DEMENY & OGDEN
[2021] FCCA 543
•22 March 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DEMENY & OGDEN | [2021] FCCA 543 |
| Catchwords: FAMILY LAW – Defacto relationship - where final orders were made in May 2014 – consideration of section 90SN(1) – final orders not complied with – application by defacto wife to enforce final orders – defacto husbands seeks that the final orders be varied –– order to vary final orders – all extant applications otherwise dismissed |
| Legislation Family Law Act 1975 (Cth), ss.79A(1), 90SN(1), 90SM |
| Cases cited: Apoda & Apoda and Anor [2013] FamCA 265 Cawthorn & Cawthorn [1998] FamCA 37 Gebert & Gebert [1990] FLC 92-137 Herold & Kay [2012] FMCAfam 1071 Lancer & Lancer [2008] FamCAFC 112 La Rocca & La Rocca (1991) FLC 92-222 Sanger & Sanger [2011] FamCAFC 210 Suiker & Suiker [1993] FLC 92-436 Ullrich & Kraft [2014] FamCA 266 |
| Applicant: | MS DEMENY |
| Respondent: | MR OGDEN |
| File Number: | ADC 1845 of 2013 |
| Judgment of: | Judge Kari |
| Hearing date: | 27 February 2020 28 February 2020 5 March 2020 |
| Date of Last Submission: | 25 November 2020 |
| Delivered at: | Adelaide |
| Delivered on: | 22 March 2021 |
REPRESENTATION
| Counsel for the Applicant: | Mr Tredrea |
| Solicitors for the Applicant: | Polson Legal |
| Counsel for the Respondent: | Ms Pyke QC |
| Solicitors for the Respondent: | Jordan & Fowler |
ORDERS
That the final order made 12 May 2014 be varied as follows:
(a)That paragraph 1.4 be varied to provide for the Applicant to make payment to the Respondent the sum of TWO HUNDRED AND TEN THOUSAND EIGHT HUNDRED AND SEVENTY SEVEN DOLLARS AND SIXTY THREE CENTS ($210,877.63) minus one half of the amount owing pursuant to the each of the following loans:
(i)Commonwealth Bank of Australia (“CBA”) Loan No. …06;
(ii)CBA Loan No. …08; and
(iii)CBA Loan No. …20 (“the Viridian Line of Credit”).
(b)That thereafter the Applicant discharge and fully and forever indemnify the Respondent with respect to the following loans:
(i)Commonwealth Bank of Australia (“CBA”) Loan No. …06;
(ii)CBA Loan No. …08; and
(iii)CBA Loan No. …20 (“the Viridian Line of Credit”).
That save and except as to any application as to costs, all extant applications otherwise be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Demeny & Ogden is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 1845 of 2013
| MS DEMENY |
Applicant
And
| MR ODGEN |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings relate to difficulties that have arisen in relation to final orders for property settlement made by consent between the parties on 12 May 2014 (“the final order”).
It is now almost seven years since those orders were made and nine years since the parties separated. Sadly for the parties they have been required to come back to court to obtain a resolution. However even that process has not been without difficulty and delay.
From the defacto wife’s perspective the final orders made are fulsome and she asks the Court to make ancillary orders to give effect to the terms of the final order made in May 2014.
From the defacto husband’s perspective the final orders are incapable of being completed and he asserts that in those circumstances the Court should vary those Orders.
I heard argument in this matter a year ago. However as a consequence of applications that were made following the argument, which were abandoned on 25 November 2020, I have been unable to deliver these reasons sooner.
Background
For present purposes the short background is as follows:
a)The defacto husband was born in 1954 and is 67 years of age.
b)The defacto wife was born in 1964 and she is 56 years of age.
c)The parties were in a de facto relationship from approximately 2000 until 28 September 2012. The duration of the relationship was 12 years.
d)There are no children of the relationship.
e)On 27 May 2013 the defacto husband commenced proceedings for the settlement of property as a result of the breakdown of the relationship.
f)The defacto wife filed a response to the application on 4 September 2013.
g)Ultimately the parties were able to resolve the question of property settlement between them amicably with the assistance of their legal representatives at a mediation that took place on 23 January 2014.
h)The terms of the agreement that the parties reached at mediation were crystallised into final orders for property settlement which were made by consent in open court before Judge Mead on 12 May 2014.
i)At the time that those Orders were made the defacto wife’s solicitor made submissions that “the settlement represents something like 50% division of the property”.
There is no dispute between the parties that since the making of those orders they have not been carried out in full.
The agreement that the parties reached
The parties agree that their mutual intention when they agreed to resolve the question of property settlement was to effect an equal division of their assets between them.
The parties also agree that the intention of the final order made on 12 May 2014 was to put in place an arrangement which saw a range of things occurring to effect that equal division, in summary as follows:
a)The defacto husband was to pay an initial settlement sum to the defacto wife in the amount of $15,455.
b)Four properties, two located in Australia and two located in United States of America were to be sold. While the sale process was to be agreed between the parties, the defacto wife was to have the conduct of the sales.
c)The proceeds from the sale of the four properties were to be applied to the repayment of selling costs, the discharge of the mortgages registered over the properties, and the payment of a loan to “Company B” in the name of the defacto wife.
d)That thereafter the remaining proceeds from the sale of the four properties would be divided in “equal shares” between the parties.
e)That within 28 days of the second of the two Australian properties being sold, the defacto husband would make a further payment to the defacto wife in the amount of $210,877.63 (“the settlement sum”).
f)The defacto husband was otherwise to retain property C “in consideration for payment” of the $210,877.63 to the defacto wife.
g)The defacto wife was to receive a superannuation split from the defacto husband’s superannuation entitlements held with “Super Fund D” in the amount of $26,000.
h)The parties were otherwise to retain certain other assets. In addition the payment of various debts was specified.
The terms of the final order
To understand the issues in dispute between the parties it is important to understand the exact terms of the final order that was made. They are set out hereunder in full.
1.In full and final settlement of all claims that either party may have against the other for the settlement of property either now or in the future and pursuant to Part VIIIAB of the Family Law Act 1975 (as amended) (“the Act”):-
1.1That forthwith upon the making of this Order the Applicant do pay the sum of FIFTEEN THOUSAND FOUR HUNDRED AND FORTY FIVE DOLLARS AND TWO CENTS ($15,445.02) to the Trust Account E for and on behalf of the Respondent.
1.2That the parties forthwith do all such things and sign all such documents necessary to effect the sale of the following properties by such selling agents as the parties may agree or in default as Ordered by this Honourable Court:-
1.2.1the property situated in Australia being the whole of the land comprised of and described in Lot …, Registered Plan …, Title Reference … (“property F”);
1.2.2the property situated in Australia being the whole of the land comprised of and described in Lot …, Registered Plan …, Title Reference … (“property G”);
1.2.3the property situated in United States of America (“property H”);
1.2.4the property situated in, United States of America (“property J”);
PROVIDED THAT:-
1.2.5the parties shall accept all reasonable recommendations of the selling agents in relation to the process of sale, including the marketing of the said properties, the method of sale and the ultimate sale prices;
1.2.6the Respondent shall have the conduct of the sale of the said properties for and on behalf of the parties in a timely fashion on condition that if the sale occurs by way of private treaty, then the ultimate sale price shall be agreed upon by both parties;
1.2.7in the event that any of the said properties are sold by auction the reserve price shall be agreed upon by both parties in consultation with the selling agent and in default of agreement, as fixed by a jointly appointed licensed valuer or as Ordered by this Honourable Court.
