Demeny & Ogden
[2021] FedCFamC1A 21
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APELLATE JURISDICTION
Demeny & Ogden [2021] FedCFamC1A 21
Appeal from: Demeny & Ogden [2021] FCCA 543 Appeal number(s): SOA 15 of 2021 File number: ADC 1845 of 2013 Judgment of: STRICKLAND, AINSLIE-WALLACE &
ALDRIDGE JJDate of judgment: 27 September 2021 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Where the primary judge varied consent orders – Impracticable to carry out – Where the consent orders provided for properties to be sold with the proceeds of sale used to repay outstanding loans – Where the proceeds of sale fell short of repaying the outstanding loans – No miscarriage of justice – Orders not impracticable and can be put into effect – Appeal allowed – Orders set aside – Enforcement application remitted for rehearing – Costs certificates granted to the parties for the appeal and rehearing. Legislation: Family Law Act 1975 (Cth) ss 79, 79A, 90SN
Federal Proceedings (Costs) Act 1981 (Cth)
Cases cited: Barker v Barker (2007) 36 Fam LR 650; [2007] FamCA 13
Cawthorn v Cawthorn (1998) FLC 92-805; [1998] FamCA 37
Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9
La Rocca and La Rocca (1991) FLC 92-222; [1991] FamCA 97
Molier and Van Wyk (1980) FLC 90-911; [1980] FamCA 85
Noetel and Quealey (2005) FLC 93-230; [2005] FamCA 677
Public Trustee (as executor of the estate of the late Gilbert) v Gilbert (1991) FLC 92-211; [1991] FamCA 10
Rohde and Rohde (1984) FLC 91-592; [1984] FamCA 41
Sanger & Sanger (2011) FLC 93-484; [2011] FamCAFC 210
Ullrich & Kraft [2014] FamCA 266
Number of paragraphs: 75 Date of hearing: 22 June 2021 Place: Heard in Adelaide, delivered in Sydney Counsel for the Appellant: Mr Tredrea Solicitor for the Appellant: Polson Legal Counsel for the Respondent: Ms Pyke QC Solicitor for the Respondent: Jordan & Fowler Family Lawyers ORDERS
SOA 15 of 2021
ADC 1845 of 2013FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS DEMENY
Appellant
AND: MR OGDEN
Respondent
ORDER MADE BY:
STRICKLAND, AINSLIE-WALLACE & ALDRIDGE JJ
DATE OF ORDER:
27 SEPTEMBER 2021
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.The orders made on 22 March 2021 be set aside.
3.The appellant’s application for enforcement be remitted for rehearing.
4.The respondent’s application to vary the consent orders made on 12 May 2014 be dismissed.
5.The Court grants to the appellant a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
6.The Court grants to the respondent a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
7.The Court grants to the appellant and the respondent a costs certificate pursuant to s 8 of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate that in the opinion of the Court it would be appropriate for the Attorney-General to authorise a payment under that Act to each party in respect of the costs incurred in relation to the rehearing of these proceedings.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Demeny & Ogden has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
STRICKLAND, AINSLIE-WALLACE & ALDRIDGE JJ:
INTRODUCTION
On 12 May 2014 a judge of the Federal Circuit Court of Australia made a suite of property orders by consent (“the consent orders”) in proceedings between Ms Demeny (“the appellant”) and Mr Ogden (“the respondent”). The aim of the consent orders, as expressed to the Court at the time, was to achieve “something like” an equal division of their property (at [6]).
The consent orders required four properties to be sold, two of which are located in Australia, and the other two in the United States of America (“the United States”). The proceeds of sale were to be used to retire a number of loans, with any funds remaining being divided equally between the parties. The respondent was also to pay the appellant $15,455.02 forthwith and $210,877.63 within 28 days after the sale of the second Australian property. The respondent was to retain a property in South Australia (“Property C”). The loans were secured, in part, by a mortgage over Property C.
