Connor & Oswald & Ors

[2012] FamCA 857

FAMILY COURT OF AUSTRALIA

CONNOR & OSWALD & ORS [2012] FamCA 857

FAMILY LAW – ORDERS – Application seeking to have final orders set aside and in the alternative, to extend the time for filing an application for review of a Registrar’s orders.

Corporations Act 2001 (Cth)
Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Bigg v Suzi (1998) FLC 92-799
Cawthorn v Cawthorn (1998) FLC 92-805
Cummings Corporation Pty Ltd v Child Support Registrar and Balnaves, PJ (1995) FLC 92-643
Gallo v Dawson (1990) 93 ALR 479
Gebert and Gebert (1990) FLC 92-137
Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257
La Rocca v La Rocca (1991) FLC 92-222
Lowe and Harrington (1997) FLC 92-747
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
McMahon and  McMahon (1976) FLC 90-038
Official Trustee in Bankruptcy v Donovan & Donovan & Stevens, LG (1996) FLC 92-703
Prowse v Prowse (1995) FLC 92-557
Sanger v Sanger (2011) FLC 93-484
Taylor v Johnson (1983) 151 CLR 422

APPLICANT: Mr G Connor

RESPONDENT: Ms Oswald

SECOND RESPONDENT: D Pty Ltd

THIRD RESPONDENT: Mr M Connor

FILE NUMBER: MLC 5758 of 2009

DATE DELIVERED: 10 October 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 7, 8, 10 & 11 May 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Glover

SOLICITOR FOR THE APPLICANT:	Harwood Andrews Lawyers
COUNSEL FOR THE RESPONDENT:	Ms Stoikovska

SOLICITOR FOR THE RESPONDENT: Hogg & Reid

COUNSEL FOR THE SECOND RESPONDENT: Dr Ingleby

SOLICITOR FOR THE SECOND RESPONDENT: Berry Family Law

COUNSEL FOR THE THIRD RESPONDENT: Mr Mellas

SOLICITOR FOR THE THIRD RESPONDENT: Kenna Teasdale Lawyers

it is ordered that

1. The applications of the applicant husband, the second and third named respondents be and are hereby dismissed and removed from the list of cases awaiting hearing.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 5758  of 2009

Mr G Connor

Applicant

And

Ms Oswald

Respondent

And

D Pty Ltd
Second Respondent

And

Mr M Connor
Third Respondent

REASONS FOR JUDGMENT

Introduction

1. The applicant de facto husband and the respondent de facto wife lived together for 18 years, separating on 10 June 2009.

2. On 2 July 2009, following their separation, the wife filed an Initiating Application seeking orders for property settlement. On 1 October 2010, following a number of interim hearings, the husband and the wife attended a round table conference and reached agreement for a settlement of their case.

3. On 2 December 2010 the husband and the wife consented to final orders for property settlement and contemporaneously entered into a binding financial agreement. The second named respondent, D Pty Ltd, was joined as a party to the proceedings and similarly consented to the orders.

4. On that date the matter had been listed for a directions hearing before Registrar Sikiotis. The husband and the wife were both in attendance and were represented by Counsel. The matter was stood down until 12.00 noon to allow Mr C Connor, the husband’s brother and one of the two directors of D Pty Ltd, to attend court, sign the minute of consent orders on behalf of that company and appear before the Registrar for the making of those orders. The husband’s other brother, Mr M Connor, is the other director of D Pty Ltd and is the third named respondent in these proceedings. 

5. On 22 December 2010 the wife signed a withdrawal of the caveat lodged on her behalf over the property at E Street, Suburb F in anticipation of settlement of sale of that property. Pursuant to the orders the husband was to be entitled to the property, which was registered in the name of D Pty Ltd, or the proceeds of its sale. The wife also signed documents to allow for the sale of what had been the family business in circumstances where the proceeds of sale of that business were to be paid to Mr M Connor and the husband’s parents. The wife at that time had no reason to believe that settlement would not be taking place in accordance with the orders. It was not until she received the letter dated 27 January 2011 from Harwood Andrews, who had taken over the matter on behalf of the husband, that she became aware that the husband did not intend to comply with the orders.  

6. It is those orders that the husband, D Pty Ltd and Mr M Connor, now seek to set aside, albeit for different reasons.  D Pty Ltd seeks, in the alternative, to extend the time for filing an application for review of the Registrar’s orders.

7. The wife opposes the applications of the husband and of the second and third named respondents.

Background

1. The husband was represented by Mr Geddes QC and his junior, Mr Hannon of Counsel, instructed by Ms Gazarella of Mason Sier Turnbull, Solicitors at the round table conference on 1 October 2010.

2. The wife was represented by Ms Stewart of Counsel instructed by Ms Sanders of Taussig Cherrie Fildes, Solicitors.

3. The husband’s accountant, Mr G, and Mr M Connor’s in-house accountant, Mr H, also attended the round table conference, although there is some dispute as to the duration of Mr H’s attendance.

4. Late that day, when it appeared unlikely that the matter would settle, the husband, through his Counsel, put a settlement proposal to the wife. The wife then put a counter proposal to the husband which was based upon the husband’s proposal save and except that the wife sought a further payment of approximately $40,000 to enable her to meet outstanding liabilities.

5. The husband accepted the wife’s counter proposal. Having reached an in principle agreement it was agreed that the solicitors for the husband would draw the consent orders and the binding financial agreement.

6. On 6 October 2010 the husband’s solicitor forwarded a letter to the husband by email requesting that he place $9,000.00 in trust to cover the cost of drafting the documents required to give effect to the settlement and noting that, as D Pty Ltd was the registered proprietor of the E Street property, D Pty Ltd would need to be joined as a party to the proceedings and that a director of D Pty Ltd would be required to sign the consent orders.

7. On 20 October 2010 the husband’s solicitors forwarded a letter to the husband by email attaching a draft of the proposed orders prepared by Ms Cherrie on behalf of the wife. The attached draft of the orders did not make provision for D Pty Ltd to be joined as a party to the proceedings.

8. On 11 November 2010 Ms Gazarella forwarded a letter to the husband referring to a telephone conversation with him on 8 November 2010 during which he advised her that he did not intend to sign orders giving effect to the in principle agreement he had reached with the wife at the round table conference. She confirmed the husband’s instructions to negotiate a settlement which included a sale of all of the real property so as to minimise his risk. The letter also advised that she had arranged a conference with Mr Hannon of Counsel at 2.30 pm on 19 November 2010 for the purposes of obtaining the husband’s further instructions. 

9. On the same day, Ms Gazarella wrote to Taussig Cherrie Fildes, the wife’s solicitors, advising that the husband did not consider that the minute of orders prepared by Taussig Cherrie Fildes on behalf of the wife reflected the agreement reached at the round table conference. The letter further advised that the husband:

   …will be in attendance at court on 2 December 2010 and he hopes that the matter can be resolved on that day, and that given the bank intends to foreclose on the properties and the dispute between the parties has not been resolved, that agreement can be reached for the properties to be sold forthwith.

10. On 17 November 2010 Ms Garzarella sent an email to Mr Hannon of Counsel advising him that the husband was “...now going to stick to the deal that he made at the round table conference.” The husband’s solicitor sent a copy of her email to Mr Hannon to the husband.

11. On 22 November 2010 Ms Garzarella forwarded an email to the husband in which she referred to the copy of the orders forwarded to the husband on 20 October 2010 and confirmed that she was not providing tax advice in relation to the orders and that he should provide the draft orders to his accountant to obtain that advice. That email also said as follows:

    In addition, I reiterate that these Orders should be provided to your banker to ensure that you can meet your obligations and the time frames required by these orders.

12. On 29 November 2010 a letter was faxed to the husband by Mr J on behalf of the National Australia Bank. That letter referred to recent correspondence and confirmed that default notices had been issued with respect to loan facilities in the name of the husband and the wife personally and K Pty Ltd. The letter also referred to the fact that the husband had informed the NAB that he was involved in Family Court proceedings and that he had provided the bank with draft consent orders. The letter concluded as follows:

    As you can appreciate the Bank has been very accommodating allowing both you and [Ms Oswald] to reach acceptable mediation. However the above account conduct will not be tolerated and is in breach of the Bank’s loan and security documentation. As you are aware, the above account conduct resulted in final demands being issued in September 2010.

    Please note that NAB is prepared to forbear from taking any further step in its recovery action until 30 November 2010 on the basis that it is provided with a letter of offer of refinance of all amounts owing to it by that date.

    If such a letter of offer is not forthcoming by that date, then NAB will have no other option but to proceed to enforce its facilities and securities, including taking possession of the security properties provided and pursuing both your personal guarantees for any potential shortfall.

13. The husband agreed that he had written Mr H’s name on that letter and circled it and conceded that his having done so suggested that the letter had been made available to Mr H, Mr M Connor’s in house accountant, or at least that he “must of thought about giving it to [Mr H]…”

14. At about 9.00 am on 2 December 2010 Mr C Connor received a telephone call from the husband asking him to come to the Family Court to sign the “…documents relating to a settlement of his proceedings with his ex-girlfriend.” The matter was stood down to allow time for Mr C Connor to attend court and sign the minute of consent orders on behalf of D Pty Ltd.

15. At approximately 12.45 pm the matter was called and, after hearing from Mr Hannon on behalf of the husband and Mr C Connor in person, orders were made in terms of the minute of orders signed by the parties, including Mr C Connor, who signed as a director of D Pty Ltd.

16. On 8 December 2010 the wife’s solicitor wrote to the husband’s solicitor, Ms Garzarella, referring to the orders and confirming the husband’s obligation pursuant to the orders to pay the sum of $9,712.36 owing on the wife’s ANZ credit card and the sum of $6,717 being the amount she owed to the ATO by 16 December 2010 and providing bank details to facilitate that payment. The letter further referred to the documents required to give effect to the transfer of the various real properties in accordance with the orders.

17. On 14 December 2010 Ms Garzarella forwarded the letter from Taussig Cherrie Fildes dated 8 December 2010 to the husband and advised that she had compared the contents of that letter with his obligations pursuant to the orders and requested his compliance with those orders. She again reiterated “...that it is important to make arrangements with your bank/financial institution so that you can comply with your Orders.”

18. The wife complied with the orders and provided a withdrawal of the caveat lodged on her behalf over E Street to allow settlement to be completed. The wife complained in her affidavit of the fact that she had not been provided with any details of the settlement of the sale. There was no evidence before me as to the date of settlement of sale. Mr L, the accountant for D Pty Ltd, deposed to an estimated Capital Gains Tax (“CGT”) liability of $90,000. Whilst he was not required for cross-examination, the fact that his evidence is based upon an estimate would suggest that there is as yet no assessment in relation to the CGT.

