Debono and Debono (No. 3)

[2013] FamCA 872

FAMILY COURT OF AUSTRALIA

DEBONO & DEBONO (NO. 3) [2013] FamCA 872

FAMILY LAW – ORDERS – Enforcement of property orders – variation of machinery provisions of final orders.

Family Law Act 1975 (Cth)

APPLICANT: Ms Debono

RESPONDENT: Mr Debono

FILE NUMBER: MLC 7072 of 2011

DATE DELIVERED: 6 November 2013

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 30 October  2013; 1 November 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr P Davis

SOLICITOR FOR THE APPLICANT: Westminster Lawyers

COUNSEL FOR THE RESPONDENT: Mr Baker

SOLICITOR FOR THE RESPONDENT: George Liberogiannis

Orders

1. That the husband comply with paragraphs 2 and 26 of the orders made on 21 December 2012 by 4 pm on 7 November 2013.

2. That pursuant to s 106A of the Family Law Act 1975, if either party fails to comply with the provisions of these orders or any orders of 21 December 2012 (other than those altered by these orders) that require documents to be signed, a registrar being satisfied by affidavit sworn by the solicitor for the party claiming that non-compliance has occurred, may execute such document in the name of the party who has defaulted.

3. That each party by 4 pm on 7 November 2013 do all acts and things necessary to pay $200,000 held in their joint names in reduction of the line of credit held with the National Australia Bank.

4. That the husband and the wife do all acts and things in their capacities as directors of D Pty Ltd to sell to the wife the real property at … P Street, Suburb Q for $406,000 by the wife paying into the line of credit with the National Australia Bank $261,000.

5. That upon the payment of the $261,000 referred to in paragraph 4, the obligations of the husband to pay the wife’s costs of $145,000 costs required by the orders of 8 February 2013 are discharged.

6. That subject to paragraph 7 of these orders, in satisfaction of the orders made on 21 December 2012, by 4 pm on 22 November 2013, the wife sign all such documents as may be required to effect D Pty Ltd transferring to the husband its interest in the real property at … N Street, Suburb K.

7. Paragraph 6 of these orders shall only apply if:

   (a)By 4 pm on 15 November 2013, the husband provides written confirmation to the solicitors for the wife the name of the credit provider he proposes to utilise for the purposes of transferring his share in the National Australia Bank line of credit from … G Street, Suburb T to the property at Suburb K referred to in paragraph 6; and

   (b)The husband’s credit provider refinances his share of the National Australia Bank line of credit to the Suburb K property including the 55% shortfall contemplated by the orders of 21 December 2012.

   If by 4 pm on 29 November 2013, the husband cannot satisfy (a) and (b) hereof, the property at … N Street, Suburb K shall be sold as provided for in paragraph 8 of these orders.

8. For the purposes of paragraph 7 of these orders where a sale is required, the following shall apply. The husband and wife in their capacities as directors of D Pty Ltd shall sign all such documents as is necessary to give effect to the sale upon the following terms and conditions:

   (a)The husband shall have 5 working days to nominate 3 real estate agents within a 5 kilometre radius of the property and the wife shall choose one;

   (b)If the husband fails to forthwith nominate 3 agents, the wife shall choose an agent of her choice;

   (c)The wife shall have the conduct of the sale including the determination of such things as commissions and expenses;

   (d)The reserve price shall be determined by the nominated agent;

   (e)The property shall be sold by either auction or private treaty as may be agreed and failing agreement between the parties within 3 days of the agent being appointed, the wife shall determine the method of sale in consultation with the appointed agent;

   (f)Upon the settlement of the sale, the proceeds be applied as follows:

   (i)To pay the costs and commissions of the sale;

   (ii)To pay $145,000 into the line of credit referred to in these orders;

   (iii)To pay the outstanding sum of $17,354 into the said line of credit;

   (iv)To pay $89,709 (or thereabouts and such amount shall be determined between the parties with particularity from the 55 per cent/45 per cent provisions of the orders of 21 December 2012) being the husband’s obligation towards discharging his share of the said line of credit;

   (v)To pay any costs so ordered as a result of the proceedings filed 20 September 2013;

   (vi)To pay any interest calculated under the Family Law Rules 2004 on the outstanding order for costs made February 2013; and

   (vii)To pay the balance of the proceeds into an interest bearing account in the joint names of the parties pending further determination of the Court.

