Dewell and Harris
[2019] FamCA 258
•24 April 2019
FAMILY COURT OF AUSTRALIA
| DEWELL & HARRIS | [2019] FamCA 258 |
| FAMILY LAW – PROPERTY SETTLEMENT – Interest – Where the wife seeks payment of interest on the judgment debt – Where the husband makes an application that no interest be payable on the judgment debt, or in the alternate, that interest only be payable for certain periods – Where the onus lay upon the husband to demonstrate it was in the interest of justice to vary the rate of interest – Where that onus was not satisfied – Where the husband kept and invested the funds and deprived the wife of that opportunity – Where interest should be paid up until the time the principal amount was paid. |
| Family Law Act 1975 (Cth) s 117B. Family Law Rules 2004 r 17.03. |
| Matthews & Matthews (2006) 47 Fam LR 20 Stephens & Stephens (2009) 41 FamLR 423 |
| APPLICANT: | Ms Dewell |
| RESPONDENT: | Mr Harris |
| FILE NUMBER: | SYC | 5809 | of | 2011 |
| DATE DELIVERED: | 24 April 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 16 April 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Campton SC |
| SOLICITOR FOR THE APPLICANT: | Karras Partners Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Williams |
| SOLICITOR FOR THE RESPONDENT: | Horton Rhodes Lawyers |
Orders
IT IS ORDERED
That, within seven days of the date of these Orders, the husband pay to the wife, or as she may direct, interest in the sum of $222,927.03.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dewell & Harris has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5809 of 2011
| Ms Dewell |
Applicant
And
| Mr Harris |
Respondent
REASONS FOR JUDGMENT
On 4 November 2016, orders were made in defended proceedings for property settlement between Ms Dewell (“the wife”) and Mr Harris (“the husband”).
Order 2(b) required that the husband pay to the wife the sum of $2,132,078, which was later amended pursuant to the slip rule to $2,059,869. The payment was to be made by 2 February 2017.
The husband appealed against the orders and sought a stay. The wife filed a cross-appeal.
In relation to the stay the husband, relevantly, sought the following order:
1.That Orders 2 to 4 (inclusive) of the Orders made on 4 November 2016 be stayed pending the determination of the husband’s Appeal filed 1 December 2016 on the following conditions:-
1.1That within 14 days from the date of these Orders the husband pay to the Wife, or as she may direct, in writing the sum of $300,000.
The husband did not seek to stay the operation of the provisions of the Family Law Rules 2004 (“the Rules”) that relate to the payment of interest on outstanding judgement debts. Nor did the husband make an application pursuant to s117(B) of the Family Law Act 1975 (Cth) (“the Act”).
The husband had paid the wife $300,000 in partial compliance with Order 2(b).
On 15 May 2017, the wife filed an application to enforce the orders. The stay application and the enforcement application were heard together.
On 12 July 2017, reasons were delivered and orders made in relation to the stay in the following terms:
That the Orders 2, 3 and 4 of the Orders made on 4 November 2016 be stayed on the following conditions:
1.1 That within 14 days of the date of these Orders the husband do all acts and things required to cause the outstanding balance of the mortgage secured over the property at B Street, Suburb C (“Suburb C”) to be reduced to $1,600,000 and shall thereafter be restrained from causing or permitting the amount outstanding to exceed that sum.
1.2 That the husband forward to the wife monthly statements from the relevant mortgagees showing the balance of the mortgage then outstanding in relation to Suburb C.
1.3 That pending the determination of the Appeal, the husband pay and be solely responsible for all mortgage repayments and any encumbrances secured over Suburb C and shall make all payments as they fall due.
1.4 That the husband forthwith cause the sum of $500,000 to be paid in partial compliance with Order 4 made 4 November 2016.
No orders were made in relation to the interest on the sum outstanding pursuant to Order 2(b).
The husband’s appeal and the wife’s cross-appeal were dismissed on 25 May 2018. The husband’s application for Special Leave to appeal to the High Court was unsuccessful.
The husband paid the balance of the capital sum to the wife on 23 November 2018, some six months after his appeal was dismissed.
On 23 January 2019, a letter was sent from the wife’s solicitors to the husband’s solicitors seeking the payment of interest on the amounts outstanding between the due date, 2 February 2017, and the date of payment, 23 November 2018. That amount was calculated to be $222,927.03.
A further claim was made in relation to interest accruing on the unpaid interest at the rate of $45.80 per day from 23 November 2018, until payment.
