Coombes and Finlay
[2012] FMCAfam 589
•21 June 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| COOMBES & FINLAY | [2012] FMCAfam 589 |
| FAMILY LAW – Property – final orders made by consent – dispute between parties regarding application of one provision of orders – is order ambiguous or capable of two interpretations – aids to interpretation of orders – reference to external materials – costs. |
| Radmanovich v Nedeljkovic [2002] NSWSC 212 In the Marriage of Kowaliw (1981) FLC 91-092 Tarrant, Construing undertakings and court orders (2008) 82 ALJ 82 |
| Applicant: | MR COOMBES |
| Respondent: | MS FINLAY |
| File Number: | ADC 1349 of 2009 |
| Judgment of: | Brown FM |
| Hearing date: | 8 February 2012 |
| Date of Last Submission: | 8 February 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 21 June 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms Redman |
| Solicitors for the Applicant: | Alderman Redman |
| Counsel for the Respondent: | Ms Hurley |
| Solicitors for the Respondent: | Robinson & Mason |
ORDERS
It is declared by the Court that in order to give effect to the orders of the Court made by consent on 30 June 2010 the husband pay to the wife the further sum of eighteen thousand dollars ($18,000.00).
IT IS NOTED that publication of this judgment under the pseudonym Coombes & Finlay is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 1349 of 2009
| MR COOMBES |
Applicant
And
| MS FINLAY |
Respondent
REASONS FOR JUDGMENT
Introduction
1.This case concerns the interpretation of some final property orders, which were made consensually on 30 June 2010.
2.The parties to the proceedings are Mr Coombes “the husband” and Ms Finlay “the wife”. They married [in] 1977 and separated in April of 2008. Their three children were adult at the time of separation.
3.By way of background, the husband, who is a [occupation omitted], commenced proceedings in this court on 7 August 2009, seeking generic orders regarding the division of marital property. He has been represented by the same solicitors throughout these proceedings, Alderman Redman.
4.The wife, who is a [occupation omitted], responded to this application on 21 September 2009. She sought a global 70/30 percent distribution of matrimonial assets, in her favour. She too has been represented by the same firm of solicitors throughout. In her case, Robinson & Mason.
5.The parties failed to reach a mutually acceptable settlement of the proceedings, at a financial mediation conference scheduled for 18 November 2009. In those circumstances, the matter was fixed for trial, before myself, on 17 & 18 May 2010.
6.In anticipation of the trial, each party retained counsel. In the husband’s case, Mr Jordan; and in the wife’s case, Ms Hurley. On 17 May 2010, the parties engaged in negotiations, to which I was not privy. Just after 12.30pm on 17 May 2010, Mr Jordan informed me as follows:
“MR JORDAN: …this matter has resolved.
…
The minute of order … across the board provides for a 60:40 division of matrimonial assets including superannuation and, effectively, an additional payment to the wife of $30,000 which is apropos of nothing, but your Honour might have seen from the case outlines and the affidavit material that an add-back issue was a matter that was exercising people’s minds at one time and …
I suppose that is thrown in for good measure into the argument and it has been able to resolve on that basis. The parties are going to sell the former matrimonial home …
at [N] and because they’re uncertain as to the net proceeds of sale and as to the agent’s commission, etcetera, this document has to be by way of formula, but the formula is set. It’s a messy document but my instructor will re-engross it appropriately.…
And from the proceeds of sale of the [N] property, that’s the Property A property, a variety of mortgages and loans will be paid out and that will, effectively, freehold two investment properties; one at Property O, [H] and the other at Property M, [M]; the wife keeping the former, the husband the latter. And there is a superannuation split in there of modest proportions, $51,112, in respect of which procedural fairness hasn’t been given. We’re hoping we can work our way around that by your Honour making an order in chambers at a later time …”[1]
[1] See transcript of proceedings page 2
7.Mr Jordan informed me that Ms Hurley wished to read some matters onto the transcript, no doubt in order to formally memorialise them. These matters related to the mortgages secured against the former matrimonial home, situated at Property A, [M] and to other mortgages related to the parties’ investment properties located at Property O, [H] and Property M, [M].
8.Ms Hurley said as follows:
“… Yes, in effect, the orders allow for my client to get a freehold property at Property O if she decides to maintain the balance and that freehold, obviously, will come by way of cash to her. But that’s a matter the parties are very comfortable with and understand. The other issues I need to raise, your Honour, you will see that the orders contemplate at paragraph 9 that what we’re attempting to do, and your Honour has already picked up with the nuances of post-separation, what we’re attempting to do is maintain this line of credit at its least amount of exercise. So at the amount, your Honour, it’s sitting at $227,516.73. There will be those matters that come out of it for those council rates, water rates, and we’re restricting the use on that. But equally, your Honour, the parties both appreciate that no other equity in any of the other properties is to be diminished during this period as well.”[2]
[2] See transcript at page 4
9.The orders proposed by the parties on 17 May envisaged a splitting of a superannuation fund between them, which was then held in the husband’s sole name. Accordingly, to give effect to this aspect of the orders, it was necessary for the proceedings to be adjourned so that the relevant trustee of the fund in question could be advised of the nature of the proposed splitting order.