9. That the parties have liberty to apply to a judge in the judicial duty list for further orders.

10. Certify for the attendance of counsel.

11. Should any party seek costs arising out of these proceedings, such application shall be by written submission, properly endorsed as having been served and such application shall be filed no later than 6 December 2013 and thereafter, any response should be filed by no later than 4 pm on 13 December and the matter otherwise determined as soon as practicable thereafter in chambers.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Debono & Debono (No. 3) 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 7072 of 2011

Ms Debono

Applicant

And

Mr Debono

Respondent

REASONS FOR JUDGMENT

1. The enforcement of two orders of Young J were before the Court. The parties compromised some of the issues but those that were not are the focus of these reasons.

2. The first order was pronounced on 21 December 2012. For the purposes of my determination, its relevant provisions were as follows:

   THAT the property of the husband and wife be divided as to:

   55% to the wife;  and

   45% to the husband.

   THAT the husband forthwith sign all documents, do all acts and things and give all necessary and required instructions to transfer his right, title and interest in [G Street, Suburb T] (“the home”) to the sole name of the wife, such transfer to be at her expense.

   ……………

   THAT the husband pay and indemnify the wife for any interest, costs or penalties, if any, imposed by the Australian Taxation Office upon (a company of the parties) and arising from the lodgement of its 2012 taxation return.

   THAT if there is a shortfall ………………… and there remains a continuing liability to the Australian Taxation Office, for monies payable pursuant to (these  orders) then the further sum required is to be paid by the husband as to 55% thereof and by the wife as to the remaining 45% thereof.

   ………..

   THAT the husband and wife, as directors of (the relevant company), sign all documents and do all acts and things necessary to forthwith transfer to the sole name of the husband the property situate at and known as … [Suburb K]…., such property to be transferred at its agreed value of $615,000 and at the expense of the husband, if any, including the payment of any applicable capital gains tax.

   ………

   THAT the property situate at and known as ……… [Suburb Q] be forthwith sold, pursuant to the existing orders of the Court, and the net proceeds of sale after payment of all proper costs, expenses and commissions of and incidental to the sale, including any capital gains tax, be forthwith paid in partial discharge of the National Australia Bank Line of Credit facility.

   THAT upon the completion and lodgement of the 2011 and 2012 taxation returns and signed financial statements of (the relevant company), the wife is then to sign all necessary documents and do all acts and things required to forthwith resign as a director and to relinquish, in favour of the husband or his nominee, her shareholding therein ……...  

   ……………..

   THAT if there is a shortfall in the payment required to be made to the National Australia Bank in full discharge of the Line of Credit facility, after contributing thereto the net proceeds of sale of [Suburb Q] and (another property) (save for the monies reserved for payment of assessed taxation and interest, costs and penalties thereon) then the parties are responsible for the payment of the balance of that facility in the following percentages:

   55% by the husband; and

   45% by the wife.

   ………

   THAT all parties have twenty-eight (28) days in which to file written submissions in support of their applications for costs ………..

3. The second order which arose out of the first, was pronounced on 8 February 2013. It was largely uncontroversial before me but it still required the attendance at court to resolve. It provided as follows:

   1.THAT the husband pay or cause to be paid to the solicitors for the wife, costs in a sum of $145,000.

   2.THAT the payment be stayed for six (6) months, free of interest, and thereafter interest be paid, quarterly in arrears, at the rate prescribed from time to time within the Family Law Rules 2004 and on such part of the sum of $145,000 as remains outstanding from time to time.

4. The property dispute culminating in the first orders proceeded before Young J over 10 sitting days and each party was represented by senior counsel.

5. The application before me was filed on 20 September 2013 by the wife. It was supported by her affidavit and that of her solicitor Ms Morgan. It was returnable on 3 October 2013 which was a time when the husband was overseas. Over opposition from the wife, the hearing was adjourned to enable the husband to file answering material on the basis that it was asserted that the husband had changed solicitors. He also disputed the allegations of the wife that he had defaulted in his obligations under the orders.

6. The matter returned on 30 October when the husband again applied for an adjournment on the basis that he had only recently returned to Australia and wanted to file an affidavit responding to the allegations of the wife as to his supposed default. Again, over opposition, the hearing was adjourned and a costs order was made.