On 24 January 2019, the wife filed an application seeking payment of the interest. On 10 April 2019, the husband filed a response seeking that the application for interest be dismissed or, in the alternate, that the interest be calculated for a different period or, again in the alternate, at different rates.
THE LEGISLATIVE FRAMEWORK
The payment of interest on a judgment debt is governed by the provisions of s117B of the Act in the following terms:
117B Interest on moneys ordered to be paid
(1) Subject to any order made by the court under subsection (2), where, in proceedings under this Act, a court makes an order for the payment of money (other than an order for the payment by way of maintenance of a periodic sum), interest is payable, at the rate prescribed by the applicable Rules of Court, from:
(a) the date on which the order is made; or
(b) the date on which the order takes effect;
whichever is later, on so much of the money as is from time to time unpaid.
(2) A court that makes an order for the payment of money as mentioned in subsection (1) may order that interest is not payable on the money payable under the first‑mentioned order or may order:
(a) that interest is payable at a rate specified in the order, being a rate other than the rate prescribed by the applicable Rules of Court; or
(b) that interest is payable from a date specified in the order, being a date other than the date from which the interest would be payable under subsection (1).
The application to vary the rate of interest must be made to the judge who made the order for the payment of the principal sum.
The rate of interest payable is prescribed by the Family Law Rules 2004 (“the Rules”) in the following terms:
17.03 Rate of interest
The prescribed rate at which interest is payable under paragraphs 87(11)(b), 90KA(b) and 90UN(b), and subsection 117B(1) of the Act is:
(a) in respect of the period from 1 January to 30 June in any year—the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced; and
(b) in respect of the period from 1 July to 31 December in any year—the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced.
Rule 22.11 deals with the effect of a stay order:
22.11 Stay
(1) The filing of a Notice of Appeal does not stay the operation or enforcement of the order appealed from, unless otherwise provided by a legislative provision.
(2) If an appeal has been started, or a party has applied for leave to appeal against an order, any party may apply for an order staying the operation or enforcement of all, or part, of the order to which the appeal or application relates.
(3) An application for a stay must be filed in the Registry in which the order under appeal was made and be heard by the Judge of the Family Court, Judge of the Federal Circuit Court or Magistrate who made the order under appeal.
In Matthews & Matthews (2006) 47 Fam LR 20 the Full Court dealt with a dispute over interest arising from a stay in similar terms. Finn J held:
I can leave open for present purposes the question of whether an order under s 117B(2) varying the operation of s 117B(1) can be made at any time other than the time at which the order for the payment of money referred to in s 117B(1) is made, or whether an order made under s 117B(2) can be made by any court other than the court which made the order for the payment of money referred to in s 117B(1).
For present purposes it is sufficient to conclude that if an order was to be made under rule 22.12(2) with the intention of “staying” the payment of interest - in other words, altering the operation of s 117B(1) – it would need to express that intention in the clearest possible terms.
Nothing in Warnick J’s order of 18 May 2004 suggests in any way that it was intended to alter the operation of s 117B(1). Thus, in my opinion, Bell J was correct in concluding that that order did not alter the husband’s statutory entitlement to interest as from 7 June 2004 on the amount outstanding under the order of 7 April 2004.
It appears that Finn J’s reference to Rule 22.12(2) was intended to be a reference to 22.11(2) as Rule 22.12 deals with applications for leave to appeal.
The plurality in the Full Court posed the question:
Did the stay order...affect the imposition of interest at all and in particular on the whole of the judgment sum or the balance unpaid from 7 June 2004.
As to the effect of that stay order on the payment of interest, the plurality held:
The stay order ... clearly related to “…payment, until further order”. The effect of the order is nothing more than a stay of execution it did not have the effect of depriving the husband of his right to interest. His right to interest commenced on 7 June 2004 when the amount as first ordered by the trial Judge became payable. The order merely prevented the husband from insisting on the payment of the whole of the amount as ordered by the trial Judge being $213,558 until the hearing and the determination of the appeal.
The answer therefore to the first question is that the stay order did not affect the imposition of interest, at first on the whole of the judgment sum but then when varied by the Full Court, interest on the sum as determined by the Full Court.
THE HUSBAND’S RESPONSE
The husband’s response seeks orders in the alternate.
Firstly, he seeks an order that the wife’s application be dismissed, with the effect that no interest would be payable.
Secondly he seeks an order that the wife pay the costs of this application.
Thirdly, and in the alternate, he seeks an order that interest be payable only for the period from 24 August 2018 to 22 November 2018.
Fourthly, and in the alternate, he seeks an order that interest be payable only from 26 May 2018 to 22 November 2018.