10.Given the length of marriage between the parties and their respective substantial contributions during it, I accepted that the proposed settlement represented a just and equitable outcome. Given the discrepancy in the parties’ capacity to earn, the differential in what each party received seemed to me to be appropriate. I was happy to approve the settlement as a fair outcome negotiated between the parties on a level playing field.
11.This case is concerned with the orders subsequently made, following this agreement between the parties, particularly how the sum of $30,000.00, which was advanced to the wife from a line of credit associated with the mortgages on the parties’ former matrimonial home and their other real properties, shortly following 17 May 2010, is to be treated in the overall context of the orders and the compromise which they represent.
12.This is the sum to which Mr Jordan referred as an “additional payment” which was “apropos of nothing”. The final orders which resulted from the agreement reached between the parties were ultimately made by the court on 30 June 2010.
13.Between 17 May and the date on which the property was sold, it is common ground that the amount owed in respect of the line of credit secured against the parties’ former matrimonial home at Property A, [M] and their other investment properties had increased to $292,228.81. This sum included the amount of $30,000.00 which had been advanced to the wife shortly after 17 May 2010.
14.The question arising is how this sum is to be treated in respect of the direct apportionment of assets between the parties given the exact content of the orders of 30 June 2010. The parties and their respective legal advisors disagree about the meaning of the relevant provisions.
15.They have attempted, at some length and with some pains, to resolve the issue consensually but have been unable to do so. It has been agreed between them that I am to resolve the dispute arising between them.
The Orders
16.Pursuant to the relevant orders, the parties agreed that, within 30 days of 17 May 2010, they would sell Property A, [M], which they jointly owned. The proceeds of sale were to be distributed to pay the following debts:
· costs incurred in preparing the property for sale;
· selling costs;
· to discharge a mortgage in favour of AMP secured against the property;
· to discharge a mortgage in favour of AMP secured against the parties’ investment property at Property O, [H];
· to discharge a mortgage in favour of the Adelaide Bank secured against the parties’ investment property at Property M, [M];
· discharge a loan to AMP which related to Property M;
· discharge a loan to AMP which related to Property O;
· discharge the line of credit in favour of AMP;
· discharge a margin loan, in joint names, owed to AMP.[3]
[3] See Order 1 of the orders of 30 June 2010
17.Following the settlement of the sale of the Property A property (the date is described as “the settlement date” in the applicable orders), the parties’ non superannuation assets were to aggregated pursuant to a formula detailed in order 2 of the orders of 30 June 2010. At this stage, it being anticipated that the net proceeds of the sale of the property would be known. The items of property so to be aggregated were as follows:
· Money in the husband’s name - $100,967.00;
· Money in the wife’s name - $153,273.00;
· Property O, [H] valued at $400,000.00;
· Property M, [M] valued at $415,000.00;
· The husband’s [business] valued at $307,000.00;
· The wife’s motor vehicle valued at $13,000.00;
· A negative value of $580.00 to be attributed to the husband’s motor vehicle;
· The net proceeds of Property A, [M].
18.From this nominal aggregation of assets, calculations were to be performed so that the wife received either assets or cash representing in value 60% of the total sum and the husband received either assets or cash representing 40% in value.
19.Accordingly, as at 17 May and again at 30 June, the exact value of this aggregation was not known, as it was dependent on the amount of monies to be repaid pursuant to the orders dealing with the sale of the former family home, including the amount to be repaid to extinguish the line of credit. However, it was anticipated that the sum could be readily calculated on the settlement date.
20.In addition, the parties agreed that they would retain an investment property each, which in both cases would be unencumbered. In the wife’s case, she was to keep Property O. In the husband’s case, he was to keep Property M. Orders were made dealing with the mechanisms of transfer and payment of outgoings in respect of each property.
21.Order 9 of the orders of 30 June is the operative one so far as the operation of the line of credit between 17 May and the settlement of the sale of the Property A property is concerned. It reads as follows:
“That pending the settlement date only the following expenses be met from the parties said AMP line of credit.
Expenses for the said property at Property A:-
Council rates;
Water rates;
Emergency services levy;
Insurance premiums;
Maintenance of the property including payments for lawn maintenance;
Electricity;
Gas;
Security and Insurances.
