DOOLAN & DOOLAN
[2013] FCCA 776
•15 July 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DOOLAN & DOOLAN | [2013] FCCA 776 |
| Catchwords: FAMILY LAW – Financial Agreement – meaning of “impracticable” – whether husband’s business failure and current financial position amount to impracticability. |
| Legislation: Family Law Act 1975, ss.79A(1)(b), 90G, 90K(1)(c), 90UM |
| Cases Cited: In the Marriage ofLa Rocca (1991) 14 Fam LR 715 In the Marriage of Rhode (1984) 10 Fam LR 56 Sanger v Sanger (2011) 46 Fam LR 275 In the Marriage of DS and ME Cawthorn (1998) 23 Fam LR 86 Herold & Kay [2012] FMCAfam 1071 |
| Applicant: | MS DOOLAN |
| Respondent: | MR DOOLAN |
| File Number: | DGC 3484 of 2007 |
| Judgment of: | Judge Small |
| Hearing dates: | 16 & 17 May 2013 |
| Date of Last Submission: | 17 May 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 15 July 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr Potter |
| Solicitors for the Applicant: | Bayside Solicitors |
| Counsel for the Respondent: | Mr O'Connor |
| Solicitors for the Respondent: | Horsfield & Associates |
DECLARATION
That the Financial Agreement and Child Support Agreement signed by the parties on 29 April 2008 remain in full force and effect.
ORDERS
Subject to order 3 hereof the husband shall pay to the wife by 31 October 2013 the sum of $77,969.22, being payments due and payable under the Financial Agreement and Child Support Agreement signed by the parties and dated 29 April 2008, minus overpayments of child support paid by the husband under the Child Support Agreement signed on the same day.
The value of the 1999 [M] motor vehicle registration number [omitted] as at 16 May 2013 shall be deducted from the amount specified in Order 1.
The matter be adjourned to this Court on 24 October 2013 at 9.30am for Mention in relation to the wife’s costs application.
The Applicant make, file and serve any documents she seeks to rely upon no later than 4.00pm, 31 August 2013.
The Respondent make, file and serve any documents he seeks to rely upon no later than 4.00pm, 30 September 2013.
The Applicant make, file and serve any response material she seeks to rely upon no later than 4.00pm, 15 October 2013.
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 is an application filed by the wife to enforce the terms of a Financial Agreement (“the Agreement”) and a Child Support Agreement (“the CS Agreement”) signed by the parties on 29 April 2008.
It is common ground between the parties that the Agreement is binding on them, as it complies with the requirements of s.90G of the Family Law Act 1975 (“the Act”), and no issue was taken in relation to the validity of the Child Support Agreement.
In enforcement of the Agreement, the wife seeks the payment of various sums of money which she says are due and payable under its terms.
In enforcement of the CS Agreement, she seeks that the husband reimburse her for payments she has made but which are his responsibility pursuant to the CS agreement, and that he pay her out-of-pocket expenses for surgery she underwent in June 2012.
In his Response, the husband seeks an order under s.90K(1)(c) of the Act that the Agreement be set aside on the ground that his changed circumstances have rendered the Agreement impracticable to carry out. He then seeks repayment of the sum of $26,040 in child support payments which he claims were overpaid, and orders for a property settlement under s.79 of the Act
Section 90K(1)(c) states as follows:
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or part of the agreement to be carried out.
Counsel for the husband was clear that he seeks to have the whole of the Agreement set aside and not part of the Agreement only.
Background
The parties began living together in 1988 and were married [in] 1989. They separated on 3 July 2006 and were divorced on 18 November 2011. The cohabitation period was therefore about 18 years.
There are three children of the marriage all of whom are now adults: [X] born [in] 1986 who at all material times has been independent of the parties (“[X]”); [Y] born [in] 1990, who turned 18 some 6 months or so after the Agreement was signed (“[Y]”); and [Z] born [in] 1994, who turned 18 about 5 months before these proceedings were instituted (“[Z]”).
At the time of signing the Agreement, the parties also entered into a Child Support Agreement in relation to [Y] and [Z] (“the CS Agreement”).
