DACE & THE ESTATE OF THE LATE A DACE
[2015] FamCAFC 215
•12 November 2015
FAMILY COURT OF AUSTRALIA
| DACE & THE ESTATE OF THE LATE A DACE | [2015] FamCAFC 215 |
| FAMILY LAW – APPEAL – Appeal against enforcement orders requiring the husband to pay the wife’s estate a sum of money – Where the consent orders were previously made including for the sale of a number of parcels of real estate – Where the wife died before the property settlement orders were effected – Where in earlier proceedings the husband unsuccessfully sought to vary the consent orders – Where the wife’s estate commenced enforcement proceedings and the husband opposed, arguing both parties should be equally liable for a number of costs accrued prior to the sale of the properties – Where the primary judge found the parties in the consent orders evinced an intention to depart from their joint obligation in respect of the liabilities – Where the husband argued on appeal that the consent orders did not intend to provide he bear the risk of the sale price and the cost of all the outgoings on the properties until their sale – Where it is not correct to look at the intention of the parties when determining the proper construction of consent orders per I Limited & Chester (2010) FLC 93-456 – Where the consent orders themselves evinced an intention to displace the right to contribution – Where the consent orders were drafted to give the wife certainty of a dollar value from a property pool, rather than a percentage – No appellate error – Appeal dismissed. FAMILY LAW – APPEAL – COSTS – Where there was no merit in the appeal – Husband should pay the Estate’s costs. |
| Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460 Harris v Caladine (1991) 172 CLR 84 I Limited & Chester (2010) FLC 93-456 Muschinski v Dodds (1985) 160 CLR 583 |
| APPELLANT | Mr Dace |
| RESPONDENT | The Estate of the Late A Dace |
| FILE NUMBER: | BRC | 12064 | of | 2010 |
| APPEAL NUMBER: | NA | 40 | of | 2015 |
| DATE DELIVERED: | 12 November 2015 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May J |
| HEARING DATE: | 20 October 2015 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 13 May 2015 |
| LOWER COURT MNC: | [2015] FCCA 1229 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Ms Carmody |
| SOLICITOR FOR THE APPELLANT: | A K Abbott & Co |
| COUNSEL FOR THE RESPODNENT: | Ms Fraser |
| SOLICITOR FOR THE RESPONDENT: | The Law Shack |
Orders
Appeal NA 40 of 2015 filed 16 September 2015 is dismissed.
The appellant husband pay the respondent’s costs of the Estate to be agreed and failing agreement, to be assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dace & The Estate of the Late A Dace has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| IN THE APPELLATE JURISDICTION OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 40 of 2015
File Number: BRC 12064 of 2010
| Mr Dace |
Appellant
And
| The Estate of the Late A Dace |
Respondent
REASONS FOR JUDGMENT
On 16 September 2015 Mr Dace (“the husband”) filed an Amended Notice of Appeal against orders of Judge Jarrett made on 13 May 2015. Those orders required the husband, inter alia, to pay to the Estate of the Late A Dace, his former wife (“the Estate”) the sum of $245,168.48 together with interest. The wife died late in 2011.
The Estate filed an application for enforcement of consent orders made between the husband and wife. The consent orders required the sale of a number of parcels of real estate.
The husband argues the parties should be equally liable for the interest and other associated charges incurred by him in respect of each of the properties prior to their sale.
It is important to note at the outset that the genesis of these proceedings are consent orders between the husband and the late A Dace, made on 26 September 2011. The issue between the parties centres on the correct interpretation of these consent orders, which relevantly provide:
1.The net assets of the Applicant Wife and Respondent husband agreed in the sum of $2,000,000.00 (plus such further sum if [Property A and Property B] sell for a sale price above $1,000,000.00) be distributed in the following proportions:
1.1$960,000.00 to the Applicant Wife being 48% of $2,000,000.00 (plus 48% of the sale price of [Property A and Property B] above $1,000,000.00); and
1.2$1,040,000.00 to the Respondent Husband being 52% of $2,000,000.00 (plus 52% of the sale price of [Property A and Property B] above $1,000,000.00).