Colonial Mutual
NMMT payments
AIA Co. Australia
A payment to the wife of $30,000 for her sole use and benefit absolutely. Such sum to be adjusted against the husband’s final entitlements on the settlement day.”
22.Accordingly, there is no controversy that the line of credit in question would be extended, prior to the settlement of the sale, by way of a number of specified payments, including to provide the wife with the immediate sum of $30,000.00.
23.It is also uncontroversial that the line of credit would be used to pay for recurrent expenses relating to Property A. In the period in question, these expenses seem to have amounted to $34,712.08.[4]
[4] See wife’s written submission
24.The controversy which does arise is the meaning of the phrases which attach to that payment to the wife, namely it to be for her sole use and benefit absolutely. But which is qualified by the expression the sum is to be adjusted against the husband’s final entitlements on the settlement day.
The implementation of the orders thus far
25.The net proceeds of sale of Property A amounted to a sum of $359,310.00.[5] I have not been provided with any detailed settlement statement in respect of this amount but the amount does not appear to be in dispute between the parties.
[5] See affidavit of the husband filed 10 October 2011 at paragraph 3.8 and affidavit of the wife filed 8 August 2011 at paragraph 7.7
26.Accordingly I accept that this amount reflected the full amount of the sum owing on the line of credit at settlement, which included the sum of $30,000.00 earlier advanced to the wife; as well as the other payments envisaged in order 1 to AMP; the Adelaide Bank and the total costs of the sale.
27.Accordingly, pursuant to the aggregation exercise envisaged by order 2 of the orders of 30 June, the following sums (or assets) were to be divided 60/40% in the wife’s favour:
Husband’s cash
$100,967.00
Wife’s cash
$153,273.00
Property O (wife to retain)
$400,000.00
Property M (husband to retain)
$415,000.00
[Business omitted] (husband to retain)
$307,000.00
Wife’s car
$13,000.00
Husband’s car
(-$580.00)
Net proceeds of Property A
$359,310.89
TOTAL
$1,747,970.89
28.The parties agree on the correctness of this calculation, up to a point. 60% of this sum is represented by the figure $1,048,782.53 and 40% by the sum of $699,188.36.
29.The wife took property in the form of her cash ($153,273.00); Property O ($400,000.00); and her motor vehicle ($13,000.00) to the value of $566,273.00. On 25 November 2010, the husband’s solicitors forward the wife’s solicitor a trust account cheque in the sum of $470,509.53[6], bringing the total value of assets received by the wife to the sum of $1,036,782.53.
[6] See letter dated 2 May 2011 from Alderman Redman to Robinson Mason being Annexure SP3 to husband’s affidavit filed 10 October 2011
30.Accordingly, on my calculations, she was short $12,000.00 on the basis of the strict arithmetical calculation arising from order 2 of the applicable orders. It is this alleged shortfall which has led to the re-instigation of proceedings between the parties. The $30,000.00 payment being taken in to account only in the sense that it is reflected in the diminishment of the net proceeds of sale of Property A by reason of the amount required to extinguish the line of credit.
The applications
31.The wife has not made a formal application in these proceedings. She did however file an affidavit on 8 August 2011, which set out her views. It is her position that she is due a further sum of $30,000.00 to give effect to the orders of 30 June 2010.
32.It is her position that in order to give effect to the orders of 30 June, the sum of $30,000.00 needs to be notionally added back into the asset pool aggregated on the settlement date. This would bring the pool of assets to $1,777,970.89. Of which 60% is represented by the sum of $1,066,782.53. However, it is her position that order 9.5 requires her to receive $30,000.00 absolutely.
33.As such, she asserts that she needs to receive the sum of $1,066,782.53 plus a further payment of $30,000.00 to give effect to the orders. In this regard she acknowledges retention of assets worth $596,273.00 (which includes the payment to her of $30,000.00 made from the line of credit) and a further payment of $470,509.53, which totals $1,066,782.53.
34.The agreement was that the husband was to pay her $30,000.00 but she was still to receive 60% of the parties’ accumulated assets on the settlement day, arising from the sale of the parties’ former matrimonial home, according to the mechanism provided by order 2 of the orders plus a sum of $30,000.00. As such, she remains $30,000.00 short.
35.The husband filed an application on 10 October 2011, together with an affidavit in support. He raised issues to do with other aspects of the orders which relate to the sale of furnishings within the former matrimonial home. He is no-longer pursuing this aspect of the case. In his affidavit, he deposed as follows:
“For the wife to claim a further $30,000 payment as an additional add back into the asset pool means that the wife is attempting to double dip. The $30,000 payment to the wife has already been offset against my entitlements to the proceeds of the settlement.”[7]
[7] See husband’s affidavit at paragraph 10
36.Accordingly, as I understand matters, the husband’s position is that if the court accedes to the wife’s submission, it will mean that he will effectively have paid her the sum of $30,000.00 twice, which is not what the orders mean. Rather there must be some reference back of the premature distribution of this sum to the calculations arising on the settlement day.
