DOOLAN & DOOLAN
[2015] FCCA 634
•20 March 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DOOLAN & DOOLAN | [2015] FCCA 634 |
| Catchwords: FAMILY LAW – Property – 2 contravention applications – where the husband is alleged to have contravened financial orders in a blatant fashion – where the husband filed a debtor’s petition and became bankrupt the day before the hearing of the first contravention application – whether the court can proceed in relation to either application. |
| Legislation: Family Law Act 1975, s.90K Bankruptcy Act 1966, s.58 |
| Doolan & Doolan [2013] FCCA 776 Melnik v Melnik (2005) 144 FCR 141 |
| Applicant: | MS DOOLAN |
| Respondent: | MR DOOLAN |
| File Number: | DGC 3484 of 2007 |
| Judgment of: | Judge Small |
| Hearing dates: | 10 September 2014 17 November 2014 |
| Date of Last Submission: | 17 November 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 20 March 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Dickson |
| Solicitors for the Applicant: | PAVUK LEGAL |
| The Respondent: | No Appearance |
ORDERS
The Orders and Declarations made 10 September 2014 are hereby discharged.
The Contravention Applications of the wife filed 25 November 2013 and 5 September 2014 are hereby dismissed with a right of reinstatement.
IT IS NOTED that publication of this judgment under the pseudonym Doolan & Doolan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
DGC 3484 of 2007
| MS DOOLAN |
Applicant
And
| MR DOOLAN |
Respondent
REASONS FOR JUDGMENT
Introduction
This judgement relates to two sets of contravention proceedings brought by the wife Ms Doolan (“the wife”) against the husband, Mr Doolan (or Mr Doolan) Doolan (“the husband”).
The first Contravention Application was filed on 25 November 2013 (“the first Contravention Application”) and was finally heard on 10 September 2014. At that hearing, I found that the husband had contravened four of my Orders made 15 July 2013, and I reserved my decision as to penalty.
Unfortunately, the husband had lodged a Debtor’s Petition and become bankrupt on the day before that hearing, that is on 9 September 2014. Therefore the question arises in relation to the first Contravention Application as to whether the court acted outside its powers in conducting the hearing on 10 September 2014.
That is the first issue to be determined in this judgment.
If I find that the court did not act outside its powers on 10 September 2014, then the second issue is what penalty ought be applied to the husband for the contraventions proven on that day.
The second Contravention Application was filed on 5 September 2014 (“the second Contravention Application”) alleging that the husband had not complied with costs orders made against him on 18 June 2014.
The second Contravention Application was listed for hearing on 17 November 2014 and on that date the wife’s counsel made an oral Application for leave to proceed under s.58(3)(b) of the Bankruptcy Act.
The third issue to be determined in this judgement is whether the court ought to grant the wife’s oral Application to proceed against the (by then bankrupt) husband.
If the court does grant leave to proceed under s.58(3)(b), then the question arises as to whether the husband has contravened Orders as alleged in the Application filed 5 September 2014, and if so, what penalty ought to be applied. Those are the fourth and fifth issues to be decided in this judgement.
The issues for this judgment are therefore:
A.Did the court have the power to hear the wife’s contravention application filed 25 November 2013 on the listed hearing date of 10 September 2014?
B.If the answer to the first question is in the affirmative, what penalty should the Court impose for the husband’s contraventions found on 10 September 2014?
C.Should the court grant the wife’s oral application made on 17 November 2014 for leave to proceed under s.58(3)(b) of the Bankruptcy Act?
D.If the answer to the previous question is in the affirmative, has the husband contravened court orders as set out in the Application of 17 November 2014?
E.If he is found to have so contravened court orders, what penalty should the court impose upon him?
Background
The parties began living together in 1988 and were married in 1989. They separated on (omitted) 2006 and were divorced on 18 November 2011.
There are three children of the marriage, all of whom are now adults but all of whom spend time living with each parent.
The wife works part-time in her own (omitted) business and the husband has worked as a (omitted) for many years.
On 29 April 2008, the parties signed a document headed “BINDING FINANCIAL AGREEMENT PURSUANT TO SECTION 90D OF THE FAMILY LAW ACT 1975” (“the Financial Agreement”).
