Cong & Krause
[2021] FedCFamC1F 52
•21 September 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)Cong & Krause [2021] FedCFamC1F 52
File number(s): BRC 9014 of 2015 Judgment of: BAUMANN J Date of judgment: 21 September 2021 Catchwords: FAMILY LAW – PROPERTY – Consideration of s 90SN(1) of the Family Law Act 1975 (Cth) to vary final consent orders made in 2018 – where the final Orders do not reflect the intentions of the parties – where the Orders submitted to the Court were not accurately drafted – Where there would be a miscarriage of justice if the Respondent was permitted to take advantage of an error in drafting – Where it is just and equitable to both parties to vary the terms of the final Orders. Legislation: Family Law Act 1975 (Cth) s 90SN Cases cited: Cong & Krause [2019] FamCA 810
Gilbert & Estate of Gilbert (deceased) (1990) FLC 92-125
Prowse & Prowse (1995) FLC 92-557
Public Trustee (as Executor of the Estate of the late Gilbert) & Gilbert (1991) FLC 92-211
Division: Division 1 First Instance Number of paragraphs: 27 Date of hearing: 5 February 2021 Place: Brisbane Counsel for the Applicant: Mr M Taylor Solicitor for the Applicant: TLG Law The Respondent: Self-represented ORDERS
BRC 9014 of 2015 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS CONG
Applicant
AND: MR KRAUSE
Respondent
ORDER MADE BY:
BAUMANN J
DATE OF ORDER:
21 SEPTEMBER 2021
THE COURT ORDERS:
1.That pursuant to s 90SN of the Family Law Act1975 (Cth) the Orders dated 11 May 2018 be amended as follows:
(a)Order 4 be deleted;
(b)Order 9 be amended to read:
“That the Applicant shall sign all documents and do all things necessary to transfer any shares he holds in Krause-Cong Investments Pty Ltd to the Respondent.”
(c)Order 10 be deleted; and
(d)Order 11 be deleted.
2.That the Respondent’s enforcement application filed 13 June 2019 be dismissed.
3.That the Applicant, Ms Cong, shall file and serve any written submissions (together with a quantification of such costs) in support of the application for costs within twenty one (21) days.
4.That the Respondent, Mr Krause, shall file and serve any written submissions in response or in support of a cross-application for costs (together with a quantification of such costs) within forty two (42) days.
5.That the Applicant shall file and serve any written submissions strictly in reply or response to any cross-application for costs within fifty six (56) days.
6.That unless otherwise ordered, all applications for costs shall be dealt with on the papers in chambers.
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 the pseudonym Cong & Krause has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
On 11 November 2019, the Court published Reasons for dismissing an Application by Ms Cong (“the Applicant”) to amend final property settlement Orders made by consent on 11 May 2018 (“the said Orders”) under r 17.02 of the Family Law Rules 2004 (Cth) (see Cong & Krause [2019] FamCA 810). I will refer in this Judgment to those earlier Reasons as “the said earlier Reasons”.
The Respondent to that earlier Application, Mr Krause (“the Respondent”), opposed the application to amend the said Orders under the “slip rule”.
Subsequent to the dismissal of the earlier Application, on 3 March 2020 the Applicant filed an Initiating Application seeking the following relief, namely:
1.That pursuant to section 90SN of the Family Law Act (1975) the orders made 11 May 2018 be amended as follows:
a) That order 4 be deleted
b) That order 9 be amended to read:
9. That the Applicant shall sign all documents and do all things
necessary to
a) transfer any shares he holds in Krause-Cong Investments Pty Ltd to the respondent.
c) That order 10 be deleted.
d) That order 11 be deleted.
2.That the application of Mr Krause for enforcement of orders 9 to 11 of orders made 11 May 2018 be dismissed.
3.That the respondent Mr Krause pay the costs of the applicant Ms Cong as agreed or assessed.
Attempts to have this current Application listed for a hearing were frustrated by a number of factors, including Covid-19 restrictions that created some limitations for a few months in the Brisbane Registry until at least July 2020, and then the difficulty in having the Respondent (a fly in/fly out work based in Western Australia) available either electronically or in person.
Ultimately, the hearing was able to proceed on 4 February 2021, however the solicitors on the record for the Respondent (who had been his solicitors for some time), regrettably withdrew from representing the Respondent on 24 December 2020, leaving the Respondent unrepresented at the hearing.
The transcript will reflect that the Court, at the commencement of the hearing and of its own initiative, raised whether the Respondent, in losing his legal representation so close to the hearing, wished to seek to adjourn the matter. The Respondent made it abundantly clear that he wanted the matter finalised and wished to proceed.