2.The Wife’s entitlement pursuant to order 1.1 hereof be received by her in cash payable as to the sum of $75,000.00 by the Husband within 60 days of the date of this order and otherwise from the net proceeds of sale of the following properties:
…
and any shortfall in the net sale proceeds be paid by the Husband to the Wife within 30 days of the last sale and any surplus net sale proceeds be paid to the Husband.
3.The Husband’s entitlement pursuant to order 1.2 hereof be comprised of:
3.1The transfer to the Husband by the Wife, within thirty (30) days from the date of the last sale of properties pursuant to paragraph 2 and 4 of these orders of any remaining jointly owned assets and/or liabilities to the Husband (excluding the assets/liabilities described in order 2 herein) PROVIDED THAT contemporaneously with the said transfer any liability attaching to any asset to be received by the Husband shall be refinanced by the Husband into his sole name and that the Husband meet any associated costs thereof, such assets to include, but not be limited to:
…
4.For the purposes of facilitating the sale of the properties identified at order 2 hereof, the following shall apply:
4.1The Husband and Wife shall do all acts and things and sign all documents necessary to list the said properties for sale within 14 days of the date of these orders with such real estate agent as may be agreed between the Husband and Wife in writing and failing agreement as may be appointed by the Chief Executive Officer of the Real Estate Institute of Queensland;
4.2The properties shall be listed for sale at a list price as may be agreed between the parties in writing and failing agreement in an amount determined by the listing agent;
4.3The Husband and Wife shall execute any contract of sale presented which provides for a purchase price which is no greater than 5% less than the list price for the property, unless otherwise agreed in writing by the Husband and Wife;
4.4Attwood Marshall Lawyers shall be appointed by the Husband and Wife to act on the conveyance of any property sold pursuant to order 2 hereof;
4.5That the proceeds of sale of any property sold pursuant to order 2 hereof be applied in the following order and priority:
4.5.1To discharge the mortgage encumbering the said property;
4.5.2To pay the real estate agent’s costs and commissions associated with the sale;
4.5.3To pay the reasonable costs and outlays of the conveyancing Solicitor; and
4.5.4The balance thereafter remaining in accordance with order 2 hereof.
…
7.Each of the Husband and Wife shall be responsible for and indemnify the other for and in respect of any Capital Gains Tax liability accruing or attaching to any item of real property to be retained and/or received by them pursuant to these orders whensover such liability arises.
8.By 30 January 2012 the Husband shall do all acts and things and provide all instructions necessary to complete and lodge with the Australian Taxation Office tax returns for the Husband and the Wife for any financial year outstanding at the date of these orders and that all taxation liabilities arising from the lodgement of tax returns pursuant to this order be paid from the proceeds of sale of [Property A and Property B], after any payment to the Wife pursuant to order 2 hereof.
…
Background and Reasons of the Primary Judge
On 23 December 2010 the wife commenced proceedings for property settlement orders. On 26 September 2011, the proceedings settled and consent orders were made. As noted above, the wife died late in 2011 before the property settlement orders were effected.
In proceedings where the wife’s executors applied to be appointed her legal personal representatives, the husband cross-applied to vary the consent orders. The husband’s cross-application was refused in reasons delivered 15 October 2012. In the reasons relevant to this appeal, the primary judge stated he found:
8....I dismissed [the husband]’s application, largely on the basis that the orders he was seeking would work a variation to the substance of the consent orders rather than the mechanics of how the substantive orders would be carried into effect…
The Estate commenced enforcement proceedings on 27 October 2013, seeking payment of $265,168.48. The husband opposed that application, arguing that he and the Estate should be equally liable for a number of costs that accrued prior to the sale of the properties. The primary judge found that the amount the Estate claimed to be owed was incorrect, and should be $245,168.45 (at [14]).
It was explained in the reasons of the primary judge that the properties listed pursuant to consent order 2 did not sell immediately. This meant the repayments on the mortgages secured over each of the properties continued and the loans continued to accrue interest, for which the husband has been solely liable.