Fifthly, and in the alternate, he seeks to vary the rate of interest payable to 1.5 percent between 2 February 2017 and 25 May 2018; and to 7.5 percent from 26 May 2018 to 22 November 2018.
Sixthly, and in the alternate, he seeks to vary the rate of interest to 2.15 percent between 2 February 2017 and 25 May 2018 and to 7.5 percent from 26 May 2018 to 22 November 2018.
In support of that response, the husband relies on an affidavit sworn by him on 10 April 2019.
The husband concedes that, from the date upon which the appeals were dismissed, interest should be paid at the rate set by the Rules.
I propose to deal with each of the husband’s contentions seriatim.
The first proposition, in Order 1, that the wife’s application should be dismissed, is contrary to the decision of the Full Court in Matthews & Matthews and cannot succeed unless an order is made that no interest be paid. That application could only be made pursuant to the provisions of s117B(2) and will be discussed later in these reasons.
The proposition in Order 3, that interest runs from 24 August 2018, relies on the husband’s contention that, because the original orders allowed the husband 90 days to pay, from the date of judgment until 2 February 2017, he should be allowed a further 90 days from the date of delivery of the judgment of the Full Court dismissing the appeal before accruing interest.
There is no basis in law for that proposition. The orders appealed required payment on 2 February 2017. Once the appeal was dismissed, payment remained due on 2 February 2017 and interest accrued from that date.
Order 3 will not be made.
The proposition in Order 4 is that interest began to accrue on the date the Full Court delivered judgment. Again, there is no basis in law for that proposition.
Order 4 will not be made.
VARIATION OF INTEREST PURSUANT TO S117B(2)
Orders 5 and 6 seek to vary the rate of interest pursuant to the provisions of s117B(2). Two issues arise from that proposition.
Firstly, do the terms of the section permit such an application to be made at any time or must the application be made at the time at which the order for the payment of the money was made? If the answer to the latter question is in the affirmative, then the application would be dismissed.
If the answer to the first proposition is that the application to vary the interest rates can be made at any time, what factors should be taken into account in determining whether no interest should be payable or interest should be payable at a different rate. In the latter instance, I note that nothing in the wording of the section mandates that the altered rate of interest should be lower than the rate prescribed by the Rules.
WHEN MUST THE APPLICATION BE MADE?
Because of the decision I have made in relation to the exercise of discretion, it is not ultimately necessary that I decide this issue. Like Finn J, I leave the question open.
SHOULD THE INTEREST RATE BE VARIED?
I dismiss the husband’s response for the following reasons.
The evidence upon which the husband relies consists of printouts of the cash rate and the retail deposit rates published from time to time by the Reserve Bank. Those documents demonstrate that cash rate at the relevant times was 1.5 percent and the retail deposit rates varied between 1.9 percent and 2.15 percent.
Thus the husband’s application is that he pay interest to the wife at either the cash rate or the retail deposit rate for the period between the due date and the delivery of the judgment of the Full Court.
No other evidence was adduced by the husband in relation to this aspect of the application.
In Stephens & Stephens (2009) 41 FamLR 423 the Full Court, in relation to the payment of interest on a judgment debt, said [at 429ff]:
Section 117B(1) of the Act is a general provision which provides that where, in proceedings under the Act, a court makes an order for the payment of money interest is payable at the rate prescribed by the Rules from the date on which the order is made, or the date on which the order takes effect whichever is later. However, the effect of s 117B(1) is subject to any order made by the court under s 117B(2). Thus, the phrase “subject to” which is added to s 117B(1) limits its operation. Section 117B(2) allows the court, by order, to vary some of the consequences which otherwise flow automatically from s 117B(1), namely by ordering that no interest be paid or by varying the rate, or the date from which it becomes payable. The wording suggests that s 117B(2) offers a divergence from the effect of s 117B(1) and thus limits its operation by working as an exception. We are also of the view that as an exception, s 117B(2) shifts the onus onto the party seeking to take advantage of the exception: see Rural Export & Trading (WA) Pty Ltd v Hahneuser (2007) 243 ALR 356 per Gray ACJ at [65].
The discretion conferred by s 117B(2) of the Act is extremely wide. However, in our view it “enables such lower or higher rate of interest to be determined as the interests of justice in a particular case may require”: see Gould and Another v Vaggelas and Others.
We would not seek to prescribe the considerations that may be relevant to the exercise of the discretion conferred by s 117B(2) of the Act. We are of the view that a purpose of interest on a judgment debt is to compensate the party entitled to the benefit of the judgment until it is satisfied. However, we do not accept that this is the only purpose and are of the view that another purpose is to ensure compliance with orders. For example, there may be circumstances where a recalcitrant party liable to pay an amount of money may seek to take advantage of an interest rate which is less than the prescribed rate.