Unfortunately, the properties that were required to be sold did not sell for the price that was expected and the loans that were intended to be repaid by the proceeds of sale were not fully repaid. The effect was that Property C remained unexpectedly burdened with a mortgage securing an unpaid loan in the sum of $110,223.73.
The respondent contended that if he was required to bear the burden of the unpaid loan and also pay the appellant the fixed sum of $210,877.63 agreed upon, he would receive much less than the intended 50 per cent division of property. Accordingly, he sought to have the consent orders varied under s 90SN of the Family Law Act 1975 (Cth) (“the Act”).
On 22 March 2021, the primary judge, who did not make the consent orders, accepted the respondent’s contentions and varied the amount payable by the respondent to the appellant pursuant to the consent orders by reducing the fixed sum of $210,877.63 by one half of the outstanding loan amount of $110,223.73. This was because, as events turned out, the consent orders had not achieved the intended division of property and a miscarriage of justice had occurred by reason of any other circumstance (s 90SN(1)(a) of the Act). In addition, it was found that the consent orders should also be varied because it was impracticable for them to be carried out (s 90SN(1)(b) of the Act).
The subject of the appeal is the variation of the consent orders on 22 March 2021. The appellant submitted that the primary judge erred because the relevant criteria for varying the orders under s 90SN of the Act were not met and that, on the proper construction of the consent orders, the intention of the parties was that any shortfall in repayments of the loans caused by the properties that were to be sold not reaching the expected price was to be borne by the respondent alone.
BACKGROUND
In order to understand the appeal it is necessary to identify the relevant properties and to look at the consent orders in some detail.
The respondent owned Property C which was said to have been valued at $450,000. Under the consent orders he was to retain it unless he defaulted in his obligations to pay the appellant the sum of $210,877.63 within 28 days after the sale of the second Australian property.
Between them, the parties owned two properties in Australia and two in the United States. The parties had borrowed funds to obtain the properties and four loans from the Commonwealth Bank of Australia (“CBA”) were outstanding. The loans were secured by a mortgage against the properties including Property C.
As we have noted, the consent orders required the sale of the properties in Australia and the United States. The properties that were to be sold took some time to sell, with the last sale being settled on 14 June 2019.
The properties did not sell for their expected prices and, instead of a healthy surplus being achieved, only one loan was repaid and the sum of $110,223.73 remained owing on the other three loans. That sum was secured over Property C. The respondent took the view that this was not what was intended by the consent orders and did not pay the agreed sum of $210,877.63.
The appellant commenced enforcement proceedings on 5 September 2018, that is, before the last property was sold, but after the two Australian properties had sold. The appellant sought the payment of the remaining lump sum owing to her and, in default, orders for the immediate sale of Property C.
In his affidavit filed on 2 November 2018 in response to the appellant’s application, the respondent sought a variation of the consent orders under s 90SN of the Act along the lines of the orders that were ultimately made.
We now turn to the consent orders themselves. We shall not refer to orders such as those dealing with superannuation and chattels, which are not relevant to the appeal.
Order 1.1 required the respondent to pay the appellant $15,445.02 forthwith. This amount was paid.
Orders 1.2 and 1.3 provided for the sale of the four properties in Australia and the United States. Those proceeds were to be applied to the repayment of the four loans, and then the repayment of a debt to Company B which was solely the obligation of the respondent.
After the above payments were made, the balance of the proceeds of sale of the four properties was to be shared equally (Order 1.3.4).
The respondent was required to pay the appellant $210,877.63 “within twenty eight (28) days of the sale of the last of the two (2) properties situated in Australia” (Order 1.4).
Order 1.5 then provided:
1.5That in consideration for payment of the sum referred to at paragraph 1.4 herein to the [appellant], the [respondent] shall be entitled to retain all his estate and interest both at law and in equity in [Property C] to the intent that the [respondent] shall thereafter be entitled to same for his sole use and benefit absolutely PROVIDED THAT the [respondent] 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 [appellant] in relation to same.