It must be said that the provisions of the Financial Agreement were somewhat favourable to the wife.
Essentially the terms of the Financial Agreement provided as follows:
· Two properties were to be sold and the net proceeds divided between the husband and wife.
· The husband was to pay to the wife the sum of $25,000 by way of 12 equal monthly instalments commencing on the date of signing the Financial Agreement.
· The wife was to continue to occupy the family home at Property H (“the Property H property”) and the husband was to pay all instalments pursuant to the mortgage and all insurance, rates, taxes and like apportionable outgoings as they fell due. Neither party was to encumber the Property H property without the written consent of the other, and the wife was explicitly to be entitled to all of the equity in the Property H property. However, the wife was permitted to sell the Property H property at any time before 9 April 2018 upon giving notice to the husband. If she did so, and bought another property with the assistance of a mortgage loan, then the husband would be responsible for the mortgage loan to the extent of the balance of the previous mortgage over the Property H property.
· On or before 9 April 2018 the husband was to discharge the mortgage and transfer all his interest in the Property H property to the wife.
· The wife would retain a Mercedes-Benz (omitted) four-wheel- drive motor vehicle and the husband would be responsible for all lease payments on that vehicle as well as all registration, insurance, repairs and servicing costs. Within three months of signing the Financial Agreement the husband was to pay out the lease on the Mercedes-Benz vehicle and acquire a new vehicle for the use of the wife, at her choice but at a cost of no more than $40,000. The husband was to then continue to pay all lease and other expenses as he had for the Mercedes-Benz and he would be obliged to transfer that vehicle to the wife at her request.
· The husband was to take out, and keep current, life insurance and accident insurance to cover his obligations as set out in the Financial Agreement.
· Otherwise the wife and husband would keep all property and superannuation benefits in their possession at the date of signing the Financial Agreement.
· If the husband defaulted on any of the payments he was obliged to make under the terms of the Financial Agreement, penalty interest of 13% per annum calculated monthly would be added to the debt.
The property to be retained by the husband under the financial agreement included his interest in various companies which operated his concreting business.
The husband ceased to pay the mortgage loan attached to the Property H property in December 2012.
The wife remains living in the Property H property and the husband lives with his partner in (omitted).
Procedural History
These are the third set of proceedings brought by the wife in an attempt to force the husband to comply with the Financial Agreement.
In the first set of proceedings[1] the wife sought a declaration that the Agreement was binding on the parties, and orders to enforce its provisions.
[1] Doolan & Doolan [2013] FCCA 776
The husband sought an order setting the Financial Agreement aside for impracticability under s.90K(1)(c) of the Family Law Act 1975 (“the Act”), and that the court make “just and equitable orders adjusting the property rights of the parties”.
After a two day trial on that issue I found that the Financial Agreement was binding and made the declaration sought by the wife on 15 July 2013.
The wife made an oral Application for her costs of the proceedings and directions were made for the parties to provide written submissions on that issue.
The wife filed her Submissions as to Costs on 14 October 2013.
These Proceedings
On 25 November 2013 the wife filed the first Contravention Application together with an Application in a Case.
In the first contravention Application she alleged that the husband had, without reasonable excuse, breached the Orders of 15 July 2013 in that he had failed to pay her the sum of $75,069.22 being the sum listed in paragraph 1 of those orders ($77,969.22 minus the value of a motor vehicle ($2,900) as contained in paragraph 2 of the orders).
She further alleged the following breaches of the Agreement, which had been declared to be in full force and effect on 15 July 2013:
(a) in an ongoing breach of his obligations, the Respondent has without reasonable excuse failed to make any payments towards the mortgage of Property H since November 2012. In this respect, the Respondent’s first failure to meet mortgage payments was 20 December, 2012;
(b) in an ongoing breach of his obligations, the Respondent has without reasonable excuse failed to make any payments towards the water rates or municipal rates of Property H since the signing of the Financial Agreement on 29 April, 2008;
(c) in an ongoing breach of his obligations, the Respondent has without reasonable excuse failed to indemnify the Applicant against payment she has made towards the mortgage, rates, taxes and outgoings of Property H since she began making such payments as a result of the Respondent’s default; and
(d) the Respondent has failed to pay the premiums on any life and accident cover to cover his obligations set out in the Financial Agreement and has failed to provide the Applicant with proof of currency on the anniversary of each policy.