37.As such, the sum needs be notionally added back into the aggregation of assets so that it can be accounted for when a calculation is made of the assets retained by each party at the settlement date. This being what was meant by the expression adjusted against the husband’s final entitlements on the settlement day. Like the other disbursements paid for from the line of credit, it needs to be apportioned 60/40% between the parties before being nominally advanced back to the wife from the husband’s entitlements.
38.It was the husband’s initial position that, in order to satisfy his obligations under the orders of 30 June 2010 it was necessary for him to pay the wife a further sum of $12,000.00. More recently again, at the hearing of the matter, which took place on 3 February 2012, through his solicitor Ms Redman, the husband has asserted that he is liable to provide the wife with a further sum of $18,000.00.
39.This sum is obviously 60% of $30,000.00. The rationale for the payment of this sum arises from the fact that, as the parties agreed on 17 May 2010, the wife received a premature distribution of marital assets in her favour in an amount of $30,000.00. Again, as the parties mutually accepted (and as is reflected in the orders), the only reasonable source of this sum was the parties’ facility to borrow funds via the AMP line of credit.
40.Ms Redman, counsel for the husband, expresses the issue this way in her written submissions:
“Had the payment of $30,000 not been made from the AMP Line of Credit then the amount of the net proceeds of the sale would have been $30,000 greater. In that event the husband would have received a further $12,000, being 40% of $30,000. By the early payment out to the wife of $30,000 the husband has suffered a detriment of $12,000.
It is common ground that the husband is to ultimately fund the $30,000 payment from his own entitlement but the wife must account for the $12,000 detriment to the husband arising from the early payment. The sum therefore due by the husband to the wife is $18,000.”[8]
[8] See husband’s written submission at paragraphs 6 & 7
41.On the other hand, Ms Hurley, counsel for the wife, expresses the issue this way in her written submissions:
“The wife accepts that the increase from $227,000 to the amount of $262,228.81 may have been costs that were associated with maintaining the assets and were appropriate joint costs of the parties. However, the increase on the line of credit from $262,228,81 to the figure discharged at the time of settlement of the former matrimonial home, namely $292,228.81 was due to the $30,000 payment to her. By that $30,000 liability being discharged from the proceeds of the former matrimonial home, the effect is that the wife has jointly paid the $30,000 to herself with the husband. This is not what the intention of the orders were (sic)…”[9]
[9] See wife’s written submission at paragraph 8
42.The wife assertion is that the sum of $30,000.00 was intended to either come out of the husband’s finalised entitlements or be funded by him in some way independent of the actual property reflected in these proceedings. Her counsel Ms Hurley having read onto the record that no other equity (apart from council and water rates and other similar expenses) in any of the other properties is to be diminished prior to the settlement date.
43.The parties agree that the issue of what the order actually means needs to be determined as they themselves are unable to agree. It was further agreed between the parties that it would fall to the court to make an adjudication on the issue following submissions made on behalf of each of them. In these circumstances, it was agreed that it was not necessary for there to be any further evidence led.
44.In terms of how the difference between the parties’ respective positions are reflected in arithmetical terms, the distinction seems to be as follows:
a)The wife’s calculation
i)Add back $30,000.00 into the pool of property aggregated pursuant to order 2 of the orders of 30 June = $1,777,970.89;
ii)Wife entitled to 60% of this sum pursuant to order 2 = $1,066,782.53;
iii)Wife entitled to further sum of $30,000.00 pursuant to order 9.5 following and independent of aggregation;
iv)Therefore – Wife’s total entitlements in dollar terms = $1,096,782.53;
v)Wife has received property to the value of $1,036,782.53 at settlement date + premature distribution of $30,000.00 following 17 May = $1,066,782.53;
vi)Entitlements $1,096,782.53 – actual amount received $1,066,782.53 = $30,000.00
vii)Therefore wife short $30,000.00.
b)The husband’s calculation
i)Add back $30,000.00 into the pool of property aggregated pursuant to order 2 of the orders of 30 June to reflect money prematurely distributed to wife on 17 May = $1,777,970.89;
ii)Wife entitled to 60% of this sum pursuant to order 2 = $1,066,782.53;
iii)Wife has to account to husband for $12,000.00 being 40% of parties’ joint capital prematurely advance to wife prior to aggregation arising under order 2;
iv)Wife total entitlements = $1,066,782.53 - $12,000.00 = $1,054,782.53;
v)Wife has received $1,036,782.53 at settlement date;
vi)Wife’s entitlements = $1,054,782.53 – monies received at settlement date $1,036,782.53 = $18,000.00;
vii)Therefore husband owes wife $18,000.00.
