Cong and Krause

[2019] FamCA 810

FAMILY COURT OF AUSTRALIA

CONG & KRAUSE [2019] FamCA 810

FAMILY LAW – PRACTICE AND PROCEDURE – Application of slip rule to final consent property orders – controversy over whether the orders reflect the intention of the parties – Application dismissed.

Family Law Act 1975 (Cth) s. 105
Family Law Rules 2004 (Cth) r. 17.02

Medlow & Medlow (No. 2) (2016) FamCAFC 63

APPLICANT: Ms Cong

RESPONDENT: Mr Krause

FILE NUMBER: BRC 9014 of 2015

DATE DELIVERED: 11 November 2019

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Baumann J

HEARING DATE: 1 November 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr M Taylor

SOLICITOR FOR THE APPLICANT: TLG Law

SOLICITOR FOR THE RESPONDENT: Senior Legal

Orders

1. That the Application to amend the Orders made 11 May 2018 under Rule 17.02 of the Family Law Rules 2004 be dismissed.

2. That the remaining Applications be listed for further Hearing at 9.30am on 9 December 2019 in the Family Court of Australia at Brisbane.

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 Cong & Krause 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 BRISBANE

FILE NUMBER: BRC 9014 of 2015

Ms Cong

Applicant

And

Ms Krause

Respondent

REASONS FOR JUDGMENT

1. On 11 May 2018, final property adjustment Orders were made between the Applicant, Mr Krause and the Respondent Ms Cong, arising from the breakdown of their de facto relationship in the substantive proceedings.

2. Earlier, on 26 April 2018, the unrepresented Applicant and the Respondent (represented by her solicitor Ms Geysen) had appeared before me, and after some negotiations on the day, they presented signed minutes of consent order – partly typed and partly handwritten.  The solicitor for the Respondent undertook to provide a clean typed copy of the said orders to chambers, which she did and which issued formally on 11 May 2018.  There is no controversy that the Orders sealed on 11 May 2018 are the same as the orders tendered to the Court on 26 April 2018.

3. The Orders that issued on 11 May 2018 are Appendix One to these Reasons.

4. The controversy between the parties arises from an assertion by Ms Cong that the Orders do “not reflect the agreement reached by the parties and outlined to the Court and intended to be made by the Court at the time the Order was made”.  By Application to the Court filed 16 May 2019, she seeks that:

   “Orders 9 and 10 of the final consent Orders of 11 May 2018 be amended pursuant to Rule 17.02 of the Family Law Rules by replacing ‘the Applicant’ with ‘the Respondent’”.

5. Mr Krause, who is the Respondent to this Application under the “slip rule” disputes that the Order contains the error asserted, and opposes the amendment sought.

6. Both parties further seek to enforce the Order, on the terms they assert the Order in the form they contend for, would permit.

The slip rule

1. Courts inherently have been permitted to correct unintended errors in orders which have been issued and authenticated. The power to do so is set out in Rule 17.02 of the Family Law Rules 2004 which provides as follows:

   “17.02 Varying or setting aside orders

   (1)     The Court may at any time vary or set aside an order, if:

   (a)        it was made in the absence of a party; or

   (b)       it was obtained by fraud; or

   (c)       it is interlocutory; or

   (d)       it is an injunction or for the appointment of a receiver; or

   (e)       it does not reflect the intention of the court; or

   (f)        the party in whose favour it was made consents; or

   (g)       there is a clerical mistake in the order; or

   (h)there is an error arising in the order from an accidental slip or omission

   (2)Subrule (1) does not affect the power of the court to vary or terminate the operation of an order by a further order.”

2. This power to rectify is discretionary, however is usually the subject of consent where the error is obvious when reading the order.  This is not the case here, where Ms Cong seeks to establish that:

   “There is an error arising in the Order from an accidental slip or omission”.

3. A long and consistent line of authority demonstrates that:

   “the power to correct an error arising from accidental slip or omission, whether under a specific rule of court or otherwise, directs attention to what the court whose record is to be corrected did or intended to do so. It does not permit reconsideration, let alone alteration, of the substance of the result that was reached and recorded”

   (See Medlow & Medlow (No 2) (2016) FamCAFC 63 at [13]).

4. Of course, s 79A, if properly enlivened, provides the Court with power to vary or set an order aside in various circumstances, but that power is not enlivened by the Application currently before me.