In the event that the respondent did not make a timely payment of the two payments to the appellant, Order 1.6 applied and said:
1.6That should the [respondent] default in payment of the sums referred to at paragraphs 1.1 and 1.4 herein:-
1.6.1the [respondent] shall pay to the [appellant] 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 [respondent] 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 [appellant] shall receive the said sum or such part thereof as remains outstanding with interest and the balance then remaining shall be paid to the [respondent].
Finally, Order 1.22 said:
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.
Section 90SN of the Act relevantly provides:
Varying and setting aside orders altering property interests
(1)If, 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; or
…
The primary judge found there had been a miscarriage of justice because the consent orders were intended to effect an equal division of property (at [59]–[60]) and that neither the parties nor their legal advisors had contemplated the possibility that after the sale of the four properties there would be a shortfall in the repayment of the loans, the repayment of which would continue to be secured over Property C (at [57]). Since the consent orders as implemented did not give rise to an equal division of property, there had been a miscarriage of justice (at [59]–[60]).
In coming to this result, the primary judge was aware that s 90SN(1)(a) of the Act is concerned with the integrity of the judicial process itself.
Alternatively, her Honour was satisfied that because the sale of the four properties did not generate sufficient funds to repay the loans, it was impracticable for the consent orders to be carried out and thus s 90SN(1)(b) of the Act was engaged because the parties intended that the loans would be repaid from the sales which could now not occur (at [73]).
This case is an example of the difficulties that arise when orders require property to be sold and where the orders divide the proceeds not by way of percentage entitlements, but by payment of a fixed sum. In Noetel and Quealey (2005) FLC 93-230 the Full Court said:
143.The practice of drafting orders based on a percentage entitlement rather than a fixed sum to achieve fairness between parties in the event of a sale is subject of many authorities. Those authorities were subject of comprehensive review in Sinclair and Sinclair [2000] FamCA 262. We take this opportunity to repeat that summary and emphasise the importance of the established principle:
108.A long line of authority in this Court (Waters and Waters (1981) FLC 91-019 at 76,208; Williams and Williams (1988) FLC 91-959 at 76,940; Docters van Leeuwen and Docters van Leeuwen (1990) FLC 92-148 at 78,024; Little and Little (1990) FLC 92-147 at 78,020; Smith and Smith (1991) FLC 92-261 at 78,759; and Bell and Bell (1993) FLC 92-347 at 79,683) establishes as a clear guideline for the exercise of discretion under s 79 of the Act, that, absent some special consideration (such as a desire by one spouse to retain a particular piece of property, in specie), and particularly where the value of an asset is contentious, or even where it is not but the market for the property is volatile, or there is likely to be a significant time lapse between judgment and sale, and where the value of the asset is to be divided between the parties, the Court should order its sale and the apportionment of the proceeds between the parties rather than order one party to pay to the other a fixed sum representing a notional proportion of its assessed value.
109.Moreover, in Docters van Leeuwin (sic) (supra) at 78,025, the Full Court (Fogarty, Nygh & Rowlands JJ), after citing a passage from the judgment of Mason and Deane JJ in Norbis v Norbis (1986) FLC 91-712 at 75,165–6, said this:–
In our view the time has come to regard a departure from a long-standing guideline, such as the one given in Waters, without adequate explanation as a ground for finding that the exercise of discretion has miscarried.
110.In Bell and Bell (supra) at 79,763, the Full Court (Ellis, Baker & Purvis JJ), after referring to the earlier decisions in Docters van Leeuwin (sic), Little, and Waters (all supra) said this:–
We see no reason to depart from the line of authority referred to above. There is always uncertainty in relation to the amount which will ultimately be obtained in respect of the sale of matrimonial property and, in particular, matrimonial real estate.
…
Although the order which the trial judge made was essentially discretionary in nature, in our opinion the authorities above referred to clearly establish that where a sale of property is necessary to satisfy a lump sum order for settlement of property and the calculation of any lump sum payable arises from a finding as to the value of the property to be sold, then the amount to be paid to one or other of the parties following any such sale should be expressed in percentage terms, rather than by way of lump sum payment, unless good and sufficient reasons are given for doing so.