The husband’s position
The husband argued before the primary judge that it was unfair he should have to bear the full cost of the interest on the loans of each of the properties, and all other associated charges. According to the husband’s affidavit filed on 25 November 2013, and summarised by the primary judge, the husband claims he has paid the following amounts:
18.…
a)[Property C]:
i)Interest costs and bank fees $20,234.59;
ii)Water charges $1,380.44;
iii)Registration fee – mortgage release $132.50;
iv)Bank cheque fee $50.00;
v)Fee to [X] $44.00
b)[Property B]:
i)Interest costs and bank fees $52,654.15;
ii)Real Estate Agent’s commission $16,170.00;
iii) Registration fee – mortgage release x 2 $274.20;
c)[Property A]:
i)Interest costs and bank fees $27,039.64;
ii)Water charges $1,799.02
iii)Real Estate Agent’s commission $15,757.50;
iv)Registration fee – mortgage release $152.10;
v)Bank Cheque fees $40.00;
vi)Settlement Agent’s fee $55.00;
d)[Property D]:
i)Interest costs and bank fees $30,008.51;
ii)Water charges $2,252.46;
iii)Registration fee – mortgage release $152.10;
iv)Bank Cheque fees $50.00;
v)Settlement Agent’s fee $55.00;
vi)MPN Lawyers $100.00;
vii)Prime Legal $51.70.
Total$168,727.11
The husband argued that the wife should also contribute to costs for property to be retained by him pursuant to the consent orders.
Findings of the primary judge
The primary judge recorded that neither party placed any evidence before him establishing whether the properties were in fact jointly owed, or they were jointly or severally liable for mortgage repayments and associated costs. It was therefore assumed that the parties were jointly liable, and a right of contribution would normally arise (per Muschinski v Dodds (1985) 160 CLR 583 and at [23] of the reasons).
As the judge correctly said:
24.The question becomes whether the order in this case, either expressly or by implication, evinces an intention to upset the position in law and equity that exists between [the husband] and [the wife] (by her estate) as joint debtors…
The judge concluded that by reason of the consent orders, the parties’ evinced an intention to rearrange their entitlements in respect of the joint liabilities (per Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460). It was concluded then that the consent orders had this effect:
25.…
a)defining the parties’ net property pool by reference to a dollar value;
b)expressing their intention to divide that pool by each receiving a nominated sum, but permitting of an additional amount calculated by reference to a percentage of the amount that [Property A and Property B] sale price exceeded $1,000,000.
It was found that the specific reference to “net assets” in the consent orders “signifies that the assets being dealt with are what are left after the payment or discharge of liabilities.” Further, the use of the word “assets” rather than “assets and liabilities” reinforced this finding (at [26]). The value of $2 million “must be a value derived from the value of the assets less the amount of the liabilities as at the date of, or for the purposes of, the order”. Further, subject to consent order 4, the orders requiring the sale of the properties made no reference to a timeframe in which they were to be sold.
Although somewhat unusual, the parties did not provide for the sale proceeds to be distributed according to a percentage of the net sale sum. They agreed the property had a certain net value. The wife was to receive a certain sum irrespective of the sale price. The primary judge found:
28.That order 2 provides for the possibility that the sums paid to [the wife] under that order might not fully discharge her entitlement to $960,000.00 (plus 48% of the sale price of the properties at [Property A and Property B] above $1,000,000.00) demonstrates that the parties did not intend to divide their property according to a percentage of its actual realised value when sold. Rather, they agreed that their “net assets” had a certain value and that each was entitled to a specified sum. Order 2 carries through that intention by requiring [the husband] to make up any shortfall in the amount to be received by [the wife].
29.Moreover, order 2 operates to cast onto [the husband] the risk that the properties to be sold to fund the payments to the applicant do not sell for their anticipated value. That must be so because the orders are structured in such a way that [the wife] was to receive a specified sum, not a specified percentage of the net sale proceeds of the properties or the realised value of the assets as a whole.
It was found that order 4 provided how the sale proceeds of the property would be dealt with, thereby in effect shifting the burden of the liabilities to the husband.
It was also found that as there was some evidence the husband had collected rental income from one of the properties, it:
38.…seems reasonably likely that the expenses in respect of which the respondent now seeks an accounting were paid from income to which the parties were likely jointly entitled. If it was so paid, the likelihood that [the husband]’s entitlement to contribution will come to anything is remote.
The primary judge concluded:
35.Thus, in my view, the orders do evince an intention to rearrange the parties’ entitlements to seek contribution from the other in respect of their joint liabilities following the making of the property adjustment orders. The intention arises by implication from the way in which orders 2 and 4.5 work to shift to [the husband] the burden of the liabilities as I have explained above.