The Financial Agreement (“the Agreement”)
The Agreement was signed on 29 April 2008 in order to finalise property issues between the parties and I set out the general effect of the pertinent part of the Agreement’s terms here for easy reference later in these reasons.
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.
3.2 The parties hold their respective interests in the Property H property on trust pursuant to this Agreement.
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.
3.5 The wife is entitled to all the equity existing in the Property H property at all times.
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.
6. The property at Property C will be sold and after all costs of the sale and mortgage have been paid, the wife shall receive $55,000, the parties’ debts to [C] Pty Ltd be paid out, and the remainder shall go to the husband.
7. The husband will pay to the wife $25,000 by way of 12 equal monthly instalments commencing on the date of the Agreement.
8. The husband will indemnify the wife against all debts and liabilities she may have incurred through the loan accounts of [C] Pty Ltd and her liability in relation to [C] Pty Ltd shall be reduced to nil
9. The property at Property N, will be sold and after all costs of sale and the mortgage have been paid out, the wife’s loan account with [C] Pty Ltd shall be paid out, and the balance to go to the husband.
10.1 The wife will retain the [M] motor vehicle, registration number [omitted] and the husband shall pay all lease payments, registration, insurance, repairs and servicing costs of that vehicle.
10.2 Within 3 months of this Agreement or upon the expiry of the lease on the [M] vehicle, whichever is the first in time, the husband will pay out the lease and lease or buy the wife a new vehicle to the value of $40,000. The husband will continue to pay all lease and running costs of the new vehicle. The husband will transfer that vehicle to the wife at her request.
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.
12 Otherwise the parties retain all property currently held by them.
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.
The final paragraph of the Agreement states:
17. This Agreement is intended to be a Binding Financial Agreement under Section 90D of the Family Law Act 1975 and deals with the rights and responsibilities of the parties with respect to existing and future property and resources of the parties both individually and jointly. It is intended to operate in complete bar and discharge to any claim by either party against the other with respect to any matter or thing covered by Part VIII of the Family Law Act.
The Child Support Agreement (“the CS Agreement”)
The CS Agreement, also signed on 29 April 2008, included provision for the husband to pay periodic child support until the occurrence of a child support terminating event under s.12(1) of the Child Support Assessment Act 1989, plus the children’s school fees until the children completed their secondary education, and for him to maintain private medical insurance for the family, including the wife, also until the occurrence of a child support terminating event.
It is conceded by the wife that the husband paid the periodic payments beyond the occurrence of the child support terminating events of [Y]’s and then [Z]’s 18th birthdays, and in fact, up to June 2012, when the husband received her Initiating Application in these proceedings, although the amount of those payments is disputed.
The husband says that he inadvertently overpaid the sum of $23,400.00 in relation to [Y]’s support, and the sum of $2,640.00 for [Z]’s support between the date of the CS Agreement and June 2012. He says that the overpayments arose from the wife’s failure to inform him that he was no longer liable to pay child support for [Y] and [Z] upon each reaching the age of 18 years.
At trial, it was put to the husband that he and the wife had made a second, verbal agreement in relation to the children’s support, whereby he would continue to support them while they were studying. The husband denied that such an agreement had been made, although he acknowledged that he had continued to pay the lease on an apartment used mostly by [X] and [Y]. That was not disputed by the wife at trial, and he did not dispute that he had continued to pay $265 per fortnight to the wife after [Y] had turned 18.
These proceedings
The wife’s Initiating Application filed on 6 June 2012, seeks orders enforcing her rights and the husband’s obligations under paragraphs 3.1, 7, 10.1, 10.2, 11.1, 11.2 of the Agreement, and the provisions of the CS Agreement relating to private medical insurance, including a payment of $4,628.20 for “payment of out of pocket expenses to be incurred by the wife for future surgery” and reimbursement of monies she had paid in health insurance premiums in the sum of $3444.27.