1.3That the proceeds of sale of each of the properties referred to at paragraph 1.2 herein shall be applied as follows:-
1.3.1in payment of all estate agent and conveyancing fees and disbursements necessary to effect the sale of the said properties;
1.3.2to repay any loan which is secured by registered mortgage over whichever of the said properties is sold and the balance of the proceeds of sale (if any) shall then be applied to discharge each of the following loans:-
1.3.2.1Commonwealth Bank of Australia (“CBA”) Loan No. …06;
1.3.2.2CBA Loan No. …00;
1.3.2.3CBA Loan No. …08;
1.3.2.4CBA Loan No. …20 (“the Viridian Line of Credit”);
1.3.3in payment of all monies required to discharge the debt to Company B in the Respondent’s sole name, purchase account number …36;
1.3.4the balance then remaining to the parties in equal shares.
1.4That within twenty eight (28) days of the sale of the last of the two (2) properties situated in Australia pursuant to paragraph 1.2 herein the Applicant shall pay the sum of TWO HUNDRED AND TEN THOUSAND EIGHT HUNDRED AND SEVENTY SEVEN DOLLARS AND SIXTY THREE CENTS ($210,877.63) to the Trust Account E for and on behalf of the Respondent.
1.5That in consideration for payment of the sum referred to at paragraph 1.4 herein to the Respondent, the Applicant shall be entitled to retain all his estate and interest both at law and in equity in property C in the State of South Australia being the whole of the land comprised of and described in Certificate of Title Register Book Volume … Folio .. (“the property C”) to the intent that the Applicant shall thereafter be entitled to same for his sole use and benefit absolutely PROVIDED THAT the Applicant shall pay all mortgage installments, rates, taxes and other like outgoings of and incidental to property C whether past, present or future and shall indemnify the Respondent in relation to same.
1.6That should the Applicant default in payment of the sums referred to at paragraphs 1.1 and 1.4 herein:-
1.6.1the Applicant shall pay to the Respondent interest upon the said sums or such part thereof as shall remain unpaid calculated in accordance with the Federal Circuit Rules 2001 from the date payment falls due until paid in full; and
1.6.2if the Applicant shall remain in default for a period of two (2) calendar months the property C shall be placed on the market for sale upon such terms and conditions as shall be agreed between the parties and in default of agreement as Ordered by this Honourable Court and from the net proceeds of such sale the Respondent shall receive the said sum or such part thereof as remains outstanding with interest and the balance then remaining shall be paid to the Applicant.
1.7That the parties forthwith do all such things and sign all such documents necessary for any and all future rental income received from leasing the property F and the property G to be deposited direct into the the Viridian Line of Credit or such other of the debts referred to at paragraph 1.3.2 herein as shall remain outstanding, from time to time.
1.8That upon compliance with paragraph 1.7 herein, the parties forthwith do all such things and sign all such documents necessary to close the following joint banking accounts with the CBA:-
1.8.1CBA Account No. ...54;
1.8.2CBA Account No. …17;
AND THAT the account balances at the date of closure shall be paid into the Viridian Line of Credit.
1.9That CBA Account No. …10 be closed upon payment of the Company B debt referred to at paragraph 1.3.3 herein.
1.10That pending the sale of the property H and the property J, the parties shall receive all rental income from leasing the said properties into their joint banking account with Bank K, account number …97 (“the Bank K account”) PROVIDED THAT:-
1.10.1if at any time the Bank K account balance exceeds SIX THOUSAND FIVE HUNDRED DOLLARS ($6,500.00), then the sum of ONE THOUSAND FIVE HUNDRED DOLLARS ($1,500.00) shall be paid into the Viridian Line of Credit or such other of the debts referred to at paragraph 1.3.2 herein as shall remain outstanding, from time to time AND THAT upon repayment of each of those debts in full, the sum of ONE THOUSAND FIVE HUNDRED DOLLARS ($1,500.00) shall be released to the parties in equal shares from the Bank K account pending the sale of the property H and the property J;
1.10.2upon the sale of the sale of the last of the two (2) properties situated in the United States of America pursuant to paragraph 1.2 herein the parties shall do all such things and sign all such documents necessary to close the Bank K account AND THAT the account balance at the date of closure shall be distributed equally between the parties.
1.11That upon the sale of the last of the two (2) properties situated in the United States of America pursuant to paragraph 1.2 herein the parties shall do all such things and sign all such documents necessary to wind up the Trust L and to wind up company M at their joint and equal expense.
1.12That the parties forthwith do all such things and sign all such documents necessary to wind up the Trust N at their joint and equal expense.
1.13That the parties forthwith do all such things and sign all such documents necessary to:-
1.13.1transfer the motor vehicle O registered number ”…” into the Applicant’s sole name to the intent that the Applicant shall thereafter be entitled to same for his sole use and benefit free of any claim or demand by the Respondent;
1.13.2transfer the motor vehicle P registered number ”…” into the Respondent’s sole name to the intent that the Respondent shall thereafter be entitled to same for her sole use and benefit free of any claim or demand by the Applicant.
1.14That in relation to the Applicant’s superannuation entitlements with Super Fund D Scheme member number …55 (“Super Fund D”):-
1.14.1the Court allocate, for the purposes of section 90MT(4) of the Family Law Act 1975 (as amended) (“the Act”), a base amount TWENTY SIX THOUSAND DOLLARS ($26,000.00) to the Respondent from the Applicant’s interest in the Super Fund D;
1.14.2in accordance with section 90MT(1)(a) of the Act whenever a splittable payment within the meaning of Section 90ME of the Act becomes payable to or on behalf of the Applicant from his interest in Super Fund D, the Respondent is entitled to be paid by the trustee of Super Fund D the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) using a base amount of TWENTY SIX THOUSAND DOLLARS ($26,000.00) and there shall be a corresponding reduction in the entitlement the Applicant would have had but for this Order;
1.14.3that paragraph 1.14 herein shall take effect from the operative time being the fourth business day after the day this Order is served upon the trustee of the Super Fund D;
1.14.4having been afforded procedural fairness the trustee of the Super Fund D shall be bound to observe the provisions of paragraph 1.14 herein, the Act and the Regulations;
1.14.5that the parties shall share equally in any fees charged by the trustee of the Super Fund D in administering the payment split pursuant to paragraph 1.14 herein.
1.15That within seven (7) days of the date of this Order the Respondent shall:-
1.15.1serve a copy of this Order upon the trustee of the Super Fund D; and
1.15.2give notice in writing to the trustee of the Super Fund D pursuant to Section 72 of the Regulations.
1.16That subject to the preceding paragraphs the Applicant shall retain for his sole use and benefit absolutely, free of any claim or demand by the Respondent:-
1.16.1property C;
1.16.2all his estate and interest at law and in equity including but not limited to all intellectual property in works created by him;
1.16.3motor vehicle O ;
1.16.4all items of personalty, jewellery, furniture, household goods and effects as may be presently in his possession;
1.16.5any monies, savings, shares and investments including life assurance or superannuation benefits in his name or due or accruing to him and to which he may become entitled;
1.16.6all benefits, rights or entitlements due or accruing to him or which may invest in him under any trust or deceased estate;
1.16.7all entitlements or benefits due or accruing to him by reason of or arising out of his employment including long service leave and benefits paid or to be paid in respect of resignation, retrenchment, dismissal or separation from his employment;
1.16.8all other items of realty or personalty as may be presently in his possession, but not otherwise specified herein.