The asserted error

1. Ms Cong asserts that:

   a)At the time of the Orders the parties owned or had an interest in three real properties, being:

   i)home at B Street, C Town (see Order 2);

   ii)house at D Street, E Town (see Order 3); and

   iii)a commercial property at F Street, G Town which was owned by Krause-Cong Investments Pty Ltd as Trustee of the KC Discretionary Trust (Orders 9, 10 & 11);

   b)I accept that there were the three real properties owned or in which the parties had an interest at the date of the Order.  A reference at Order 4 to the “Suburb J property”, it is agreed was an error as that property had been sold in July 2016;

   c)As a result, it is asserted that when the wife’s solicitor made submissions to the Court, about there being three real properties, this was a reference to the properties at C Town, E Town and G Town;

   d)A transcript of the hearing before me on 26 April 2018 reveals that, after an adjournment between 9.51am to 12.51pm, the parties returned to my list, and the Court was informed by Ms Geysen that “we have resolved property on a final basis”.  What then follows betwee12.51pm and 1.17pm (when the Court concluded the matter) was a discussion between the Bench and Ms Geysen and Mr Krause, about the agreement reached and if the orders achieved justice and equity.  I have no independent recollection of the hearing before me but accept that the transcript (from line 45 on page 18) is in respect of the property orders.

   e)In short, Counsel for Ms Cong submitted that it was the intention of the parties that as part of the property settlement, Ms Cong would retain the G Town property and that, inclusion of Order 9 & 10 were an error as Ms Cong had control of the legal entity and no orders were necessary if she was to retain that interest;

   f)It is asserted that, similarly to the inclusion of Order 4 (relating to the Suburb J property), the inclusion of Orders 9 and 10 were an error.  It is contended that those orders had been contained within earlier drafts of orders used for settlement discussions, the parties having, it seems, been engaged in at least two conciliation conferences and numerous written exchanges;

   g)Further, it is asserted that when the solicitor for Ms Cong referred to:

   -    “there are three real properties”

   at line 47, page 19, that was a reference to the three properties [that] remained.

   -    “…these orders provide for the mother to retain the two real properties at the Gold Coast and the father to retain the one in C Town”

   at line 29, page 21 that was a further reference to the three remaining properties (not Suburb J as it had been sold).

   h)When asked by the Bench, based on a nett pool of around $600,000 what does the orders represent by way of division, the answer was:

   “it’s 57 percent to the husband”

   (line 5, page27).

   i)Mr Taylor, Counsel for Ms Cong submits (at paragraph 18) that if the Orders remain as made on 11 May 2018, this would effect a distribution to Mr Krause of 68% - outside an approximate range.

The case in opposition made by Mr Krause

1. Mr Krause, although unrepresented on 26 April 2018, was ably represented by solicitor Mr Senior on 1 November 2019 and submits that:

   a)although Senior Legal Pty Ltd previously acted for Mr Krause, they ceased acting for him on 16 April 2018;

   b)in his Affidavit filed 13 June 2019 Mr Krause says, inter alia, in respect of the Orders and the asserted error in including Orders 9 and 10 that:

   i)“14. I say the orders correctly state what was agreed on 16 April 2018”; and

   ii)“117. At paragraph 9 Ms Cong deposes that the ‘draft property orders had been originally prepared by Senior Legal’. I don’t know who prepared the orders that Ms Cong and I signed on 26 April 2018 but in so far as they refer to ‘the company and G Town property’ the orders reflect what I believe was negotiated and that the G Town property was to effectively be transferred to me by replacing me (sic) as the sole director of the Trustee Company and by substituting me as First Principal Beneficiary and removing any other reference of Ms Cong as a beneficiary of the KC Discretionary Trust”.

   c)In submissions relied upon by Mr Krause and signed by his solicitor, it is asserted that:

   i)“the consent orders identified three properties” (referring only to C Town, E Town and Suburb J properties) (paragraph 5). This is not, in the Court’s view, correct when the undisputed fact that the G Town property/interest did exist and is referenced to in Orders 9 and 10 (not Orders 8 and 9 as paragraph 6 of the submissions contended); and

   ii)At paragraph 17 of the submissions he contends that the change sought in the Application does not take account of the fact that, consistent with the intent of Orders 9 and 10, references to “she” and “her” would also need to be changed.  In effect, the further references confirm the intention that the parties agreed that Mr Krause would retain the G Town property.

Discussion on slip rule application

1. It is entirely conceivable during the course of negotiations various forms of order might well have been discussed between the parties and exchanged.

2. In this case, the inclusion in the Orders of a reference to the Suburb J property (sold nearly two years earlier), was unnecessary.  Its inclusion, in my view, reveals a degree of “sloppiness” in the drafting exercise.

