Davalos and Davalos

[2016] FamCA 496

FAMILY COURT OF AUSTRALIA

DAVALOS & DAVALOS [2016] FamCA 496

FAMILY LAW – PRACTICE AND PROCEDURE – Stay pending appeal – Where the wife seeks a stay of substantive property orders – Where the wife submits that without a stay order, there is a risk that her appeal could be rendered nugatory in some respects – Where the husband submits that he ought to be entitled to the full amount awarded to him in the substantive judgment – Where the husband submits that in the alternative, a stay could be granted on the condition that he be paid a sum – Where it was proposed that such sum would be of an amount which is not in contest – Consideration of the principles in Aldridge & Keaton [2009] FamCAFC 106 – Where it is unlikely that the wife’s appeal would be rendered nugatory – Where a cautious approach is taken in assessing the prospects of the appeal being successful – Where the appropriate course is to order the stay on the condition of a payment to the husband.

Family Law Act 1975 (Cth)

Aldridge & Keaton [2009] FamCAFC 106

APPLICANT: Ms Davalos

RESPONDENT: Mr Davalos

FILE NUMBER: SYC 6919 of 2011

DATE DELIVERED: 1 April 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston J

HEARING DATE: 4 February 2016 and 1 April 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Batey

SOLICITOR FOR THE APPLICANT: Delaney Lawyers

COUNSEL FOR THE RESPONDENT: Mr Lloyd SC

SOLICITOR FOR THE RESPONDENT: Blanchfield Nicholls Partners

Orders

1. That the Court notes that the husband proposes to rely on his affidavit sworn on 29 March 2016 and the Financial Statements earlier identified.

2. That the Court notes that the wife would propose to cross-examine Mr A and Ms B Davalos in respect of material in their Financial Statements.

3. That the wife is given leave to have subpoenas issued in respect of the “leave” application.

4. That order 3 of the orders made on 18 August 2015 is stayed pending completion of the wife’s appeal but only on condition that the husband and wife forthwith do all things and sign all documents necessary to cause the payment to the husband of the amount of $500 000 out of the money held in the controlled money account.

5. That these proceedings are adjourned to 2.15 pm on 15 April 2016 for the purpose of an application for implementation orders.

6. That the Court notes that Mr Batey will submit a form of orders to Mr Lloyd not later than Friday, 8 April 2016.

7. That all costs are reserved.

8. That the husband’s application for leave to make a costs application out of time is listed for hearing at 10.00 am on 22 June 2016.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Davalos & Davalos 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 SYDNEY

FILE NUMBER: SYC 6919 of 2011

Ms Davalos

Applicant

And

Mr Davalos

Respondent

REASONS FOR JUDGMENT

1. Ms Davalos (“the wife”), is seeking a stay of substantive property orders, at least in respect of order 3 of the orders which I made on 18 August 2015 pending completion of an appeal which she has filed against those substantive orders. 

2. The order which is sought, after some discussion between those at the bar table and myself, is in the following form:

   1.        That order 3 of the orders of 18.8.15 be stayed conditional upon:

   a.        the amount of $250,000.00 be paid to the husband;

   b.the wife be at liberty to sell the medical suite and the proceeds of sale after payment of selling fees, be distributed as follows:

   i.$250,000.00 be paid to the wife;

   ii.the balance of proceeds be deposited into a controlled monies account.

3. The making of the substantive orders followed a long and complex contested hearing over many days spread over many months. 

4. The respondent to the stay application is Mr Davalos (“the husband”), who had been married to the wife for in excess of 52 years.  They were divorced in October 2013.  Some of their children are also parties to the proceedings, but the stay proceedings do not involve any of those parties. 

5. The substantive orders which are relevant to these parties, in respect of the stay application, provided, in effect, for the sum of $1 419 972 in a controlled-monies account to be paid in relation to $1 410 110 to the husband and $9862 to the wife.  Certain machinery orders were made in relation to the husband’s professional service company, otherwise the parties were to retain their property and their superannuation.

6. The wife has a valuable superannuation entitlement, this being found to have had a value at hearing of $578,884.  The practical difficulty is that this comprises the business premises at which, for many years, the husband has conducted his business as a health professional. 

The Wife’s Case

1. The submissions on behalf of the wife were as follows. 

2. If the stay is not granted the orders will continue to operate so that the husband would obtain the fruits of his litigation namely, the payment out of the controlled-monies account of $1 410 110.  Given what the wife says is his propensity for spending money, this might well mean that there is every likelihood that there would be insufficient funds available to meet an order of the Court in her favour if, ultimately, she is successful, firstly, in respect of her appeal and secondly, on a retrial.  The broad effect of orders she would seek on a retrial would be that in addition to the property that the husband has, he would obtain the medical rooms and the wife would obtain the entirety of the money in the controlled-moneys account.