7. The husband filed an affidavit for the hearing on 1 November 2013. Although it had not been on the Court file when the hearing began, at the urging of the husband’s counsel, I have now read it.

8. The initial position of the wife altered in the intervening period after some common sense discussions between counsel. Those did not completely resolve the issues.

9. The parties required rulings in relation to the obligations of both parties so it is important that I set out their respective evidentiary positions.

10. The wife said that the husband had continued his “bold and ongoing non-compliance” since the December orders. She asserted that he had not complied with either the first or the second orders and showed a flagrant contempt for the system. The wife asserted the husband had lied in the trial and had then asserted to ASIC that she had resigned from her company directorship when she had not. Although the husband did not specifically refer to those assertions, I have presumed by his stance that he denied the first part. In respect of the former however, I made orders on the first return date requiring the husband to reinstate the wife with ASIC to her position within the company on the basis that she had not resigned.

11. In his oral submission, counsel for the husband said that the husband did not remove the wife as director but in any event, the ASIC removal was from 31 July 2013. That submission arose out of the following evidence of the husband:

    On 3 January 2013 I applied for the Applicant to be removed as a director of (the company) which would have then enabled me to transfer the [Suburb K] property without her assistance.

12. The husband then attached a “letter” from ASIC which confirmed that the “request” for the wife’s removal was “processed” on 30 July 2013. That was an extraordinary statement having regard to the fact that the same document confirmed the “form 484” had been received on 3 January 2013 and was “effective” from that date. Although the husband did not say so, I can take judicial notice of the fact that form 484 documents do not simply materialise but have to be lodged by the party seeking to alter the records.

13. More importantly, it was not his seeking to remove the wife that was the problem but rather that the document seemed to indicate that she had resigned when she had clearly not.

14. In the first orders of Young J, it was clear that the wife was not to resign until the completion and lodgement of the 2011 and 2012 taxation returns. It was not disputed by the husband that the triggering event had not occurred by 3 January 2013.

15. Lest one might think that this was some sort of administrative matter or misunderstanding on the part of the husband, I think the words of Young J have some significance. His Honour at paragraph 177 of his judgment said:

    The husband was not always a witness of truth.  His primary focus at or about separation had been to protect and secure all of his assets and post separation earnings and in so doing he entered into transactions which both deceived and misled the wife and her legal advisors.  He failed to disclose earnings and other monies and properties.  He did so in a background that he said he was wrongly advised that his post separation earnings would either be retained by him or considered separately, and in a different manner by the Court.  However at all times he was instructed to disclose his money, savings and assets and all proper documents and this he vigorously avoided.  Thus as a witness he was initially protecting his savings and income that had been flushed out by and was known to the wife and her solicitors.  Thus much of his evidence was unconvincing and misleading.

16. The statement just referred to not only has resonance in relation to credibility, it also highlights the extent to which the husband would go to secure his financial position vis-à-vis the wife.

17. To the extent that Young J had any doubt about the wife, bearing in mind the evidence of the husband to which I shall turn that the wife was not compliant with orders, his Honour said:

    Generally the wife was a witness of truth.  She was clearly affected by the emotional issues of the separation and the stress of the proceedings.  In particular she well understood that her savings and assets had been dissipated by the very substantial length and costs of these Court proceedings, extended by the significant investigations that she had undertaken to discovery financial facts and information that should have been, but were not, disclosed to her by the husband.

18. Although the reinstatement of the ASIC records was not agitated before me, the husband’s affidavit and the two passages from the judgment of Young J give some strength to the reasoning I used when ordering the husband to put the wife back into the recorded position with ASIC.

19. The wife went on in her affidavit to say that the husband had not transferred G Street to her. She said it secured a line of credit. The husband’s response was that he had never received any transfer documents. I think that this was a reference to a conveyancing practice rather than any legal position. The order said nothing about any practice. It was a personal obligation of the husband to forthwith sign any documents required to transfer the property to the wife. Whatever might be the practice, the obligation was immediate. The husband failed to meet that obligation.

20. Counsel for the husband said that the husband had always been ready to sign the documentation and was willing to do so if it was presented to him at the court. In my view, that submission ignored the immediacy of the obligation.