1.17That subject to the preceding paragraphs the Respondent shall retain for her sole use and benefit absolutely, free of any claim or demand by the Applicant:-
1.17.1all items of personalty, jewellery, furniture, household goods and effects as may be presently in her possession;
1.17.2motor vehicle P;
1.17.3any monies, savings, shares and investments including life assurance or superannuation benefits in her name or due or accruing to her and to which she may become entitled;
1.17.4all benefits, rights or entitlements due or accruing to her or which may invest in her under any trust or deceased estate;
1.17.5all entitlements or benefits due or accruing to her by reason of or arising out of her employment including long service leave and benefits paid or to be paid in respect of resignation, retrenchment, dismissal or separation from her employment;
1.17.6all other items of realty or personalty as may be presently in her possession, but not otherwise specified herein.
1.18That the Applicant shall discharge without calling upon the Respondent to contribute thereto the Commonwealth Bank of Australia MasterCard account number …68 and indemnify the Respondent in relation to same.
1.19That the Respondent shall discharge without calling upon the Applicant to contribute thereto the Westpac Bank MasterCard account number …23 and indemnify the Applicant in relation to same.
1.20That the Respondent shall forthwith close the Vodafone account which remains active in relation to the Respondent’s mobile phone and shall pay the balance (if any) owing in relation to that account at the date of closure.
1.21That unless otherwise specified in this Order hereafter each party shall discharge without calling upon the other party to contribute thereto the several debts contracted for or by them and henceforth the parties are restrained and an injunction hereby granted restraining each of them from pledging the credit of the other.
1.22That subject to the preceding paragraphs each party shall be solely liable for and indemnify the other party against any liability encumbering any item of property to which they are entitled pursuant to the terms of this Order.
1.23That each party shall bear their own Capital Gains Tax liability as assessed by the Australian Tax Office consequent of the disposal of any property of the parties.
1.24That each party do all such acts and things and sign all such documents necessary to give effect to the terms of this Order including a Statutory Declaration for the purposes of Revenue SA determining the taxation liabilities of either party.
1.25That each party do pay their own legal costs of and incidental to these proceedings.
1.26That unless otherwise specified in this Order the cost of any transfer or assignment or consequential disbursement necessary to give effect to the terms of this Order shall be paid by the transferee or assignee in each case.
1.27That each party do hereby release and discharge the other party from liability for any claim that they may have against the other in respect of:-
1.27.1any legal or equitable interest in property either now or hereafter owned by that party; and
1.27.2any claim for legal costs against that party in these proceedings.
1.28That in the event of a failure or neglect by either party to sign any document or Memorandum of Transfer or to do anything necessary to give effect to this Order then upon proof by Affidavit of such failure or neglect a Registrar of this Honorable Court is hereby empowered to sign any necessary document or Memorandum of Transfer or to do such thing in the name of the party who has failed or neglected to do so in order to give effect to the terms of this Order.
1.29That a party in default of this Order shall pay the other party’s costs as agreed or as taxed.
1.30That the Applicant shall make payments into the Viridian Line of Credit of THREE HUNDRED AND FIFTEEN DOLLARS ($315.00) per fortnight from the date hereof and until he complies with paragraph 1.4 of this Order and thereafter at the minimum monthly rate required by the Commonwealth Bank of Australia until the settlement of the sale of the parties’ properties in the United States of America.
2.That all extant Applications do otherwise stand dismissed as finalised.
The events since the making of the final order
After the final order was made, the parties went about complying with the terms of the order.
The parties agree that in compliance with the final order:
a)The defacto husband remained in property C and that he paid outgoings for that property in accordance with paragraph 1.5 of the final order.
b)The defacto husband otherwise complied with the final order and made payments as follows:
i)The payment of $15,445.02 to the defacto wife pursuant to paragraph 1.1 of the order.
ii)The payment of $315 per fortnight towards the Viridian Line of Credit pursuant to paragraph 1.30 of the final order.
c)The parties directed the rental income from the two properties in United States of America towards a joint Bank K Account, and thereafter applied the funds in that account as provided for in paragraph 1.10 of the final order.
d)That all four properties intended to be sold were sold as follows:
i)The property G in Australia (“property G”) was sold for $150,000 and settlement took place in February 2016.
ii)The property in the, USA (“property J”), was sold for $85,800 and settlement took place in April 2016.
iii)The property in Australia (“property F”), was sold for $80,000 and settlement took place in July 2018.
iv)The property in the USA (“property H”) was sold for $64,395.77 and settlement took place in June 2019.
The parties also agree that the following additional events have occurred:
a)That following the sale of the four properties, the funds that were realised from those sales were insufficient to discharge the loans that were registered over each of the four properties (“the four loans”). This resulted in a shortfall. At the time the wife commenced these proceedings the shortfall was approximately $174,000 prior to the sale of the property H. The shortfall was reduced to $110,223.73 after the sale of the property H.
b)The defacto husband has not made the payment of the settlement sum to the defacto wife in the amount of $210,877.63, which was to have been paid by him in August 2018 (being 28 days after the settlement of the sale of the property F, which settled in July 2018).
On 5 September 2018, the defacto wife filed an Application in a Case in which she sought orders as follows:
(1)That Mr Ogden pay to Polson Legal Trust Account on behalf of Ms Demeny the sum of $210,877.36 plus interest calculated from 21st August 2018 to the date of payment and in accordance with the provisions of the terms of an Order of this Court and dated 12 May 2014.
(2)If the payment specified in clause 1 is not made on or before 21st October 2018 then and in such a case a Registrar of this Court shall be authorised to take all steps and sign all such documents as shall be necessary to place property C being the whole of the land comprised in Certificate of Title Register Book Volume … Folio … upon the market for sale with Real Estate Agent Q and upon such terms and condition as such real estate agent shall recommend.
(3)That Mr Ogden pay the costs of an incidental to this Application.
The affidavit that the defacto wife filed in support of that Application was simple and brief. The defacto wife highlighted in that affidavit that the defacto husband had not complied with the terms of the final order by making the payment to her of $210,877.63 within 28 days of the sale of the second Australian property.
From the defacto husband’s perspective, the defacto wife’s application and affidavit filed in support were filed prematurely because the proceedings were commenced by her before the final of the four properties had been sold; that property being the property H, which did not settle until June 2019. The defacto husband argued before me that this created a range of issues. In circumstances where that property has now sold, this is no longer an issue that needs to be considered.
However of more relevance and significance for present purposes, from the defacto husband’s perspective, when the defacto wife commenced these proceedings she failed to identify that:
a)Each of the four loans for the four properties were cross-secured not only against each other, but importantly against property C that he was to retain pursuant to the final order.
b)When property G and the property J were sold the proceeds from each were applied to the four loans, with only one loan (CBA Loan No. ...00) being discharged in full. This meant that there were no surplus funds to distribute, and that the remaining loans had substantial balances.
c)The properties in Australia each sold in a declining real estate market for less than the parties had anticipated when the final order was made:
i)Property G sold for $150,000 as against the anticipated $180,000-$200,000.
ii)Property F sold for $80,000 as against the anticipated $180,000-$200,000.
d)There was a significant shortfall in the amounts owing on three of the loans referred to in paragraph 1.3.2 of the final order.
From the defacto husband’s perspective, the impact of all of this is that because there are remaining balances on three of the four loans for which property C acts as cross security, if he was to borrow or sell property C to make payment of the settlement sum to the defacto wife, he would also need to personally pay the amounts owing on the remaining three of the four loans referred to in paragraph 1.3.2 of the final order.