In satisfaction of that claim, she seeks payments totalling $74,466.57, plus interest pursuant to the Agreement, those payments being particularised as follows:
(a)Water rates at the former family home
$3,254.10
(b)Replacement of taps at the former family home
$150.00
(c)Repair of the heating system at the former family home
$550.00
(d)Pest control at former family home
$434.50
(e)Necessary maintenance to the former family home
$10,000.00
(f)Swimming pool maintenance at the former family home
$796.00
(g)Unpaid remainder of amount due under Clause 7
$10,598.50
plus interest
(h)Fine for driving unregistered vehicle
$611.00
plus interest
(i)Money for motor vehicle purchase
$40,000.00
plus interest
(j)Reimbursement for medical insurance
$3,444.27
(k)Reimbursement for the wife’s surgery in June 2012
$4,628.20
Total sought under the Agreement and CS Agreement
$74,466.57
That is, in satisfaction of her claim overall, the wife seeks a total payment of $74,466.57 plus certain amounts of interest in relation to the items set out at (g), (h) and (i) above.
In his Response, filed 29 August 2012, the husband sought orders that the wife’s application be dismissed, that the Agreement be set aside under s.90K(1)(c) of the Act, and that the court make “just and equitable orders adjusting the property rights of the parties”. He further sought a declaration that all payments made by the husband to the wife pursuant to the Agreement be deemed to have been fully discharged, as well as repayment of $26,060 which he claims he has overpaid in child support under the CS Agreement.
In the alternative, he sought that the same amount be applied to fully discharge his obligations under both the Agreement and the CS Agreement.
The matter first came before Whelan FM (as Her Honour then was) on 18 July 2012 when Her Honour made an order that the husband file and serve a Financial Statement and Affidavit within 14 days and that he pay the wife’s costs of that day in the sum of $500 by 31 August 2012. The matter was then adjourned for mention on 31 August.
On 31 August 2012, orders were made by consent in relation to certain sale proceeds relating to a property in which the husband was said to have an interest, and the matter was listed for trial, with the usual trial directions, for 7 February 2013.
On 7 February 2013, the matter was adjourned for final hearing on 16 May with further trial directions.
The trial took place before me on 16 and 17 May 2013.
Counsel for the wife conceded at the beginning of the trial that some of her claims were perhaps a little overreaching, although it was left to me to decide what, if any, payment the husband should make should the court decline to set the Agreement aside.
As the parties agree that the Agreement is prima facie binding upon them under s.90G of the Family Law Act (“the Act”), the issue before the court was whether to set the Agreement aside under s.90K on the ground that the husband’s alleged change in circumstances had made the performance of the Agreement impracticable.
The Law
The relevant section of the Act states:
S.90K(1)(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or part of the agreement to be carried out.
The issue of what “impracticable” means at law, and particularly what it means in relation to Financial Agreements or Court Orders made under the Family Law Act 1975, has been canvassed in several salient cases .
In In the Marriage of La Rocca (1991) 14 Fam LR 715, Kay J was asked to make a determination as to whether a change in the husband’s circumstances had led to a situation where orders previously made by Wilczek J had become impractical to be carried out . That application was brought pursuant to s.79A(1)(b), which is in almost exactly the same terms as s.90K(1)(c), save that it relates to court orders made under s.79 rather than to a Financial Agreement made under s.90D.
In that case, Kay J accepted that there had been a significant downturn in the husband’s cleaning business, and said that that situation “leaves him in a precarious position, which is likely to leave him in a net insolvent position if he has at any one time to pay out all of his creditors” (at 717).
Nevertheless, Kay J was not prepared to set aside orders under s.79(1)(b). He said, at 718:
In In the Marriage of Rhode(1984) 10 Fam LR 56; FLC 91-592 Gee J examined the meaning of the word “impracticable” and concluded that it was something different from impossible and said at FAM LR 64; FLC 79,768:
“(a) It is not enough that circumstances have arisen since the order was made which make it unjust for the order or part of the order to be carried out; the onus is upon the applicant to establish to the reasonable satisfaction of the court, that in the circumstances that have arisen it is impracticable for the order or part of the order to be carried out.
(b) The word “impracticable” means gleaning a definition from the Shorter Oxford Dictionary, “not practicable”, “that cannot be carried out or done”, “practically impossible”; “unmanageable”; “intractable”.