19. On 27 January 2011 the wife’s solicitors received a “without prejudice” letter from Harwood Andrews, who had been instructed to act on behalf of the husband, as follows:

    Since the making of those orders our client has made enquiry of the National Australia Bank and it is quite apparent that the orders are incapable of being carried out as our client is simply unable to comply with the financial obligations due under the orders.

    We have attached a summary of the financial effect of the proposed orders. You will see that it contemplates your client receiving property totalling $1,058,000 whilst our client is left in a position where his liabilities exceed his assets by some $385,500.

    The matter is further complicated by our instructions that a co-director of [D Pty Ltd], [Mr M Connor], was not consulted in relation to the obligations of [D Pty Ltd] under the orders specifically that it sell the property at [E Street, Suburb F]. We have instructed [Mr M Connor] that he will need to obtain his own independent legal advice in relation to that matter. We understand that he is in the process of obtaining that advice at the present time from Berry Family Law…

    It is therefore apparent that the settlement agreed upon is so overly generous to your client as to make its implementation impossible for our client….

    Our client remains in contact with the National Australia Bank. It may well be that with the assistance of his family putting up alternate security, which as you are aware they are not obliged to do, he will be in a position to comply with the majority of the terms of settlement however it will require a readjustment of the negotiated terms. In particular it will require your client to agree to sell the property at [M Street, N Town] and apply the proceeds of that sale firstly in payment of the mortgage secured thereon of $194,000 and then in payment of the balance of the sale proceeds in reduction of the mortgage secured over the [O Town] property in which your client resides. If your client will agree to that proposal and an extension of time within which our client is required to comply with the balance of the orders this matter may be capable of resolution…..

20. On 28 January 2011 the wife’s solicitors received a letter from Berry Family Law on behalf of D Pty Ltd objecting to the orders made 2 December 2010 on the basis that notice was not given to all of the directors, that D Pty Ltd was not legally represented at the hearing or given sufficient opportunity to obtain legal advice or representation, that had Mr M Connor, as a director of D Pty Ltd, been given notice of the orders, he would not have allowed his brother Mr C Connor to sign the orders, that the Court was not provided with sufficient financial information, particularly with respect to the level of debt to the NAB, to assess the fairness of the orders, that the Court was not made aware of the impact of the orders upon the financial position of D Pty Ltd and in particular that the orders did not make proper provision for the payment of CGT on the sale of E Street. The letter sought the wife’s consent to the setting aside of the orders.

21. On 4 February 2011 the husband emailed the wife putting proposals for an alternative property settlement in lieu of the orders of 2 December 2010.

22. On 10 February 2011 Berry Family Lawyers forwarded a further letter to the wife’s solicitor on behalf of D Pty Ltd proposing that, given their client’s intention to apply to set aside the orders, the proceeds of sale of E Street, after discharge of the orders, be held in an interest bearing account pending resolution of that application. The letter stated that it was D Pty Ltd’s position that the orders “…imposed personal obligations upon Directors in addition to the company…” and that the orders had not “…had regard to the Capital Gains Tax applicable to the disposal of that property…”

23. On 9 February 2011 the wife’s solicitor forwarded a letter to the husband’s solicitor referring to the fact that the husband had contacted the wife directly to negotiate an alternative property settlement and requiring the husband’s immediate compliance with the orders.  

24. By letter dated 21 February 2011 the wife’s solicitor advised the solicitors for D Pty Ltd that it was the wife’s position that the husband was in default of his obligations pursuant to the orders and that she proposed to exercise her rights pursuant to the orders. The letter further advised that if D Pty Ltd wished to file an application it should do so without delay, that such proceedings would be opposed and that the wife would seek costs on an indemnity basis.   

25. On 3 March 2011 the wife’s solicitors forwarded a letter to the husband’s solicitors enclosing a transfer of land for the property at P Street, N Town to the wife in anticipation of sale in accordance with the default provisions of the orders.

26. On 29 March 2011 the wife filed an application in a case seeking enforcement of the orders of 2 December 2010.

27. On Friday 10 April 2011 the wife became aware that the property at M Street, N Town, which was to be transferred to her pursuant to the orders, and the property at P Street, N Town, to be transferred to the husband pursuant to the orders, were for sale.

28. On 18 April 2011 the wife was contacted by a Mr Q from the NAB and advised that the bank was taking possession of both properties.

29. The wife then instructed her solicitors to obtain a copy of the Default Notices upon which the NAB was relying to take possession of the properties.

30. On 19 April 2011 the wife instructed her solicitors to write to the NAB requesting a meeting and that the NAB stay any further action in relation to the default pending the outcome of her application in a case seeking enforcement of the orders.

31. Subsequently the NAB took possession of the P Street property and the U Street property, both properties which were to be retained by the husband pursuant to the orders. Both properties were sold at mortgagee auctions. P Street was purchased at auction by S Pty Ltd an entity controlled by Mr M Connor. 

32. The NAB have also taken possession of M Street and have threatened to take possession of T Street, O Town, the two properties to be retained by the wife pursuant to the orders.

33. On 20 April 2011 the husband filed an Initiating Application seeking to set aside the orders of 2 December 2010.

34. On 31 May 2011 D Pty Ltd filed a Response to the Husband’s Initiating Application seeking to set aside the orders made 2 December 2010 and, in the alternative, leave to review the order of Registrar Sikiotis out of time.

35. The matter came on for hearing before Cronin J on 2 June 2011. At that time there were three parties to the proceedings, however for the purpose of the hearing that day his Honour treated Mr M Connor as a person who had sought to intervene in the proceedings. In his affidavit in support of D Pty Ltd’s application filed 31 May 2011 Mr M Connor deposed that:

    My brother and his former de facto owe me the sum of approximately $305,460.88. I am informed by my solicitor and verily believe that this debt was not disclosed by either of them as part of their proceedings for property settlement. Until proper arrangements have been made for payment of this sum owing to me by them, I seek Orders permitting [D Pty Ltd’s] money from the sale of [E Street] less Capital Gains Tax to be held in trust until further order.

    Mr Spicer of Counsel appeared on behalf of both D and Mr M Connor on that date.

1. On 28 June 2011 his Honour made orders requiring D Pty Ltd to release the proceeds of sale of E Street to the husband and that the husband apply those proceeds “…in part satisfaction of his obligations under the orders made on 2 December 2010 in and towards the obligations to the National Australia Bank otherwise encumbering the properties at [M Street, N Town] and [T Street, O Town].”

2. It was the husband’s evidence that:

   ·    his solicitors received a cheque from D Pty Ltd’s solicitors on 10 August 2011;

   ·    that the cheque was sent to the husband care of his post office box the next day;

   ·    the husband advised his solicitors on 16 August 2011 that he had not received the cheque;

   ·    on 31 August 2011 the husband’s solicitor requested a replacement cheque from D Pty Ltd’s solicitor;

   ·    the husband’s solicitor received a replacement cheque from D Pty Ltd’s solicitor on 5 September 2011 and the husband collected the cheque from their offices that day; and

   ·    the husband then transferred the funds to the NAB by internet transfer without instructions as to how the funds were to be applied.  

3. The sum of $236,240.84 was paid to the NAB, which was applied by the bank as follows:

   K Pty Ltd       $36,720.96

   K Pty Ltd       $83,311.79

   K Pty Ltd       $15,274.51

   Mr G Connor/ Ms Oswald      $23,421.90

   Mr G Connor/Ms Oswald       $66,535.10   

   Mr G Connor/Ms Oswald       $11,976.58

4. Mr M Connor filed a Notice of Intervention by Persons Entitled to Intervene on 22 December 2011.

Documents Relied upon by the Parties

1. The husband relied upon the following documents:

   ·    His outline of case document filed 2 May 2012

   ·    His Second Amended Initiating Application filed 13 March 2012;

   ·    His affidavit filed 13 March 2012 (in particular paragraphs 23 to 38 inclusive);

   ·    His affidavit filed 10 April 2011;

   ·    His affidavit filed 2 May 2012 in response to the wife’s affidavit;

   ·    His financial statement filed 13 March 2012;

   ·    The affidavit of Mr V filed 13 March 2012 (not required for cross-examination);

   ·    His Closing Submissions filed 28 May 2012;

   ·    His Reply to the Closing Submissions of the wife filed 18 June 2012; and

   ·    His closing submissions dated 27 June 2012.

2. The wife relied upon the following documents:

   ·    Her submissions filed 3 May 2012;

   ·    Her affidavit filed 17 April 2012; and

   ·    Her Response to the submissions of the husband and the second and third named respondents filed 12 June 2012.

3. D Pty Ltd, the second named respondent,  relied upon the following documents:

   ·    Summary of argument filed 2 May 2012;

   ·    The Amended Response filed 21 December 2011;

   ·    Affidavit of Mr M Connor filed 31 May 2011;

   ·    Affidavit of Mr M Connor filed 13 March 2012;

   ·    Affidavit of Mr C Connor filed 1 March 2012;

   ·    Affidavit of Ms L Connor filed 1 March 2012;

   ·    Affidavit of Mr L filed 1 March 2012 (not required for cross examination); and

   ·    Closing Submissions filed 25 May 2012; and

   ·    Written submissions in reply dated 15 June 2012.

4. Mr M Connor, the third named respondent, relied upon the following documents:

   ·    Outline of Case dated 3 May 2012;

   ·    Notice of Intervention by Person Entitled to Intervene together with Statement of Claim filed 22 December 2012;

   ·    Affidavit of Mr M Connor filed 13 March 2012;

   ·    Closing Submissions of the third named respondent filed 25 May 2012; and

   ·    Reply to the respondent’s closing submissions dated 21 June 2012

The Witnesses

1. The applicant in each case bears the onus of proof and, pursuant to s 140(1) of the Evidence Act 1995 (Cth), the Court must be satisfied on the balance of probabilities that they have proved their case. Section 140(2) further provides that without limiting the matters the Court may take into account, the Court must take into account the nature of the cause of action, the nature of the subject matter and the gravity of the matters alleged.

2. The husband, his two brothers, Mr C and Mr M Connor, Mr C’s wife, Ms L Connor and the wife all gave evidence and were cross-examined. I have had the benefit, except for Ms L Connor, who gave her evidence by telephone, to observe all of the witnesses when they gave their evidence.