45.In simple terms, it would seem that the different processes arising from the parties’ respective calculations is as a consequence of their differing interpretation of order 9 (5). The wife’s calculation is informed by the fact that she is to receive the sum of $30,000.00 for her sole benefit and use absolutely. Accordingly, although conceding the sum needs to be added back into the pool, she asserts that there need be no further adjustment made against this sum.
46.On the other hand, the husband contends that the use of the phrase to be adjusted against the husband’s final entitlements on the settlement day require the adjustment of 40% which he has made to the premature advance of monies made to the wife prior to the settlement day.
Legal Principles
47.For obvious reasons, it is highly desirable that all court orders are sufficiently clear on their face so that they do not require subsequent interpretation. However that is not always possible. This appears to be one such case.
48.In this case the parties seek a declaration as to what the orders of 30 June 2010 mean. I accept that I have the authority to make such a declaration. In Radmanovich v Nedeljkovic[10] Young CJ in Eq said as follows:
“There is power in a separate suit for any judge of the court to make a declaratory order as to what a previous order of the court means, but in doing that the court construes it just like any other document.”
[10] Radmanovich v Nedeljkovic [2002] NSWSC 212 at [7]
49.The power to make such a declaration is one which must be exercised cautiously. Ordinarily, the meaning of orders should be determined by a strict construal of the words appearing in them, in the sense that they are to be regarded “as a freestanding piece of prose, unaffected by any surrounding circumstances, for the purposes of deciding their construction.”[11]
[11] See Kirkpatrick v Kotis [2004] NSWSC 1265 at [39] per Campbell J
50.That is all well and good. But difficulties will arise when it is apparent that the orders concerned are ambiguous or are open to a number of different interpretations. This appears to be the case in this matter. The question then arises as to what, is any, sources of evidence to which the court may look to in order to resolve any such ambiguity.
51.The orders in this case were made consensually by the parties following a process of negotiation to which the court was not privy. Accordingly there are no reasons for judgement to which the court can have regard in its attempt to ascertain what the particular orders in question mean.
52.It is clear from authority that the court is not permitted to attempt to ascertain what the actual intentions of the parties themselves were when they entered into consent orders. However the court is entitled to make reference to the circumstances surrounding the making of the orders.
53.Accordingly, the focus of any extrinsic material, in interpreting a consent order, is on the facts known to both parties and not on their actual intentions.[12] Such circumstances are:
“… the surrounding circumstances that are taken into account are facts known to all parties to the consent order, they are the very thing that a person trying to understand and obey the order would take into account.”[13]
The aim being that when orders which appear ambiguous in isolation their meaning can become clear when viewed in the light of surrounding circumstances.
[12] See Tarrant, Construing undertakings and court orders (2008) 82 ALJ 82 at 89
[13] See Kirkpatrick v Kotis (supra) at [57]
54.In Kirkpatrick v Kotis Campbell J drew parallels between the principles to be applied in interpreting an ambiguous consent order and those applicable to the interpretation of an ambiguous contract. In this context he applied the dicta of Mason J (as he then was) in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales.[14]
[14] Codelfa Constructions Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352
55.In the case, Mason J said as follows (the emphasis is mine):
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”
Conclusions
56.In interpreting the orders of 30 June 2010, I must first look to the clear language of the document in question. In the event that any aspect of the orders is ambiguous or the orders themselves are capable of being construed in more than one way, I am entitled to look to circumstances surrounding the making of the order as a possible aid to resolving such ambiguity.
57.These circumstances may include any relevant pleadings filed in the process leading up to the making of the consent order. They may also comprise facts known to each of the parties at the time the orders were made. I am however not entitled to examine the actual intentions of the parties themselves in agreeing to enter the consent order in question. In this sense, any relevant surrounding circumstance, applicable to resolving any latent ambiguity arising in the order, must be objectively ascertainable.
58.In this case, it would seem to me that the comments of each party’s counsel, made when they introduced the proposed consent order to the court, particularly its appropriateness in terms of overall justice and equity, are a relevant circumstance, in determining now what the orders in question mean.
59.There is no ambiguity, in the relevant orders, as to how the settlement date, on which the aggregation of marital assets is to be completed, is to be nominated. It is the date on which the sale of the former matrimonial home was settled. Nor is there any uncertainty about what assets and liabilities are to be included in the process of aggregation and how the resulting sum is to be divided between the parties in arithmetical terms.