The Respondent also indicated that he did not wish to cross-examine the Applicant. As a result, the Respondent was the subject of cross-examination by Counsel for the Applicant, Mr Taylor. At the conclusion of the Respondent’s cross-examination, I gave the Respondent a further opportunity to cross-examination the Applicant (who was appearing by Microsoft Team from her home in Sydney where she was in lockdown), but the Respondent again said he did not wish to do so.
MATERIAL RELIED UPON
The Applicant relied upon:
(a)Initiating Application filed 3 March 2020;
(b)Affidavit of the Applicant filed 18 February 2020;
(c)Financial Statement filed 18 February 2021; and
(d)Bundle of documents (tendered and marked as Exhibit 1 on 24 April 2020).
In this respect, when the first attempt to hear this application on 24 April 2020 failed for reasons known by the parties, a number of documents were tendered by the Applicant and marked Exhibits 1 to 5; and documents were tendered by the Respondent and marked Exhibits 6 and 7. Furthermore, on 5 February 2021, a transcript of the proceedings on 26 April 2018 were tendered as well. All these exhibits were part of the body evidence before the Court in this Application.
At a time when the Respondent was represented by an experienced solicitor and in readiness for the trial that was original listed to proceed on 24 April 2020, a case outline was filed (dated 27 February 2020) which identified that the Respondent relied upon:
(a)Affidavit of the Respondent fled 13 June 2019;
(b)Affidavit of the Applicant filed 27 May 2019; and
(c)Balance sheet filed 30 November 2017.
However, subsequent to the filing of that case outline, the Respondent filed (and he was permitted to rely upon) the following further material:
(a)Response filed 24 March 2020;
(b)Affidavit of the Respondent filed 24 March 2020;
(c)Financial Statement filed 2 April 2020; and
(d)Affidavit of Geoffrey Senior (the Respondent’s former solicitor) filed 28 May 2020.
It follows that the Respondent had the benefit of legal advice when he affirmed his affidavit in reply on 19 March 2020.
The Response filed 24 March 2020, incorporated orders that had earlier been sought by the Respondent, in his enforcement application (seeking a s 106A order) filed 13 June 2019, with the total relief pleaded as follows.
It is clear from the material that:
(a)the Applicant now seeks to vary the said Orders pursuant to s 90SN of the Family Law Act 1975 (Cth) (“the Act”);
(b)the Respondent opposes any amendments and seeks enforcement of the said Orders; and
(c)both parties seek costs orders.
THE STATUTORY PATHWAY
Section 90SN(1) of the Act (which relates to de facto property proceedings) is in the same terms as s 79A, and provides as follows:
(1)If, on application by a person affected by an order made by a court under section 90SM in property settlement proceedings, the court is satisfied that:
(a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or
(c)a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or
(d)in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the de facto relationship, the child or, where the applicant has caring responsibility for the child (as defined in subsection (3)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or
(e)a proceeds of crime order has been made covering property of the parties to the de facto relationship or either of them, or a proceeds of crime order has been made against a party to the de facto relationship;
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 90SM in substitution for the order so set aside.
Note: For child of a de facto relationship, see section 90RB.
Section 79A of the Act has been described “as a remedial section intended to overcome miscarriages of justice and certain other specific difficulties or hardships and should be construed liberally to effect its intended purpose” (Gilbert & Estate of Gilbert (deceased) (1990) FLC 92-125 at 77,838).
In Prowse & Prowse (1995) FLC 92-557, the Full Court stated that:
An applicant for an order under s79A(1) bears the onus of satisfying the Court that the original orders should be set aside or varied, and that includes the onus of satisfying the Court not just that there has been a “miscarriage of justice” but also that the appropriate exercise of the discretion is so to order.
Finally, s 90SN of the Act is intended to apply only to circumstances occurring before or at the time of the making of the subject order. The term “miscarriage of justice” does not aptly apply to matters which arise after the order has been made (see Public Trustee (as Executor of the Estate of the late Gilbert) & Gilbert (1991) FLC 92-211 at 78,427).
As a result of these authorities the analysis of the evidence which follows identifies relevant evidence which establishes whether a “miscarriage of justice” occurred for “any other circumstance” and then, if so, whether the Court’s discretion should be exercised to vary the said Orders.