3. I must assess the credit of the various witnesses in relation to their versions of events and consider how my findings in relation to the evidence impact on the issues I must determine. In doing so I am aware that the truth about a particular event is not always easy to discern. It is possible that even when there are two versions of the same event this is not necessarily because one witness is telling the truth and another is lying. Memory is not always accurate, especially a long time after the event, and it is possible that each of those witnesses honestly believes their version of the events. A witness may be mistaken rather than untruthful about what occurred. It also does not follow that even if a witness is not telling the truth or mistaken about one event that all of their evidence is either untruthful or that they are likely to be mistaken about other aspects of the evidence, although these are matters which I must of course consider in assessing their credibility.

4. In this case there are not only contradictions between the evidence of the different witnesses, there are also contradictions in their own evidence. The husband gave evidence about a number of matters which he later attempted to clarify and which was not consistent with the evidence of his brothers and Mr M Connor in particular. There was on the one hand a certain naivety about the husband’s evidence in so far as that evidence contradicted his affidavit evidence and the very basis upon which he puts his case. There were other aspects of his evidence that were on occasions vague and evasive and I was particularly concerned about some of his attempts to clarify evidence he had given earlier in the case during either cross-examination by Counsel for D Pty Ltd and Mr M Connor or during re-examination. For reasons which I will set out in more detail in my judgment I have significant misgivings about the evidence of Mr M Connor, and in particular, in so far as that evidence conflicts with the husband’s evidence, I generally have more confidence in the husband’s evidence and his initial recollection of events.

5. There are aspects of the evidence in relation to each of the applications and the various aspects of the applications which I must determine which overlap and are dealt with in my reasons and I have attempted where possible to avoid unnecessary repetition when dealing with each of the applications unless I have considered necessary for completeness and clarity to do so.

The Husband’s Case

1. In summary, it is the husband’s case that the orders should be set aside on the basis of their impracticability. He submits that the orders of 2 December 2010 were unable to be put into practice and are thus impracticable because of the following circumstances that have arisen since the making of those orders:

   a)his inability to refinance the NAB liabilities in accordance with the orders when it was reasonably expected by both the husband and the wife that his family would assist the husband to meet his obligation to refinance;

   b)that his family’s refusal to do so was unexpected and not anticipated;

   c)that the husband’s family cannot be compelled to assist him to meet his obligations pursuant to the orders;

   d)that the CGT liability arising from the sale of E Street would in normal circumstances, have been paid from the net proceeds of sale, however, as a result of the order of Cronin J made 28 June 2012, the net proceeds of sale have been applied to the NAB liabilities of the husband and wife. The husband’s case is that he is unable to reimburse the second named respondent, who is currently liable for that liability as the previous owner of the property;

   e)that the NAB has enforced its security over properties which were to be retained pursuant to the orders by both the husband and the wife and has sold the two properties which were to be retained by the husband;

   f)that, notwithstanding the sale of those two properties, there remains an outstanding liability to the NAB of approximately $450,000, which is secured by the two properties the wife was to receive and that the NAB has taken possession of those properties and unless the debt is satisfied will proceed with the sale of those properties to satisfy the debt; and

   g)that Mr M Connor seeks payment of monies he says are owed to him by the husband and the wife. The husband acknowledges that he and the wife owe money to Mr M Connor although he is unable to say how much.

Legal Principles

1. Section 90SN(1)(b) of the Family Law Act 1975 (Cth) (“the Act”) provides that if the Court is satisfied that “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” the Court, “may, in its discretion, vary the order or set the order aside”.

2. Kay J in La Rocca v La Rocca (1991) FLC 92-222 at p 78,538 referring to s79A(1)(b), likened the concept of impracticability to the doctrine of frustration in contractual matters and said:

   …what the appropriate application of s79A(1)(b) ought to be is that circumstances that 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 impracticability is, it may then become just and equitable to change the orders.

3. In Cawthorn v Cawthorn (1998) FLC 92-805 the Full Court, agreeing with the views of Kay J in La Rocca, said (at p 85,060) as follows:

   …the concept of impracticability contained in s79A(1)(b) is quite different from problems of enforcement that may arise due to a party’s insolvency. In such a case, the matter may well have to be dealt with pursuant to the provisions of the Bankruptcy Act 1966. This, however, merely reflects the vicissitudes of life and is in harmony with the clean break principle enshrined in the Act. An application for a further settlement of property is not available in circumstances when one party suddenly becomes immensely rich….

4. In the recent decision of Sanger v Sanger (2011) FLC 93-484 at p 86-006 the Full Court said in relation to a financial agreement:

   We agree with the submissions of Counsel for the wife that there is a material distinction between an agreement which is unable to be put into practice, and is thus impracticable, and an agreement which, although producing a potentially different outcome to that for which a party hoped, is able to be implemented, or put into practice…

   As is not in doubt, the provisions of s 90K are not designed to, and do not facilitate a party escaping from what proves, or is perceived to be a “bad bargain”.

5. The Full Court also referred to the concept of “self induced frustration” which was discussed by the Full Court in Cawthorn at p 85,061 as follows:

   …in our view a party cannot successfully seek an order pursuant to s79A(1) as a result of that party’s own default unless such default was due to circumstances quite beyond that party’s control. This rests firstly upon the well established principle of law that no-one should profit by their own wrong doing. This principle clearly embraces the obligation to carry out the provisions of a court order. Secondly, it would normally not be just and equitable to grant relief under s79A(1) in those circumstances.

6. Even if the applicant establishes that it is impracticable for the orders to be carried out, it does not follow necessarily that the order will be either set aside or varied. Pursuant to s 90SN(1)(b) the Court has a discretion as to whether or not to set aside or vary the orders.

7. The onus is on the applicant seeking to set aside or vary the order to satisfy the Court that not only is it impracticable for the orders to be carried out but that the Court should in the circumstances exercise its discretion to set aside or vary the order.

Are the orders impracticable?

1. The husband, in his affidavit filed 13 March 2012, at paragraph 26, deposed that the net result of the orders of 2 December 2010 was that “[Ms Oswald] was to receive net property excluding superannuation of $1,051,300 whilst I was to be left in a position with my liabilities exceeding my assets by $363,560”. For reasons which will become clear during the course of my judgment I have formed the view that this is what lies at the very heart of the case that the orders should be set aside.  

2. At para 27 the husband further deposed that:

   The net effect of the orders was further that I was required to refinance the various National Australia Bank facilities of [Ms Oswald] and I and the company [K Pty Ltd]. Those liabilities were agreed as being in the vicinity of $1,647,807.22.

   In order to comply with the orders, the husband was required to refinance that debt using P Street, N Town and U Street, W Town as security, which were valued at $400,000 and $760,000 respectively, together with the net proceeds of sale of E Street, Suburb F. 

3. It was his evidence that the orders placed obligations upon him which he could never have complied with without the assistance of his family either lending him money or providing alternative security. He deposed that his family indicated to him “subsequent” to the making of the orders they were not prepared to do so and that “neither the National Australia Bank nor any other bank would finance debt of $1,640,000 with assets and sale proceeds of $1,390,000” (emphasis added).

4. It became clear during the course of the evidence, and in particular during cross-examination by Ms Stoikovska on behalf of the wife, that the husband was aware, prior to the making of the orders, not only that he would not be able to refinance but that he could also not rely upon his family to assist him. Notwithstanding that to be the case, the husband consented to the orders. It is also quite clear from the evidence that, prior to the making of the orders, the husband had formed the view that the orders were not favourable to him, but thereafter determined for reasons which are unclear from his evidence, to finalise the matter in accordance with the agreement reached at the round table conference.

5. The husband was represented by experienced Senior Counsel and Junior Counsel at the round table conference on 1 October 2010. His solicitor also attended to instruct Counsel. Both his own accountant Mr G and his brother’s in house accountant, Mr H, attended the round table conference.

6. Prior to the round table conference the parties jointly engaged X Pty Ltd to prepare valuations of the real property and Mr V of V Pty Ltd to prepare a valuation of AA Pty Ltd, BB Pty Ltd, K Pty Ltd, CC Pty Ltd and DD Pty Ltd. Mr V provided two valuations. The first of those valuations was dated 10 March 2010 and the second valuation was dated 24 September 2010 and was provided in response to a request that he address specific questions. For the purposes of the second report Mr V was provided with a statement of assets and liabilities prepared by the husband’s accountant, setting out the parties’ respective positions. 

7. The wife’s solicitor prepared a statement of assets and liabilities which set out the parties respective valuations for the purposes of the round table conference.

8. I am satisfied that at the time the husband reached the in principle agreement and consented to the orders giving effect to that agreement he was fully appraised of his financial position and would have been aware of what assets and liabilities he would be left with as a consequence of the settlement. It is difficult in these circumstances to understand why he would have been surprised to find himself in the position he now says he did after the orders were made.

9. The husband conceded that the settlement was based upon a proposal he put to the wife subject to a relatively minor cash adjustment. He agreed that his proposal anticipated the refinancing of the NAB liabilities and required him to indemnify the wife with respect to both personal liabilities and the liabilities of the various entities in which they had an interest, including D Pty Ltd. The husband conceded in cross-examination that the two accountants were present to provide information and because he needed their advice in relation to how a settlement might be put into effect or, as put by Ms Stoikovska, to know whether the settlement was “doable”. It was Mr M Connor’s evidence that his accountant was in attendance to protect his interests and not the husband’s interests and that he was not present all day. During cross-examination the husband said that although Mr H may not have been present at the very end of the day, when the parties reached an in principle agreement, he was there for a good part of the day. I was also left with the clear impression from his evidence that Mr H’s role was to assist the husband and not simply to ensure that provision was made for the monies that Mr M Connor had allegedly lent to he and the wife. When the husband was cross-examined by Mr Mellas of Counsel on behalf of Mr M Connor it was put to him that Mr H had only been there for two or three hours. The husband’s answers were hesitant and somewhat evasive and he seemed reluctant to contradict the version of the evidence being put to him on behalf of Mr M Connor. In all of the circumstances I have more confidence in the evidence that the husband gave when first questioned about the matter.  

10. The husband gave evidence that there was some discussion with his barristers and solicitors as to ways in which the deal he proposed might be financed, which included the possibility of assistance from his family. It was also clear from the husband’s evidence that both the accountants and in particular his accountant thought that the wife was getting too much. Although he said that there was no plan or strategy in place and that he was acting on “a wing and a prayer” of financial help from the family, he confirmed that he was not advised by either of the accountants present that day that it was not possible for him to comply with the settlement on the terms proposed. In response to my question about whether the accountants were saying he would not be able to raise the money to settle with the wife he said “No… they were just sort of not happy with the deal that I was agreeing to… they weren’t really thinking about how I was going to finance it or … get to pay the debt…but it was more in the sense that they were just sort of throwing their hands in the air going I wouldn’t do this but it is your life”.  