3. And the wife says that if the monies in the controlled-monies account come into the possession of the husband, there is a likelihood that her appeal could be rendered nugatory at least in some respect. 

4. The wife in her affidavit particularises her assertions in relation to the husband’s spending.  She says that he has spent the entirety of a $200 000 partial property settlement payment.  The wife says that he spent another $50 000 received by him, that he spent a further $100 000 which he obtained by way of a partial property settlement payment which was applied towards payment of his legal costs and a further amount of $23 327 of an additional $50 000 payment received by him in October 2015.

5. The husband has spent in excess of $750 000 since December 2012.  Based on submissions and on material which was tendered in the form of bank statements of the husband, the wife says that when one looks at that expenditure, which I have done, much of that expenditure was for purchasing luxuries.  The Court would have no confidence that in the event that the husband was able to obtain the entirety of the funds due to him under the substantive orders, by the time that the appeal was heard or perhaps even when some final determination was made, there would not be sufficient funds left in order to make a just and equitable order in her favour.

6. In the written submissions it is pointed out that the husband has few assets against which enforcement could be made, the major asset being his yacht, the value of which appears now to be somewhat uncertain, but which the wife suggests is in the vicinity of $140 000.  I would accept that for the purposes of these proceedings.  Apart from that, there is some money in savings accounts and some other assets of modest value. 

7. It is submitted that there would not be sufficient property against which an enforcement order could be made to enable the Court to fulfil a substantive order.   The overall submission really is that, in all the circumstances, if the Court does not make the order for the stay, then the wife’s appeal would be rendered nugatory, at least to some extent.

The Husband’s Case

1. The submissions on behalf of the husband were as follows. 

2. The husband ought to be entitled to obtain the fruits of the judgment being payment out of the controlled monies account of the full amount, consistently with the substantive order in his favour.  The form of orders contained at Annexure B of the wife’s notice of appeal appears to flag the orders which the wife would be seeking if she was successful in her appeal and the matter was, again, before a trial judge for a re-determination.  What the wife is seeking in broad terms is the same as what she was seeking in the substantive proceedings before me. 

3. There was what I would describe as a fall-back position for the husband.  This was to the effect that there would not be prejudice to the wife’s appeal or a proper order on any retrial, if the husband was to gain that which is not in contest between the parties.  The Court might consider it appropriate in all the circumstances to put the stay into effect but include as a condition of the stay that the husband be paid out of the controlled monies, the sum of $500 000.  In circumstances where the wife has the benefit under the substantive orders of the rooms to the value that I have indicated and something like that sort of amount was released from the controlled monies to the husband, then that would not cause a prejudice to the wife. 

4. (Mr Batey for the wife said that in fact that would cause a prejudice to the wife because the wife simply does not want to have the medical rooms and there are practical issues, and possible issues of capital gains tax which might flow from a sale of those rooms.  In those circumstances the wife would be prejudiced.)

The Applicable Law

1. The law applicable to the granting of a stay was as set out by Mr Batey in his case outline document.  It was also summarised in the well-known authority of Aldridge & Keaton [2009] FamCAFC 106.

2. The first matter to note is that the onus to establish a proper basis for the stay is on the applicant for the stay, that is the wife in these proceedings.  However, it is not necessary for the applicant to demonstrate any special or exceptional circumstances. 

3. The second matter to note is that a person who has obtained a judgment is entitled to the benefit of that judgment and that a person who has obtained a judgment is entitled to presume the judgment is correct.

4. The Full Court said that the mere filing of an appeal is insufficient to grant a stay.  The Court is to consider the bona fides of the applicant.  A stay may be granted on terms that are fair to all parties, which may involve the Court weighing the balance of convenience and the competing rights of the parties. 

5. Importantly, the next principle is a weighing of the risk that an appeal may be rendered nugatory if a stay is not granted.  And the Full Court says that this will be a substantial factor in determining whether it will be appropriate to grant a stay.  There should be some preliminary assessment of the strength of the opposed appeal and whether the appellant has an arguable case. 

6. The next matter is the period of time in which the appeal can be heard and whether existing satisfactory arrangements may support the granting of the stay for a short period of time. 

7. In looking at the balance of convenience factors the Court would look at the overall prejudice to the parties in relation to the granting, or not granting, of a stay. 

8. As I say, I have noted the first of those matters. 

9. In relation to the bona fides of the applicant, I note what Mr Batey has said in his outline of argument.  I do not question at all the bona fides of the applicant wife. 

