lodged their 2009 BAS statements and as such incurred a debt of $86,000 plus interest of about $49,000 with a balance due of $172,973.  They did not lodge their 2010 BAS statements and incurred a further debt of $62,000 making a total of about $242,000of which $49,000 is interest and may be remitted.  Therefore the net is $193,000 if interest is remitted.  I had allowed $137,000 as a liability.

22. The wife filed an affidavit in reply.  I have had regard to it.

23. In relation to the tax question, I had considered tax credits and tax liabilities in my reasons dated 14 January 2010.  Paragraphs 56 to 62 of the judgment provided:-

    56.The value, if any, of tax credits owing from the Australian Tax Office in respect of the agriculture business is also in issue.  Some time after separation the wife ceased the bookkeeping of the Forestry business. 

    57.However, the wife has continued to do the books for the distribution business and the agriculture business. The wife says that the husband has, in recent times, not provided her with the relevant invoices to enter them in the accounting system.

    58.The husband says he provided such invoices to the wife by leaving them in an office part of the packing shed.  There is a serious miscommunication or mal-communication between the husband and wife.

    59.As a consequence there is money which has been expended, perhaps a considerable sum, which may not have been placed on the records of the agriculture business.

    60.In addition the evidence of the husband is that he has spent a large sum of money on seeds and that this money was paid out of his loan account with the Forestry Company.  That amount of money could be in excess of $200,000.

    61.Some of those amounts were not placed on the records of the agriculture company.  As a consequence, now that these issues have been identified, it is open for the husband to file an amended tax returns and BAS returns and receive back some goods and services tax.  It was submitted by senior counsel for the wife that the husband would also get tax credits back.  This is not likely to be the case as the evidence of the husband was that the agriculture business has not made any serious profits in recent years.

    62.Senior counsel for the wife submitted that an amount of $30,000 should be allowed for these tax credits and the goods and service tax.  Having regard to the evidence of the husband, which I accept, the evidence of the husband’s accountant Mr I, which I also accept, and other evidence in relation to these sums it seems to me that the amount likely to be repaid to the husband will be about $20,000.  Doing the best I can with what evidence I have I determine that the tax credits are $20,000.

24. As a consequence I did not allow as an asset the significant tax credit sought by the wife and I did allow a tax credit, doing the best I could with the evidence I had, of $20,000.  In fact this turned out to be greater.

25. I accepted a tax liability of the agriculture business of $137,000.

26. The husband’s evidence was:[5]

    [The wife] refers to tax credits reportedly received by [T Services] in her aforementioned affidavit.  I confirm that tax credits were received but they were immediately paid out in corresponding tax debts.  Annexed hereto and marked with the letter “A” is a letter from my accountant dated 7 September 2010 outlining what has occurred in relation to tax credits and tax debts. The letter outlines that the business currently has a debt of $172,973.  The reason for this debt arises from the failure of the wife to provide all appropriate business activity statements, and the information required for preparation and lodgement of those Business Activity statements. Neither [the wife] nor myself could have known at the hearing of the matter, that failure to lodge the appropriate information would result in such a significant tax debt.

    [5] At paragraph 12 of husband’s affidavit filed 9 September 2010.

27. Annexure “A” to the husband’s affidavit contains a letter from Ms GS a Certified Practicing Accountant whose evidence I accept, for the purpose of this argument.  She says that after allowances and deductions there was a balance of $37,517 owing to the Australian Taxation Office.  She goes on to say:-

    I realised from his [Mr I CPA] notes that [the wife] had not provided any information for the 2009 year and as such no BAS’s were lodged for the entire year or any time after.  This information seemed to arrive at our office between February 2010 and July 2010.  …

    The BAS’s contain the PAYGW paid on behalf of [T Services’] employees and the GST applicable to labour hire. …

28. She goes on to say that the tax is calculated on this basis:

Starting balance	$37,517
2009 BAS’ lodged	$86,351
Interest applied	$49,105
Total currently outstanding	$172,973

Plus the 2010 BAS and interest making a total of $242,000.  Less the likely remission of interest.

1. Counsel for the husband asserted that the wife had not produced documents to enable the lodgement of the BAS until after the hearing had concluded.  However, this has to be seen in the context that the Australian Tax Office deemed the payments between the organisation to be GST inclusive and assessed GST on a Family Trust.

1. The rhetorical question is what does this mean? 

2. I had allowed a net liability to the husband of $117,000 (tax liability agriculture business $137,000 set off against agriculture tax credit of $20,000).