11. It is clear from his evidence that the husband was aware at the time he entered into the negotiations at the round table conference that the NAB mortgages were in arrears. Although he did not believe that at the time of the conference he had received a final demand for payment, it is clear from the letter to K Pty Ltd from Mr J of the NAB dated 29 November 2010 that final demands were issued in September 2010 and that, at least by the time that letter was written, which was prior to the orders being made, default notices had been issued for the facilities in the joint names of the husband and the wife and those in the name of K Pty Ltd.

12. It was put to the husband that he received the letter from the NAB dated 29 November 2010 the same day. He initially said yes but qualified that answer on the basis that it would definitely have been around then or within a week of that date. It was later put to the husband that it was clear from the letter itself that it had been faxed to him the same day. I find, as was ultimately conceded by the husband, that he received the letter from the NAB on 29 November 2010, just days before he consented to the orders.

13. It is also clear from that letter that the husband had provided the NAB with draft consent orders and that the NAB did not consider itself bound by the orders.

1. The husband gave a number of versions of evidence as to what occurred following the round table conference and in particular Mr M Connor’s involvement following that conference. The husband initially gave evidence that he went away for a fortnight after the round table conference and, although he definitely spoke to Mr M Connor following the round table conference about refinancing, it was not until late October that he had a chance to sit down with Mr M Connor and go through the figures. He said that when he met with his brother he did not think that he had taken a draft of the proposed agreement with him. He later said that when he met with his brother they had a copy of the draft orders in front of them and that his brother looked at the “preliminary” orders but that he was not sure if his brother had a copy of those orders. He said that at that meeting they sat down and worked out what he would have in terms of assets and worked out the interest rate and that, as his brother had a relationship with the local manager of the Bank of Queensland, he said he would make enquiries as to the possibility of refinancing. It was the husband’s evidence that in early November Mr M Connor approached the local branch manager of the Bank of Queensland who advised him that the husband would not be able to obtain the necessary finance to do the deal.

2. The husband also gave evidence that Mr M Connor came back to him within a week to 10 days of the discussions in late October and told him that it would not be possible to refinance “...unless mum and dad and me and [Mr C Connor] and everyone throw some money in and we’re not going to do it”.  This is, in my view, consistent with and explains why in early November 2010 the husband instructed his solicitor that he did not intend to sign the proposed orders.

3. At a later stage of his evidence the husband said that it was not until sometime in November that he provided Mr M Connor with a copy of the orders. Mr M Connor’s evidence was that the husband was mistaken and that he first saw the orders and made enquires as to the availability of finance from the Bank of Queensland after the orders were made by Registrar Sikiotis.

4. Although the husband had given evidence that he believed he had given his brother a copy of the draft orders when cross-examined by Mr Mellas, on behalf of his brother, he said that due to a “fuzzy” memory he had decided that he should go home and clarify his evidence. He then referred to having looked at some letters and emails on his laptop from his solicitor in which she indicated certain time lines from which he had concluded that as he had been away for two weeks and Mr M Connor had been at the races for 10 days there was no way he could have given his brother a copy of the draft orders. Those letters were produced and form part of the evidence.

5. It is clear from the exchange of letters and emails that the husband produced on 6 October 2010, shortly after the round table conference, the husband’s solicitor wrote to him asking him to pay $9,000 in to trust before she would start drafting the orders. She also indicated in that letter that she did not think the 11 October 2010 deadline was achievable. The husband received a further email from his solicitor on 20 October 2010 which included the proposed minute of orders drafted by the wife’s solicitor. The next letter was a letter from the wife’s solicitor of 10 November 2010 which refers to their letters of 20 and 27 October 2010 and 3 November 2010 to which they said they had received no reply.

6. On 11 November 2010 the husband’s solicitor forwarded a letter to him which refers to a telephone discussion on 8 November 2010 during which the husband had advised that he did not intend to sign the orders. As I have previously indicated this is consistent with the husband’s evidence that:

   I must have had a rough conversation after [Mr M Connor] had had a conversation with [Mr EE] from the Bank of Queensland and him indicating negativities around fulfilling the orders and I made a call to Elisa explaining the situation in the fear of not being able to fulfil the orders…

7. It would appear that, as a result of that conversation, the husband’s solicitor also forwarded a letter to the wife’s solicitor in which she suggested that the documents drafted by them did not reflect the agreement negotiated at the round table conference and that given that “…the bank intends to foreclose on the properties and the dispute between the parties has not been resolved, that agreement can be reached for the properties to be sold forthwith.”

8. On 16 November 2010 the husband’s solicitor forwarded a letter to the wife’s solicitor setting out proposed amendments to the draft orders. This included the inclusion of an order joining D Pty Ltd as a party to the proceedings.

9. On 17 November 2010 the husband’s solicitor sent emails to both the husband and Mr Hannon of Counsel confirming that the husband had decided to proceed with the settlement.

10. On 20 November 2010 the husband’s solicitor forwarded a further email to him referring him to the draft orders forwarded to him on 20 October 2010 and advising him to provide the draft orders to both his accountant for tax advice and his banker to ensure that he could meet his obligations. It is clear from the letter from the NAB of 29 November 2010 that the husband had followed this advice at least with respect to providing a draft of the orders to the bank.

11. I am satisfied that Mr M Connor had significant involvement in the financial affairs of the husband and the wife notwithstanding his expressed lack of time for, or interest in, their affairs. Mr M Connor was involved in the acquisition of E Street, both providing the deposit and arranging finance for the acquisition of the property. It is clear from the evidence of Mr M Connor, Mr C Connor and the husband that there were family discussions in relation to the husband’s need to either refinance or otherwise address the NAB’s concerns about the level of debt. The husband also gave evidence in relation to a meeting with the NAB which both Mr M Connor and Mr H attended. It was this that led to the proposed sale of E Street by D Pty Ltd and Mr M Connor, as one of the directors of D Pty Ltd, signing the sale authority.

12. The husband’s evidence was that Mr M Connor had always been involved in his company’s affairs, becoming a shareholder immediately following separation, it would appear, in order to secure the monies Mr M Connor and his parents had contributed to the business, and that Mr M Connor was actively involved in the negotiations for the proposed sale of the business.

13. I am satisfied that Mr M Connor sent his accountant to the round table conference to protect both his interests, in particular the monies he alleges he was owed in relation to the business and the $305,460.88 he said he had lent the parties personally over a number of years, and the husband’s interests. The fact that the husband hand wrote the name “[Mr H]” on the letter from NAB of 29 November 2010, which he agreed suggested that he had an intention to forward the letter to Mr H, is also consistent with Mr M Connor being aware of and involved in the proposed settlement.

14. It is clear from the husband’s evidence that Mr M Connor’s accountant was clearly told by the husband’s Senior Counsel that the $305,460 purportedly owed to Mr M Connor was not being taken into account and that when Mr H left the conference he would have known that no provision was to be made for the monies allegedly owed to Mr M Connor. For that reason alone one might have expected Mr M Connor to take some interest in the proposed orders.

15. I am satisfied that the husband has used the emails to reconstruct what he says has occurred rather than relying on his memory. As I have previously said, I found the husband to be a somewhat naïve witness doing his best to recall events and, whilst his memory might not be perfect, I have more confidence in that memory than I do in his attempts to reconstruct history based upon the documentation he has produced. Nor would that documentation lead me to a conclusion that Mr M Connor was not shown a copy of the orders prior to 2 December 2010. To the contrary I find it difficult to believe that the husband would not have shown the draft orders to Mr M Connor or that if he did not do so his brother, given his involvement in the financial affairs of the husband and the wife and the alleged debt of approximately $305,000 would not have asked to see the draft orders.

16. I do not have confidence in Mr M Connor’s evidence of what occurred and I am satisfied that Mr M Connor was not only aware of the settlement but that he had been provided with, or at the very least had read a copy of, the proposed minutes. I am also satisfied that Mr M Connor had made enquiries on the husband’s behalf of his local bank manager, at the very least on an informal basis, with respect to the availability of finance from the Bank of Queensland for the husband to effect the proposed settlement with the wife prior to the orders being made. One would assume that it would have been relatively simple for Mr M Connor, having had a business relationship with the Bank of Queensland, to call evidence with respect to when he first made contact with the bank on behalf of the husband.  

17. Even if I were to accept Mr M Connor’s evidence that he did not see the orders until after they were made and that he did not make any enquiries of the Bank of Queensland until after the orders were made, his own evidence is that he did speak to the husband prior to 2 December 2010 and that, as he dealt with finance, he ran the numbers and concluded that the husband would be unlikely to obtain finance. He also gave evidence that the husband told him at the time that he was going to pull the pin. Again, this is consistent with the evidence of the husband and the documents tendered by the husband which confirm that he contacted his solicitor and told her he was not intending to sign the orders.

18. The husband gave evidence that it was clear to him by the second week of November that no financial institution was going to lend him the money. He also said that he was aware at that time that Mr M Connor was not going to provide him with finance but that although he said he had not approached his parents he still had a slight hope that they might assist him. He said he did not ask any person or approach any financial institution after the second week in November. I also find that notwithstanding that he deposes in his affidavit to having approached the NAB to obtain the necessary finance after the orders were made, there is no evidence that he made any attempt either before or after the orders were made to obtain finance from the NAB or any other financial institution other than what would appear to be an informal approach to the Bank of Queensland by Mr M Connor prior to the making of the orders.  

19. It is therefore the husband’s evidence that he consented to the orders with the knowledge that he had no guarantee of finance, in fact not even a possibility of finance, and no family assistance available to him to meet his obligations pursuant to the orders. That the NAB would enforce its security over the properties, the subject of the orders, was in all of the circumstances not only foreseeable, it was inevitable. The NAB had made that quite clear prior to the orders being made. There is no evidence to suggest that he made this known to the wife. The wife was, in those circumstances, entitled to assume that as the husband was consenting to the orders he had both the capacity and intended to comply with those orders.

20. It is difficult to see how the husband can now say that his family’s refusal to assist him was “unexpected or unanticipated”. It is quite clear on the basis of the evidence that that was not the case. In so far as he suggests that he still held out some hope that his parents might assist him, it is clear that he didn’t actually ask them. He also said that he hoped that a wealthy friend might assist but it is clear from his evidence that he did not approach any of his friends prior to the orders being made and only approached one friend after they were made.