10. In relation to a weighing of the risk that the appeal may be rendered nugatory if a stay is not granted and if the wife was to be successful in her appeal, she would be seeking orders for a rehearing.  In a rehearing she would seek orders to the effect that the money in the controlled moneys account would be paid in its entirety to her.  And there would be a superannuation splitting order in a form which would result in the husband receiving the superannuation represented by his professional rooms.

11. As Mr Lloyd has said, there could be no contest in respect of at least the equivalent in money of the wife’s superannuation interest in those rooms.  It was found in the substantive proceedings that the value of the rooms was $578 884.  But, of course, as Mr Batey has said the wife did not want those rooms and it would be more important for her to have money rather than money’s worth as represented in the rooms. 

12. In my view that would be the only prejudice flowing to the wife if the sort of funds which Mr Lloyd has suggested could be made available to the husband, namely, $500 000.  At the end of the day, it might be the situation that the wife continued to find herself with the business premises, which she does not want.  But in my view, the only extent to which her appeal could be rendered nugatory would be in respect of that particular item of property, which would go to kind rather than to quantum.  In my view, that is a somewhat frail argument.  In my view, if money was available to the husband such as suggested, that would be unlikely to render the wife’s appeal nugatory. 

13. The next matter to consider is the prospects of the appeal being successful.  It can be difficult for trial judges to form a view about the likely success of an appeal.  The present appeal contains 21 grounds, and I have read these grounds.  I cannot leave ground 20 without some comment.  Mr Batey seems to be saying that this is a fairly important part of the wife’s case.  It is that the wife has been left with her superannuation entitlements, consisting of the property in the husband’s business premises, and that somehow this does not satisfy s 81 of the Act.  Yet, as I have indicated to the parties now on a couple of occasions, the last orders I made in the substantive orders, namely orders 13 and 14, suspended commencement of the substantive orders for more than a fortnight and gave opportunity to the parties to relist the proceedings for the purpose of addressing me about changes to the form of the orders if they so desired.  The wife could have availed herself of this opportunity and sought a change to this superannuation order about which she now complains and relies on as a ground of appeal.  But she chose not to do so.  I do not propose to address the other grounds of appeal.  Suffice it to say, it is difficult to know whether the appeal might succeed.  I propose to approach this aspect of the matter with some caution and with some sympathy to the wife. 

14. In relation to the balance of convenience and any prejudice to the parties, clearly, if the husband does not achieve his payment of $1.4 million plus from the controlled moneys, that would be a prejudice to him.

15. On the other hand, if the stay was not granted and the wife did not have confidence that there would be the entire funds available in the controlled moneys account to be able to enable the Court ultimately to be able to order these funds in her favour under s 79, then that would be a prejudice to her. 

16. I have not directed my mind to the period of time in which the appeal could be heard.  The wife seeks that the hearing of the appeal be expedited.  One would have thought, given the ages of these parties, all the difficulties and complexities of the case and a multiplicity of applications, including interlocutory applications, and applications following the substantive orders, then one would have thought that there would be considerable merit in the appeal being expedited. 

17. So probably there can be some optimism that the appeal would be dealt with sooner rather than later.  But one would anticipate that still some months delay would be involved in that.  There would also likely be a period of time from the time that the appeal was heard until judgment could be delivered to the parties.  And, all in all, one could be fairly clear that many months would go by until such an appeal could be heard.  That is, obviously, also a matter to take into account in respect of each of the parties’ cases concerning the stay. 

18. Bearing all those matters in mind, in my view the appropriate course is to order the stay, but to order the stay on the condition which Mr Lloyd suggested, namely a payment to his client of $500 000, who after all, as things stand, is due a payment of $1.4 million. 

19. I note Mr Batey’s concern that, at least in kind, one might ultimately arrive at a situation where the wife might find herself continuing to have the rooms, which she does not want, and that to that extent her appeal could be rendered nugatory.  But in my view, in the exercise of the Court’s discretion, taking account of all relevant matters, the husband should receive a reasonable part of the fruits of the judgment. 

20. I note the condition contained in the amended order for the stay sought by Mr Batey, that is, that the wife be at liberty to sell the medical rooms and that the proceeds of sale be distributed after paying the costs of sale, $250 000 to the wife and the balance be deposited into a controlled monies account.  The position under the current orders is that the wife is entitled to the superannuation.  It would be available, at least in my view, for the wife to approach this Court for some machinery orders to facilitate a sale of those rooms and some orders which would be able to be designed to ensure that she was able to achieve some funds from such a sale.

21. In all the circumstances, in my view it is appropriate to grant the stay on the basis of the condition that I have indicated in favour of the husband.  I do not propose to put in place the condition applied for by Mr Batey for the wife.  

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 1 April 2016.

Associate:     

Date:              21 June 2016