60.So far as the line of credit with AMP is concerned, there relevant provision (Order 1.8) speaks of the sum required to discharge and close the account as at the date of settlement. More specifically the orders in question envisaged that this would be the source of the immediate payment of $30,000.00 to the wife (Order 9.5).
61.Accordingly the husband was not doing anything unauthorised by or extraneous to the consent orders by utilising the line of credit as a source of funding for this payment to the wife. It was always anticipated that the line of credit would be the immediate source of the sum.
62.Where the ambiguity arises is in the construal of order 9.5, which authorises the payment of $30,000.00 to the wife pending the settlement date. The provisos attaching to this payment being twofold:
· firstly, the sum is to be for the wife’s sole use and benefit absolutely;
· secondly, the sum is to be adjusted against the husband’s final entitlements on the settlement day.
63.The payment of $30,000.00 is one of a class of payments which is to be made pending the settlement date. Pending is defined in the Australian Oxford English Dictionary as meaning, when used as an adjective, “awaiting decision or settlement, undecided;” and when used as a preposition: “during or until”.
64.It seems to me to be the case that the word pending in the order is being used as a preposition in this later sense. The various specifically delineated payments set out in order 9 are the only payments which are authorised to be made from the line of credit until the settlement date.
65.The expression sole use and benefit absolutely does not appear to be inherently ambiguous, when read alone. Again utilising the Australian Oxford English Dictionary to provide the necessary definitions sole is used in the order in the sense of “exclusive”. The word use can be both a verb and a noun, in the order in question it seems to be applied in the sense of “the power, right, or privilege of employing or using something”.
66.Benefit is also both a verb and a noun. The sense in which it is used in the order concerned seems to denote some form of “advantage or profit” accruing to the wife. Absolutely is an adverb. Its use in the order means that the use of the $30,000.00 is “complete or unqualified”. In my view, none of the various expressions is unduly complex or ambiguous.
67.Utilising the ordinary meaning of the words concerned, it is clear that the order in question is intended to convey that Ms Finlay is to receive the exclusive use of $30,000.00 [from the parties’ joint matrimonial estate] which she is apply for her own advantage, as she sees fit and sum, until the settlement date.
68.By necessary implication, this must be taken to mean that the payment in question is irrevocable in the sense that it is to take effect immediately but it is not otherwise without conditions because it is subject to a temporal qualification. The wife is to have $30,000.00 to do with as she wishes, in her complete discretion, until the settlement date.
69.In my view, the key word in the order is pending. The wife’s sole use of the sum in question extends until the settlement date. A formula is provided in the order for calculating this date. It is the date on which settlement of the sale of the former matrimonial home occurs. This is also the date, on which the other various distributions of property to each of the parties, envisaged by the entirety of the orders in question, crystallises.
70.The use of the word pending to my mind indicates that the distribution of the sum in question to the wife is intended to be provisional or conditional in the sense that her sole use of the money extends only until the settlement date. The wording of the orders convey that something further is intended to take place, in respect of the payment, on the settlement date. What that something is provided by the final sentence of order 9.5.
71.Again the word settlement is not a particularly arcane or obscure one in its definition. In the context of these proceedings I take it to mean an arrangement ending a dispute. In this particular case, the sale of the parties’ former matrimonial home triggers a cascade of various payments and event which put into effect the various arrangements arrived at between the parties to finalise the dispute between regarding the division of their matrimonial estate.
72.The payment of $30,000.00 to the wife is obviously part of that scheme of arrangements. However the portion of order 9.5, on which the wife relies, is subject to the final sentence of the order. The sum is to be met in the sense of provided for from the line of credit but it is to adjusted against the husband’s final entitlements on the date of settlement.
73.In my view, the crucial word is adjusted. The orders denote that something is to happen to the wife’s payment of $30,000.00 on the day earmarked for the unconditional implementation of the raft of arrangements on which the parties have agreed and which constitute the unequivocal finalisation of their financial relationship with one another.
74.There is to be what is termed a process of adjustment in respect of the sum of $30,000.00. In my view this subsequent process obviously qualifies the categorisation of the payment as being for the wife’s sole benefit and entitlement in the sense that this benefit is to be one prevailing ad infinitum or without some further sense of refinement which is to occur on the settlement date.
75.Adjust is a verb. It means “to arrange; put in correct order or position; regulate, esp. by a small amount; …harmonise (discrepancies)…” Pursuant to the orders in question, such a process is take place against what the husband’s final entitlements. It is impossible to determine whether this process is to be one in the husband’s favour or otherwise. The order denotes a process of adjustment but does not stipulate what that process is to be.
76.Given that this process is referable to a sum of money and arises in the context of a complex regime for the settlement of matrimonial property issues, it does not seem to be unreasonable to infer that the process of adjustment referred to is one of an accounting nature. However, how any such process of account taking is to be embarked upon is unclear from the order itself, other than it is to occur on the date of settlement.