21. The wife then turned to a property in G Street which was sold by the parties. The mortgagee bank somehow mishandled the distribution of the funds and when it was brought to their attention that there was a need to rectify the situation, they required both parties to sign some documents. The husband refused. The bank rectified the position eventually without the husband’s assistance but there was an interest factor involved because the debt had not been properly reduced as Young J had anticipated and ordered. The husband’s response was that he had a belief that what the bank had done represented what Young J had ordered. He submitted that the wife had not suffered any “significant” loss but he did not address the question of the bank’s dealings to rectify what the wife complained about.

22. I have concluded that whether or not the wife suffered any loss is not to the point. The husband seemed to dismiss her concern that the order was not being followed. I accept the wife’s position on that and the dilemma is how to rectify the problem in relation to the lost interest because it seems that rental money from the Suburb K property continued to be paid into the line of credit and that was money to which the wife would have had little or no entitlement once the transfer of that property had occurred. I shall deal with that as part of the enforcement issue.

23. A significant dispute had raged about a property owned by the parties’ company. It was in Suburb Q. Young J’s order required that it be sold forthwith pursuant to the existing orders of the Court. Those earlier orders were consent orders and were made in February 2012. They provided that the parties were to sell Suburb Q on such terms and conditions as agreed and in default of agreement on such terms and conditions as nominated by the Administration Officer of O Homes. Leaving aside the delegation of power question which was not argued, it was the husband’s position that the Administration Officer had not been approached.

24. In a submission put on behalf of the husband, it was suggested that that absence of approach to the relevant officer precluded the wife doing what she was. It was the wife’s position that the property had been on the market for sale for 2 years and had not been sold. The wife referred to two appraisals she had obtained and offers that had been made. The highest amount this property would have reached would have been $406,000. Initially, the husband’s position was that he would buy it for that. His other position was that it should be auctioned. Having regard to the husband’s reticence in finalising the matter, I consider his position odd if there was now to be another delay for the purposes of attempting to sell the property.

25. I think it is important to mention that the orders of February 2012 could be altered because they were machinery orders rather than substantive orders (see Ravasini & Ravasini (1983) FLC 91-312, Slapp & Slapp (1989) FLC 92-022). Similarly the orders of Young J can be altered because they did not devolve an interest on a party but rather were designed to effect the alteration of the interests of the parties in other assets.

26. The sale of Suburb Q was to provide net proceeds after payment of expenses and commissions and capital gains tax. Those net proceeds were to then be paid in partial discharge of the National Australia Bank Line of Credit facility. The absence of a sale of this property was another dilemma because the line of credit was not being reduced and interest was accruing.

27. Suburb Q had been advertised at $460,000 to $480,000. That came from Young J’s reasoning where his Honour said:

    At the commencement of the hearing the parties agreed to the following current market valuations of property in Australia:

    …………..[Street, Suburb Q]  $485,000

28. In her evidence, the wife said that the husband had refused to reduce the price and when two offers were made which were much lower than the anticipated price, he would not agree.

29. At the hearing before me, the husband’s counsel announced that the husband would agree to the sale of Suburb Q to the wife at $406,000. However, that was not the end of the matter.

1. The wife conceded that she did not have the money to buy Suburb Q but she pointed to her entitlement to $145,000 costs under the second of Young J’s orders. She sought that that sum be offset.

2. The husband complained that the wife had not complied with the order of Young J that both parties as directors of (the relevant company), sign all documents and do all acts and things necessary to forthwith transfer Suburb K to the sole name of the husband at its agreed value of $615,000 at the expense of the husband, if any, including the payment of any applicable capital gains tax.

3. Here seemed to be the difficult position.

4. The wife’s position when the proceedings were filed was that Suburb K should be sold to resolve the impasse. Initially in the first hearing, I queried whether that was a machinery or substantive order, counsel for the wife submitted it was irrelevant because the husband had not complied with the Court’s orders and therefore, the wife’s application could be treated as an enforcement application and any entitlement he had in property could be pursued to satisfy the entitlement of the wife. That approach is correct.

5. The wife’s evidence was that with the impasse on Suburb Q, the unpaid costs order and the interest components outstanding, this was the only avenue of breaking the impasse. Here it is important to look at the husband’s evidence. He said that because of the drop in the value of Suburb Q, which was not what Young J had in mind, he would suffer significant detriment. He could not, in any event, meet the obligations in respect of SuburbQ unless he had the title to Suburb K so that he could use it for security for refinancing the line of credit at the National Australia Bank. It was common ground that Suburb K remains unencumbered.