The trial judge gave no reasons for departing from the above principle and, given the facts of the case, we are unable to perceive that there was any justification in law for doing so. For this reason therefore, we consider the trial judge has erred in the proper exercise of his discretion and we would allow the appeal to this extent.
THE APPEAL
Was there a miscarriage of justice? (Ground 1)
In the appellant’s Summary of Argument filed on 4 June 2021, she submitted that there was no miscarriage of justice in this case because:
·The relevant event that caused the injustice, that being the sale of the four properties, occurred after the making of the orders;
·The primary judge failed to look at the financial effect of the respondent’s retention of Property C under Order 1.5 or its sale under Order 1.6; and
·The “shortfall” was not of such a magnitude as to give rise to a miscarriage of justice.
In the course of oral submissions it was also contended that on the true construction of the consent orders, it was clear that any shortfall in the payment of the mortgages was to be borne by the respondent.
It is convenient to commence with a discussion of the principles applied by the primary judge, which were not the subject of challenge. Section 79A and s 90SN of the Act are in similar terms.
In Barker v Barker (2007) 36 Fam LR 650 (“Barker”), the Full Court said:
120.A miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which “for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process” (original emphasis) (Bigg v Suzi (above) in [4.5]). See also Suiker; Public Trustee v Gilbert). While cases such as Suiker; In the Marriage of Holland (1982) 8 Fam LR 233; (1982) FLC 91-243; and In the Marriage of Gebert (1990) 14 Fam LR 62; (1990) FLC 92-137 indicate that the words “miscarriage of justice” should not be construed narrowly and the phrase “integrity of the judicial process” should not be taken only to refer to the hearing in the court, the circumstances creating the miscarriage must nevertheless have been such as to have had an influence on the outcome of the litigation. As the Full Court said in Holland (above at 239):
To succeed in an application under s 79A, the wife must show some circumstance leading to a miscarriage of justice. Agreement to a consent order which may not adequately reflect a party’s entitlements under s 79 does not, of itself, show that there has been a miscarriage of justice. There may be cases where the order consented to is so far outside the ambit of what is just and equitable that the court may infer that a party has acted under duress, in ignorance or as a result of incompetent advice.
…
124.But s 79A is a remedial section designed to avoid a miscarriage of justice. Where there is some intervening factor known to one party, but not the other, this may lead to a result which is unfair and unjust and can be characterised as a flaw in the judicial process by which the orders were made. There may also be circumstances in which the judicial process could be impugned by a sale after orders were made and in the absence of bad faith by either party or suppression of some relevant fact, if it led to a significant miscarriage of justice.
(Emphasis added)
That passage must be seen in the light of Molier and Van Wyk (1980) FLC 90-911 (“Molier”) at 75,767–8 and Public Trustee (as executor of the estate of the late Gilbert) v Gilbert (1991) FLC 92-211 (“Gilbert”) at 78,426–8 where it was held that s 79A(1) of the Act “is intended to apply only to circumstances occurring before or at the time of the making of the order” and that “[t]he term ‘miscarriage of justice’ does not seem apt to apply to matters which arise after the order has been made”.
The Full Court in Gilbert was asked to reconsider the correctness of Molier, but declined saying at 78,427:
[The term miscarriage of justice] relates to the judicial process which resulted in the order sought to be set aside. Its integrity cannot be put into question by something that happened after that process was completed.
The Full Court then pointed out that the legislature had accepted the correctness of the decision in Molier by inserting subsections (b), (c) and (d) into s 79A(1) of the Act to overcome the difficulties identified by the Court in that case.
The possible tension between these two decisions and the comment in Barker was explained by Kent J in Ullrich & Kraft [2014] FamCA 266 (“Ullrich”), a matter with facts similar to the present, as follows:
72.In my judgment, the corollary of that principle apposite to the circumstances of this case discussed further below is that a miscarriage of justice by reason of “any other circumstance” within the meaning of s 79A(1) has occurred because of the manner in which the subject consent orders were framed or constructed having regard to the real effect or outcome of those orders, or the operative effect of those orders, in the circumstances of this case. In this case it was not only the fixed sum provision in the consent orders but the manner in which those orders were constructed to deal with taxation issues that affected the overall outcome for the Wife.