In her Application in a Case the wife sought orders that the following clauses of the Agreement be enforced as if they were orders of the court:
3.1 The wife will have the sole right to occupy the property at Property H. The husband will pay all insurance, rates, taxes and like apportionable outgoings on the property including the mortgage.
3.3 Neither party is to encumber the Property H property without the consent of the other.
3.4 The husband indemnifies the wife in relation to all the rates, taxes, outgoings and insurance of the Property H property including the mortgage.
4. on or before 9 April 2018.
4.1 The husband will transfer the Property H property to the wife
4.2 The husband will pay out the mortgage on the Property H property.
5.1 Notwithstanding the above, the wife has the right to sell the Property H property at any time prior to 9 April 2018 upon giving notice to the husband.
5.2 The husband will assist the wife to make application for a further mortgage to purchase any new property and the husband will be liable for the mortgage over any new property to the extent of the value of the Property H property at that time.
11. The husband will take out and maintain life and accident insurance, with the wife named as beneficiary, to cover his obligations under this Agreement.
13. If the husband is in default of any of the payments referred to in paragraphs 6, 7, 9 and 10, he shall incur interest on those payments at the rate of 13% per annum.
In that Application, the wife sought further orders restraining the husband from selling, disposing, and transferring his shareholdings and interest in the following companies:
· (omitted) Pty Ltd (ACN (omitted))
· (omitted) Pty Ltd (ACN (omitted))
· (omitted) Pty Ltd (ACN (omitted))
· Doolan (business omitted) and (omitted) (ACN (omitted)) and
· (omitted) Pty Ltd (ACN (omitted))
and, if the husband had already sold, disposed of or transferred such shareholdings or interests, that those transactions be set aside.
She also sought her costs of that Application on an indemnity basis.
On 10 December 2013 the proceedings came before me in the Duty List for the first return of the wife’s first Contravention Application and her Application in a Case, and a further mention hearing of the wife’s costs Application from the previous proceedings.
The wife was represented by counsel at that hearing and the husband failed to make any appearance on that day. I noted that there was an Affidavit of Service on the file. The Applications were adjourned to 19 February 2014 and the wife’s costs of that day were fixed and reserved at $1,650.00.
A Notation was added to those orders to the effect that if the husband failed to appear on the adjourned date the wife may have leave to proceed on an undefended basis.
On 27 December 2013 the Husband’s Solicitor filed a Notice of Withdrawal as Lawyer.
At the hearing on 19 February 2014 both parties were represented by counsel and Orders were made in the following terms:
1. Pursuant to s.90KA(c) of the Family Law Act 1975, the following clauses of the Binding Financial Agreement executed by the parties on 29 April 2008 be enforced as if they were an Order of the Court, this Order to be operative from 12 March 2014:
a) Clause 3.1;
b) Clause 3.3;
c) Clause 3.4;
d) Clause 4.1;
e) Clause 4.2;
f) Clause 5.1;
g) Clause 5.2;
h) Clause 11.1;
i) Clause 11.2;
j) Clause 13.
2. The Respondent is hereby restrained by injunction from selling, disposing, and transferring his shareholdings and interest in the following companies:
a) (omitted) Pty Ltd (ACN (omitted));
b) (omitted) Pty Ltd (ACN (omitted));
c) (omitted) Pty Ltd (ACN (omitted));
d) Doolan (business omitted) (ACN (omitted));
e) (omitted) Pty Ltd (ACN (omitted)).
3. The Respondent husband pay to the Applicant mother the costs reserved on the 10 December 2013 fixed in the sum of $1,650.00 (“the costs”) with the Respondent husband to pay such costs in full within 30 days of these Orders.
4. The Respondent husband file his written submissions within 14 days of these Orders in respect to the costs of the ‘Binding Financial Agreement’ proceedings that concluded with judgment delivered 15 July 2013.
AND THE COURT NOTES THAT:
A. In the event that the Respondent husband fails to file his written submissions as per Order 4 hereof, the Court will deliver judgment on this issue.
The matter was then adjourned to 18 June 2014 for Directions in the Duty List.