3. In effect, Ms Cong says that such a drafting error extends to clauses 9 and 10 – as the de facto wife, on the evidence before me, controls the corporate entity and the trust and so there was no need to include Orders 9 and 10.  To that extent it may well fall into the same category as Order 4 relating to the Suburb J property.

4. However, Mr Krause deposes, under oath, that the orders he signed reflected the agreement reached on 26 April 2018.  The nature of a “slip rule application” generally is dealt with on the papers as was the case here.

5. In my view, the Court would need to be satisfied, contrary to the direct evidence of Mr Krause, that it was not the intention of the parties to ask the Court to make the orders – a request made jointly on 26 April 2018.  In this respect, apart from his signature to the document tendered (and in that respect the signature of Mr Krause appears at the foot of each page) that document reveals that:

   a)a number of hard written amendments were made (see Order 4; Order 7(a); Order 11 (deleted); Order 13 (deleted); Order 14 (deleted)) and an earlier notation was deleted; and

   b)a clause relating to a superannuation split in the favour of Ms Cong was made in handwriting.

6. In view of the arguments advanced by Ms Cong in this Application, I say:

   a)the Court was not referred specifically to the G Town property by either party.  I accept that the unnecessary reference in Order 4 to the Suburb J property confuses the reference by Ms Geysen to the “two real properties at the Gold Coast”;

   b)After hearing from Ms Geysen that the Orders represent a 57% share to the “husband” and noting that there was a pool of approximately $600,000 (nett), the Court said:

   “HIS HONOUR: But there’s a bit of pragmatism here, isn’t there? These parties want to move on with their life, have a – and concentrate on doing the best for their kids. And I should – unless it’s outside the range, unless it’s well outside, it seems to me that: (a), I should make some orders; and (b), these orders appear to be just and equitable.

   MS GAYSEN (sic): Thank you, your Honour.

   HIS HONOUR: Based on what you’ve said. Is there anything else you want to say, sir?

   MR KRAUSE: No.

   HIS HONOUR: No. Okay.

   MR KRAUSE: I just want to get it over and done with.”

   c)The submissions did not refer to or identify to the Court any precise pool of assets, with the solicitor’s estimate of $600,000 seemingly accepted at that time by Mr Krause.  In the circumstances where the particularisation of the pool was not made (e.g. the solicitor did not offer at that time a summary of the pool or tender – or refer the Court to – a balance sheet that was apparently filed on 30 November 2017) it is not now open to Ms Cong to attempt to “reconstruct” what the pool consisted of and how a figure of 57/58% or 68% might have been estimated;

   d)If the evidence of Mr Krause is to be accepted, then his understanding of the “agreed” discussion is different from that of Ms Cong.  If the evidence of Ms Cong (and her solicitor) is accepted then it could be argued that Mr Krause is wrongly taking advantage of an error in drafting.  That could – I put it no higher – constitute a miscarriage of justice by reason of “any other circumstance” (under s 79A(1)(b) of the Family Law Act 1975) but that is not the application before me. Any such finding could only be made after evidence in dispute is properly tested.

Conclusion

1. Applying the principles I am bound to observe, I have formed the view that the Application for amendment of the Orders made 11 May 2018 under Rule 17.02 of the Family Law Rules 2004 must be dismissed.  I will so order.

Other issues

1. The enforcement of the Orders made 11 May 2018 in respect of the G Town property is sought by the Respondent Mr Krause.  I note from his Affidavit he refers to the lodgement in 2015 of a Caveat over the property which still remains registered.

2. In my view, the orders for enforcement sought by Mr Krause in his Response filed 13 June 2019 (at paragraph 1) require an exercise of discretion under s 105 of the Family Law Act 1975.  In the circumstances of this case, I have decided not to make those orders at this time, but to allow the parties time to consider the Orders I have made today in respect of the slip rule application.

3. The Application, including the application for enforcement and costs, shall be adjourned to my list for further hearing at 9.30am on Monday, 9 December 2019.

4. I can deal at this time however with the Application for declarations for interest payable, arising from a delay in payment by Mr Krause to Ms Cong of the principal sum of $70,000 ultimately paid in June this year after a sale of the C Town property was settled.  The evidence is that at settlement, an interest component was paid (by way of a direction signed by Mr Krause) on or about 12 June 2019 which authorised the conveyancing solicitors to pay $73,800 to Ms Cong.  By letter to the solicitor for Ms Cong, Mr Krause’s solicitors, on his behalf, informed them that the authority was signed:

   “under protest and with a reservation of rights”.