…
74.It is well settled that for the purpose of s 79A(1)(a) a miscarriage of justice can only occur by reason of a fact or event which occurs before or at the time of the making of the order which is sought to be set aside…
75.The parties sought and obtained the protections and benefits of a curial order, as part of the judicial process of a superior court, on the basis that the terms of the order were taken to effect, at least in broad terms, a 55 per cent/45 per cent division of their property interests overall.
76.However, the way in which the consent orders were constructed resulted in their operative effect being that the Wife actually received or retained not
45 per cent, even in broad terms, but less than 30 per cent when the sale of the G Property assets, in the manner and within the time frame contemplated by the consent orders, occurred…
(Footnotes omitted)
Ultimately, his Honour in Ullrich found that a miscarriage of justice “occurred in the judicial process given the extent of the difference between the intended effect of the orders and their actual effect” (at [83] and [99]).
Neither party suggested that Ullrich should not be applied and therefore it is not appropriate for ourselves to consider that question.
What is the true meaning of the consent orders?
The appellant submits that the parties’ intention, as derived from the consent orders, was that the respondent should bear any shortfall in repayment of the loans after the sale of the four properties. This is said to arise from Orders 1.4, 1.5 and 1.22.
Order 1.4 casts the obligation on the respondent to pay $210,877.63 to the appellant upon the sale of the second Australian property and not after the sale of all four properties. Thus, it is submitted, the obligation to pay the lump sum could arise before all properties are sold and before the loans are fully repaid. This indicates that the obligation to pay is an independent obligation and not connected with the proceeds of sale of the four properties.
There is some force in this proposition.
The appellant submitted that the obligation cast upon the respondent by Order 1.5 to pay “all mortgage instalments, rates, taxes and other like outgoings of and incidental to Property C” was an indication that the respondent was to bear all the obligations of the mortgage including those arising from the shortfall from the sale of the Australian properties.
We do not accept the submission and agree with the primary judge (at [54]–[57]) that the natural interpretation of the words “mortgage instalments” is that they refer to periodical repayments of outstanding principal and interest, not to the repayment of outstanding capital. This is confirmed by the words which follow and which indisputably refer to regular payments required for the retention of Property C. Further, the repayment of mortgages over the Australian properties which happened to be also secured over Property C, could not be described as being “of and incidental” to it.
The appellant submitted that Order 1.22 also supports the position that the respondent was to bear any shortfall. It states:
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.
The submission is that the only property that was to be retained by a party was to be Property C by the respondent, and since it was subject to the mortgage securing the loans, the respondent would be liable for any shortfall.
This order is part of a group of generic orders (Orders 1.21–1.27) that are designed, in general terms, to terminate the financial relationship between the parties. Order 1.22 in our opinion, is a failsafe designed to ensure that whenever a party is to retain property, he or she will be responsible for the liabilities over it. Whilst it may have the effect contended for by the appellant, it is difficult to see Order 1.22 as an expression of an intention that the respondent should be liable for loans which unexpectedly were not paid because properties were sold for less than the anticipated price.
In order to derive the parties’ true intention from the consent orders, they must be looked at as a whole and terms not taken in isolation.
It is telling that there was an express agreement that any surplus on the sale of the four properties to be sold, after payments of the loans (and the Company B debt), was to be shared equally (Order 1.3.4). If the agreement was, however, that there be an equal division of property and that any surplus after repayment of the loans was to be shared equally, but that any shortfall was to be borne by the respondent alone, that needed to be clearly spelt out. Such a departure from what otherwise appears to be orders designed to achieve an equal division should be obvious. We consider that the subtle inference that arises from Orders 1.4 and 1.22 is not sufficient for that purpose.
