Edelson & Wadding
[2024] FedCFamC2F 1113
•15 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Edelson & Wadding [2024] FedCFamC2F 1113
File number: MLC 2712 of 2021 Judgment of: JUDGE SYMONS Date of judgment: 15 August 2024 Catchwords: FAMILY LAW – Application for enforcement – distinction between substantive and machinery orders – where final orders comprehensive and deal with different contingencies to fund settlement sum – where limited orders made by way of enforcement Legislation: Family Law Act 1975 (Cth), ss 79, 105
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), r 11.01(1)
Cases cited: Bebbington & Bebbington (2017) FLC 93-765
Bray & Bray (1988) FLC 91-968
Ernesta & Ernesta [2023] FedCFamC2F 1753
McMillan & McMillan [2016] FamCA 387
Molier & Van Wyk (1980) FLC 90-911
Ravasini and Ravasini (1983) FLC 91-312
Division: Division 2 Family Law Number of paragraphs: 76 Date of last submissions: 23 July 2024 Date of hearing: 23 July 2024 Place: Melbourne Counsel for the Applicant: Ms A Metherell Solicitor for the Applicant: Nicholes Family Law Counsel for the Respondent: Ms R Teicher Solicitor for the Respondent: Davies Moloney Barristers & Solicitors ORDERS
MLC 2712 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS EDELSON
Applicant
AND: MR WADDING
Respondent
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
15 AUGUST 2024
THE COURT ORDERS THAT:
To give effect to paragraph 6 of the orders made on 15 August 2023 (Final Orders):
1.The Applicant be permitted to do all such acts and things and sign all documents as may be required to engage Mr B of C Company (the selling agent) to place the property situate and known as D Street, Suburb F (the D Street property) on the market for sale immediately.
2.The Applicant be permitted to appoint E Conveyancing as the conveyancing solicitor for the sale of the D Street property.
3.The Applicant shall follow the recommendations of the selling agent, including but not limited to:
i. any staging, maintenance works or repairs to the D Street property to increase the sale price, with the parties to equally share in the expense of any staging, maintenance or repair work;
ii. the terms of the sale;
iii. the sale price and/or reserve price of the D Street property.
4.The selling agent be authorised by this order to speak with and keep the Respondent informed of all negotiations.
5.The Applicant do all acts necessary to make the D Street property available for inspection and photography as requested by the selling agent.
6.The Applicant is authorised to execute a contract for sale of the D Street property in the form prepared by the conveyancing solicitor at a price recommended by the selling agent.
To give effect to paragraphs 7 and 8 of the Final Orders:
7.No later than 21 days prior to the settlement of the default sale, or contemporaneously with the settlement of the default sale if so directed by Westpac, the Respondent do all such acts and things and sign all documents necessary and pay any such monies to:
(a)Pay and discharge all loans owing to Westpac that are secured by a registered encumbrance against the D Street property, including to remove the D Street property as security for the Westpac mortgage encumbering the property situate and known as G Street, Suburb F (the G Street property).
(b)Release the Applicant from the Guarantee and Indemnity provided by her in favour of Westpac in respect of the G Street property.
8.To give effect to paragraph 7(b) of the Final Orders, in the event the Respondent does not comply with paragraph 7 of these orders, the Applicant be appointed as the trustee for the sale as follows:
(a)Within seven days of the Respondent failing to comply with paragraph 7 of these orders or immediately, if default occurs at the time of settlement, the Applicant be at liberty to execute all authorities and/or instruments, including but not limited to a Discharge of Mortgage related to the Westpac loans secured by registered encumbrance against the D Street property, in the name of the Respondent and do all such acts and things to give validity and operation to the authorities and/or instruments;
(b)At the date of settlement of the D Street property, the Applicant be at liberty to execute all authorities and/or instruments to authorise the net proceeds of sale of the D Street property to pay all loan accounts owing to Westpac in the name of the Respondent that are secured by registered encumbrance against the D Street property, and do all such acts and things to give validity and operation to the authorities and/or instructions; and
(c)The Applicant be at liberty to provide a copy of these orders to the mortgagee(s) associated with the mortgage encumbering the G Street property.