21. The impression I am left with from the evidence of the husband and his brother Mr M Connor is that whilst his family were prepared to help him, they had ultimately decided that it was not a good deal and that they should pull the proverbial pin on it. This is consistent with the fact that the husband made no attempts to obtain finance after the orders had been made, did not ask his parents or his brother Mr C Connor for assistance and asked only one friend to help him. It is also consistent with the letter received from Harwood Andrews on behalf of the husband dated 27 January 2011.

22. As discussed earlier in these reasons, even if a settlement is over generous to one party, that is not of itself a reason to have it set aside nor does it follow that the orders should be set aside. Both parties may have ended up with significantly less by way of assets than anticipated or as in this case, properties to which a party may have been entitled may have been sold by the bank. That does not of itself make the orders impracticable to carry out and in this case the circumstances which give rise to the situation the parties now find themselves, not only could, but should have been contemplated by the husband. As pointed out by Kay J in the case of La Rocca (supra) the concept of impracticability and enforcement are very different. It may be that the wife would have difficulty enforcing the orders as against the husband however it does not follow that they should be set aside or varied.

23. The fact that there is an outstanding liability which the husband says he cannot meet, potentially affecting the properties the wife is entitled to retain, is also a question of enforcement and not impracticability. The wife’s evidence is that she has entered into negotiations with the bank with a view to refinancing. She did not give evidence as to whether she intended to retain one or both properties but again, that is a matter for her and not a matter which supports the husband’s case as to the orders being impracticable.

24. For reasons which I will address when I deal with the applications of D Pty Ltd and Mr M Connor, I am also not satisfied that the orders are impracticable or that I should exercise my discretion to set aside those orders because the husband cannot reimburse D Pty Ltd for any CGT it has incurred or will incur or repay the monies he says are owed to Mr M Connor.   

Application of D Pty Ltd

1. There are three elements to D Pty Ltd’s case. They are, in summary, that firstly D Pty Ltd should be given leave out of time to review the orders made 2 December 2010 because:

   a)D Pty Ltd was not made a party to the proceedings until the morning the orders were made, notwithstanding that both parties knew that D Pty Ltd would be required to be joined as party and consent to the orders;

   b)that the Registrar made no enquiries as to the responsibility for tax liabilities pursuant to the orders or whether the orders were in fact capable of implementation;

   c)the orders themselves make no express provision for the payment of CGT in circumstances where it is clear that the husband and the wife intended the CGT to be paid from the proceeds of sale of E Street; and

   d)the orders were expressed to bind the directors each personally in circumstances where Mr M Connor, one of the directors, was not before the Court.

2. Secondly, it was submitted that, as it was intended by the parties that CGT be taken into account and be funded from the proceeds of sale of E Street, and in so far as the orders did not provide for that to happen, that was a mistake and that, as a consequence of that mistake, D Pty Ltd is entitled to an order pursuant to s 90SN(1)(a) allocating responsibility for the CGT as between the husband and the wife.

3. Finally, it was submitted on behalf of D Pty Ltd that the orders should be set aside pursuant to s 90SN(1)(b) on the basis that if no orders are made this will, on the balance of probabilities, create an insolvency in D Pty Ltd, that there is then a possibility that the dispositions pursuant to the orders of 2 December 2010 are deemed “uncommercial transactions” within Part 5.7B of the Corporations Act2001 (Cth), potentially threatening the allocation of the proceeds pursuant to the order of 2 December 2010 and the subsequent order of Cronin J made 28 June 2011.

Legal Principles

Application to Review Out of Time

1. Rule 18.08 of the Family Law Rules 2004 (Cth) makes provision for a party to apply for a review of an order made by a Judicial Registrar, Registrar or Deputy Registrar within specified times which are determined on the basis of the delegated power being exercised. In the case of final property orders made by consent, as in this case, the application for review must be filed within 28 days of the making of that order. Rule 1.14 provides for a party to apply to the Court to shorten or extend any time fixed by the Rules and that application may be made even if, as in this case, the time fixed by the relevant rule has passed.

2. The principles governing an application to extend time in relation to an appeal were considered by Evatt CJ in McMahon and McMahon (1976) FLC 90-038. Her Honour said at page 75,144 as follows:

   The general principles governing applications for leave to extend time are established by a number of cases. In summary, the applicant must show that there are adequate reasons which explain the delay; that there is a substantial issue to be raised on appeal; and that no hardship or injustice is caused to the Respondent which cannot be compensated by orders as to costs or otherwise.

3. In Cummings Corporation Pty Ltd v Child Support Registrar and Balnaves, PJ (1995) FLC 92-643 at 82,501 the Full Court referred to the observations of McHugh J in Gallo v Dawson (1990) 93 ALR 479 at page 480:

   The grant of an extension of time under this rule is not automatic. The object of the rule is to ensure that those Rules which fix times for doing acts do not become instruments of injustice. The discretion to extend time is given for the sole purpose of enabling the court or justice to do justice between the parties: see Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VR 257 at 262. This means that the discretion can only be exercised in favour of an applicant upon proof that strict compliance with the Rules will work and injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time…

Mistake

1. Although it is accepted that the words “any other circumstance” as they appear in s 90SN(1)(a) are to be interpreted broadly and that a mistake may be an example of such “other circumstance,” the “...important matter that must be established for an application under this part of the section to succeed is that there has been a miscarriage of justice…” (Gebert and Gebert (1990) FLC 92-137 at p 77,935).

2. It is not necessary for the purposes of establishing that there has been a miscarriage of justice to establish that there has been a mistake according to the principles of contract law relating to mistake. However as the Full Court said in Lowe and Harrington (1997) FLC 92-747 at p 84,091:

   It does not follow, however, that those principles of contract law should be entirely disregarded. They may be of assistance, as a guide, to trial judges who are considering whether particular circumstances constitute a miscarriage of justice.

3. The Full Court did however also note at p 84,095 that if it could be shown that there was a mistake of the type which would lead the Court to set aside the orders based upon the principles of contract law or equity then it could not “see how it could possibly be argued that there was not a miscarriage of justice”.

1. Principles of contract law relating to mistake apply in relation to a mistake made by one or both of the parties at the time the contract was entered into. In this case the relevant date is the date upon which the orders were made. In Cheshire and Fifoot’s Law of Contract (N C Seddon and M P Ellinghaus, 9^th Australian Edition, 2008: Butterworths Australia) the learned authors at para 12.3, referred to Taylor v Johnson (1983) 151 CLR 422, and went on to state that the doctrine of mistake could be reduced to one simple principle:

   …a court will set aside or rectify a contract, so long as no innocent party will thereby be affected, when it would be unconscionable for one party to assert his or her strict legal rights arising from the contract, having regard to a mistake which has been made either by both parties or by one party which was known to the other.

2. The learned authors at para 12.5 went on to classify three possible types of mistake as follows:

   Common Mistake.  In common mistake, both parties make the same mistake. Each knows of the intention of the other and accepts it, but each is mistaken about an underlying and fundamental fact. The parties, for example, are unaware that the subject-matter of their contract has already perished.

   Mutual Mistake.  In mutual mistake, the parties misunderstand each other and are at cross- purposes. A, for example, intends to offer her Holden car for sale, but B believes that the offer relates to another car, a Trabant.

   Unilateral Mistake. In unilateral mistake, only one of the parties is mistaken. In legal discourse a pure unilateral mistake, that is, where one party is mistaken and the other is unaware of the mistake, is of no consequence. Accordingly, the use of the expression ‘unilateral mistake’ means that the other knows, or must be taken to know, of the first person’s mistake. Suppose, for instance, that A agrees to buy from B a specific picture that A believes to be a genuine Streeton but which in fact is a copy (and B knows this). If B is ignorant of A’s erroneous belief, the case is one of mutual mistake, but, if he knows of it, of unilateral mistake (in the sense just described). Often a unilateral mistake must be known to the other party because of the circumstances surrounding the clinching of the agreement. Thus, in the above example, B may not know precisely how or why A is mistaken but must be aware that there is some mistake because of the price that A is prepared to pay.

3. In the case of a common mistake rectification of a written document may be available in circumstances where although there is no mistake in relation to the underlying agreement, that agreement has been mistakenly expressed in the document giving effect to that agreement. The presumption that a written document accurately records the agreement can be displaced in circumstances where there is clear evidence of a mistake in that agreement. In Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350 Mason J said as follows:

   What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately.

4. Even if it is not established that there was a mistake based upon the principles of contract law it is still open to the Court to find that there has been a miscarriage of justice. As the Full Court said in Bigg v Suzi (1998) FLC 92-799:

   ...in order to demonstrate such a miscarriage of justice ‘circumstances must exist which, for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process’.

5. It is also the case that even if it is established that for whatever reason there has been a miscarriage of justice, it does not follow that the court must vary or set aside the orders. The Full Court in Prowse v Prowse (1995) FLC 92-557 at p81,563 approved the statement of Strauss J at first instance that:

   [Section 79A(1)(a), which is the equivalent to s 90SN(1)(a)] confers a discretion to vary or set aside an order and make a fresh order if there has been a miscarriage of justice in the relevant sense. The mere fact that there has been a miscarriage of justice does not seem to me to mean that the Court must vary the order or set it aside.

6. The onus is on the applicant seeking to set aside or vary the order to satisfy the Court that not only has there been a miscarriage of justice but that the Court should in the circumstances exercise its discretion to set aside or vary the order.

Was there a mistake?

1. It was submitted by Dr Ingleby on behalf of D Pty Ltd that it is clear from the evidence that the husband, the wife and D Pty Ltd intended that the CGT be paid from the proceeds of sale of E Street and it follows that, in so far as the orders did not so provide, there was a mistake and that mistake should be rectified as follows:

   a)varying paragraph 13 to insert the words “…after payment of capital gains tax” in line 4 after “[E Street]”;

   b)inserting paragraph 13A “That the husband and/or the wife reimburse [D Pty Ltd] such proportion of the monies released to the husband pursuant to paragraph 1 of the orders made by Justice Cronin on 28 June 2011 as is required to meet [D Pty] Ltd’s liability for capital gains tax arising from the sale of the [E Street property]”; and

   c)inserting paragraph 13B “That the liability of the husband and/or the wife pursuant to paragraph 13A above be secured on the real estate in their respective possessions”.