The consent orders are more than just a contract between the parties – they are orders made after the Court was satisfied that they were just and equitable. Whilst little more than consent may be required to satisfy a court that proposed orders meet that standard where the parties are represented (Harris v Caladine (1991) 172 CLR 84), we cannot overlook the statement made to the Court when the consent orders were made that the orders represented “something like a 50 percent division of the property” (at [44]).
We are comfortably satisfied that the intention of the parties, as evidenced by the terms on which they are agreed and by the statements made to the Court, was for an equal division of their property. Whilst the parties turned their minds to how that would be achieved if the properties sold for more than what was expected, they did not, in the consent orders at least, address the issue of a shortfall.
Did the relevant event occur after the making of the consent orders?
As Kent J explained in Ullrich, whilst the sale of the property did take place after the orders were made, that sale established the difficulty which already existed with the orders, in that the orders had not allowed for the sale at a different value and, in that case, for the impact of capital gains tax (at [74]–[76] quoted above).
Here, as in Ullrich, the consent orders were made on the basis of a percentage division which the Court found to be just and equitable. Due to the way the consent orders were framed, they did not deal with the possibility of a sale at values which would result in a very different percentage division.
We have already highlighted the difficulties that arise when orders under s 79 of the Act provide for properties to be sold but where the division of property is effected by a lump sum payment. Unless there are provisions which adjust the lump sum payable to account for a sale at a price which exceeds expectations or where the price falls short of them, the amount payable is unlikely to give effect to the agreed percentage division.
This was the relevant circumstance which led to the miscarriage of justice.
Did the primary judge overlook the effects of Orders 1.5 and 1.6?
Order 1.5 provided for the respondent to retain Property C if the sum of $210,877.63 was paid. If it was not, Order 1.6 required its sale and the payment of the lump sum from the proceeds of sale, with the respondent retaining the balance. The appellant submits that the effect of these orders is that the respondent will retain any increase in value of Property C, which cannot be ignored.
The evidence was that Property C had increased in value from $450,000 to $540,000 at the time of the hearing before the primary judge.
The appellant put the following to the primary judge:
34. It would appear that the present outstanding mortgage over [Property C] is about $110,000. It would appear the present value of [Property C] (using the [respondent’s] own figure as at 2 November 2018) is at least $540,000.
35. When the [appellant] receives her entitlements under the Orders, this will amount to the sums of $15,445.02 (Order 1.1) and $210,877.63 (Order 1.4), total: $226,322.65.
36. The [respondent] will then be left with [Property C], value $540,000, less mortgages of $110,000 (existing) and $210,877.63 (payment required by Order 1.4), total mortgage $320,877.63, net equity approximately: $219,122.37.
37. Where is the injustice?
(Appellant’s Outline of Submissions filed on 24 February 2020, paragraphs 34–37) (Footnotes omitted) (Emphasis in original)
In short, the appellant submits that in assessing whether a miscarriage of justice arose from the failure of the orders to deal with any shortfall in the sale price, the Court also had to take into account any relevant increase in the value of Property C.
In Ullrich, Kent J found that if the lump sum payable to the wife under the orders had been calculated by reference to the actual sale price of the property to be sold, then in order to achieve the 45/55 per cent division upon which the orders were predicated, the lump sum she was to be paid would increase by $924,300. Thus, instead of receiving 45 per cent of the property as intended by the orders, she received just 30 per cent (at [76]). It was that disparity that led to the miscarriage of justice.
The primary judge dealt with this submission as follows:
122.The basis for this submission was that there was no injustice occasioned by leaving the [respondent] to solely meet the loan shortfall of $110,000, when taking into account that:
a)The [appellant’s] entitlements pursuant to the final order amounted to a total cash payment to her of $226,322.65;
b)The [respondent’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.
123.Counsel for the [appellant] submitted that by this calculation, the parties are left with very close to the equal division that the parties intended.