Their Honours held at [479] that:
There was no obligation on the Wife to put evidence before the Court directed to establishing why it would be in the interests of justice to retain the prescribed rate. We accept the submissions by senior counsel for the Wife that there was no onus on the Wife to establish that the rate prescribed by the Rules would in the circumstances adequately compensate the Wife. In any event, as senior counsel for the Husband pointed out it would be very difficult “to prove what is compensatory” Neither purpose is addressed by awarding interest at the rate that would be available to the husband if he simply retained the funds in his bank account.
Their Honours further held at [482]:
The trial Judge was obliged to be satisfied that it was in the interests of justice that the interest rate be varied and he failed to address this fundamental issue. The purpose of an award of interest on a judgment debt includes that it be compensatory but by so confining the inquiry, the trial Judge was in error.
Thus their Honours found that the purpose of an award of interest is both to compensate the judgment creditor for being kept out of her money and to ensure compliance with orders. Further, the onus lies upon the husband to demonstrate that it is in the interests of justice to vary the rate of interest. Lastly, there is no obligation upon the wife to demonstrate that the prescribed rate of interest is appropriate.
On behalf of the husband, counsel submitted that interest should run at the cash rate, or the retail deposit rate, from the due date until the date of delivery of the judgement of the Full Court.
It was submitted, on behalf of the husband, that, because both parties appealed from the decision at first instance, they both were advantaged by the stay and both sought the benefit of the appeal.
I note that no stay was ever sought by the wife and neither was she advantaged by it. The effect of the stay was to allow the husband to retain and use some $1,760,000 of the wife’s money for almost two years.
Counsel for the husband submitted that, until the Full Court delivered judgement, because payment of the principal sum had been stayed, there was no utility in applying an interest rate to ensure compliance with the order. The only purpose of interest in that circumstance was to compensate the wife for being out of her funds.
The application carries with it an assumption that the wife would be adequately compensated by the payment of interest at either rate.
The amount in question is a significant sum. It cannot be assumed that the wife, had she had control of the funds, would simply have placed them in a bank at the available cash rate of interest. Investment opportunities would have been available to her in the market. Those have been lost to her.
Conversely, senior counsel for the wife submitted that the husband had the benefit of the funds for the entire period.
The husband did not file a Financial Statement in relation to this application and his evidence was confined to those matters set out above.
At trial, the husband’s assets were found to include shares in listed companies to the value of some $7,850,000 and investment properties to the value of some $8,855,000. He also had significant borrowings. One of the issues in the trial was how the husband would pay any amount he was ordered to pay to the wife. The issue was what assets the husband would sell to raise the funds. He did not propose to borrow.
Thus the benefit to the husband of retaining the use of some $1,760,000 was significant.
Those funds could continue to be used by him to earn income or pay down debt.
The husband’s proposition that the wife be compensated by the payment of interest at the cash, or retail deposit rate, makes no allowance for any income he may have received as a result of the investment of the wife’s money during the period she was kept out of her funds.
The husband did not put any evidence before the Court of the income he had earned from his investments, particularly from the investment of the wife’s funds, in the period from 2 February 2017.
There is no evidentiary basis upon which the Court could assume that the benefit which accrued to the husband from the retained funds was no more than equivalent to the cash rate or to the retail deposit rate.
In simple terms, the husband kept and invested the funds and potentially earned income from them, and deprived the wife of the same opportunity.
The husband bore the onus of satisfying the Court that it was in the interests of justice to vary the rate of interest. That onus is not satisfied by reference to the rate of interest the wife could have earned if she had invested the funds in a bank account when, on the clear terms of the Rules which set the interest rate, an intention is displayed that the relevant interest should be six percent above that rate.
It is not in the interests of justice that the wife should be compensated at the cash or deposit rate for being kept out of her funds when the husband has not disclosed the income he earned from investing her funds for the same period.
For those reasons, the response should be dismissed.
INTEREST ON INTEREST
The purpose of interest is to compensate the wife for being kept out of her funds. Once the principal amount was paid to her on 23 November 2018, no further compensation was required.
Thus the husband should pay interest from the due date until the date of payment of the principal sum, 23 November 2018, at the rate prescribed by the Rules.
As at 23 November 2018, the interest owed was $222,927.03.
I certify that the preceding seventy one (71) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 24 April 2019.
Associate:
Date: 24 April 2019
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