To give effect to paragraph 7 of the Final Orders:
9.Upon the settlement of the default sale the parties shall distribute the proceeds of sale in the following manner and priority:
(a)To pay all sale costs, commissions and marketing fees and legal fees associated with the sale and selling agent;
(b)To pay out all loan accounts owing to Westpac that are secured by registered encumbrance against the D Street property;
(c)To pay the sum of $2,900,000 to the Applicant, being the entirety of the outstanding payment owing to the Applicant, together with interest as prescribed under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on so much of the payment as is then outstanding from the date of default (being 10 February 2024) until the date of settlement, with such amount to be paid to the trust account of Nicholes Family Lawyers on behalf of the Applicant;
(d)To pay the remaining balance, if any, to the Respondent.
To give effect to paragraphs 12(c) and 22 of the Final Orders:
10.
(a)Within 7 days of these orders, the Respondent produce to the Applicant all draft and finalised Statements of Account (or such other document that evidences all payments made and outstanding), Notices of Assessment and Tax Returns for Ms Edelson, Mr H, Ms J and Ms K for the 2021, 2022 and 2023 financial years; and
(b)Within 30 days of these orders, the Respondent pay the total estimated outstanding tax liability for Ms Edelson, Mr H, Ms J and Ms K for the 2021, 2022 and 2023 financial years and the projected estimated tax liability for the 2024 financial year into the trust account of Nicholes Family Lawyers to be held on trust pursuant to these orders pending finalisation of the Tax Returns; and
(c)The Applicant be permitted by this order to authorise Nicholes Family Lawyers to apply the funds held on trust to pay all tax payable (after all deductions and tax already paid and including any penalties and interest (if any)) by the Applicant, Mr H, Ms J and Ms K personally for any outstanding financial years, including 2021, 2022, 2023 and 2024 (when and where applicable);
(d)If, following the application of funds pursuant to paragraph 10(c) of these orders there remains monies held by Nicholes Family Lawyers, such monies shall be returned to the Respondent.
11.Save as to costs, all extant applications are dismissed.
AND THE COURT NOTES THAT:
A.For the avoidance of doubt, paragraphs 10-27 inclusive of the Final Orders remain in full force and effect.
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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
This is an application by the Wife. She seeks orders that will enable her to give effect to final consent orders made by Judge Jenkins on 15 August 2023 (Final Orders).
In the Final Orders, the Husband was required to pay the Wife the sum of $2,900,000 by 9 February 2024 (settlement payment). A failure to make the settlement payment was to result in the sale of the property situated at D Street, Suburb F (the D Street property) with the sale proceeds (less sale disbursements and payments in respect of loan accounts owing to Westpac) to be distributed to the Wife. There were further orders that would operate if the sale of the D Street property did not yield sufficient funds to allow the Husband to make the settlement payment. The particular orders to which this application is directed are reproduced in Annexure A.
The Husband has not made the settlement payment and the D Street property has not been sold. The Wife now seeks orders to give effect to the Final Orders but with some additional safeguards that she submits are necessary having regard to the conduct of the Husband in the period since the Final Orders were made.
The Husband acknowledges that the D Street property must be sold but resists the making of the further orders sought by the Wife including because (on his case) they go beyond the scope of an enforcement application.
At the hearing on 23 July 2024, the Wife appeared before me represented by counsel, Ms Metherell. The Husband did not appear (citing work commitments) but was represented by counsel, Ms Teicher. For reasons given at the time, I declined the Husband’s request for an adjournment.
BACKGROUND
The Wife was born in 1968 and is aged 56. The Husband was born in 1968 and is aged 55. The parties commenced cohabitation in 1995 and were married in 1998. There are three children of the relationship, the youngest being 17 years of age.
The Wife currently works as a sales representative at L Company. The Husband is a professional at M Company.
The Wife commenced these proceedings by filing an application for enforcement on 19 April 2024. The application was accompanied by a supporting affidavit. On 11 June 2024, the Husband filed a response and affidavit. On 12 June 2024 a Judicial Registrar listed the matter to me for a final enforcement hearing.
It was noted at the time that the matter was before the Judicial Registrar that:
·It is agreed that the D Street property needs to be sold to meet the payment to the Wife inclusive of interest.
·The selling agent is agreed.