2. D Pty Ltd was joined as a party to the proceedings and pursuant to paragraph 13 of the orders was required to “…do all acts and things necessary and sign all documents necessary forthwith upon settlement of the sale of E Street to provide to the Respondent the entire sale proceeds of [E Street] including the deposit moneys after deducting the selling agents sale costs and after repayment of a mortgage number… with the National Australia Bank”. It was further ordered that “…in the event the settlement of the sale of [E Street] does not take place then the Second Respondent (and each of the Directors of the Second Respondent) forthwith upon the settlement not proceeding do all acts and things necessary and sign all documents necessary to transfer to the Respondent at the expense of the Respondent all their right title and interest in [E Street]”. 

3. The orders also required the husband to indemnify and keep the wife effectively indemnified against all liability of and in relation to her involvement in various companies and trusts including D Pty Ltd.

4. The husband in his affidavit sworn 7 March 2012 deposed that:

   [t]he amount available to me is further reduced by virtue of the fact that no account was taken of the capital gains tax of approximately $98,000 payable by [D Pty Ltd] as a result of the sale of [E Street] property which I assert is a matrimonial debt payable by [Ms Oswald] and I as the net sale proceeds of the property were included in the asset pool and [D Pty Ltd] and its directors should not be exposed to liability to meet that debt.

5. It is clear from the evidence, and was conceded by the husband in cross-examination, that he was aware in the course of the negotiations, and it follows axiomatically at the time the orders were made, that the sale of E Street would attract CGT. Annexure RC1 to the affidavit of the single expert Mr V is a copy of Mr V’s report.  Appendix 4 of that report contains a summary of assets and liabilities prepared by the husband’s accountant Mr G and dated 22 June 2010 which made provision for estimated CGT upon the sale of E Street of $156,000.

6. On a number of occasions during the course of the case there was some debate and a number of attempts made to clarify the basis upon which each of the parties were put their case in relation to the issue of the CGT. It is fair to say that there was initially some confusion, including on my part, as to how each of the parties, and in particular the husband and the wife, put their case with respect to this issue. The debate was largely one of semantics and ultimately irrespective of that debate the husband in his evidence acknowledged that pursuant to the agreement he was to receive the net proceeds of sale and that he would be responsible for any CGT that was ultimately payable. This is consistent with the wife’s evidence as to her understanding of the agreement and what was ultimately the intent of the orders made 2 December 2010. The fact that the proceeds of sale might be applied to the payment of the CGT does not alter the underlying understanding of the husband and the wife that he was to be ultimately responsible for the payment of CGT however and from wherever it was to be paid.

7. The husband also conceded that the fact that he was to be responsible for the payment of any CGT was discussed at the round table conference in the presence of his accountant and Mr H. It is also evident from the email received by the husband from his solicitor dated 22 November 2010 that she had made it clear to him that she was not providing him with tax advice and that he should provide a draft of the orders to his tax accountant. There is no evidence as to whether the husband did or did not do so, however it is clear that if he did enter into the consent orders without having obtained further advice, if in fact it was necessary to do so, he did so in the face of clear advice from his solicitor that he should obtain such advice.

8. Although E Street was already on the market at the time the orders were made, those orders also made provision for the directors of D Pty Ltd to do all necessary acts and things to transfer the property to the husband. The orders would have triggered the roll over provisions and the property would have been transferred to the husband subject to the CGT. This supports my conclusion that the CGT had been taken into account for the purposes of the settlement and it was intended to ultimately, in the context of the settlement, be the responsibility of the husband. 

9. It is hard to understand, in circumstances where he knew there would be a CGT liability that would ultimately be his responsibility, how the husband could depose in these proceedings that no account was taken of that liability which was a debt of the parties. I am satisfied on the balance of probabilities that CGT was taken into account by the husband and the wife, that it was their intention that the CGT was to be the husband’s responsibility, whether it was to be paid out of the proceeds of sale or otherwise and that there was no mistake as the fundamental nature of the agreement, as between the husband and the wife.

What was D Pty Ltd’s understanding of what the orders intended?

1. In his affidavit filed 1 March 2012 Mr C Connor deposed that the husband’s “lawyers read the parts of the documents to me that referred to [D Pty Ltd] and explained the terms of the agreement to me. I assumed she was receiving the profit after all the expenses of sale.” He did not elaborate in his affidavit what he thought was included in the “expenses of sale”.

2. Mr C Connor said that Mr Hannon who was appearing for the husband explained the orders to him. He said he could not remember verbatim but that he had explained to him “what [Ms Oswald] was going to be getting, what [Mr G Connor] was going to be doing, what agreement had been reached.” Mr C Connor said that he had read the orders with respect to D Pty Ltd with care and attention and that Mr Hannon’s explanation was consistent with his understanding of the orders.

3. He initially said that it was his understanding that D Pty Ltd would release funds to the husband after disbursements of the sale of E Street. He said that in everyday language he understood that to mean “all general costs and expenses to do with the sale of the property. It was put to him that by that he meant agent’s commission, rates adjustments and that sort of thing to which he replied “whatever the costs and disbursements and charges are whatever they are needs to be paid”.

4. When Mr C Connor was later asked what, in his mind, were the expenses that were included, he said that he “would be assuming that whatever the expenses are [Mr G Connor] was going to be entitled to a cheque from the profit and anything that wasn’t clear profit, that was an expense in relation to that sale would come out… whether that was GST, whether it was tax, capital gains tax, whatever was a cost or a charge against that particular property was going to be, was going to be… deducted and then the balance would be paid to [Mr G Connor]”. He also agreed that he had turned his mind to the fact that CGT was a potential likely expense and said that, whatever it turned out to be, it would be taken out of the sale proceeds and that there was no question in his mind that the order meant anything other than that.

5. When he was asked to distinguish between whether it was his understanding that the husband would get a cheque after all the expenses including CGT had been paid or whether he would be paid after payment of commission, rates and the other costs of sale and then pay the CGT his response was “profit is profit....not profit less GST or capital gains”.  In my view his response did not answer the question he was being asked and tends to highlight the flaws in his evidence.

6. When he was asked whether I could conclude on the basis of his evidence that he had turned his mind to the CGT and had satisfied himself that the orders dealt appropriately with an asset for which he, as a director, had legal responsibility, he responded that I could not draw that conclusion because he didn’t know if CGT was going to be paid or not.

7. I found his evidence to be quite disingenuous. When faced with the possibility that his answer to a question might lead me to a conclusion contrary to the basis upon which D Pty Ltd was putting its case, that is, that CGT had been taken into account or that the orders, in his opinion, had made provision for the payment of CGT, he would dissemble and feign either lack of interest or knowledge in the affairs of D Pty Ltd.  

8. Mr C Connor is a businessman of many years experience. He said that his experience includes buying and selling properties. Although he is not a lawyer, it is his evidence that the husband’s Counsel explained the orders to him and that he understood them. In my view the orders are clear. They require D Pty Ltd to provide the husband with the entire proceeds of sale after “deducting the selling agents sale costs and after repayment of mortgage number … with the National Australia Bank”(emphasis added). I find it almost inconceivable that an intelligent man, as Mr C Connor appeared to me to be, and an experienced businessman would have believed that the orders provided for the payment of CGT out of the proceeds of sale.

9. On the basis of the evidence before me even now there is no assessment with respect to the CGT arising from the sale of E Street, whereas it is clear from the orders that the proceeds of sale were to be paid to the husband forthwith upon settlement (emphasis added). Commonly in cases such as this one, as no-one knows exactly what the CGT will be until returns for the relevant tax period are lodged and an assessment issued, an accountant will provide an estimate and some provision will be made for the payment of CGT once it is assessed. There is no evidence that that was the intention of any of the parties. Mr C Connor simply refers to the husband receiving the profit after payment of expenses including CGT. In my view that is not consistent with an order requiring payment forthwith after settlement.  

10. If, as Mr C Connor said, it was his understanding of the orders that the proceeds of sale were to be paid to the husband after payment of the CGT it is hard to understand what then led to either Mr M Connor or Mr C Connor as directors of D Pty Ltd objecting to the orders on the basis that no provision had been made for CGT when they did. If, as Mr C Connor says, it was the intention of the parties that the CGT would be paid from the proceeds of sale, there would have been no reason to believe at the time that objection was taken that either the CGT was not going to be paid if assessed or provision made for payment from the proceeds of sale of E Street, or, ultimately that the husband was not accepting responsibility for the CGT.  It would have of necessity been a matter between the husband and D Pty Ltd as the wife was not to receive any of the proceeds of sale of E Street. In my view it is clear from the letter from Harwood Andrews to the wife’s solicitors on behalf of the husband dated 27 January 2011, that the issue was that the effect of the proposed orders was that the husband would be left with liabilities exceeding his assets of some $385,500.  If as was submitted by Dr Ingleby the CGT was to be paid from the proceeds of sale there was no reason up until the orders were made by Cronin J for D Pty Ltd to have any concern that provision would or could not be made for CGT.  To the contrary, it is clear from that letter that if the wife would agree to renegotiate the terms of the agreement the husband’s family might be prepared to put up alternate security allowing the husband to otherwise comply with the orders, one would assume, including payment from the proceeds of E Street of any CGT.

11. It was Mr M Connor’s evidence that he first became aware of the problem in relation to the CGT when he saw the orders for the first time, which he said was some days after 2 December 2010.  He deposed in paragraph 11of his affidavit filed 21 April 2011 as follows:

    Pursuant to my instructions the company solicitors have previously sought to obtain the cooperation of the Applicant [Ms Oswald] to renegotiate the arrangements and to do so in an endeavour to permit the payment of Capital Gains Tax. 

    A copy of that correspondence was annexed to Mr M Connor’s affidavit.

12. The letter annexed to Mr M Connor’s affidavit was dated 28 January 2011. Even if I accept that Mr M Connor had not seen the orders until after they had been made, as was the case with Mr C Connor, until Cronin J made his orders on 28 June 2011 requiring the husband to apply the proceeds of sale of E Street in part satisfaction of his obligations pursuant to the orders of 2 December 2010, there would have been no reason, on the basis of his evidence, for Mr M Connor to believe that the CGT would not be paid or provision made for its payment from the proceeds of sale prior to their distribution.

13. As a result of the orders made by Cronin J on 28 June 2011, loans, which pursuant to the final orders were to be the responsibility of the husband, were repaid. I have already determined that I should not accede to the husband’s application seeking to set aside the orders. In those circumstances, funds that might otherwise have been applied by the husband to the payment of the CGT or the reimbursement of D Pty Ltd for the CGT liability have been applied to other debts in his name and in the name of entities which he controls which he is responsible for pursuant to the final orders. He has in those circumstances had the benefit of those repayments which amount to approximately $147,000,   which is in excess of the estimated CGT.