On 6 March 2014 the husband filed his Submissions as to Costs.
Legal representatives for the husband filed an Address for Service on 11 March 2014 and on 5 June 2014 filed a Notice of Withdrawal as Lawyer.
On 18 June 2014 the matter returned in the Duty List for a Directions Hearing. The wife was represented by counsel and there was no appearance by or on the behalf of husband. He had actually attended at the court and had begun negotiations with the wife’s counsel, but the wife’s counsel informed me that he had left the court precinct during those negotiations.
The wife was granted leave to proceed on an undefended basis in relation to her costs application for the initial proceedings and those costs were granted in the sum of $55,822.95 being 95% of the indemnity costs sought. Reasons for judgment were provided on that day.
A further oral Application for the costs of the Application filed on 25 November 2013 was made and granted on an undefended basis in the sum of $50,000.00. I set out the terms of the Orders below:
THE COURT ORDERS THAT:
1. The Respondent Husband pay to the Applicant Wife for her costs of the proceeding of the 16 and 17 May 2013 fixed in the sum of $55,822.95 (“the costs”) being 95% of the indemnity costs sought by the wife.
2. The Respondent Husband pay to the Applicant Wife for the costs of her Application filed on 25 November 2013 fixed in the sum of $50,000.00 (“the costs”) those being the costs ordered on an indemnity basis.
3. The Respondent Husband to pay the costs specified in Order 1 and 2 hereof by no later than 31 August 2014.
Those were Final Orders.
I note that no findings or Orders were made at that time in relation to the substance of the wife’s first Contravention Application. That matter was adjourned to 10 September 2014.
On 5 September 2014 the wife filed a further Contravention Application in relation to the Orders of 18 June 2014 alleging that the husband had failed to pay the sums ordered by 31 August 2014 (“the wife’s second Contravention Application”). That matter was listed for initial hearing on 17 November 2014 in the Duty List.
On 9 September 2014 the husband presented his Debtors Petition for Bankruptcy and was made bankrupt.
The wife’s first Contravention Application came before me on 10 September 2014 in the Duty List when the wife was represented by counsel and Mr K appeared as the husband’s Trustee in Bankruptcy as a courtesy to the Court. However, he took little or no part in the hearing, the Trustee not having formally intervened in the proceedings.
The wife was given leave to proceed on an undefended basis on her first Contravention Application, and on the evidence found in her Affidavit sworn and filed 25 November 2013, and the submissions of counsel, I found the husband guilty of all four contraventions set out in the wife’s Application.
My decision on penalty was reserved at that time and further orders were made that the husband pay the wife’s costs between 18 June 2014 and 10 September 2014 on an indemnity basis in the sum of $14,300.
The wife’s second Contravention Application came before me in the Duty List on 17 November 2014, where the wife was represented by counsel and the husband made no appearance.
The wife’s counsel had prepared written submissions in relation to the effect of the husband’s bankruptcy on the wife’s second Contravention Application, and he made an oral Application for leave to proceed against the (now bankrupt) husband under s.58(3)(b) of the Bankruptcy Act.
The husband had apparently not been given notice of that oral Application to Proceed.
I reserved my decision in relation to that issue.
Issues and Evidence
A. Did the court have the power to hear the wife’s contravention application filed 25 November 2013 on the listed hearing date of 10 September 2014?
On 10 September 2014 I found that the husband had contravened four orders:
a)Paragraph 1 of the orders made on 15 July 2013 which provided that the husband pay to the wife by 31 October 2013 the sum of $77,969.22, being payments due and payable under the Financial Agreement and the Child Support Agreement signed by the parties and dated 29 April 2008 (“the Child Support Agreement”), minus overpayments of child support paid by the husband under the child support agreement signed on the same day.
b)Clause 3.1 of the Financial Agreement[2], that clause having been declared to remain in full force and effect in orders dated 15 July 2013. That clause provides for the wife to have the sole right to occupy the property at Property H (“the Property H property”) and that during such right of occupation the husband is required to pay all instalments pursuant to the mortgage and all insurance, rates, taxes and like apportionable outgoings as they fall due.
c)Clause 3.4 of the Financial Agreement, which required the husband to indemnify the wife against “any liability pursuant to the mortgage, rates, taxes, outgoings and insurance” in relation to the property at Property H.
d)Clause 11 of the Financial Agreement, which required the husband to take out insurance to cover his obligations under the financial agreement, nominating the wife as beneficiary and prohibiting him from changing that nomination without the wife’s written consent. Under that clause he was obliged to pay all premiums, ensure that those insurance policies are up-to-date at all times, and provide to the wife proof of currency of the insurance on the anniversary of each policy or at such other times as might be requested by the wife.