Kay J then said that he thought that s.79A(1)(b) was capable of either a wide or a narrow interpretation. He preferred the narrow interpretation, and went on to say, at 720:
…circumstances that have arisen in which it becomes impracticable to carry out the orders are circumstances which 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.
The potential insolvency of one of the parties in the future is not such a matter, in my view. In every case before the court property values may change, go up or down, business may flourish or not flourish, the vicissitudes of life may affect one of the parties.
(T)he commercial failure of one of the parties post the making of orders which will lead to the orders not being capable of being fully implemented does not, in my view, amount to a basis on which to set the order aside.
There is no provision in the legislation to have matters looked at a second time if one of the parties suddenly becomes wealthy and, in my view, I do not see that the legislation can be appropriately read as applying when one of the parties becomes suddenly poor, in normal business circumstances.
Kay J’s interpretation of s.79A(1)(b), including his interpretation that the provisions of s.79(1)(b) could be likened to the doctrine of frustration in contract, was confirmed by the Full Court in In the Marriage of DS and ME Cawthorn (1998) 23 Fam LR 86 (“Cawthorn”).
That was a case in which the husband claimed that orders made by consent in September 1992 were now impracticable because a property had realised considerably less than expected at sale, and because his business had been required to make significant payments as the result of embezzlement by a partner.
In dismissing the husband’s appeal The Full Court said, at 95:
All business activities however are subject to the vicissitudes of commercial life…. Businesses may always be the subject of financial misfortune and it is not necessary, for the purpose of s.79A(1)(b) to be able to predict the precise form or nature of such a misfortune or the manner in which it may arise.
Later, while discussing the concept of “self-induced frustration”, the Full Court said, at Fam LR 96; FLC 85,061:
However in our view a party cannot successfully seek an order pursuant to s.79A(1) as a result of that party’s own default unless such a default was due to circumstances quite beyond that party’s control. This rests … upon the well established principle of law that no-one should profit by their own wrong doing. This principle clearly embraces the obligation to carry out the provisions of a court order.
In Sanger v Sanger (2011) 46 Fam LR 275, the Full Court again considered these issues, but this time specifically in relation to s.90K(1)(c).
In that case, the husband sought to have a Financial Agreement set aside because he had placed his business in voluntary liquidation and its goodwill value, which had been agreed at $400,000.00 at the time of signing the Financial Agreement, was now nil.
In dismissing his appeal, the Full Court decided, inter alia:
·that there is a material distinction between an agreement which is unable to be put in practice, and is thus impracticable, and an agreement which, although producing a potentially different outcome to that for which a party hoped, is able to be implemented or put into practice
·that the provisions of s.90K are not designed to, and do not facilitate a party escaping from what proves, or is perceived to be a “bad bargain”.
·Authorities in relation to s.79A(1)(b) are relevant in the context of s.90K(1)(c)
Significantly in the context of the current case, the Full Court endorsed the statements of the Full Court in Cawthorn in relation to the issue of “self-induced frustration”.
In Herold and Kay, an unreported judgment of Jarrett FM (as his Honour then was) concerning a Financial Agreement executed under s.90UM of the Act, His Honour considered an Agreement where one of the partners to the de facto relationship was obliged to refinance a mortgage. That obligation was unconditional – that is, it was not stated as being “subject to finance”.
Unfortunately, that partner, despite having done everything in her power, had been unable to secure finance to carry out her obligation, and therefore sought to have the Agreement set aside as being impracticable to carry out under s.90K(1)(c). Jarrett FM agreed that in the circumstances of that case, the Financial Agreement was incapable of being carried out.
I note that in that case, the obligation on the relevant party was not to pay money to the other party which she said she was now unable to pay – it was to refinance the mortgage in her own name. She was unable to do that and therefore the Agreement was set aside.
History of events since 29 April 2008
At the time the parties signed the Agreement on 29 April 2008 they had been separated for almost two years. [Y] and [Z] were living week about with their parents, and still do.
I note that the husband made no attempt to have the Agreement set aside for any reason until the wife filed the current proceedings seeking its enforcement.