·It is further agreed that it is possible/probable that there will be a shortfall of net proceeds from the sale of the D Street property to meet the payment and the Australian equities referred to in paragraph 9 of the Final Orders will need to be sold.
·The primary enforcement issues requiring resolution pertain to machinery provisions to ensure there is appropriate security to the default provisions for the purposes of the payment, noting the D Street property is still securing the G Street property and Westpac Bank’s position on seeking to enforce such security upon the sale of the D Street property is unclear.
The landscape had not altered in any material way by the time the matter came before me.
The parties have since filed:
For the Wife:
·Amended Enforcement Application filed 5 July 2024.
·Consolidated Affidavit filed 5 July 2024 (Wife’s Consolidated Affidavit).
For the Husband:
·Response to Amended Application filed 18 July 2024.
·Affidavit filed 18 July 2024 (Husband’s Affidavit).
APPLICATION BY THE WIFE
It is the Wife’s case that the orders she seeks will enable her to manage the implementation of the Final Orders in circumstances where this has proven impossible to date and where to accede to the proposal of the Husband (characterised as involving a repetition of what is already in place) would only serve to entrench the unworkability of the situation.
The necessity for this approach is said to emerge from the following chronology of attempts made by the Wife to engage with the Husband and his lawyer to implement the Final Orders as described in the Wife’s Consolidated Affidavit:
·On 20 November 2023 the Wife received a letter from the Husband’s lawyer which put her on notice of the Husband’s intention to make the payment of $2.9 million pursuant to order 2 of the Final Orders.[1]
[1] Wife’s Consolidated Affidavit at [19].
·On 29 November 2023 the Wife (who at this time was self-represented) wrote to the Husband’s lawyer to provide a quote from E Conveyancing to transfer the D Street property to the Husband (this being a condition of the payment of the $2.9 million to the Wife with the Husband to be solely responsible for the expenses associated with the transfer). The Wife did not receive a response to this communication.[2]
[2] Wife’s Consolidated Affidavit at [20].
·In the expectation that the Husband was going to make the settlement payment, the Wife vacated the D Street property and obtained a 12-month lease for a rental property in Suburb F. The Wife moved into the rental property in early 2024 and has, since this time, been incurring rental expenses of $720 per week which, she notes, she would not have incurred had she remained living in the D Street property.[3]
[3] Wife’s Consolidated Affidavit at [21].
·On 1 February 2024 the Wife emailed the Husband’s lawyer to confirm that she had vacated the D Street property and to obtain the details for the settlement that was still scheduled to occur on 9 February 2024.[4]
[4] Wife’s Consolidated Affidavit at [22] and annexure “MSE-1”.
·On 8 February 2024 (the day before the settlement payment and transfer of the D Street property was to occur), the Husband’s lawyer emailed the Wife to advise that settlement could not occur because Westpac needed to value the property to undertake the refinance of the mortgage.[5]
[5] Wife’s Consolidated Affidavit at [23] and annexure “MSE-1”.
·The Wife responded to the Husband’s lawyer to query when settlement might now be expected to occur but did not receive a response. The Wife made arrangements for a Westpac valuer to attend the D Street property in February 2024.[6]
[6] Wife’s Consolidated Affidavit at [24].
·On 12 February 2024, the Wife emailed the Husband’s lawyer in an effort to start the default sale process for the D Street property. Although the orders provided for the parties to agree on a selling agent, the Wife instead offered for the Husband to make this nomination.[7] The Wife did not receive a response to this communication.
[7] Wife’s Consolidated Affidavit at [26] and annexure “MSE-2”.
·On 19 February 2024, the Wife emailed the Husband’s lawyer with sales proposals from three local real estate agents and asked for the Husband’s nomination. The Wife did not receive a response to this communication.[8]
[8] Wife’s Consolidated Affidavit at [28].
·On 21 February 2024, the Wife emailed the Husband’s lawyer a Real Estate Institute of Victoria appointment application form (this being the process identified in order 6(a) of the Final Orders where the selling agent could not be agreed) and requested the Husband to sign and return the form. The Wife did not receive a response to this communication.[9]
[9] Wife’s Consolidated Affidavit at [29].