The defacto husband asserts that it was neither agreed nor intended by the parties that he would be responsible for any shortfall in the loans referred to in paragraph 1.3.2 of the final order. It is the defacto husband’s position that the possibility of a shortfall was not contemplated by either of the parties when the final order was made. He asserts that both he and the defacto wife always anticipated that there would not only be sufficient funds from the sale of the four properties to discharge all four loans, but that in addition there would be surplus funds to distribute between them.
The defacto husband further asserts that as a consequence of the shortfall, if the final order were to be maintained, it would not result in the equal division that he and the defacto wife intended and agreed.
There are some further issues in dispute between the parties, including:
a)An assertion on the defacto husband’s part that the defacto wife dragged her feet in selling the four properties and that in doing so she did not comply with paragraph 1.2.6 of the final order which required her to sell the four properties in a “timely fashion”.
b)An assertion on the defacto wife’s part that the defacto husband essentially wanted nothing to do with the sale of the four properties.
c)An assertion on the defacto wife’s part that the defacto husband has had a significant financial benefit since the final order was made as he has resided in property C and only had to service one of the loans at the rate of $315 per week, whereas she has been stuck in rental accommodation paying far more than $315 per week while she waits for the payment of the settlement sum provided for in paragraph 1.4 of the final order.
The Application’s before the Court
The defacto husband filed a Response to the defacto wife’s Application in a Case on 2 November 2018.
The applications that are now before the Court are the defacto wife’s Amended Application in a Case filed 18 February 2019, and the defacto husband’s Amended Response filed 25 November 2019.
By her Amended Application in a Case filed 18 February 2019 the Defacto wife seeks the following orders:
(3)The land known as Property C comprised and described in Certificate of Title Register Book Volume … Folio … (“the land”) shall forthwith be placed on the market for sale with Real Estate Agent Q (the “selling agent”), and sold by public auction, with such sale being conducted in such manner and upon such terms and conditions as the said selling agent shall recommend.
(4)The parties shall take all steps and sign all documents necessary to place the land for sale with the selling agent, and to give effect to the sale of the land, and should either party default in respect to any such requirement, a Registrar of this Court shall be authorised to take such steps and sign all such documents, in lieu of the defaulting party.
(5)The parties shall be free to bid at the auction in respect to the sale of the land.
(6)The net proceeds of the sale of the land after deduction of all proper expenses and the payment of the amounts due under any mortgage secured over the land shall be paid to the parties as follows:
(6.1) The amount of $210,877.63 to the Respondent defacto wife, by cheque made payable to the trust account of the Respondent’s defacto wife’s solicitors;
(6.2)The further amount of interest on the amount of $210,877.63, calculated by way of simple interest at the rate of 7.5% per annum as from 22 August 2018 until the date of payment, by cheque made payable to the trust account of the Respondent defacto wife’s solicitors; and
(6.3)The balance to the Applicant defacto husband.
(7)A sealed copy of this order shall be served by the Respondent defacto wife upon the selling agent and upon any such other person who may be holding the proceeds of the sale of the land.
(8)In default of compliance with these orders, and in any event should the land not be sold within nine (9) months of the date of these orders, either party may apply to this Honourable Court for further orders and directions concerning the sale of the land, the disbursement of the net proceeds of sale, and costs.
(9)That Mr Ogden pay the costs of an incidental to this Application.
By his Amended Response filed 25 November 2019 the defacto husband seeks the following orders:
(1)That the applicant’s Amended Application in a case filed 18 February 2019 be dismissed.
(2)That the parties do contribute in equal shares to payment in full of all sums that remain owing with respect to the loans set out in paragraph 1.3.2 of the final orders (respectively “the applicant’s loan share” and the “respondent’s loan share”).
(3)That paragraph 1.4 of the final orders and Order 2 above be given effect as follows:
(a)By way of the respondent paying both the respondent’s loan share and, on behalf of the applicant, the applicant’s loan share; and
(b)By way of the respondent paying to the applicant a sum equal to the sum due to the respondent pursuant to paragraph 1.4 of the final orders, less the sum of the applicant’s loan share.
(4)That to the extent necessary to give effect to the above, the Orders of 12 May 2014 be varied pursuant to s79A of the Family Law Act 1975.
(5)That the applicant do pay the respondent’s costs on an indemnity basis or such other basis as the Court sees fit.
During oral submissions before me, Counsel for the defacto husband acknowledged that because the parties were not married, it is not s79A of the Act that applies, but rather s90SN. No issue was taken by Counsel for the defacto wife as to this correction, presumably in circumstances where the provisions of s79A and s90SN are in effect identical in their terms. Likely out of habit, both Counsel referred to s79A throughout their submissions rather than referring to s90SN. I make no criticism of that having occurred, albeit that I acknowledge that jurisdiction arises pursuant to s90SN in the present case.
As can be seen from the orders that the parties now seek:
a)The defacto wife’s position is effectively that the final order be given full force and effect, and she asks the court to make orders to enforce the terms of the final order.
b)The defacto husband’s position is that the final order should be varied pursuant to s90SN. In particular the defacto husband asserts that:
i)That as a consequence of circumstances unanticipated by the parties at the time that they agreed the final order there has been a miscarriage of justice, as provided for in s90SN(1)(a).
ii)There are circumstances that have arisen since the making of the final order that make it impracticable for part of the order to be carried out, as provided for in s90SN(1)(b); and
iii)That the defacto wife defaulted in carrying out her obligation pursuant to the final order to sell the four properties in a “timely fashion”, and as a consequence of the issues that have flowed from that default it would be just and equitable to vary the final order as provided for in s90SN(1)(c).
Approach
I am mindful that the defacto wife is the applicant in these proceedings and that she is pressing for the final order to be maintained and enforced.
However in circumstances where the defacto husband puts in issue whether the final order itself should be varied, in my view it is necessary to determine the s90SN question first.
If it is ultimately my finding that the final order should not be varied pursuant to s90SN, then it follows that the appropriate next step is to consider making the orders that have been sought by the defacto wife as and by way of enforcement.
If however, I consider that the final order should be varied, then the need to consider any orders by way of enforcement becomes otiose.
In my consideration of whether the final order should be varied pursuant to s90SN, the parties appropriately referred me to, and I have considered those authorities that relate to s79A.
Should the final order be varied pursuant to section 90SN?
The defacto husband has grounded his application to vary the final order on three grounds set out in s90SN, namely s90SN(1)(a), s90SN(1)(b) and s90SN(1)(c).
The invoked subsections of s90SN provide as follows:
(1) Where, on application by a person affected by an order made by a court under section 90SM in property settlement proceedings, the court is satisfied that:
(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b) in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out;
(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order;
(d) …; or
(e) …;
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 90SM in substitution for the order so set aside.
By his reliance on s90SN, the defacto husband bears the burden of establishing that the grounds he contends are made out.
As identified by Bryant CJ in Lancer & Lancer[1], section 79A requires satisfaction of two aspects:
a)“… One is essentially a fact-finding exercise, that is whether the applicant can establish on the relevant evidentiary standard, namely the balance of probabilities, that there has been a miscarriage of justice by reason of one of the matters set out; in this case, suppression of evidence. That is often referred to as the threshold test.”
b)“The second part which follows from a positive finding about the first is a discretionary one, namely that the court may in its discretion vary or set aside the original order and, if appropriate, make another order…”
[1] Lancer & Lancer [2008] FamCAFC 112 at 34-35.
While Her Honour’s comments with respect to the first aspect were directed to s79A(1)(a), the same approach applies to any of the grounds provided for in s79A(1) and correspondingly s90SN(1). Firstly a determination of the threshold question as to whether a ground in s79A(1)/s90SN(1) is made out, and secondly whether the court should exercise discretion to vary or set the order aside.