6. The husband said that the wife had deliberately not complied with the orders of Young J about Suburb K. He pointed to a concerning letter written to his Honour’s Associate after the pronouncement of the orders indicating that if the wife was required to transfer Suburb K prior to compliance with all orders by the husband, there was a problem. The letter then said that there was a long history of the husband not complying with orders and a “real risk” that he would not comply. That letter was copied into the then solicitors for the husband. My understanding is that the wife’s solicitor did not receive a reply. If that was so, I am not surprised. It is quite inappropriate to approach the chambers of a judge in that fashion. To the extent that the orders of Young J were machinery orders, they could have been varied but to the extent that they were substantive, and it certainly appears on the face of the orders that Suburb K was such an alteration of interests, His Honour was functus officio. Copying the other party into the correspondence is not sufficient justification. If there is a controversy to be quelled, it should have been through application to the Court and based on evidence.

7. The point of this is that the husband took no steps to enforce his entitlement to Suburb K anyway. Suburb K was property owned by the company which had been joined as a party to the proceedings.

8. It was only in these proceedings that the issue of dealing with Suburb K arose again. The wife had sought its sale and the husband sought its transfer.

9. Counsel for the wife submitted that the order should be that the husband have 7 days to advise the wife of his nominated credit provider who would transfer the line of credit from G Street to Suburb K. The credit provider would need to confirm that the 55 per cent obligation of the husband under the shortfall foreshadowed by Young J and the sale of Suburb Q would be part of the refinancing deal. The wife’s position was that if that did not happen in 21 days, Suburb K should be sold and the domino effect would be the payment out of all of the various obligations.

10. Counsel for the husband submitted that the Court should not link the properties but simply order the wife to transfer Suburb K and then the husband would sort out the financing. It was the husband’s position that banks did not settle conveyancing arrangements in such a contemporaneous way. I found that submission perplexing because I would have thought most conveyancing transactions are conducted on such a basis.

11. The husband’s position would not be unreasonable if there was no doubt about the trust between the parties and an efficacious approach to sorting matters out. The Court is left with the resounding words of Young J, the evidence of the wife that the husband had obfuscated about Suburb Q (even factoring in that the price was going to be much less than anticipated by Young J) and the unsatisfactory evidence of the husband about the ASIC approach.

12. There are interlinked difficulties with offsetting interest in this case and unpaid payments but I do not consider it appropriate for the Court to delve into the intricacies of varying interest and rental computations. That is a job for the parties.

13. I find the wife’s approach is a sensible one. If the husband is genuinely concerned about his capacity to fund the refinancing, he has had almost a year to sort that out. He can either refinance or he cannot. His position about Suburb K was not reasonable in the face of the letter written by the wife’s solicitor to the Court. What he could have, and probably should have done, was to commence his own proceedings to obtain the transfer of Suburb K.

14. I find the most efficacious way to achieve the just and equitable outcome foreshadowed by Young J is to make the orders sought by the wife.

15. There was also an odd argument about the non-transfer by the husband to the wife of shares in Telstra. The husband again indicated the wife had the documents. Unlike conveyancing where documents had to be prepared, this is a situation where the corporation has to be involved and as I was informed the shares were jointly owned, the onus should be on the wife to get the scrip and transfer documents and the husband should sign them.

16. In the machinations, the husband has not paid the land tax, various municipal debts and there is the unpaid interest on the costs and other obligations. Those can be clearly seen in Young J’s orders to be the responsibility of the husband. To the extent that the husband might argue that the wife did not transfer Suburb K and therefore the interest continued to mount, I reject that argument on the basis that it was his obligation to resolve. In his evidence, the husband said that he had a belief about these sums being part of a statement of adjustment and the fact that the wife was residing in the property. I find that indicates that he did little to follow up on what was his personal obligation. He is the master of his own misfortune.

17. Each party agreed that there should be orders under s 106A of the Act to authorise the registrar to sign in the name of the defaulting party any document that is necessary to give effect to orders. Accordingly, I shall make that order in respect of the orders and separate orders.

18. If the parties cannot agree on the finer details, they will need to return to the court with some evidence as to how the formulaic approach of 55 per cent and 45 per cent is to be calculated.

19. Issues of costs can be dealt with on written submission.

I certify that the preceding forty (48) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 6 November 2013.

Associate: 

Date:  6 November 2013