[2] On 19 February 2014 orders were made so that certain clauses of the Financial Agreement, including clauses 3.1, 3.4, and 11, were to be enforced as though they were orders of the Court, that order to be operative from 12 March 2014
As is already apparent, those orders were made on the day after the husband lodged his Debtor’s Petition and became bankrupt.
In order to decide whether the court acted outside its powers in hearing the Application which led to those orders in circumstances where the husband was declared bankrupt only the day before, we must turn to the Bankruptcy Act.
Section 82 states:
(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject to the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
I am satisfied, given that broad definition, that the debts or payments owed by the husband on 10 September 2014 pursuant to previous court orders are “provable debts” under s.82(1) of the Bankruptcy Act.
Section 58(1) states that any property owned by a bankrupt at the date of his bankruptcy vests immediately in the Trustee in Bankruptcy where one is appointed. In this case a Trustee in Bankruptcy was appointed for the husband on 9 September 2014.
Section 58(3) of the Bankruptcy Act states as follows:
Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt:
or
(b) except with the leave of the court and on such terms as the court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
It was obvious on 10 September 2014 that the husband was, on that day, a bankrupt. Indeed his Trustee was in court, if only to advise the court that he did not intend to intervene in the proceedings.
I am also satisfied that the remedy sought by the wife on 10 September 2014 was a remedy “against the person or the property of the bankrupt in respect of a provable debt”[3].
[3] see Melnik v Melnik (2005) 144 FCR 141
Therefore, and very unfortunately for her, it was “not competent” for the wife on that day to “enforce any remedy” against the husband, who was on that day, a bankrupt, and it follows that I was in error in allowing the hearing to proceed and making findings in relation to the first Contravention Application.
I note that no leave to proceed under s.58(3)(b) was sought on that day.
Conclusion as to Issues A and B.
Having found that it was not within the Court’s power to make the orders that I made on 10 September 2014, I will discharge those orders.
In those circumstances, the second issue as set out in the introduction to this judgment becomes moot.
C. Should the court grant the wife’s oral application made on 17 November 2014 for leave to proceed under section 58(3)(b) of the Bankruptcy Act?
The husband did not appear at court on 17 November 2014. Nor did any legal representatives appear on his behalf.
The husband had been declared bankrupt some two months previous to that date, and it would have been open to the wife’s legal representatives to have given him notice of their intention to seek leave to proceed under s.58(3)(b), either by filing an Application in a Case, or by informing him that they would be making an oral application to proceed on 17 November.
No evidence of such notice has been provided to the Court.
As a matter of natural justice, the husband, who I note is the Respondent in these proceedings, and is now self-represented, ought to have been given notice of that Application.
Conclusion as to Issues C, D and E
In those circumstances, I will not grant leave under s.58(3)(b) of the Bankruptcy Act for the wife to proceed with her Contravention Application filed 5 September 2014.
Leave not having been granted, I do not need to decide whether the husband has contravened orders in terms of the Contravention Application of the wife filed 5 September 2014, nor what penalty should apply were he to be found to have so contravened orders.
Final Conclusion
It gives me no pleasure to have made this decision.
On the evidence presented to me on 10 September 2014 I found, as a matter of fact, that contraventions had occurred. By declaring himself bankrupt on 9 September 2014, it would appear that the husband has managed to avoid any consequences which might flow from his non-compliance with court orders.
The consequences for the wife, however, are very serious, in that she is confronted with considerable debt as a result of legal fees she has incurred in these and previous proceedings, as well as the possibility of losing her house due to the husband’s failure to pay the mortgage.
I certify that the preceding seventy five (75) paragraphs are a true copy of the reasons for judgment of Judge Small
Date: 20 March 2015
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