THE APPLICANT’S CASE
The Applicant’s case has not materially altered from that relied upon for the “slip rule” application and I adopt paragraph 11 of the said earlier Reasons, namely:
11. 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 (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 M 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 M 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 N City 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 M 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 Applicant’s affidavit filed 18 February 2020 is a restatement of earlier evidence and confirmed that:
(a)the Respondent received $19,207.11, being the nett proceeds of sale of Suburb M property which settled on 28 July 2016. Accordingly, a valuation of the Suburb M property was not necessary and was not the subject of a joint letter of instructions to a single expert valuer from the parties’ solicitors dated 15 December 2017;
(b)the E Town property was valued at $850,000; the C Town property was valued at $370,000 and the G Town property was valued at $395,000 – with a Commonwealth Bank of Australia debt at the time of $330,000. These valuations were available for a conciliation conference thereafter, however the matter was not resolved at that conference;
(c)at paragraphs 34 to 41 of the Applicant’s recent affidavit, she deposes to the negotiations on the day the said Orders were made and the fact that the Applicant’s solicitor Ms Geysen used a draft of a previous order prepared by the former solicitor for the Respondent “as the template for the orders which she had Mr Krause and I sign”;
(d)in paragraphs 42 to 51 of the said recent affidavit of the Applicant, she deposes as to the delays the Respondent encountered obtaining finance over the C Town property to enable the Respondent to pay to the Applicant the sum of $70,000 under Order 5. As a result of non-payment, Order 7 required the C Town property to be sold;
(e)the Applicant says (at paragraph 62) that:
Mr Krause was unable to obtain a loan for $70,000. I was informed by Mr Krause that at the point at which he sought to obtain a loan secured against the C Town Property, he also owed a judgment debt as at 26 November 2018 to Senior Legal in the amount of $105,427.19 and could not therefore get finance.
Further negotiations (after the said Orders) resulted in an agreement for the Respondent to increase the “super split” to $110,000 (noting that Order 12 of the said Orders provided for a superannuation splitting order in the Applicant’s favour of $30,000), that was unable to be achieved as the Respondent’s balance was not sufficient. Accordingly, the parties, who were still joint owners of the C Town property, signed a contract to sell the property in April 2019 for $360,000.
(f)On settlement of the C Town property, the parties’ dispute as to any interest payable to the Applicant under Order 6 was resolved and the Applicant says that shortly after settlement on 31 May 2019 of the C Town property, she received from the proceeds the sum of $78,000, with the balance of nett proceeds available to the Respondent;
(g)Consistent with what the Applicant says was the joint intention that the Applicant would be retaining the E Town and G Town properties and the Respondent would retain the C Town property, the Applicant says in her recent affidavit that:
(i)in late 2018 she commenced steps to refinance liabilities over the E Town and G Town properties and after revaluation by the Bank, the Bank reduced the amount they were prepared to lend at that time;
(ii)as a result the Applicant reduced the then liability on the G Town property by $107,000 from the sources set out at paragraph 57 and refinance occurred; and
(iii)at paragraphs 59 to 60 of the Applicant’s recent affidavit she says that as she was the only director of Krause-Cong Investments Pty Ltd all that was required to divert the Respondent of any interest in the company was for him to transfer his shares. The Applicant says she instructed her accountant to prepare the necessary documents to effect a transfer of the shares, but for reasons “not clear to me” the documents were not completed and submitted to the Respondent.
The evidence is relevant to the second stage of the s 90SN(1) analysis.
(h)The Applicant says that despite all the events that occurred before the said Orders were being formally made on 11 May 2018 (after procedural fairness had been afforded to the Respondent’s superannuation trustee), it was not until 12 months later on 11 May 2019 when an email was received from the Respondent’s solicitor that she became aware the Respondent or anyone on his behalf was asserting he would be retaining the G Town property; and
(i)Shortly thereafter on 16 May 2019, the Applicant filed her Application seeking the said Orders be amended under the slip rule.
THE RESPONDENT’S CASE
The Respondent’s case has not materially altered from that relied upon for the “slip rule” application and I adopt paragraph 12 of the said earlier Reasons, namely:
12.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 Property Investments 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 M 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.
The gravamen of the Respondent’s position was his sworn testimony that the Orders “correctly state what was agreed on 26 April 2018”. That assertion needed to be tested for the purpose of the s 90SN Application and the Respondent (with legal assistance) prepared an affidavit in response (filed 24 March 2020) and a Financial Statement (filed 2 April 2020). As earlier noted, the Respondent was the subject of cross-examination and from that cross-examination the following relevant evidence arises:
(a)The Suburb M property was sold in July 2016 and the Respondent says the nett proceeds were to be paid equally to the parties. The Applicant produced evidence of the settlement statement for the Suburb M property reflecting after all expenses and the mortgage, the nett available to the parties, credited to the ANZ Bank, was $38,861.59. There is no reliable evidence that the Order of Forrest J of 18 February 2016, requiring the nett funds to be disbursed equally, was not complied with;
(b)Under cross-examination the Respondent was directed to his Financial Statement. Whilst in his earlier affidavit he says (at paragraph 23) that the pool “did not include any value for the G Town property because it did not have any equity at the time”, in the Financial Statement he now claims “his” equity is $80,000 – being 50% of the current value (of $380,000) less 50% of the current debt (of $220,000). He conceded that the reduction in the mortgage by $107,000 was not due to any payments by him. The bank statements (Exhibit 4) confirmed the payments. I accept they were made by the Applicant as she says, and for the reasons she gave in her evidence;
(c)The Respondent said when the matter was before the Court on 26 April 2018, he was unrepresented but “negotiated” the final Orders. He now says that “my opinion was that we already had 4 properties” and that the Applicant “got the proceeds of the Suburb M property.” I do not accept that evidence. Whilst I accept the proceeds of sale from the Suburb M property could have potentially been taken into account, the proceeds were equally distributed two years earlier. I regard the Respondent’s evidence that at, the time of the said Orders the parties had four properties, as disingenuous.