It is also important to point out at this juncture, that unlike s79A(1)(c)/s90SN(1)(c); s79A(1)(a)/s90SN(1)(a) and s79A(1)(b)/s90SN(1)(b) do not require the court to consider whether it is “just and equitable” to vary or set aside the order.
Has there been a miscarriage of justice - s90SN(1)(a)?
In order to consider whether there has been a miscarriage of justice within the meaning of s90SN(1)(a) it is important to understand the basis upon which the defacto husband argues that ground. In this instance, the defacto husband advances his case on the basis that “any other circumstance” applies.
A “miscarriage of justice” as a consequence of “any other circumstance” has previously been considered and interpreted to have a wide meaning. As identified by the Full Court in Gebert & Gebert[2]:
“We consider that the words ''any other circumstance'' appearing in sec. 79A(1)(a) whilst not to be read ejusdem generis with fraud duress suppression of evidence or the giving of false evidence, are intended to cover other situations where, for one reason or another, a miscarriage of justice has occurred. See McKenna v. McKenna (1971) 18 F.L.R. 15 at p. 18; Holland and Holland (supra) at p. 77,341. The important matter that must be established for an application under this part of the section to succeed is that there has been a miscarriage of justice. It is, we think, clear as counsel for the appellant argued that the words ''miscarriage of justice'' should not be given a restrictive meaning, particularly when coupled with the words ''any other circumstance'' and that justice means justice according to law. See Kokl and Kokl (1981) FLC 91-078 at p. 76,557.”
[2] Gebert & Gebert [1990] FLC 92-137 at 77,935.
This is a view that the Full Court in Suiker & Suiker[3] agreed, commenting:
“As regards the view expressed in Clifton and Stuart that the expression “miscarriage of justice” “relates to the integrity of the judicial process” we are of the opinion that this passage was not intended to refer only to the hearing in the Family Court, but that the expression “judicial process” can refer to a variety of matters and circumstances which has an influence on the outcome of the litigation. It is neither necessary nor desirable to attempt to define the matters which may amount to a miscarriage of justice by reason of any other circumstance in the relevant sense.”
[3] Suiker & Suiker [1993] FLC 92-436 at 80,472.
In considering this very issue, Justice Kent in Ullrich & Kraft[4] considered it appropriate to look at the context in which a consent order was made, and in particular the submissions made in support of the proposed consent order so as to understand the outcome the parties intended to achieve. His Honour took this approach as he considered that fundamental to the question of whether there had been a miscarriage of justice at the time that an order was made, was the need to consider why a court making an order by consent had been satisfied that the proposed orders were “just and equitable” as required by s79(2). The miscarriage of justice occurring if “because of the manner in which the subject consent orders were framed or constructed”[5] the orders did not achieve their intended purpose.
[4] Ullrich & Kraft [2014] FamCA 266.
[5] Ibid at 72.
In Ullrich & Kraft[6], His Honour ultimately considered that there had been a miscarriage of justice as a consequence of “any other circumstance” in circumstances where:
a)The court was told that the intention of the parties was to effect a 55/45 percent division in favour of the defacto husband; and
b)This intended outcome was not achieved as a consequence of the way that the orders were crafted; by prescribing a fixed sum payable to the defacto wife rather than making it a percentage based payment and as a consequence of the way taxation issues were dealt with in the order.
[6] [2014] FamCA 266.
Ms Pyke QC on behalf of the defacto husband advanced the same proposition that the court should have regard to the intention of the parties when the final order was made; albeit not with reference to Ullrich & Kraft[7] but with reference to the discussion of circumstances surrounding the making of a consent order by Justice Le Poer Trench in Apoda & Apoda and Anor[8]. In her submissions Ms Pyke QC highlighted that in the present circumstances the parties had mutually submitted to Judge Mead that the proposed orders represented “something like a 50 percent division of the property”[9], which her Honour accepted would affect “justice and equity between the parties”.[10] However, as a result of circumstances unforeseen by either of the legal representatives when drafting the orders, the final order no longer achieves that mutually desired outcome.
[7] [2014] FamCA 266.
[8] Apoda & Apoda and Anor [2013] FamCA 265 at 42.
[9] Transcript of hearing before Judge Mead dated12 May 2014 , page 2, line 18.
[10] Transcript of hearing before Judge Mead dated 12 May 2014, page 3, line 35.
The drafting flaw from the defacto husband’s perspective is that there was an omission in the drafting of the orders because there is no provision to deal with how any shortfall in the four loans was to be paid if that situation arose. The husband asserted that this omission arose as neither he nor the defacto wife ever contemplated that there would ever be anything other than a surplus of funds from the sale of the four properties and the discharge of the four loans. The husband’s position is that the existence of paragraph 1.3.4 of the final order underscores the fact that the parties only ever contemplated that there would be sufficient funds to discharge all of the four loans, but that in addition there would be surplus funds to distribute equally between them.
The husband asserts that the failure to deal with the shortfall has resulted in a miscarriage of justice, because the effect of the order is now such that the desired equal division is not achieved.
From the defacto wife’s perspective, she does not dispute that the intention of the parties was to implement an equal division of their property. However Counsel for the defacto wife asserts that the “plain wording” of paragraph 1.5 of the final order “reveals that it was contemplated by the parties that after the defacto husband’s payment of $210,877.63 to the defacto wife” [11] there may still have been amounts outstanding and owing on one or more of the four loans.
[11] Outline of Submissions of the Applicant Defacto Wife dated 21 February 2020, paragraph 18.
While this argument was advanced by the defacto wife’s Counsel, I have difficulty accepting this submission in light of the defacto wife’s oral evidence during cross examination by the defacto husband’s Counsel, Ms Pyke QC. I set out hereunder the relevant portions of her evidence[12]:
MS PYKE QC: Yes. Right. Now, there’s something I’m perhaps quite clear about, and it’s this. Are you saying that when you consented to these orders back on the – 2014, the orders for property settlement, that you had contemplated that there may be a shortfall between the amount owing on the joint debts and the amount that would be received from the, I will call them the investment properties, the investment properties?
THE DEFACTO WIFE: At that time, no.
MS PYKE QC: And do you agree with me that it was the understanding, or the belief of both you and the defacto husband, that there should be, and I’m putting it in a quote, but “more than enough equity in the properties to discharge the joint loan”?
THE DEFACTO WIFE: Yes.
MS PYKE QC: And that was the premise upon which the orders were made?
THE DEFACTO WIFE: Yes.
MS PYKE QC: And that the orders indeed provided for the sale of all of the investment properties, the payment out of the joint loans and the balance to be divided between you?
THE DEFACTO WIFE: Yes.
[12] Transcript of hearing dated 27 February 2020, page 16, line 28-42.
In his submissions, the defacto wife’s Counsel did not shy away from her oral evidence, however he submitted that while this appeared to be what the defacto wife understood, what was more important was what the legal advisors understood; submitting that defacto wife’s legal advisors “contemplated a shortfall in respect of the outstanding loan balances”.[13]
[13] Transcript of hearing dated 27 February 2020, page 53, line 46.
Prima facie this is an argument that I have some difficulty with. No evidence was lead on behalf of the defacto wife by her former solicitor, that a shortfall had been contemplated in the drafting of the final order.
Be that as it may, the wife’s counsel submitted that the wording of the final order made it clear that the wife’s legal advisors had turned their mind to the possibility of a shortfall as evidenced by the wording of paragraph 1.5 of the final order, and in particular the inclusion of the words “mortgage instalments” on the third to last line of that paragraph.