5. The “reservation” is ambiguous and fails to demonstrate what “rights” were sought to be preserved.  Exhibit 1 are some text messages between the parties personally, which reveal an agreement reached on the interest paid.  In my view, the parties should be bound by their collateral agreement and no refund by Ms Cong to Mr Krause will be ordered as sought.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bauman delivered on 11 November 2019.

Associate: 

Date:  11 November 2019

APPENDIX ONE

Previous orders

1. That all previous Orders with respect to property settlement remain in force and are to be complied with and are to be discharged upon compliance with these Orders.

That by 1 September 2018:

C Town property

1. That the Respondent shall transfer to the Applicant at his cost and expense all of her right title in interest in the property at B Street, C Town in the State of Queensland, more particularly described as Lot … on SP …, Title Reference ….

E Town property

1. That the Respondent shall at her cost and expense refinance the property at D Street, E Town in the State of Queensland, more particularly described as Lot … on Registered Plan …, Title Reference … in her sole name without recourse or collateral support by B Street, C Town thereby releasing Commonwealth Bank of Australia mortgage number …89 causing that B Street, C Town property to thereafter be unencumbered.

Suburb J property

1. That contemporaneously with the transfer of B Street, C Town, the Applicant shall transfer all of his right title and interest in the property H Street Suburb J in the State of Queensland, more particularly described as lot … on GTP …, Title Reference … into the Respondent’s sole name and she will at her cost and expense refinance the property in her sole name and shall indemnify and forever hold the Applicant harmless from any liability in respect of the said property.

Cash payment

1. That contemporaneously with the transfers of properties set out below the Applicant shall pay the amount of $70,000 in cleared funds by bank cheque to the Respondent.

2. That if the said sum is not paid within the period specified the Applicant to pay to the Respondent interest at the rate prescribed by the Family Law Act 1975 and calculated on a daily basis until such payment is received by the Respondent.

3. That in default of the payment from the Applicant referred to in Order 5 above, the property at B Street, C Town be sold and that the parties forthwith do all acts and things and sign all necessary documents to effect a sale of the real property and by way of consequential arrangement that shall be made for the purpose of effecting a sale:

   a)the listing price for the real property shall be as agreed between the parties and if there is no agreement the listing price shall be as advised by a valuer nominated by the CEO of the Real Estate Institute of Queensland;

   b)the real property shall be listed for sale by a private treaty with an agent agreed between the parties and if there is no agreement the agent shall be nominated by the CEO of the Real Estate Institute of Queensland.

   c)in the event that the real property has not been sold by or before a date three (3) months from the date of default of payment, then the parties shall make all such arrangements and do all such acts and sign all such documents and pay all moneys equally necessary to procure a sale by public auction of the real property upon the following terms:

   i)The auctioneer shall be as agreed between the parties and if there is no agreement the auctioneer shall be nominated by the CEO of the Real Estate Institute of Queensland;

   ii)The auction shall take place within four (4) months after the deadline date for sale by private treaty;

   iii)The reserve price shall, unless agreed upon by the parties, be as proposed by the auctioneer; and

   iv)The parties shall each pay and be responsible for payment of one half of auction expenses payable before the real property is auctioned (or from the proceeds of sale).

   d)In the event that the property is not so sold by auction or by private negotiation within fourteen (14) days after the said auction, then the parties do all acts and sign all necessary documents and shall pay all moneys equally necessary to procure a second auction within a further five (5) weeks of that date otherwise upon the same terms and conditions as applied to the first auction

1. That upon completion of the sale the proceeds of the sale be applied as follows:

   a)Firstly, to pay the sum of $70,000 plus interest to the Respondent;

   b)Then all costs, commissions and expenses of the sale and to pay any Council and water rates and maintenance levies outstanding in respect of the real property;

   c)Then to discharge the mortgage and any other encumbrances affecting the real property; and

   d)Then to any and all capital gains and/or land tax payable in relation to the sale of the properties by either party.

Company and G Town property

1. That the Respondent shall sign a Form 484 Notice of Change of Company Details to:

   a)resign as Director of Krause-Cong Investments Pty Ltd and in her place appoint the applicant as sole director; and

   b)transfer her shares in Krause-Cong Investments Pty Ltd to the Applicant.

2. That contemporaneously with Order 5 the Respondent shall cause her name as “First Principal Beneficiary of the KC Discretionary Trust” to be removed together with any other reference to her as a beneficiary in the KC  Discretionary Trust, direct or otherwise, and in her place name the Applicant as First Principal Beneficiary and no Second Principal Beneficiary shall be nominated.

3. That immediately following the lodgement of the Form 484 Change of Company details the Trustee shall offer to the incumbent tenant a two (2) year lease for the trust property at F Street, G Town, Title Reference … upon such terms and conditions as the Trustee may impose acting reasonably for the current market rent with the Trustee to ensure that the current rent and conditions are maintained for two years from the date of these Orders or as long as the current tenant remains in this property.