The husband was at the time the Agreement was signed the sole director of a company, [C] Pty Ltd (“the first company”) which [omitted].
At that time, the first company was thriving and the Agreement contains the following statement:
K.That it is acknowledged by the parties that the Husband intends this Agreement to provide a home for the wife in the future. That the Husband and Wife do not have sufficient assets to provide a home without borrowing against the Property H property, therefore the Husband will take responsibility for all mortgage and outgoing payments as set out in this Agreement in relation to the Property H property.
In his Affidavit sworn 29 August 2012 (“his first Affidavit”), the husband deposes that at the time he signed the Agreement on 29 April 2008, the first company was “a significant business able to generate good income and director’s fees”, and that it had been expected that it would generate enough income for him to honour his obligations under the Agreement and the CS Agreement.
However, he says that in late 2007 the first company had entered into an arrangement to lease a second site for its operations in [omitted], and that that arrangement proved so disastrous during 2008 that a liquidator was appointed for the first company on 27 November 2008. I note that that date is seven months after the husband signed the Agreement.
The husband deposes that the debts of the first company at the time the liquidator was appointed were “in excess of a couple of million dollars”. He says that an associated company, [P] Pty Ltd, also subsequently went into liquidation.
The husband deposes that as a result of the failure of the first company, he was left personally liable for the first company’s tax debt of some $500,000.
He further deposes that he was sued in 2010 for a “debt in relation to a factory jointly purchased for $1.4 million”.
However, under cross-examination, he conceded that he was not being pursued for either of those debts since he entered into an arrangement under Part X of the Bankruptcy Act 1966 on 23 June 2011 (“the Part X arrangement”), and that he had paid out his debts for the amount of $90,000 as part of the Part X arrangement in about September 2011. He stated that he needed to make that payment urgently so that he could continue trading as a [omitted] and that the payment came from “the company”, by which I inferred that he meant [P] Pty Ltd (“C Pty Ltd”), the company he had established in January 2010.
The husband deposes that he is the sole working director of [C] Pty Ltd, and that the company is owned by him alone as sole shareholder. The other “non-working” director is Mr G.
The husband said in evidence that [C] Pty Ltd pays a wage of $1450 or $1470 per week to Mr G in the form of lease payments for a car and cash, and a wage of $5,000 per week to him in the form of a salary. He said that Mr G has injected amounts of capital into [C] Pty Ltd totalling $400,000, although he was unable to produce documents to prove $100,000 of that, and denied that those monies were in the form of a loan rather than an investment. He did however, concede that Mr G had been paid back some $250,000.
Neither party called Mr G to give evidence.
The Property I site
At an unspecified date in 2008, the husband signed a contract to buy the land at Property I (“the Property I site”). The purchase price was, he says, about $500,000 and the approval process for a planned subdivision of that land took more than 18 months.
Once approval had been obtained, the husband says he was not in a financial position to complete the purchase and he therefore involved two partners, Mr W and Mr D, in the property. The land was sold to [B] Pty Ltd (“[B]”), “which operated as a vehicle for a three way partnership” between Mr W, Mr D and the husband, all of whom are directors and shareholders of [B]. The mortgage loan obtained was for $350,000. The husband says that each of the directors contributed (unspecified) funds for the acquisition of the land and loan repayments.
It was intended that [B] would build a custom-built warehouse on the Property I site which would be leased by a company associated with Mr W. However, after plans and a building permit had been obtained, Mr W decided to lease a warehouse at a different location.
It would appear that the Property I site has since been sold.
The husband says that since 2010 he has had little contact with Mr W and has no access to the books of [B], despite being a director and shareholder. He says that he has never been provided with any documents associated with the sale of the Property I property.
However, he deposes to a conversation with Mr W in mid 2012 during which Mr W informed him that “the best I would get out of the land sale would be $30,000”.
In an attachment to his Trial Affidavit, the husband provides what he says is a balance sheet for [B] as of 1 May 2013, which states, among other things, that [B] had assets of $190,036.54 in the form of cash at the bank, and liabilities of $373,598.66 at that date. Those liabilities include a loan from Mr W in the sum of $236,755.00, a loan from Mr D in the sum of $54,650.57, and a loan from the husband in the sum of $77,792.14.