3. The overall difference is some $76,000 or so.

4. The parties had come to court with their tax affairs unclear.  They had asked the Court to make a determination on that basis and in the context of a pool of assets which was, at that time, almost four million dollars.  In that context the difference is not significant.  If the BAS had been lodged the husband would have been far better off.  It was part of the entrepreneurial risk that he took.

5. As an example I note that the parties had agreed that the value of the asset “M Trust” at $68,431. The husband deposed in his affidavit filed 9 September 2010[6] that the business was sold in January 2010 for $82,872.75, a difference of about $14,000.

   [6] At paragraph 15.

6. The submissions on behalf of the husband were that the wife did not provide the invoices (albeit there was no suggestion of hiding them) and neither party could have foreseen the tax consequences.  During the course of argument I asked counsel for the husband if I could infer the matters of fact which I have outlined above.  He offered no objection to that course although said he would make submissions within five to seven days after the argument, if there was a different view.  No such submissions have been made in that regard.

7. I accept that the issues arose in two ways, firstly the change in attitude by the Taxation Department as set out in the accountant’s letter and secondly that the BAS statements were not lodged.  The husband has been in business for many years and ought to have been aware that these were not lodged.

8. The first basis is a construction argument raised by senior counsel for the wife.  

9. Counsel for the husband submitted that a miscarriage of justice had occurred not by reason of fraud, duress, the suppression of evidence or even the giving of false evidence, but rather by falling under the category of being another circumstance which the Court can consider.  Counsel for the husband said that there had been a tax review in relation to the parties’ taxation liability, “as a result of GST documents being lodged during the time before the orders were made, and during the time that the respondent [the wife] was involved in the preparation of that documentation.”[7]  As a consequence, he says, a taxation liability had arisen.  Counsel for the husband submits that this is a “significant matter”[8] which the Court needs to have regard to when considering the husband’s application to vary the orders.

   [7] Transcript of Proceedings dated 10 September 2010 page 4 at lines 34-37.

   [8] Ibid at line 30.

10. Initially the principle provided a wide interpretation of the term “miscarriage of justice”. However, in the marriage of Clifton and Stuart (1991) FLC 92-194; 101 FLR 244 the Full Court discussed the integrity of “judicial process” and said:-

    miscarriage of justice should not be given a restrictive meaning [emphasis added] particularly when coupled with the words ‘any other circumstance’ and that justice means justice according to law.  The proposition ‘justice means justice according to law’ relates to the integrity of the judicial process.

11. In the marriage of Clifton and Stuart the Full Court held there has been no miscarriage of justice or similar.  In the current proceedings the parties came to court knowing that their tax affairs were not clear.  They invited the Court to make findings and the Court did so.

12. Senior counsel for the wife submitted that the husband’s assertions in respect of s 79A (1) (a) and (c) were misconceived. He argued that the construction of s 79A (1)(a) needed to “be undertaken in the context of the language utilised by parliament, and particularly in construing the phrase ‘any other circumstance’’.[9]  He said that the rules of statutory construction gave that phrase meaning within the context of the other phrases which the subsection uses, which are fraud, duress suppression of evidence and the giving of false evidence.

    [9] Ibid at page 10 lines 14-21.

13. He went on to argue that counsel for the husband was attempting to give no boundaries to the meaning of the phrase “any other circumstance”, which in his submission was not the intention of parliament.  Counsel for the wife submitted that parliament’s intention was to “capture by that phrase was any other circumstance akin to, or of a similar species to, fraud, duress, suppression of evidence or the giving of false evidence.”[10]

    [10] Ibid at page 10 lines 23-27.

14. He submitted that the authorities, discussed earlier in these reasons, identify the phrase “miscarriage of justice” used in s 79A(1)(a) as focusing upon the “process rather that the result”.[11] This, he argued, was consistent with the wife’s case in respect of the construction of s 79A(1)(a), “because indeed fraud, duress, suppression of evidence and the giving of false evidence does pertain – or all do pertain – to process rather than outcome”.[12]  He said that in this case the husband complained of a liability to the tax office which had arisen subsequent to the Court’s reasons being delivered.  Counsel for the wife submitted that this in no way touched upon the process by which the Court achieved the result of the order, but rather it dealt with a liability which arose subsequent to the orders being made.  He said that it followed that this was not a process and said it was doubtful that it resulted in an unjust outcome, and argued that in any event a tax liability was not a “circumstance of a kind”[13] which enlivened the jurisdiction set out under s 79A(1)(a).

    [11] Ibid at line 33.