Central to the defacto wife’s argument in this regard is an interpretation of the words “mortgage instalments” in the context of paragraph 1.5 of the final order. The defacto wife’s Counsel asserted that the term includes not only periodic instalment payments, but also capital payments towards the principal sum owed.
I have difficulty with this interpretation of the term “instalment”. The word “instalment” is defined in the Oxford English Dictionary[14] as follows:
“the arrangement of the payment of a sum of money in fixed portions at fixed times; Each of the several parts, successively falling due of a sum payable”
[14] Clarendon Press Oxford, The Shorter Oxford English Dictionary, vol 1 (1993), 1381.
This definition does not lend itself to an interpretation that what was intended was the payment of the whole of the principal sum, but rather instalments of the principal sum to be paid over a specified period of time.
Moreover, in the context of paragraph 1.5 of the final order the term “mortgage instalment” is given better understanding when the entire context of the proviso provided for in that paragraph is read together, namely:
“PROVIDED THAT the Applicant shall pay all mortgage instalments, rates, taxes and like outgoings of an incidental to property C whether past, present or future…” (my emphasis added).
In my view the items encompassed by the words “like outgoings” makes it clear that what was intended was the regular periodic payments and not the payment of any principal or capital mortgage amount.
In my view, when all of these factors are considered together, there can be no doubt that neither the parties, nor their legal advisors contemplated that there would be a shortfall in the amount required to discharge all of the four loans and they accordingly did not provide for that possibility when they drafted the orders.
While it appears that neither Judge Mead in 2014, nor I were provided a schedule of assets and liabilities upon which the calculations were completed in 2014 to arrive at an understanding that the final order effected an equal division between the parties, I do not think that it is unreasonable for me to infer that at the time the orders were made (on the expectation that all four loans would be paid and there would be surplus to divide):
a)The parties were satisfied that after the repayment of all of the debts (including those the parties were each separately responsible for), those assets that they were each to otherwise retain effected an equal division between them, and that this was factored into the calculation of the total settlement sum to be paid to the defacto wife; and
b)That if there was a shortfall in the ability to discharge all four loans, then the only way to have achieved equality between the parties was to have shared that shortfall, much in the same manner as any surplus was to have been shared.
In light of this, from my perspective the mischief created by drafting an order which does not contemplate a shortfall is that the orders do not effect an equal division between the parties as they each intended, and which formed the basis for the court being satisfied that it was just and equitable to make the final order on 12 May 2014.
As a consequence, it is my view that this circumstance gives rise to a miscarriage of justice within the meaning of s90SN(1)(a).
Is it impracticable for the final order to be carried out – s90SN(1)(b)?
The defacto husband also asserts that it is impracticable for the terms of the final order to be carried out.
The defacto husband grounds this argument essentially on the same omission in the order, namely that because the final order did not contemplate that there would be a shortfall, it is now impracticable for the terms of the final order to be carried out.
Specifically, the defacto husband asserts that not only is it “impracticable” for paragraphs 1.3, 1.4 and 1.5 of the final order to be carried out, but that it is in fact “impossible” for those terms of the final order to be carried out because:
a)Paragraph 1.3 contemplated that all of the liabilities referred to in paragraphs 1.3.1 – 1.3.3 would be paid in full from the proceeds of the sale of the court properties, and that did not occur and cannot occur;
b)Paragraph 1.3.2 required that each of the four loans would be “discharged”, and that did not and cannot occur;
c)Paragraph 1.3.4 contemplated that there would be surplus funds from the sale of the four properties that would be divided equally between the parties, and that did not occur and cannot occur;
d)When read together paragraphs 1.3, 1.4 and 1.5 cannot be carried into effect as the defacto husband will not be retaining property C subject only to making a payment to the defacto wife of the settlement sum and the payment of certain outgoings.
Moreover, the defacto husband asserts that the effect of the shortfall and the inability to discharge all four loans is that there will remain a joint liability secured over property C for each of the undischarged liabilities. The consequence of this is that the defacto wife will not be relieved of her joint liability, and this is again something that the parties had not contemplated or intended when the final order was made.
The defacto wife on the other hand argues that while paragraph 1.4 and 1.5 of the final order should be read together, the terms are unconditional and cannot be interpreted as requiring the defacto husband to retain the property C freehold. Further the defacto wife asserts that the indemnity provided for in paragraph 1.5 of the final order ensures that the defacto husband is solely responsible for any mortgages registered over property C.
As a consequence, the defacto wife asserts that the there is nothing ambiguous about the obligation created by paragraph 1.4 of the final order and that the order is not only capable of being carried out by the defacto husband, but also that it is not impracticable that it be carried out.
In La Rocca and La Rocca,[15] Kay J was of the view that a final order should only be set aside pursuant to s79A(1)(b) if a “serious inequity” has arisen, commenting:
“My own view is that the concept of impracticability, as referred to in this section, is akin to the application of the doctrine of frustration in contractual matters. What the Parliament is concerned with and what ought to be concerning the Court is the happening of events which cannot be reasonably foreseen, which will have the effect of causing an injustice to one of the parties if the happening of such events is not given effect to.
In standard contractual doctrine, I think that is as comfortably as anywhere described by Russell J. in Re Badische Co. Ltd. (1921) 2 Ch. 331 at 379, where his Honour said:
``The doctrine of dissolution of a contract by the frustration of its commercial object rests on an implication arising from the presumed common intention of the parties. If the supervening events or circumstances are such that it is impossible to hold that reasonable men could have contemplated that event or those circumstances and yet have entered into the bargain expressed in the document, a term should be implied dissolving the contract upon the happening of the event or circumstances.''
Now, in my view, what the appropriate application of s. 79A(1)(b) ought to be is that circumstances that have arisen in which it becomes impracticable to carry out the orders are circumstances that could not reasonably have been contemplated and that in such circumstances, whilst impossibility is not the test and impracticability is, it may then become just and equitable to change the orders.”
[15] La Rocca and La Rocca (1991) FLC 92-222.
Counsel for the defacto wife took the court to a number of authorities (La Rocca & La Rocca [1991] FamCA 97; Cawthorn & Cawthorn [1998] FamCA 37, and Sanger & Sanger [2011] FamCAFC 210) as discussed by Jarrett FM in Herold & Kay[16] that do not amount to an order being impracticable simply because it “produces a different outcome to what the parties intended, but remains capable of implementation”.[17]
[16] [2012] FMCAfam 1071 at [38-40].
[17] Supplementary Outline of Submissions of the Applicant Wife dated 6 April 2020, paragraph 12.
In each of the cases discussed by Jarrett FM, his Honour pointed out that the facts concerned circumstances where one party was required to pay the other party a sum of money and that “… In each case the Courts (both at first instance and on appeal) rejected the claims. That a bargain had turned out to be worse for the payer than it was expected to be when the relevant orders or agreement was made was beside the point.”[18]
[18] Herold & Kay [2012] FMCAfam 1071 at [40].
Counsel for the defacto wife argued that the facts in the present circumstances put the dispute between these parties in the same category as those authorities discussed by Jarrett FM. The basis for this submission rests on an assertion that because the defacto husband is able to make the payment to the defacto wife as required by paragraph 1.4 of the final order, it is otherwise irrelevant that there is “the unintended circumstances of approximately $110,000 in loan debt remaining against the property C after the sale of the investment properties.”[19]
[19] Supplementary Outline of Submissions of the Applicant Wife dated 6 April 2020, paragraph 15.
This is a submission with which I do not agree.