The profit and loss statement for [B] attached to the husband’s Trial Affidavit says that [B] earned no income from 1 January to 1 May 2013, save for $96.23 in interest, while its outgoings included loan fees of $131,315.52, expenses for plans and permits of $21,520.91 and professional fees of $10,093.39.
The husband says that in these circumstances, he cannot expect any repayment of his loan to [B].
However, the husband says that in November 2012, [B] reimbursed [C] Pty Ltd for expenses incurred in preparing drawings and permits for the proposed warehouse to be built on the Property I site in 2010. I infer from his Trial Affidavit that the amount of that reimbursement was $12,103.60.
I set these matters out here because the wife claims that the husband either has been, or is entitled to be paid one-third of the net proceeds of sale of the Property I site pursuant to his shareholding in [B]. No evidence of such payment actually having been made was adduced at trial, and in those circumstances it was suggested that I might make an order that the husband apply any monies he receives from the
Property I site sale in future to the monies he might be ordered to pay were I not to set the Agreement aside.
The Part X arrangement
The husband deposes that his financial distress arising from the failure of the first company, including the financial pressure he was experiencing in meeting his obligations under the Agreement, led him to enter into the Part X arrangement in June 2011.
As previously stated, he extinguished his debts for $90,000 under the Part X arrangement. He says that, having fully complied with the terms of the Part X arrangement, he was given a certificate by the controlling trustee on 20 August 2011 certifying “that the terms of the Composition had been carried out.”
The husband says that due to the fact that he entered into a Part X arrangement, and because that information is freely available to credit agencies, he can no longer easily obtain finance.
However, in December 2011, four months after the discharge of the Part X arrangement, the husband borrowed the sum of $279,350.09 from [C] Pty Ltd and applied those monies to the purchase of the property at Property R. He says the purchase price for that property was $710,000.00 plus stamp duty and that he borrowed the sum of $500,000.00 from MK Capital to complete the purchase. He says that because of his credit history, he was charged an interest rate of 10% on that loan. He says that he has been paying that loan on an interest-only basis and that therefore he holds no equity in that property.
The husband’s income
In his first Affidavit, the husband deposes that his income from [C] Pty Ltd was $216,000 in 2011-2012 and that in August 2012 he was receiving an income of $5,000 per week, which, if extrapolated to a whole year would provide him with an annual gross income of $260,000.00. At trial, he confirmed that until December 2012, he had been receiving a salary of $5,000 per week from [C] Pty Ltd.
However, he describes his income as “highly precarious” as it is based on 2% percent of turnover as long as [C] Pty Ltd makes a net profit of 4%. He says that the business may deteriorate, or its bad debts may increase but provides no reason as to why that might be so or evidence to support that assertion, other than a general downturn in the [omitted] industry since the Global Financial Crisis.
He says further that if the Agreement is not set aside and his financial position deteriorates over the next year, “it will inevitably lead to my insolvency”.
The Property H mortgage payments
In December 2012, the husband ceased paying the mortgage over the Property H property. In his trial Affidavit sworn 16 May 2013, which I note was the first day of trial, the husband says that he ceased making those payments after the wife applied for an Intervention Order on 28 November 2012, claiming that the husband had engaged in financial abuse. He says, at paragraph 4:
In light of the unrealistic and enormous financial burden imposed by the mortgage payments and the wife’s application for an intervention order, I ceased paying the mortgage.
I set out here some of the husband’s evidence at trial in relation to the issue of his having ceased to pay the mortgage in December 2012:
Counsel for the wife: Now your income, according to your affidavit end of August, was $5,000 per week.
Husband: Mm
Counsel: But currently you’re not being paid that amount, are you?
Husband: No. No.
Counsel: What do you say shows why you are being paid less?
Husband: It’s the mortgage amount that I am not paying myself to pay for the mortgage – the $6,000. I think you will find that’s the difference.
Counsel: So what you’ve done is, you’ve had your pay reduced so that you can’t pay the wife’s mortgage?
Husband: Yes.