    [12] Ibid at lines 35 -37.

    [13] Ibid at line 47.

15. I accept and adopt the wife’s submission and accordingly dismiss the husband’s application to vary the orders pursuant to s 79A (1)(a) of the Act.

16. I am not satisfied that the tax issue, on its own amounts to a miscarriage of justice within the meaning of s 79A.

SETTING ASIDE ORDERS PURSUANT TO S 79A(1)(c)

1. Counsel for the husband says that the enforcement application in the wife’s response amounts to a default in carrying out an obligation imposed on a person in some form.

2. The submission was that if there was enforcement as sought by the wife it would mean a division of property other than on the percentage determined by the Court pursuant to the orders in February 2010.  The actual submissions were:-[14]

   because … circumstances had arisen since the order was made that it [sic] impracticable for the order to be carried out, and in particular impracticable for part of the order to be carried out, and that in relation to that part of the percentage which your Honour awarded that relates to the timber entities.  Because…. Shortly after or shortly before the payment was due, [EF Pty Ltd] went into receivership and into receivership, sorry into administration and later into receivership, and as a result of that, while the ANZ Bank approved finance for the applicant [the husband] to pay all the moneys out pursuant to the order, and he had an approval letter, the ANZ Bank then withdrew that approval on the basis that the [EF Pty Ltd] had gone into receivership.

   [14] Ibid at page 4 lines 45-47 and page 5 lines 1-7.

3. Counsel for the husband went on to say that as a consequence the:-[15]

   total income in relation to timber entities, by virtue of the demise of the [EF Pty Ltd], has been reduced by 56 per cent and there are accordingly, and we say logically and without any doubt a corresponding devaluation in the value of the timber entities as your Honour found them at the hearing.

   [15] Ibid at page 5 lines 14-18.

4. Counsel for the husband argued that the wife’s application for summary dismissal appeared to be “under the guise of an application for enforcement. The consequences of which would be the appointment of the respondent as a trustee for sale “to receive the full amount” that the Court ordered”.[16]

   [16] Ibid at lines 28-32.

5. He went on to assert:-[17]

   … that while that is under the guise of an enforcement application, it really is an application in itself under section 79A(1)(c), which is that a person has defaulted in carrying out an obligation and circumstances have arisen as a result of that default, but it is just and equitable to vary the order.

   [17] Ibid at lines 34-37.

6. Counsel for the husband argued that if the wife was successful in obtaining an order that the farm and agriculture business be sold it would put the husband in a position whereby he did not have an income, which would not be just and equitable.  He submitted, further, that for everything to be sold whereby the wife received $1.9 million and the husband be left without an income, would still not be just and equitable.  He submitted that what the Court needed to determine was “what the impact of all of that was on the parties and how that impacted upon the justice and equity of the order that was being made”.[18]

   [18] Ibid at page 6 lines 8-10.

7. He concluded his submissions by saying that if the s 79A application was to proceed, that the Court would need to determine in these circumstances where “there has been an inability to comply with the order, that as a result of that inability it is just and equitable to vary the order”.[19]

   [19] Ibid at lines 20-22.

8. Senior counsel for the wife initially considered that this was the husband relying upon his own fault and made submissions that he was not entitled to. He submitted that in the two step process contained within s 79A(1)(c), the Court must firstly identify a default in carrying out an obligation, and secondly that the Court must define what is the result of the default and characterise it and determine whether it is just and equitable in light of that result to vary the order. Counsel for the wife submitted that is a default with consequent circumstances that have arisen since default would not apply.

9. Senior counsel for the wife submitted that “there are a line of authorities which supported the notion that a party cannot rely on their own default as justifying an application under section 79A”.[20]  He argued that the husband could not come to court admitting that “Look, it’s all my fault.  I’ve defaulted.  I’ve now got a lot more money for a lot longer than I anticipated, and on that basis, you should set aside the property orders”.[21]  Senior counsel submitted that even if the husband could, when one analyses the result of his default, it would not be just and equitable for the Court to vary the orders.  

   [20] Ibid at page 12 lines 39-40.

   [21] Ibid lines 43-45.

10. The husband’s agreement is self serving and artificial.  I prefer and adopt the approach submitted on behalf of the wife.

SECTION 79A(1)(b) SETTING ASIDE OR VARYING THE ORDERS AS CIRCUMSTANCES HAD ARISEN SINCE THE ORDER WAS MADE WHICH MAKE IT IMPRACTICABLE FOR THE ORDER TO BE CARRIED OUT

1. This is the real point to the husbands concerns.  He ties it in with the other issues but essentially this is the focus of his concerns and unhappiness.