While I accept the submissions made on behalf of the defacto wife that it is possible for the husband to make payment to her as required by paragraph 1.4 of the final order, I do not consider this to be the end of the issue given the context and the requirements of the whole of the order.
I accept the submissions made on behalf of the defacto husband that it is not only impracticable for there to be a discharge of the loans referred to in paragraphs 1.3.2.1, 1.3.2.3 and 1.3.2.4 of the final order, but that it is impossible for that to occur in the manner that the parties intended, namely from the funds received from the sale of the four properties.
From my perspective, the only possible construction of paragraph 1.3 of the final order is that there would be sufficient funds from the sale of the four properties to pay all of the liabilities referred to in paragraph 1.3 of the final order, and in particular that there would be sufficient funds to “discharge each” of the loans referred to in paragraphs 1.3.2 and 1.3.3 (my emphasis).
Moreover, I do not consider that I am able to ignore the fact that there will remain a joint liability for the loans referred to in paragraphs 1.3.2.1, 1.3.2.3 and 1.3.2.4, and that there is nothing in the order beyond the provision in paragraph 1.3.2 to deal with the discharge of that mutual liability.
From my perspective, and for the reasons that I discussed when considering the definition of “mortgage instalment”, I do not consider that the indemnity provided in paragraph 1.5 of the final order extends, and nor was it ever intended to extend to the discharge of any of the loans referred to in paragraph 1.3.2.
I pause at this juncture to note that paragraph 1.22 of the final order provides:
“1.22That subject to the preceding paragraphs each party shall be solely liable for and indemnify the other party against any liability encumbering any item of property to which they are entitled pursuant to the terms of this Order.”
While this might at first blush appear to provide a requirement that the defacto husband pay any liability registered over property C (which would include the four loans that were cross-secured over property C), I do not consider that this would be the correct construction of this provision in the final order. That is because the entire paragraph is predicated on the words “subject to the preceding paragraphs”. From my perspective, what that means is that if the preceding paragraphs are complied with, then each party is responsible for the liabilities encumbering those assets that they are to retain.
For the reasons that I have already discussed, there is an impossibility in some of the paragraphs preceding paragraph 1.22 being complied with, and accordingly it is my view paragraph 1.22 does not require the defacto husband to be solely liable for those liabilities encumbering property C that were not discharged pursuant to paragraph 1.3.2 of the final order.
While the parties make complaints about each other and the delays in selling the four properties, from my perspective those complaints are irrelevant because as a consequence of reasons beyond the control of the parties, and in particular the declining real estate market in Australia, the orders are now not only impracticable but they are incapable of being effected.
In my view, all of these issues puts the facts of this case in the same category as the factual matrix which Jarrett FM discussed in Herold & Kay[20], and distinguished from the group of cases where the court did not consider that the ground of impracticability had been made out.
[20] [2012] FMCAfam 1071.
Accordingly my view is that the present factual matrix is sufficient to make out the ground provided for in s90SN(1)(b).
Has there been a default in carrying out an obligation imposed by the final order – s90SN(1)(c)
The defacto husband asserts that the defacto wife has defaulted in carrying out a specific term of the final order, namely that she did not attend to the sale of the four properties in a “timely fashion” as required by paragraph 1.2.6 of the final order.
The defacto wife rejects this proposition and asserts that there were no delays on her part. She says that where the defacto husband did not make any complaint about her alleged delays in selling the four properties in the period of time between the making of the final order and these proceedings, the defacto husband cannot now make that complaint.
Rather the defacto wife asserts that the defacto husband was content to sit on his laurels, as this meant:
a)firstly that he did not have to make the payment of the settlement sum to her for a lengthy period of time; and
b)secondly the defacto husband has had the benefit of only paying $315 per fortnight towards the Viridian Line of Credit whereas she was required to pay much more by way of rental payments for her own housing as she was unable to rehouse herself without payment of the settlement sum.
I do not accept that there is sufficient or indeed any evidence before me to establish that the defacto wife has defaulted in carrying out her obligation to sell the properties in a timely fashion.
Moreover, this was not a topic that Counsel for the defacto husband pursued with any vigour in her cross examination of the defacto wife.
In all of these circumstances, I do not consider that this ground is made out.
Should the court exercise discretion and vary the final order?
In circumstances where I have determined that two of the grounds advanced by the defacto husband have been made out, it now befalls me to consider whether I should vary the final order as sought by the defacto husband.
There are a number of factors which I consider in the circumstances of this case to be relevant in determining whether I should exercise that discretion, and in particular:
a)The consequences of the grounds that have been made out;
b)The delay in the sale of the properties;
c)The delay in the defacto husband bringing the s90SN proceedings; and
d)The party’s respective financial circumstances.
The consequences of the grounds that have been made out
I have already discussed at length the consequences of the grounds that have been made out earlier in these reasons. I do not propose to repeat those matters here, other than to record that I have taken those matters into account.
I am conscious that the factual circumstances that the defacto husband relies upon for both grounds that are made out, are entwined.
What I emphasise however is my view the miscarriage of justice, and the frustration of the terms of the order appear to have occurred through no fault of the parties.
It is clear to me from the evidence before me that both parties appeared to operate on the premise that there would be sufficient proceeds from the sale of the four properties to not only discharge all debts, but to have each of them share in the surplus proceeds.
What is also clear to me is that the parties intended to implement an equal division of their assets. Unfortunately it is apparent to me that the way in which the final order were drafted did not ensure that this outcome was achieved.
What I do not know, because no evidence has been put before me, is whether the parties were advised as to the risk of there being a shortfall between the proceeds of sale and the amount owing on the loans. While I might assume that the advice was not given, from the evidence that I have before me, I cannot be certain that was the case.
If however, my assumption is correct, I would have to also assume that subject to the orders that I make, each of the parties have open to them the prospect of making a claim against their former solicitor. This might however be a more relevant factor to take into account when considering any costs application that might be made.
Whatever the case may be in that regard, I consider that the drafting oversight and/or the assumption that there would only be surplus funds is a factor that weighs heavily in favour of varying the final order.
The delay in the sale of the properties
As I have already determined, I do not consider that blame can be placed at the feet of the defacto wife for any delay in selling the properties.
To the contrary, I think it is reasonable for me to infer that in circumstances where the parties agree the Australian market was in decline, it was all the more difficult to sell the two properties in Australia and in particular the second of the two properties that was sold, being property F.
As to the properties in the United States of America, there does not appear to be any complaint that there was a delay in selling property J. Rather the complaint appears to be in relation to the property H. I do however consider it somewhat disingenuous that the defacto husband complains about these delays, without providing any evidence to the court that he actively and meaningfully engaged with the defacto wife to either raise the delays or to do anything to assist in selling those properties.
In light of all of this, again, I consider that the delay in the sale of all four properties is a circumstance that has arisen beyond the control of both parties.
As a consequence, I am not necessarily certain that this is a factor that takes on great significance when determining whether or not to vary the final order.
The delay in the defacto husband bringing the s90SN proceedings
I am aware that:
a)The s90SN proceedings were not that which brought these proceedings to the Court’s attention. Rather the proceedings were commenced by the defacto wife on 5 September 2018 seeking orders to aid in the enforcement of the final order.
b)When the defacto husband filed his Response to the wife’s application on 2 November 2018, he immediately sought a variation of the final order pursuant to s79A (noting that s79A was incorrectly pleaded instead of s90SN, but no issue was taken about this by the defacto wife).
I am equally conscious that in both the Response and the Amended Response filed by the defacto husband on 25 November 2019, the defacto husband did not plead any specific ground pursuant to s79A, which left the defacto wife and her legal advisors to guess at what ground(s) were being relied upon and what case would be put.