Superannuation

1. That in accordance with Section 90MT(4) of the Family Law Act 1975, a base amount of $30,000 is allocated to Ms Cong out of Mr Krause’s interest in L Super Personal Plan.

2. That in accordance with s.90MT(1)(a) of the Family Law Act 1975:

   a)the Respondent is entitled to be paid using the base amount allocated in the above Order 12, the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and

   b)the entitlement of the Applicant in the L Super Personal Plan account is correspondingly reduced by force of this Order.

3. That the Trustee of L Super fund (“the Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:

   c)calculate, in accordance with the requirements of the Family Law Act 1975 the entitlement awarded to the Respondent in the immediately preceding Order; and;

   d)pay the entitlement whenever the trustee makes a splittable payment from the Applicant’s interest in his superannuation account.

4. That this Order has effect from the operative time and the operative time is four (4) business days after service of these Orders on the Trustee.

5. That after service of the payment split notice in accordance with the Superannuation Industry (Supervision) Regulations 1974 (”the SIS Regulations”), the Respondent shall do all such things and sign all such documents as may be necessary, including but not limited to exercising the Respondent’s request in accordance with the SIS Regulations, for the retention of the non-member spouse interest to a complying superannuation fund of the Respondent’s choosing in accordance with the SIS Regulations.

6. That the Court notes:

   a)the value of the non-member spouse interest is calculated in accordance with the SIS Regulations; and

   b)any payments from Mr Krause’s superannuation interest in L Super made after the trustee has created a new interest in Ms Cong's name in L Super are not splittable payments in accordance with the requirements of the Family Law (Superannuation) Regulations 2001.

Catch all

1. That each party receiving sole interest in any property shall be responsible for and shall indemnify the other in respect of any and all rates, water and body corporate fees and charges attaching to the properties which they shall assume at settlement.

2. That each party indemnifies and hold harmless the other in respect of any credit card debt, trade debt or personal liability in their name at the date of settlement.

3. That each party shall retain for their sole use and benefit:

   a)any superannuation benefit accruing to the party at the date of settlement;

   b)any motor vehicle in their possession and control at the date of settlement;

   c)any and all proceeds of any bank account in their name at the date of settlement.

   d)any chose in action in their name; and

   e)any furniture chattels or items of value in their possession at the date of settlement.

4. That any item of property not specifically dealt with shall remain the property of the person exercising control and possession at the date of settlement.

Tax

1. That the Applicant indemnify the Respondent in respect of all liability to pay tax including income tax, goods and services tax, capital gains, penalty tax and interest which he may in the future have in respect of any tax returns lodged on behalf of the applicant or any entity in which he has an interest to at the date of these Orders or in respect of any transactions pursuant to these Orders.

2. That the Respondent indemnify the Applicant in respect of all liability to pay tax including income tax, goods and services tax, capital gains, penalty tax and interest which she may in the future have in respect of any tax returns lodged on behalf of the respondent or any entity in which she has an interest to at the date of these Orders or in respect of any transactions pursuant to these Orders.

3. That the parties remain individually liable for any taxation liability that may accrue or has accrued up to and including date of separation and shall continue to remain individually liable for any such liability accruing thereafter and shall indemnify the other regarding same.

Other

1. That the transferee spouse prepare the documentation necessary to give effect to the provisions of these Orders at their cost and further be responsible for the payment of any registration fees in relation to the transfers of property into their name.

2. That any stamp duty payable on transactions arising from these Orders or any documents executed pursuant to these Orders be paid for by the transferee spouse or the spouse receiving the benefit.

1. That save and except as referred to in these Orders, each party pay their own legal costs of and incidental to these proceedings, preparation of these Orders and putting settlement into effect.

2. That the parties acknowledge that the terms of these Orders are intended to end their financial relationship as far as possible in relation to property settlement pursuant to the provisions of s.81 of the Family Law Act 1975.

3. That in the event that either party refuses or neglects to do any act or sign any document required to be signed or executed in compliance with the provisions of these Orders then pursuant to s.106A of the Family Law Act 1975 the Registrar of the Family Court of Australia at Brisbane is hereby appointed to execute all deeds and documents in the name of the defaulting party and do all acts and things necessary to give validity and operation to the said order and the affidavit of the solicitor for the non-defaulting party shall be sufficient evidence of such non-compliance.  The party in default is ordered to pay all reasonable solicitor/own costs incurred by the non-defaulting party.