2. Section 79(1)(b) provides as follows:-

   Where, on an application by a person affected by an order made by the Court under s 79 in property settlement proceedings, the court is satisfied that …

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

3. Senior counsel for the wife’s submissions was that it is not impracticable[22] for the orders to be carried out, even taking the husband’s case at its highest.

   [22] Ibid at page 13 lines 6-9.

4. He argued that it is not impracticability but rather inconvenience.  

5. He submitted “that is not impracticability, it is inconvenient”.[23]  I accept that at the trial the husband:-[24]

   had a strong desire to retain the entirety of the substantial assets in the matrimonial pool.  That was the basis upon which the case was conducted. He, and he alone, sought a structure of orders which saw him obliged to pay money rather than to place the wife in an equivalent position by transfer of assets.

   [23] Ibid line 22.

   [24] Ibid lines 23-27.

6. Senior counsel for the wife said that “whilst one could have some sympathy with the husband, in that his plans to retain all of the assets now seemed unlikely, and have been thwarted”,[25] it did not give rise to impracticability of complying with the orders.  He submitted that the fact that “the husband hasn’t been able to twist the arm of a bank manager to give him some money doesn’t mean that it’s impracticable to carry out your Honour’s orders”.[26]  He said the husband had assets which could be sold to comply with the orders but was “clearly reluctant to proceed down a path that he finds unpalatable”.[27]

   [25] Ibid line 27-29.

   [26] Ibid at page 15 lines 15-17.

   [27] Ibid line 18.

7. Counsel for the husband’s submissions were that the impracticability in these circumstances arose firstly not because of the husband’s inability to obtain finance, but rather the fact that bank had changed its position and had withdrawn finance once it became aware that EF Pty Ltd had gone into voluntary administration.  He said it was not a situation:- [28]

   where it’s just one of the vagaries or vicissitudes of life.  It’s not a situation where it’s another instance where some other financial market goes up, sometimes goes down, and the court shouldn’t take account of that because it’s one of the things that the parties simply have to put up with.

   [28] Ibid at page 19 lines 43-47.

8. Counsel for the husband said that as a consequence that income was no longer available to the husband and that it was a situation where the entire value of the timber entities had come under question and had been devalued.

9. Counsel for the husband argued that the impracticability also related to what would happen if the Court determined that the orders should not be varied.  He argued it would mean the husband would lose the benefit of the agriculture business and would not have an income of his own.

10. He submitted it made it impracticable for the order that the Court made, “whereby there was a division of 52.5 to 47.5, to operate effectively in terms of the justice and equity of a division between the parties”.[29]  In support of this submission he relied upon Kay J in La Rocca and La Rocca (1991) FLC 92-222 at 78,538 where his Honour said:-

    My own view is that the concept of impracticability, as referred to in this section 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. 

    …

    Now, in my view, what the appropriate application of s 79A(1)(b) ought to be is that circumstances have arisen in which it becomes impracticable to carry out the orders are circumstances that could not reasonably have been contemplated and that in such circumstances, whilst impossibility is not the test and the impracticability is, it may then become just and equitable to change the orders.

    [29] Ibid at page 23 lines 16-18.

11. Counsel for the husband argued that this applied because of what had happened that is, there had been a significant change to the asset pool by virtue of a supervening event that was not reasonably foreseeable. 

12. Senior counsel for the wife asserted that the event was not unforeseeable he submitted that:-[30]

    what has occurred, and may continue to occur, is that there is a deferral of the liability in relation – deferral of income in relation to rental, and one assumes that it will play it self out in one of two ways.  Either there will be a forfeiture of the leases.  At the moment that’s precluded during the course of administration under section 440C of the Corporations Act, but ultimately there may be forfeiture, or alternatively, the income stream will return.

    [30] Ibid at page 17 lines 12-17.

13. He went on to say that on either scenario it was not an unforeseeable event because “the lease specifically contemplated the prospect of an event of default, and hence forfeiture”[31] and submitted that “it’s a bit hard to say that’s unforeseeable when the lease specifically provides for it”.[32]

    [31] Ibid lines 23-24.

    [32] Ibid lines 24-25.

14. I accept these submissions on behalf of the wife that it is not impracticable for the husband to comply with the order, it is inconvenient.  In that regard the husband has sold two assets being part of the farm real estate and his business but there is no evidence he has endeavoured to sell other assets.  The approach he adopted was through finance which I accept has been exhausted.