While this criticism can be made of the way in which the husband and his legal advisors have run their case, I do not consider this to be a fatal blow when I take into account the following matters.
I am mindful that the formal applications before the Court were not the first time that the parties turned their attention to the circumstances that they found themselves in.
I have the benefit of having before me some of the correspondence that was exchanged between the parties’ solicitors prior to these proceedings. In particular, I have a copy of correspondence from the defacto husband’s solicitor to the defacto wife’s solicitor dated 17 April 2018,[21] sent at a point in time when it was clear from the defacto husband’s perspective there would be a problem with carrying out the terms of the final order.
[21] Exhibit “H1”
That letter from the outset refers to “recent correspondence”. From that, I would have to infer that the topic was being discussed earlier than 17 April 2018, but certainly no later than that date.
At the point in time that correspondence was sent on 17 April 2018, only two of the four investment properties had been sold, and it was clear that there was likely to be insufficient funds to discharge all of the liabilities.
The letter sets out the following:
“Clearly the current circumstances were not anticipated at the time that the Orders were made.
We are writing to propose a way forward without litigation.”
The letter goes on to propose that “the Orders be amended so as to provide” a range of strategies including “a more aggressive approach to selling both remaining properties” and that the defacto husband make payment to the defacto wife of “$210,877.63 less 50% of the total amount” he was to pay to discharge the balance of the “shortfalls in the joint debts”.
While I do not have the correspondence from the defacto wife’s solicitor in response, I would have to infer that the offer made in the letter of 17 April 2018 was rejected, because the proposal that the defacto husband advanced in that correspondence remains the same proposal that is being advanced by him today.
I do however have a copy of correspondence from the defacto wife’s solicitor to that of the defacto husband dated 30 May 2018.[22] In that correspondence the defacto wife explicitly rejects any suggestion that there be a “variation” to the terms of the final order.
[22] Affidavit of the Defacto Wife filed 17 January 2020. Annexure “ 1.”
What is clear to me from both of these letters is that the defacto wife knew, without a doubt that the prospect of a variation of the final order, was one which the defacto husband was raising as early as April 2018, in an effort to avoid litigation.
As a consequence, in my view, the wife knew some time in advance of her commencing these proceedings in September 2018, that this would be the position of the defacto husband. That the defacto wife was first in time to bring the proceedings before the Court in all of those circumstances becomes less relevant.
What is significant from my perspective is that the defacto wife has not ever filed either a Reply to the s79A/s90SN application. This is a topic that I propose to discuss further when considering the parties respective financial circumstances.
The parties respective financial circumstances
As I have already indicated, the defacto wife has not ever formally responded by way of a Reply to the application made by the defacto husband to vary the final order.
In addition, not only has the defacto wife failed to seek any formal orders dismissing the orders sought by the defacto husband, but she has additionally failed to file any meaningful evidence that engages with s90SN question. In particular, the defacto wife has failed to file a Financial Statement.
Counsel for the defacto husband submitted that in those circumstances, the s90SN question has effectively proceeded before the court on an undefended basis; albeit that counsel for the defacto wife was heard and made submissions based on the evidence that was before the court.
Acknowledging that the s90SN question requires a two-step process, Counsel for the defacto wife submitted that even if the court were satisfied that any of the grounds pursuant to s90SN were made out, it would not be appropriate for the court to exercise discretion to vary the final order.
The basis for this submission was that there was no injustice occasioned by leaving the defacto husband to solely meet the loan shortfall of $110,000, when taking into account that:
a)The defacto wife’s entitlements pursuant to the final order amounted to a total cash payment to her of $226,322.65;
b)The defacto husband’s entitlements pursuant to the final order, (adopting a current day value of $540,000 for property C contained in his Financial Statement filed 2 November 2018), is a net position of $219,122.37.
Counsel for the wife submitted that by this calculation, the parties are left with very close to the equal division that the parties intended.
Moreover, the defacto wife’s counsel submitted that if the wife was to contribute to one half of the loan shortfall (approximately $55,000), then the defacto wife’s entitlement would be reduced to a total figure of $171,322.65, whereas the defacto husband’s entitlement would be a figure of $274,122.37; a position which was asserted to be far from the equal division contemplated by the parties.
From my perspective, this is an overly simplistic approach because as I highlighted earlier in these reasons I do not know, because it has not been provided now, nor was it provided in 2014, the basis upon which the parties calculations were undertaken to be satisfied that the final order effected an equal division.
Further to the comments that I have already made earlier in these reasons and the inference that I drew in this regard, I am mindful that it is not clear to me, among other things:
a)Whether the parties approached the question of the division of property on the basis of a single pool inclusive of superannuation or not; and
b)I do not know how the two payments to the defacto wife of $15,445.02 and $210,877.63 totalling $226,322.65 were calculated with reference to the other assets that the parties were to retain pursuant to the final order (including but not limited to property C, but also those assets referred to in paragraphs 1.16 and 1.17 of the final order), and the separate liabilities that they were to discharge.
While both of the parties might be criticised for the failure to put sufficient evidence before the court, in light of the inference that I consider to be open on the evidence, one of the reasons that I am unable to properly understand the complete effect of the final order is because the defacto wife has failed to engage in that question and put any evidence before the court, as to what she (or the defacto husband) otherwise retained pursuant to the final order and in addition what her present circumstances are in the form of a Financial Statement. These are not matters which I am able to overlook.
In addition, I am mindful that the defacto wife also resists the court exercising discretion to vary the final order on the basis of her assertion that she has been financially disadvantaged in the period between the making of the final order and the present day. This assertion has its foundation in the terms of the final order which required the defacto husband to make a payment of $315 per fortnight to the Viridian Line of Credit, whereas she asserts that her costs of housing in the post separation period have been much greater.
The defacto wife asserts that the amount that she has had to pay for her separate living expenses is a figure of $137,930.[23] This is a figure that is simply asserted as a fact without any evidence to support it. It is a figure which the defacto husband challenged. In the absence of understanding how the figure was arrived at, I do not consider that I am in a position to accept it, particularly in the absence of a Financial Statement setting out the defacto wife’s expenses.
[23] Affidavit of the Defacto Wife filed 17 January 2020, paragraph 17.
In any event in my view, the submissions on this aspect of financial disparity between the parties is somewhat of a red herring, as it was always contemplated by the parties that there would be a delay in the wife receiving all of her settlement funds and that she would need to fend for herself financially until such time that the defacto husband was required to make the final payment to her pursuant to the final order.
While I accept that neither of the parties anticipated that the four properties would take as long as they did to sell, I equally consider that the parties each went into this aspect of their agreement with their eyes wide open to the possibility that there would be delays in selling all four properties and that there would be a delay in the defacto wife receiving her settlement funds.
Conclusion as to whether discretion should be exercised to vary the final order
For all of the reasons that I have discussed, I consider that on balance it is appropriate to vary the final order.
While it is open to me to simply find that a ground in s90SN is made out and otherwise require a full hearing of the s90SM question, I do not consider that this approach is appropriate because it was not a position advanced by the defacto wife.
The defacto wife’s enforcement application
In circumstances where I have found that grounds exists pursuant to s90SN and that it is appropriate to exercise discretion to vary the final order, it is unnecessary that I consider the defacto wife’s application to enforce the final order.
I accordingly propose to dismiss that application.
For all of these reasons, I make those Orders that appear at the commencement of these reasons.
I certify that the preceding one hundred and thirty-six (136) paragraphs are a true copy of the reasons for judgment of Judge Kari
Associate:
Date: 22 March 2021
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