Counsel: So you’ve structured your financial position, if I understand what you say, your pay has been reduced to ensure that you can’t pay the wife’s mortgage. You’ve just reduced it by the amount that was being paid for the mortgage.
Husband: I’ve reduced my income, yes.
Later the following exchange took place:
Counsel: Would it be fair to say that you were angry when you got the intervention order served on you?
Husband: Yes.
Counsel: And that intervention order was an allegation that you being financially abusive – economically abusive?
Husband: Mm
Counsel: And that upon getting that, you said, “Okay. Well, I’m not paying the mortgage anymore”?
Husband: Mm.
Counsel: That’s the real reason you stopped, isn’t it?
Husband: It’s in part, yes. And a couple of blackmailing issues that you would have to take up with [Ms Doolan]….alleged misdemeanours.
The husband was then asked why he had not sought to refinance the Property H property at a more favourable interest rate, on the same terms for instance as he had been able to obtain to buy Property R in December 2011. He said:
If I didn’t get a knock at the door with an intervention order suggesting I was financially abusing her, which at the time I wasn’t, you know, I’m sure we would’ve been in a position to refinance and move on, but sadly there has been no communication.
One can only admire the husband’s candour in relation to this issue.
Conclusion
Based on the husband’s own evidence, I find that he stopped the mortgage payments in retaliation for the intervention order application and for some other perceived slight from the wife (about which no evidence was adduced apart from the exchange above), and that he arranged his financial affairs in order to reduce his income so that he could no longer afford the payments.
That is very far from proving a need to be relieved of the obligation to pay the mortgage because it is impracticable for him to do so.
In circumstances where the husband’s evidence is that he has control over his salary, and had been paying himself about $5,000 per week, or $260,000 per year until December 2012, and where the husband has been able to procure finance, albeit at a less favourable rate than at the time of the Agreement, I find that no circumstances have arisen since the Agreement was made that make it impracticable for the husband to fulfil his obligations under the Agreement.
It is undeniable that the Agreement was drafted heavily in favour of the wife, and even that it may have been unjust in its terms and overall effect. Indeed, one could see it as a “bad bargain” for the husband. But that is not enough, as the authorities set out above indicate, to set an Agreement aside under s.90K(1)(c).
I therefore decline to set the Agreement aside.
It follows then that the obligations of the husband set out in paragraph 4 of the Agreement, which oblige him to transfer the title and pay out the mortgage on the Property H property remain in force. The husband had sought to set aside that obligation on the basis that he could not guarantee what his financial position would be in 2018.
I find that the husband’s reasons for seeking to be excused from that particular obligation must fail based on the statements of Kay J in La Rocca set out in paragraph 30 of these reasons, and confirmed by the Full Court in Cawthorn as set out in paragraph 33 above.
If that situation has changed at the time that obligation must be met, the husband is at liberty to seek that he be released from it at that time.
Orders to be made under the Financial Agreement
The Agreement having been confirmed as being in force and the husband and wife being bound by it, I must now make orders in relation to the Application of the wife and the Response of the husband.
I note that counsel for the wife conceded at trial that some of the orders the wife sought in her Initiating Application were inappropriate as not being strictly covered by the Agreement, but that he left it to the court as to what orders ought to be made.
I will therefore make orders in the following terms:
(a) The water rates at the former family home, being an outgoing of the property, are covered by the Agreement and therefore the husband must pay the wife the sum of $3,254.10 for those outgoings.
(b) The following claims relate to issues of maintenance rather than outgoings and therefore are not covered by the Agreement. I will make no order in relation to them:
(i) Repair of the heating system at the former family home
(ii) Pest control at the former family home
(iii) Necessary maintenance to the former family home
(iv) Swimming pool maintenance at the former family home
(c) The unpaid remainder of the amount due under Clause 7 of the Agreement stands, and the husband must therefore pay to the wife the sum of $10,598.50 plus interest from the date of the last payment to the date of the final payment at a rate of 13% per annum. The last payment was made on 16 March 2011. Therefore the interest payable at the time of trial was $2,985.25, bringing the payment due at that date to $13,583.75. Further interest will have accrued since that date and will do so until the date of final payment.