15. The Full Court in Cawthorn and Cawthorn (1998) FLC 92-805 approved the approach of Kay J In the marriage of La Rocca and La Rocca (1991) FLC 92-222 where he said at page 78,538:-

    My own view is that s79A(1)(b) should be narrowly interpreted …

    My own view is that the concept of impracticability, as referred to in this section, is akin to the application of doctrine of frustrated and contractual matters.

16. In Cawthorn and Cawthorn the Full Court observed at page 85,060:-

    We also agree with the views of both Kay and Moss JJ in that the concept of impracticability contained in s79A(1)(b) is quite different from the problems of enforcement which may arise due to a parties insolvency. In such a case, the matter may well have to be dealt with pursuant to the provisions of the Bankruptcy Act. This, however, merely reflects the vicissitudes of life and is in harmony with the clean break principals enshrined in the Act. An application for a further settlement of property is not available in circumstances where one party suddenly becomes immensely rich.

17. The Full Court went on to say:-

    All business activities however are subject to the vicissitudes of commercial life … businesses may always be subject to financial misfortune but not necessary for the purpose of s79A(1)(b) to be able to predict the precise form or nature of the misfortune or manner in which it may arise.

18. It is clear that the husband wanted to retain all of the assets and sought orders that he pay out the wife.  I accepted and adopted that course.

19. The husband’s primary complaint is that with the vicissitudes of life in that EF Pty Ltd is now in receivership the Court should re-open the question of property.

20. The husband’s underlying primary asset, which is the interest in the real estate is retained.  If there is a forfeiture by way of default by EF Pty Ltd or its subsidiaries then the trees and the properties would vest in the husband and, in the words of senior counsel for the wife, his income would convert into capital which although long term is still available to him.  He said:-[33]

    … assuming a new tenant can’t be found – there is no income which is derived, ultimately there is an ever increasing valuable asset on the land as the trees mature.

    So that again at harvest the income that would have been received incrementally under the lease is ultimately received at the time of the harvest and to that extend all that the forfeiture would effect is a deferral of an income stream which is in effect capitalised in the form of maturing trees. …  And to the extent that there’s a continuing income stream, albeit perhaps six months or a year’s worth of income might not be received or some lesser sum might be received, again that isn’t unenforceable and the impact of it upon the value of the land seems to be minimal.

    [33] Ibid lines 29-41.

21. Whilst I have great sympathy for the husband, he took the entrepreneurial decision and consequent risk.  It is open for the husband to find other ways to pay out the wife including selling some assets, albeit it is not what he initially desired.  

22. In Gitane v Velacruz (No 3) [2007] FamCA 1277 Rose J said at paragraph 88:-

    The principles to be applied are set forth in the Full Court’s judgment in Cawthorn and Cawthorn.[1]  It is clear from those principles that changed circumstances that may make it “unjust for the order or part of the order to be carried out” are insufficient by themselves in that a successful applicant must still be able to persuade the court that “it is impracticable for the order or part of the order to be carried out”.

1. I am not satisfied that it is impractical for the order or part of it to be carried out.  Further, the law remains as stated in Cawthorn v Cawthorn (supra) and La Rocca and La Rocca (supra).

CONCLUSION

1. Having regard to the matters I have discussed elsewhere in these reasons I am not satisfied that there had been a miscarriage of justice by reason of another circumstance, namely that the agriculture business currently has a tax debt of $172,973.The tax debt was at some levels known to the parties at the time of hearing or when they asked the court to determine the issue, notwithstanding that it remained unclear.

2. With the reduction of the value of the forestry assets there will be a reduction in the asset pool and the consequent division to the parties from the overall property will be other than the percentage determined by the Court. However, that was the entrepreneurial risk that the husband sought and with which the wife acquiesced. 

3. On the husband’s evidence I am not satisfied that, within the meaning of s 79A(1)(b) of the Act that circumstances have arisen since the order was made that make it impracticable for the order to be carried out or impracticable for part of the order to be carried out. The failure of the public company, EF Pty Ltd, will diminish the husband’s interest in timber companies to a sum less than $2,414,700. This is not a circumstance to which the provisions of s 79(A)(1)(b) apply and as such there is no entitlement to vary or set aside the orders. If there was, on the facts asserted by the husband I would not exercise my discretion to set aside or vary the orders.

4. I am not satisfied that the facts and circumstances give rise to an entitlement under s 79A to set aside or vary these orders.

I certify that the preceding eighty eight (88) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 5 November 2010.

Associate: 

Date: 5 November 2010