77.The comments of the parties, at the time the settlement was proffered, seem to be the only source of collateral evidence as to what the contentious order means. In his submissions to the court in support of the proposed settlement orders, Mr Jordan indicated the percentage basis of the division as being one in proportions of 60:40 favouring the wife.
78.However what that meant in precise dollar terms could not be ascertained on the date on which the parties had actually reached agreement because it was unclear as to firstly what expenses would arise to liquidate assets and secondly what expenses would arise because of the payment of recurrent joint expenses.
79.In this context, Mr Jordan described the original heads of agreement as a “messy document” but the formula which it prescribed as being “set”. Ms Hurley, in her comments, did not specifically demur from this characterisation. The point she wished to make was that it was understood between the parties that the amount secured against the line of credit would be maintained “at its least amount of exercise”. The underlying implication of this situation being that the line of credit was a joint matrimonial liability, which would crystallise on the settlement date and then be apportioned between the parties according to the settlement formula contained in the orders arising.
80.In this context, Mr Jordan’s statement that the payment of $30,000.00 to the wife was “apropos of nothing” is not helpful. He does however relate the issue of the payment to a controversy apparently arising between the parties regarding “an add back issue” although he does not specifically allude to whom of the parties such putative add backs should be attributed, other than he makes reference to the case outlines and affidavit material.
81.Accordingly, Mr Jordan placed the payment to the wife in the context of an add back. Ms Hurley did not specifically demur from this characterisation. The topic of add backs is the bread and butter reality of matrimonial property lawyer.
82.Like all members of professions or other closed groups of persons performing specialist tasks, lawyers talk in jargon or short hand language. Matrimonial property lawyers are no exception. One example of their jargon is the expression add backs. This phrase encapsulates a complex and often contentious concept, which frequently arises in property cases because there is an inevitable hiatus between the date on which spouses finally separate and go their separate ways and the date on which issues to do with the division of their property are actually finalised.
83.In this period of hiatus, it has been pointed out that it is impossible for the spouses concerned to “enter a state of suspended financial animation”. Amongst other things, each spouse is likely to have to utilise financial resources to defray recurrent living expenses. In extreme cases, financial necessity may render it necessary to liquidate items of capital.
84.In property cases, it is frequently a matter of great controversy where the line is to be drawn between the satisfaction of reasonable living expenses and what is characterised as an unfair or premature distribution of property in favour of one party, which needs to be taken into account, in some way or other, at the final hearing.
85.Necessarily the process of division of matrimonial property must proceed on the basis that a single identifiable date be attributed as the date on which the pool of asset to be divided between the parties can be collated and its various items valued. Invariably this date is the date of hearing. It is against this background that the concept of add backs has developed in matrimonial property proceedings.
86.It is essentially an accounting exercise designed to ensure that the ultimate outcome of any matrimonial property proceedings is a just and equitable one. Under its rubric, items of property (or sometimes liabilities) which no-longer exist at the date of settlement are notionally added back into the pool of matrimonial property to ensure a just result.
87.The Full Court of the Family Court[15] has identified three areas where it is appropriate to notionally “add back”, into a pool of matrimonial property, assets which do not exist or cannot be proved to be still existing. The circumstances are as follows:
· Where matrimonial assets have been utilised to pay the parties’ legal fees, thus diminishing the pool of assets available to be distributed between them and so creating a situation where the normal rule whereby each party should bear his or her own costs is defeated.[16]
· Where there has been a premature distribution of matrimonial assets.[17]
· Where one of the parties has embarked on a course of conduct, either recklessly or with the direct intent to reduce or minimise the effective value of some item of matrimonial property.[18]
[15] See AJO v GRO (2005) 33 Fam LR 134 at 144
[16] See In the Marriage of DJM and JLM (1998) 23 Fam LR 396
[17] See In the Marriage of Townsend (1994) 18 Fam LR 505
[18] See In the Marriage of Kowaliw (1981) FLC 91-092 at 76,644
88.The parties separated in April 2008. Proceedings were instituted by the husband in August of 2009. The matter came on for trial in May of 2010. During this period the husband continued to operate his [business]. It is also his position that the line of credit, secured against the former matrimonial home, was significantly extended between separation and trial. Both parties were able to draw from the line of credit.
89.Controversy arose between the parties as to why the line of credit had been so extended. The husband contended that he had paid his income into the line of credit between separation and August 2009. The wife asserted that she had been “reasonable” in her drawings from the line of credit. The husband does not necessarily seem to have accepted this assertion.