(d) The wife’s fine for driving an unregistered vehicle was the fault of both parties (the husband’s in not paying the registration and the wife’s for driving the vehicle while unregistered) and both parties should therefore bear the cost. The husband must pay to the wife the sum of $305.50, being half the fine. I do not propose to make an order that the husband pay interest on his half.
(e) The money for the motor vehicle purchase is a clear obligation under the Agreement and the husband must pay to the wife the sum of $40,000.00 plus interest from the date the payment came due, that is 29 July 2008 (3 months after the date of the Agreement), to the date of trial, at the rate of 13% per annum. That brings the interest payment to $22,881.60 (for 4 years and ten months) and the total payment in relation to the car to $61,881.60, minus the value of the [M] motor vehicle at the time of trial based on a certified valuation of that vehicle. In the alternative, the husband must provide the wife with a new car to the value of $61,881.60 minus the value of the [M] vehicle.
(f) Under the CS Agreement, the husband was clearly obliged to pay for the family’s health insurance until the occurrence of the child support terminating event, being the date of each of [Y]’s and [Z]’s 18th birthdays. The wife claims, and the husband does not dispute, that he did not do so. The wife claims $3,444.27 in reimbursement of monies she paid for that purpose and I will order that sum to be paid to her.
(g) The claim for reimbursement for the expenses of the wife’s surgery in June 2012 is not covered by the terms of the CS Agreement, as those costs were incurred after both [Y] and [Z] turned 18. There is also evidence that the husband and the wife’s sister actually paid for a significant amount of those costs, and I will make no order in relation to that claim.
The total amount the wife sought under the Agreement was $66 394.10 plus interest on the items at paragraph 87 (c), (d) and (e) above.
I propose to make an order that the husband pay her $79,024.95 in satisfaction of that claim, minus the value of the [M] motor vehicle registration number [omitted] at the time of trial.
Orders to be made under the Child Support Agreement
The amount the wife sought under the CS Agreement was $8,072.47. However, as stated above, the costs of the wife’s surgery are not covered by the terms of the CS Agreement and I therefore propose that the husband pay the wife $3,444.27 in satisfaction of that claim.
However, the husband’s claim that he overpaid child support under the CS Agreement has some force. He says that the amount overpaid after first [Y] and then [Z] turned 18, is $26,040.00, and that that amount should be deducted from any payment he is ordered to pay to the wife as a result of these proceedings.
The wife says that there was a verbal agreement made after the CS Agreement was signed that the husband would continue making those payments after the children turned 18 in order to support them while they were studying. The husband denies that such an agreement was ever made.
As there is no independent evidence in relation to the alleged verbal agreement, and I cannot on the evidence make a positive finding that one or other of the parties has lied on their oath, I cannot find on the balance of probabilities that it was made. Therefore I cannot take it into account when determining the sum by which to discount the husband’s payment to the wife.
However, the wife claimed further that the amount of the overpayment was less than that claimed by the husband. He has claimed the full amount of $240.00 per week for the whole period following [Y] and [Z]’s 18th birthdays, but he did not demur when it was put to him in cross-examination that he had in fact paid only $265.00 per fortnight since [Y]’s 18th birthday. That is $25.00 per fortnight more than the CS Agreement allowed in relation to [Y] in circumstances where the children were spending equal time with each parent. I therefore find that the amount of the overpayment for [Y] was $25.00 per fortnight from 30 October 2008 to the date of the initiation of these proceedings which was 6 June 2012, a period of three years and seven months. The total amount overpaid for [Y] is therefore $2,100.
In relation to [Z], the overpayment was for the period [omitted] 2012 to [omitted] 2012, a period of five months at $240.00 per fortnight – a total of $2,400.00. I will therefore discount the total payment to the wife under these orders by $4,500.00.
Overall result
In all of the above circumstances, the husband will be ordered to pay to the wife the sum of $77,969.22 minus the value of the [M] vehicle at the time of trial.
I will allow the husband until 31 October 2013 to pay.
I certify that the preceding one hundred (100) paragraphs are a true copy of the reasons for judgment of Judge Small
Date: 15 July 2013
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