14. I am satisfied that all the relevant parties, including D Pty Ltd, understood that although E Street was registered in the name of D Pty Ltd any CGT incurred as a consequence of its sale was to be the responsibility of the husband. Or alternatively if E Street was not sold but instead transferred to the husband he would hold it subject to CGT. I am not satisfied that it was intended that the CGT be paid out of the proceeds of sale prior to any payment being made to the husband. On that basis I am satisfied that there was no mistake with respect to the underlying agreement. 

Did the orders mistakenly fail to give effect to the intention of the parties?

1. Prior to filing the Notice of Intervention and the attached Statement of Claim Mr M Connor filed two affidavits in the proceedings in support of D Pty Ltd’s case. The first of those affidavits was filed on 21 April 2011. In that affidavit he made no mention of any monies owed to him. In his second affidavit which was filed on 31 May 2011 he deposed for the first time to the fact that the husband and wife owed him $305,460.88. He did not provide any details of the alleged loans.

2. The husband in his affidavit filed 20 April 2011, by way of response to the wife’s application for enforcement of the property orders, referred to the fact that D Pty Ltd had been made a party to the proceedings without proper notice to Mr M Connor, an issue which was not pursued at trial, and that the orders did not make provision for the payment of CGT and made no mention of the monies purportedly owing to Mr M Connor. In his trial affidavit filed 13 March 2012 the husband deposed to monies lent to him by his parents and his brother to acquire and establish the FF Pty Ltd business. At paragraph 15 of that same affidavit the husband deposed that his “…brothers [Mr C Connor] and [Mr M Connor] advanced some funds…” for the purchase of U Street, W Town.  The only other mention in relation to monies purportedly owed to Mr M Connor was at paragraph 37 of that affidavit where the husband deposed that his “…brother [Mr M Connor] has intervened in these proceedings asserting a debt owing by [Ms Oswald] and I of approximately $305,640.88. That debt is admitted by me.” It is a very specific sum and it is hard to see how, in the light of Mr M Connor’s evidence, the husband could possibly have admitted that debt.   

3. In the witness box the husband said that he agreed that Mr M Connor was owed approximately $305,000, that he had always known about the debt and that it was a large sum that he was not “…likely to forget”. The evidence suggests however that he never knew how much he and the wife allegedly owed Mr M Connor and at least when he commenced the proceedings in April 2010 he did appear to have forgotten the debt.

4. There was no mention of the debt to Mr M Connor in the husband’s affidavit filed 11 March 2010 or his Statement of Financial Circumstances filed the same date. It was put to him and he agreed that he would have included all of his liabilities at the time he swore his statement of financial circumstances, however he qualified his answer on the basis that it was as good as he could do at the time and that although he knew about the debt he didn’t know the amount of the debt. This is not really a satisfactory explanation as one would expect the husband in those circumstances to have included the debt even if he could not quantify it. In contrast, the husband did list the amounts he said were outstanding to his parents and Mr M Connor in relation to the business. 

5. In the statement of assets and liabilities which was prepared by the husband’s accountant and annexed to a letter forwarded to the husband by his accountant and dated 2 June 2010, reference is made to a loan from Connor Consultancy Service (Mr M Connor) of $60,000. There is no reference to any other money owing to Mr M Connor by the husband and/or the wife.  The letter from the husband’s accountant also refers to the alleged liability to Connor Consultancy Services (Mr M Connor) having been included after discussions with the husband.  

6. In the course of his evidence the husband offered a number of explanations which, in the context of his other evidence, in my view do not satisfactorily explain why that debt was not included in his material. One explanation was that he was waiting on documents from his brother’s accountant. Another was that it was an oversight on his part as he didn’t believe it was something relevant to his case.

7. Of particular significance in my view was his oral evidence that:

   …There was a period where we were stating the actual obvious and then we were waiting on some documents from [Mr H], [Mr M Connor’s] accountant and at the time ...the period that we were going through we were documenting the obvious debt... and the debt that I had to my brother was always something that we were getting to at sometime in my life when I was financial enough to sort of pay him back but when it all arose and we looked the situation and I couldn’t believe how much I owed him and so then it became an issue further down the track outside of that affidavit…

8. The husband’s evidence suggests a clear distinction between the “obvious” debt, which was the money owed in relation to the business and which was included both in his statement of financial circumstances and the summary of assets and liabilities prepared by his accountant for the assistance of the single expert valuer and other money provided to him by his family which on his evidence might be paid back when he was “financial enough”.

9. The husband was also cross-examined about what was described as an informal Will dated 15 April 2009 and signed by both the husband and the wife. The husband agreed that it was his handwriting although he suggested that he simply wrote and signed what the wife read out to him. In that document the husband wrote that “… any monies given by [Mr M Connor] were as promised as a gift to us. However, money loaned from [B and V Connor] is to be repaid ($350,000 Approx)...” His explanation for this document which on its face contradicts his evidence in this case was to “keep the peace do what you have to do to keep [Ms Oswald] happy…it was a false accusation to keep her happy”. I do not find that explanation credible. However he also went on to say that “...if [Mr M Connor] became the richest man in Australia you know the money would not have to be returned but in the moment it was working capital to get the business off the ground...” The husband was clearly distinguishing between those amounts given to him and the wife by Mr M Connor for the business and repaid from the proceeds of sale and the other monies given to them by Mr M Connor which he now says were a loan and not a gift.  I am satisfied that the husband did not consider the monies provided by Mr M Connor to be loans which he and the wife would have to repay.

10. The husband’s evidence, when asked whether Mr M Connor had proven to his satisfaction the amount of the alleged debt, was that “we sat down and he showed me the areas where he contributed and I obviously could remember those periods and he showed me paper work and so forth so I humbly agreed to his presentation.”

11. It is not clear when the husband was saying this conversation took place. However, it is clear from his evidence that at the roundtable conference Mr Geddes QC told Mr H that he did not have the paperwork to prove the alleged loans. He also gave evidence that in the initial meeting he had with Mr M Connor in October following the round table conference, which he said took place in Mr M Connor’s lounge room, Mr M Connor had questioned him about the fact that the orders didn’t appear to make any provision for the repayment of the money he said was owed to him. When asked if Mr M Connor had told him at that time how much he was owed he said that “…he ended up kind of going back…and he indicated that it was … the mid to high $200,000’s.” What he didn’t say was when Mr M Connor had produced the paperwork which, he says, proved to him that he and the wife owed Mr M Connor $305,460.   

12. In light of Mr M Connor’s evidence I have grave reservations about the husband’s evidence with respect to what he says he was told or shown which could have established the debt.  It is difficult to see how the husband could have been satisfied as to the amount of the debt.

13. In his affidavit filed 13 March 2012 Mr M Connor set out in some detail what he said were the circumstances in which he said monies were “advanced” to the husband and the wife. He produced copies of cheques, cheque butts, bank statements and settlement statement for the HH Street property in support of his case. 

14. The statement of claim filed on his behalf referred to amounts he said were lent on 13 and 30 June 2007, 30 July 2007, 18 June 2008, 31 December 2008, 12 January 2009 and 17 April 2009. In his affidavit he referred to and produced documents in support of payment on 13 and 30 June 2007, 30 July 2007, 14 July 2008, 17 September 2008, 12 January 2009 and 17 April 2009. There was no mention in that affidavit of monies lent on either 18 June 2008 or 31 December 2008.

15. Mr M Connor was cross- examined about the alleged loan made to the husband and the wife on 31 December 2008. He was asked about the purpose of that loan. His explanation was that it was not for anything specific other than it being Christmas. He was then asked about the payment of $30,000 from one of his entities on 19 September 2008 which he said came after the $20,000 deposit for HH Street in June or July 2008 which was to make up the 10 per cent deposit for the purchase of that property. He then sought to correct his evidence on that basis that these payments related to HH Street and not U Street. There are a number of aspects about Mr M Connor’s case and his evidence in support of his case which cause me to have significant concerns about parts of his evidence. They include the following:

    a)there is no mention in Mr M Connor’s Statement of Claim of the amount of $30,000 paid on 19 September 2008;

    b)although the Statement of Claim included an alleged loan of $30,000 on 31 December 2008 there were no documents produced in support of any payment to the husband and the wife on that date;

    c)there is no evidence of any payment to the husband and the wife of $20,000 on 18 June 2008; and

    d)there is evidence of a payment of $20,000 to K Pty Ltd on 14 July 2008 but this is not included in the Statement of Claim setting out the particulars of the alleged loans.

16. Mr M Connor ultimately gave evidence following the lunch time adjournment that, notwithstanding the Statement of Claim dated 22 December 2011 which up to that point of the proceedings he had not sought to amend, he did not recall making the payment of $30,000 he had allegedly lent to the husband and the wife on 31 December 2008 and he conceded that the sum of $30,000 could be deducted from the total of $305,460.88 leaving a balance owing of $275,460.88

17. Mr M Connor attempted to explain his error a number of ways. Mr M Connor’s evidence was at best evasive and at worst deliberately misleading. He was at times dismissive in relation to both the questions and the issues about which he was being asked which was most unhelpful and did not inspire confidence in his answers. His first explanation was that it was a typographical error and that the correct date was the September payment. Given that he gave evidence as to the circumstances of the December payment and that they were different to the circumstances of the September payment I am not satisfied that it was a typographical error. I also do not accept his explanation that he was confused by Counsel for the wife’s questions about the December payment. It was his case that he had lent money to the husband and wife in December 2008, the date was his date not a date suggested by the wife’s Counsel. It was not suggested that the Statement of Claim, which was dated December 2011, was prepared other than in accordance with his instructions, no application was made to amend that statement nor was any evidence lead in evidence-in-chief with respect to the alleged loans clarifying the dates of those alleged loans as set out in the Statement of Claim or his affidavit. Mr M Connor ultimately conceded that when he gave evidence about the purported payment to the husband and the wife on 31 December 2008 he did so “ad lib”.

18. The second and perhaps the most significant problem with his evidence was in relation to his allegation both by way of the particulars in his Statement of Claim and in his affidavit filed 13 March 2012 that he had advanced the sum of $324,236.95 to the husband and the wife to enable them to complete the purchase of U Street and it was his case that, of that sum, $153,776.07 was repaid upon settlement of the sale of HH Street to JJ Pty Ltd. He was extensively cross-examined in relation to this issue and insisted that he had advanced $324,236.95 and only been repaid $153,776.07. However on the last day of the trial and after some hours of cross-examination he gave evidence that whilst he had only been repaid $153,776.07 a further sum of $172,000 was credited against his loan account in JJ Pty Ltd repaying in full the amount he had advanced to enable the husband and the wife to complete settlement of U Street and leaving a total sum of $133,000 owing as against the original amount claimed of $305,460.88. Mr M Connor’s explanation that he had made “…a bit of a blue yesterday” and that when he looked at the figures the previous night and “ran the numbers” it did not explain either the basis upon which he had put his case or his evidence. It was not a “blue” he had made the day before, it was the basis upon which he had put his case since at the very least the date upon which he first claimed to be owed the sum of $305,460.