90.In his affidavit material, filed in respect of the anticipated trial of the parties’ respective applications for the settlement of matrimonial property, the husband provided a spread sheet of what his drawings had been. He said he had been “extremely frugal [in terms of his] drawings of personal expenses from the line of credit”.
91.This was a point of contention between the parties with each it seems asserting that the other had engaged in a process of premature distribution of assets by an unwarranted access to the line of credit. In this wife’s case, this was particularly so in respect of the period after the husband had ceased to deposit his recurrent income into the line of credit. The husband’s case outline, provided on the day prior to the date scheduled for final hearing indicates that the “husband opposes the wife’s add back argument”.
92.Given the settlement of the matter, these issues were not subject to any scrutiny by the court and no formal determination was made. However, in my view, I may take into account the formal pleadings filed in anticipation of trial, to determine what the provisions of the resulting consent order mean.
93.Order 9 of the orders in question constitutes a regime for the management of the line of credit prior to the date on which the parties’ pool of assets is to crystallise and the various settlement provisions effected. The payments concerned, apart from the last one, are recurrent expenses which seem to relate specifically to the maintenance of the former matrimonial home. By virtue of the other provisions in the orders, these expenses are apportioned between the parties in the ratio of 60:40 percent.
94.The payment to the wife is also included in this list of payments. She is to receive the payment pending the settlement. Although it is to be for her sole use and benefit it is also to be adjusted against the husband’s final entitlements. To my mind, the process of adding back items of property, into a pool of matrimonial property, is essentially a process of adjustment, in the sense that the proprietorial issues arising between the parties concerned are regulated and any discrepancies harmonised.
95.Accordingly the appearance of the final sentence of order 9.5 qualifies the sentence preceding. It envisages that there will be a change or adjustment to the payment on the settlement date. This is the same characteristic which the various preceding payments have. They regulate the final distribution of monies to each of the parties in terms of the overall percentage division on which they have agreed.
96.In all the circumstances of this case, it seems reasonable to conclude that the sum of $30,000.00 paid to the wife can be regarded as a form of premature distribution of capital to her, which is to be notionally added back into the parties’ pool of assets so that it can be taken into account against the parties’ final entitlements as at the date of settlement.
97.The ejusdem generis (Latin for "of the same kind") is a rule of statutory interpretation. It has application in cases where there is a list of words and one of the words appearing is ambiguous or inherently unclear within the context of that list. The rule holds that where general words follow enumerations of particular classes or persons or things, the general words shall be construed as applicable only to persons or things of the same general nature or kind as those enumerated.
98.Applying the ejusdem generis rule to the list of payments set out in order 9, it seems to me to be reasonable that the payment of $30,000.00 to the wife should be construed as having the same characteristics as the other payments with which it is listed. Each of which has the characteristic of reducing the line of credit but also of distributing the resulting reduction in equity in the former matrimonial home between each of the parties concerned as at the date of settlement. This after all seems to be what is clearly meant by any process of adjustment.
99.For these reasons, I have come to the conclusion that the construction of the order proposed by counsel for the husband is the preferable one. Accordingly I will make an order in the nature of a declaration that in order to give effect to the orders of 30 June 2010 the husband pay to the wife the further sum of $18,000.00.
100.As the length of time entailed in producing these reasons for judgement indicates (a state of affairs for which I apologise to all concerned), I have not found this to be an easy matter to determine. To the contrary I have found it to be troubling and difficult. The difficulty has arisen because the order in question was not well drafted and it is apparent that there has been a misunderstanding between the legal advisors of the parties concerned.
101.There is a latent ambiguity arising in an order which provides for a payment to be made to a person for his or her sole use and benefit but which is also to be subject to a degree of adjustment at a later stage. The parties were at cross purposes in respect of what the order was meant to do.
102.It fell to me to resolve the difficulty. It was not open to me to metaphorically throw my hands up in the air and say “I don’t know” what the order means. Nor could I arbitrarily pick one of the options open to me as a means of resolving the impasse. Rather I had to apply a process of reasoning to the task in hand, aided by the rules of interpretation to which I have alluded earlier.
103.I accept that another mind may have reached a different conclusion in respect of how the order is to be interpreted. The counsel involved in this case were each able to advocate strongly and logically for their preferred position. As such the case cannot be regarded as clear cut.
104.Nor am I critical of either party or the respective legal advisers for the misunderstanding which has arisen between them. After all such misunderstandings are the common currency of everyday human intercourse. Given both parties signed off on the orders in question and both thought that they were ad idem in respect of what the orders were intended to do, both sides must bear some responsibility for the subsequent difficulty which arose between and which they were unable to resolve consensually. In all these circumstances, I have come to the conclusion that there should no orders as to costs.
105.For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of Brown FM
Date: 21 June 2012
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