(d)In cross-examination the Respondent could offer no explanation why the Applicant would have reduced the liability over the G Town property IF it was the intention he secure control of the Trustee that owned the property. He provided no evidence why he did not take any steps to enforce the said Orders in respect of the G Town property, save he was working in Western Australia and Country P; and
(e)The Respondent says that the parties had decided that the G Town property was to be kept “for the children”. When pressed, he agreed that the comments made by Ms Geysen to the Court on 26 April 2018 of a nett pool around $600,000 were correct, but then elected to complain to me that properties in China were not taken into account; gambling losses of $80,000 by the Applicant were not taken into account and there was also an issue (unclear to the Court) relating to a $70,000 motor vehicle 3.
DISCUSSION
I am satisfied on the evidence, including the unchallenged evidence of the Applicant, which I accept as truthful, that:
(a)the intentions of the parties was effectively for the Applicant to retain the E Town and G Town properties and the liabilities in respect of those properties; receive $70,000 and a super splitting order for $30,000;
(b)the intentions of the parties was effectively for the Respondent to retain the C Town property with provision for a sale if he was unable to refinance the mortgage over that property;
(c)the orders signed on 26 April 2018 did not reflect the intentions of the parties. The solicitor for the Applicant used an old template for the orders, and failed to ensure that the references to the Suburb M property (Order 4) and the G Town property (Orders 9, 10 and 11) were deleted or properly drafted. The solicitor is deserving of criticism for the failure to put before the Court an accurate form of order. That she failed to be aware of the error (for that is what it was) until over 12 months later, is explainable in part by the fact that:
(i)with the sale of C Town there was no transfer documents by the Applicant to sign;
(ii)when initially discussing with the solicitors for the Respondent the question of interest payable or the payment of $70,000 neither solicitor raised the errors around the G Town property; and
(iii)the Respondent in the 12 months to 11 May 2018 had not sought to enforce the said Orders.
(d)On balance, whilst the remedies open to the Applicant may include actions against her solicitor, I am persuaded that it would create a miscarriage of justice if the Respondent was permitted to take advantage of an error in drafting as did clearly occur in this matter. Accordingly, I find that the Court should consider whether to set aside or vary the said Orders;
(e)I find it is just and equitable to both parties to vary the terms of the said Orders in the manner sought in the Application because:
(i)the parties have put into effect all other terms of the said Orders;
(ii)the Applicant, in reliance upon what she felt was the orders, caused $107,000 to be paid in reduction of the Commonwealth Bank of Australia liability secured over the G Town property;
(iii)the orders I make, as set out at the commencement of these Reasons, do at this time still achieve justice and equity to both parties considering the limited material offered to the Court – namely the parties’ recent Financial Statements. In that regard, the Respondent’s Financial Statement is seriously deficient. He makes no disclosure of his current income or personal expenditure (save for $20 per week for motor vehicle registration for his motor vehicle 1 and motor vehicle 2). In cross-examination he says he earns $4,600 a fortnight (after income tax) as a fly in/fly out worker. He deposed to having $153,000 in the bank and two motor vehicles totalling $9,500, together with a superannuation entitlement of $75,415. I exclude any entitlement to the G Town property;
(iv)the Applicant, who is now self-employed part-time in the real estate industry has deposed to gross income of $2,180 per week (including rent from the G Town property of $708 per week); living expenses of $2,377 per week (including rent of $470 per week and the G Town mortgage of $908 per week); superannuation of $50,000; nett interest in the E Town property ($70,000) and the G Town property ($172,000) and bank accounts totalling $11,000 and a motor vehicle 3.
As a result of the orders being made under s 90SN, the Respondent’s enforcement application must be dismissed.
COSTS
It is to be hoped that considering that the parties both say they wish to move on with their lives, that they could negotiate some agreement in respect of competing costs applications relating to:
(a)the Applicant’s unsuccessful slip rule application; and
(b)the Respondent’s unsuccessful enforcement application; and
(c)the Applicant’s successful s 90SN application.
If however logic and common sense fails to materialise, then the directions I now make in respect of costs should be complied with and, in the absence of an order otherwise directing, the competing application shall be determined on the papers in chambers.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann. Associate:
Dated: 21 September 2021