…
42.In my view, the applicants have made out their case to the sum of $245,168.45. [The Husband] has not made out his claim to a set-off or to contribution as he asserts.
Appeal
In the Amended Notice of Appeal, the husband argues the following grounds:
1.That the Orders are not just and equitable.
2.[deleted]
3.That the Orders are made on a mistake as to the facts.
4.That the Orders are based on a mistake of law.
5.That His Honours findings are inconsistent with the evidence.
6.[deleted]
7.That His Honour acted upon or applied the wrong principles of law.
Submissions on appeal
Counsel for the husband argued that the consent orders did not intend to provide that he bear the risk of the sale price and the cost of all the outgoings on the properties until sale. It was submitted that there was a right of contribution from the Estate “notwithstanding that the consent orders were silent on that issue” (Husband’s written submissions).
The argument depends entirely upon the meaning and interpretation of the consent orders.
The husband attempts to rely on the absence of evidence from the Estate to demonstrate it was not the intention of the parties that the husband would bear such liability. As will become clear, it is incorrect to consider such evidence, if it exists, in light of the authorities below.
The High Court of Australia discussed the nature of a final consent order in Harris v Caladine (1991) 172 CLR 84, finding (per Brennan J at 104):
A consent order … though made in accordance with the parties’ contract, takes effect as an order of the Court and is enforceable as such rather than as a contract to be sued on in a separate action”: see De Lasala v De Lasala [1980] AC 546, at p 560…
The Full Court in I Limited & Chester (2010) FLC 93-456 considered at length the various authorities dealing with consent orders and explained:
173.The effect of a consent order may be construed by reference to the surrounding circumstances. It is not, however, permissible to look at the actual intention of the parties or their legal representatives. In General Accident Fire & Life Assurance Corporation Ltd v Inland Revenue Commissioners [1963] 1 All ER 618 Plowman J at 627 articulated the proposition in the following terms: “A consent order must, in my judgment, be construed in the light of any admissible evidence of surrounding circumstances, but without direct evidence of the parties’ intention”: see also Ernst & Young (a firm) v Butte Mining [1996] 2 All ER 623 at 634-5 per Robert Walker J and Kirkpatrick v Kotis (2004) 62 NSWLR 567 at 573-575 per Campbell J.
174.This approach is consistent with that adopted in relation to the construction of contracts. In Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at 462-63 explained the principle of objectivity by which the rights and liabilities of parties to a contract are determined. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 219 CLR 165 Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ observed at 179: “The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction” (citations omitted): see also Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1 per Weinberg J at 12-13, Kenny J at 22 and Lander J at 48.
In written submissions, the Estate relied on the findings of the primary judge that the consent orders “evince an intention to otherwise displace the right to contribution”. The Estate submitted:
10.The requirement in Order 2 that the [husband] pay to the [wife] any shortfall in the amount received by her from the sale of the properties at order 2 demonstrates that the parties intended that the [wife] receive no less than the dollar amount payable to her at order 1.1.
The husband’s argument that he unfairly bore all of the risk cannot be correct. The nature of the consent orders afforded the wife a certain dollar figure. The consent orders operated by requiring the husband to make up any shortfall in the properties in the event a property sold for less than the agreed value. While the husband did bear the responsibility for outstanding liabilities on such properties, he also enjoyed the benefit if they were to sell for an amount above and beyond the agreed dollar value in which the wife had no share. Specific provision was made in respect of property that the husband would have the benefit of a sale exceeding a certain figure. This was the bargain the parties agreed upon.
It is clear that the orders have been drafted in a way to give the wife (and now the Estate) certainty of a dollar value from the property pool, rather than a percentage. The wife was not to bear any liabilities for interest, mortgage repayments or other charges. There is no ambiguity in the orders. The primary judge was correct. No appellate error has been demonstrated. The appeal is dismissed.
costs
There being no merit in the appeal, the husband should pay the costs. The circumstances do not justify an order for costs on an indemnity basis. Failing agreement, the costs should be assessed.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice May delivered on 12 November 2015.
Associate:
Date: 12 November 2015
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