19. Finally, Mr M Connor also confirmed during cross-examination that in accordance with both the particulars of the Statement of Claim and his affidavit filed 13 March 2012 that there had been three payments: the first made on 13 June 2007 for $10,000, the second on 30 June 2007 for $30,000 and the third made on 30 July 2007 for $40,000, all of which were made in relation to the acquisition of HH Street. On the last day of the trial Counsel for Mr M Connor sought leave to re-open his case to call further evidence from Mr M Connor as to the amounts he had lent to the husband and the wife with respect to the acquisition of HH Street. I gave leave to reopen the case notwithstanding the opposition of the wife. That evidence, which totally contradicted both the particulars set out in his Statement of Claim and his affidavit filed 13 March 2012, was that there were two not three payments by the husband and wife, each of $40,000, one which was made in August 2005 and a further payment of $40,000 on 31 January 2006.

20. There were also various versions of the amounts that were owed by the husband and the wife to Mr M Connor and the husband’s parents in relation to the business and repaid from the proceeds of sale of that business. It was conceded by the husband, and Mr M Connor acknowledged, that the husband was not very good with finances, relying upon Mr M Connor for information. The uncertainty of the evidence in relation to the amount of the business loans only adds to the misgivings I have about Mr M Connor’s evidence in relation to the amounts he says he is still owed by the husband and the wife.

21. It was submitted in support of Mr M Connor’s application to reopen the case that the computer systems he operated had been updated in 2007 and that when he looked at it he was under the impression that the monies were advanced in 2007. Mr M Connor also gave evidence that he had spent some time tracking back to identify the payments that had been made. Whilst the statements he located show the payments made for the benefit of the husband and the wife, they do not explain the particulars in his Statement of Claim or the evidence in the affidavit or why he would present a case to the court in circumstances where he had either at best not bothered to substantiate his claim or at worst set out to deliberately mislead both the wife and the court. I am left with the distinct impression that he was prepared to make a claim with respect to the repayment of alleged loans irrespective of whether he could substantiate that claim and to say whatever he thought was necessary to advance that claim.

22. The wife denied that the sum of $324,236.95 which was applied to the purchase of U Street was a loan. It was the wife’s evidence that she and the husband sold the property at HH Street to JJ Pty Ltd, a company she said belonged to Mr M Connor, and applied the net proceeds of sale in the sum of $324,236.95 to the purchase of U Street. Although the history and timing of that transaction and Mr M Connor’s involvement may have been somewhat more complicated, she was correct in so far as it was ultimately conceded by Mr M Connor that he had been repaid any monies he had advanced in relation to the purchase. The wife otherwise denied any outstanding loans to members of the husband’s family. It was her case that funds provided by Mr M Connor for the business were gifts not loans, which is consistent with the informal Will, and she otherwise disputed the loans as alleged by Mr M Connor in his affidavit. She did acknowledge that Mr M Connor and Mr C Connor had lent she and the husband $70,000 to purchase E Street on condition that it be repaid once there was sufficient equity in the property. There is no evidence of any steps ever been taken to have that loan repaid although there was clearly some equity in the property. Mr M Connor gave evidence that he was not seeking repayment of that loan or other monies he said he had advanced to the husband and the wife during the relationship beyond those that he is claiming in these proceedings.

23. Whilst Mr M Connor ultimately conceded that the amount owing was $133,000 not $305,460, the circumstances in which those concessions were made and the manner in which he presented his case leave me with no confidence in his evidence and lead me to conclude that where there is a conflict in the evidence of the husband and Mr M Connor I should, generally speaking, prefer the evidence of the husband. Given the various versions of Mr M Connor’s evidence, the wife could not have been expected to respond to the allegations with respect to the alleged loans in his affidavit or the Statement of Claim. The only real conflict in the evidence of the wife and Mr M Connor is in relation to the alleged loans and I have already indicated that I have no confidence in Mr M Connor’s evidence in relation to that issue.   

24. In order to decide whether there has been a miscarriage of justice in that Mr M Connor as a creditor should have been given notice of the proceedings, notice of the return date of those proceedings, whether final orders were to be sought on that date and that he was entitled to intervene or seek a stay of those orders, I first have to determine whether or not he is in fact a creditor. The issue to be determined is whether the monies provided to the husband and the wife by Mr M Connor provided by way of a loan and whether it was ever intended that they be repaid.  Whilst Mr M Connor asserts that the parties owe him money and the husband acknowledges the debt, in the context of Mr M Connor’s evidence, the husband’s acknowledgement of that debt is questionable.

25. Nor are Mr M Connor’s actions since the husband and the wife separated consistent in my view with there being a debt which he is entitled to have repaid or of which he genuinely sought repayment. Whilst it is true that Mr M Connor sent his accountant to the round table conference to protect his interests, I am also satisfied on the basis of the husband’s evidence that he would have known when his accountant reported back to him that provision was not being made for the monies which he said were owed to him. He did nothing. It was his evidence that the husband rang him within a few days of the round table conference to advise him that he and the wife had agreed upon a settlement and that Mr M Connor asked the husband whether his loans had been taken into account and was advised that they had not been. It was his evidence that he was not too concerned. As Mr M Connor himself pointed out, he is an experienced businessman and in those circumstances it is my view that it is inconceivable that if, as he said at the time, he was owed $305,460.88 he would not have taken steps to recover or secure that money. In contrast when the husband and the wife separated Mr M Connor took steps to secure what he said was money they owed to him and his parents by acquiring, with the husband’s agreement and without notice to the wife, 80 per cent of the husband’s shares in BB Pty Ltd and AA Pty Ltd.

1. I would also have expected him to take an interest in the orders that were being made if he was in fact intending to seek the repayment of those monies. It was his evidence that he knew at least a week or so before that the matter was listed for hearing on 2 December 2010 and that it was intended to have orders made on that date. He was also aware before 2 December 2010 and his evidence was that it was in late November 2010 that it was proposed to join D Pty Ltd to the proceedings. He said he was told by the husband that both directors were required to sign the orders. He was certainly intricately involved in the financial affairs of the husband and wife at that time, being actively involved in the finalisation of the business and the sale of E Street. I do not accept his evidence that he wasn’t concerned because he had the security of the shares in D Pty Ltd. He acknowledged that he was aware that there would be a CGT liability and, as someone with experience in financial matters, he would have known that even without having to pay CGT, there was insufficient equity in the E Street property to repay him the amounts he said he was owed by the husband and the wife at that time. His evidence that they could not touch the E Street property without his consent would in any event have left him significantly out of pocket if, as he said at that time, he was owed $305,460.88.

2. It is not uncommon for families to provide assistance and following the breakdown of the relationship to seek to argue that the monies were loans and should be repaid. Sometimes, whilst it is determined that there have been loans, the court ultimately decides that it is not likely that those loans will have to be repaid and are therefore not taken into account.

3. In this case, even though there is some evidence that money has been provided to the husband and the wife or their associated entities by Mr M Connor, I am not satisfied on the balance of probabilities, particularly in light of Mr M Connor’s evidence with respect to the alleged debts, that the monies provided were intended to be loans not gifts or were expected to be repaid by the husband and the wife. The matters which lead me to that conclusion include the following:

   a)the husband’s evidence that the wife was not a party to the discussions he had with Mr M Connor in relation to the monies provided by Mr M Connor but that he always told her what had been said which contradicts the Statement of Claim filed by Mr M Connor in which he asserts that requests for the sums he alleges were lent were oral and contained in conversations between Mr M Connor, the husband and the wife;

   b)there was no reference by the husband in his Statement of Financial Circumstances or in the Statement of Assets and Liabilities prepared by the husband’s accountants and based upon his instructions to the debts to Mr M Connor other than the debts arising from the husband’s business;

   c)the loans were not documented;

   d)neither Mr M Connor nor the husband gave any evidence with respect to the circumstances of the provision of the funds on each occasion and the basis of any agreement for the provision of those funds nor were these matters put to the wife in any real sense in cross-examination;

   e)neither Mr M Connor nor the husband gave any evidence in relation to the terms and conditions of the alleged loans;

   f)there is no evidence of any demands for repayment or repayments being sought or being made save and except that it is now clear that the monies provided by Mr M Connor to enable the husband and wife to complete the purchase of U Street were repaid upon settlement of the sale of HH Street;

   g)the husband gave evidence that the debts were something he would get to “sometime in my life when I was financial enough to sort of pay him back”;

   h)a clear distinction was made in what has been described as the informal Will between monies that were lent to the husband and wife by Mr M Connor and monies that were gifted to them. I do not accept the husband’s evidence that the only reason he signed this document was to “keep [the wife] happy”;

   i)according to Mr M Connor’s evidence he has given the parties money over many years but not all those monies are either alleged to be loans or sought to be recovered; and

   j)there is evidence of a loan for which Mr M Connor has not and does not intend to seek repayment;

4. I am not satisfied on the balance of probabilities that the monies provided by Mr M Connor were loans and on that basis he is not a creditor and it was not necessary to give him notice.  Accordingly, there was no miscarriage of justice as required by s 90SN(1)(a) and the orders should therefore not be set aside or varied pursuant to that section.   

Notice

1. Even if Mr M Connor had been a creditor it is clear from the evidence that although he may not have been give written notice specifically in accordance with the Family Court Rules and I am satisfied:

   a)he was aware that no provision was being made in the settlement for the repayment of the alleged loans;

   b)he was aware of the proceedings and that it was intended to make final orders;

   c)he was aware that D Pty Ltd was going to be joined as a party to the proceedings; and

   d)he took no steps to protect his interests.

2. In those circumstances I am not satisfied that there was a miscarriage of justice or, alternatively, if there could be said to have been a miscarriage of justice, the circumstances of the case are such that I should exercise my discretion to set aside the orders.

Conclusion

1. In conclusion neither the husband, D Pty Ltd or Mr M Connor have met the onus of proof with respect to their applications and I propose to otherwise dismiss those applications.

I certify that the preceding two hundred and six (206) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 10 October 2012

Associate:

Date:  10 October 2012