124.Moreover, the [appellant’s] counsel submitted that if the [appellant] was to contribute to one half of the loan shortfall (approximately $55,000), then the [appellant’s] entitlement would be reduced to a total figure of $171,322.65, whereas the [respondent’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.
125.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.
126.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 [appellant] 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.
127.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 [appellant] has failed to engage in that question and put any evidence before the court, as to what she (or the [respondent]) 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.
Whilst the criticisms by her Honour in [126] and [127] are apt, the intention of the parties was to achieve an equal division of their property. This flows from the statement made by the lawyers for the parties to the judge at the time the consent orders were made that they effected “something like” a 50 per cent split and with the intention of the parties as drawn from the terms of the orders themselves (at [6]).
Due to the clear intention of the consent orders to achieve an appropriately equal division of property, we consider that in considering whether any miscarriage of justice occurred because the Australian properties decreased in value, the increase of value of Property C cannot be ignored.
The respondent submitted that the above analysis was not to the point because it takes into account the present day value for one asset that is Property C, and leaves intact the valuation of the other assets (Respondent’s Summary of Argument filed on 17 June 2021, paragraphs 15 and 21). That is not so because the shortfall on the mortgages reflects the price for which the Australian properties actually sold. Thus, as best as can be done, the appellant’s submissions take into account the present day values of all of the assets.
Looked at in this way, on the consent orders if they stood having regard to the actual values of the properties, the appellant would receive $219,122.37 and the respondent $226,322.65.
That is a roughly equal division of the parties’ properties, noting that neither party suggested that the issue of superannuation had any bearing on the question.
The difference is not of such a magnitude as to give rise to a miscarriage of justice. It follows that this ground of appeal has been established.
Was it impracticable for the consent orders to be carried out? (Ground 2)
The primary judge found that the low sale price of the Australian properties meant that it was impossible and hence impracticable for the loans to be repaid from the proceeds of sale as contemplated by the orders (at [73]). This was because:
74.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).
75.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.
76.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.
(Emphasis in original)
Her Honour’s reasons proceed on the basis that “to repay” (Order 1.3.2) is to repay the mortgages in full from the proceeds of their sale alone, which would indeed, be impossible given the prices for which the properties were sold.
Order 1.3 dealt with how the proceeds of sale of the four properties were to be applied. First, all estate agent, conveyancing fees and disbursements were to be paid (Order 1.3.1). Next, the proceeds were to be used “to 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 [the four CBA loans]” (Order 1.3.2).
The use of the words “if any” indicate that there may not be sufficient proceeds of sale to repay the loans after the payment of any unrelated mortgage. This is a recognition that the proceeds may be insufficient to make any repayment and precludes a finding that the intention of the parties was to require the full repayment of the loans only from the proceeds of sale.
It remains the position that the orders can be carried out because either the respondent can pay the appellant the agreed sum of $210,877.63 or Property C can be sold so as to realise the funds in order to make the payment. All that has occurred is that the burden of the outstanding mortgages has fallen onto Property C. The orders are still capable of being carried out.
It is well established that orders which can be put into effect are not rendered impracticable simply because they produce a different outcome to that which was intended (Rohde and Rohde (1984) FLC 91-592 at 79,768; La Rocca and La Rocca (1991) FLC 92-222; Cawthorn v Cawthorn (1998) FLC 92-805 and Sanger & Sanger (2011) FLC 93-484).
It follows that a finding that it was impracticable to carry out the consent orders could not have been made.
This ground has been established.
That makes it unnecessary to consider Ground 3, which is essentially a restatement of the other two grounds, but cast as an error in the exercise of discretion.
CONCLUSION AND COSTS
It follows that the appeal must be allowed, with the orders made by the primary judge set aside and the application by the respondent to vary the consent orders dismissed. The application for enforcement will be remitted for rehearing.
There will be costs certificates under the Federal Proceedings (Costs) Act 1981 (Cth) for the parties for both the appeal and the rehearing.
I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Strickland, Ainslie-Wallace and Aldridge. Associate:
Dated: 27 September 2021
3
3
0