·On 26 February 2024, the Wife informed the Husband’s lawyer that it was her intention to file an Application for Enforcement.[10] On the same day, the Husband’s lawyer advised that the Husband was unable to secure funding to re-finance the Westpac mortgage secured against the D Street property.[11]
[10] Wife’s Consolidated Affidavit at [30] and annexure “MSE-3”.
[11] Wife’s Consolidated Affidavit at [31].
·On 1 March 2024, the Husband’s lawyer proposed to the Wife that the D Street property be transferred to the Husband and there be a partial payment to the Wife, with the balance of the settlement payment to be made at a later, undisclosed, date. The Wife did not agree to this proposal.[12]
[12] Wife’s Consolidated Affidavit at [33].
·On 22 March 2024 the Wife gave instructions to her lawyer (recently re-engaged) to write to the Husband’s lawyer seeking the Husband’s compliance with the Final Orders within seven days, including by the taking of a series of identified steps.[13]
[13] Wife’s Consolidated Affidavit at [34] and annexure “MSE-5”.
·On 25 March 2024, the Husband’s lawyer responded to advise that payment of the outstanding amount was approximately 3 to 4 weeks away “due to a delay in our client’s bank organising various funds”.[14]
[14] Wife’s Consolidated Affidavit at [37] and annexure “MSE-6”.
·On 19 April 2024, the Wife filed this Enforcement Application, and it was served on the Husband’s lawyer on 22 April 2024. The Husband did not instruct his lawyer to accept service and so on 22 May 2024 the Wife instructed her lawyer to attempt substituted service of the Application on the Husband by email.[15]
[15] Wife’s Consolidated Affidavit at [40]-[41].
·On 28 May 2024, the Husband sent the Wife and copied to the parties’ three children, an email which read (in part):[16]
[16] Wife’s Consolidated Affidavit at [42] and annexure “MSE-10”
[Ms Edelson]
You can proceed to more court actions and I’m happy for you to take every last cent we have rather than work with your family. Legal bills have cleaned me out and they keep coming at no value bc you refuse to work to any level of collaboration.
….
As you have already gone to my work to request information that led to nothing as previously disclosed – but going down this enforcement route it will have disclosure issues for my [employment] and I will need to disclosure (sic) it if a warrant or other action is issued. I will be required to step down as a [professional] of the [company] as it has happened in a similar case. So again be careful of not destroying the hand that feeds this family. But given the actions of the last 2 years you don’t.
But ultimately your refusal to work together but rather destroy a lifetime of work for your family and children is staggering.
·On 12 June 2024 the parties appeared before a Judicial Registrar and there was agreement for the sales agent for the D Street property to be appointed from C Company. The Wife signed the exclusive sales authority for C Company on the same day. In their appraisal of the D Street property dated 2 July 2024 C Company provided an indicative sale quote of $3,200,000 to $3,400,000 and suggested that styling, rather than re-painting or re-carpeting the property would be a “more cost and time effective solution to have the property presented in its best light for the sale”. A number of remedial jobs were also identified.[17]
·In mid-2024 the Wife travelled to New Zealand to visit her family. During her absence, the Husband attended the D Street property (the Wife says in breach of the Final Orders) and later instructed his lawyer to write to the Wife with allegations that she had removed part of the fixtures and left the garden and house in a mess.[18] The wife denies these allegations.
·At the time of hearing the parties are in dispute as to the extent of the works to be performed on the D Street property, which inhibits its marketing and sale.
[17] Annexure “MSE-11”.
[18] Annexure “MSE-13”.
The Wife submits that the non-exhaustive chronology documented above should indicate to the Court the need for machinery orders that would implement the default sale of the D Street property but in a manner that excludes the Husband’s participation. The Wife contends that to facilitate his further participation would only stymie the process at each stage.
The Wife’s proposal therefore is that the default sale provisions from the Final Orders be largely preserved save that where they required the parties to agree on the reserve price, marketing strategy and costs and conduct of the sale (6(c)), the Wife should be authorised to execute a contract for sale for a price that reflects the recommendation of the (agreed) selling agent. The Wife submits that the necessity for this order is reinforced by the fact that the Husband’s proposal for sale would require a reserve price of $3.6 million to be set in circumstances where this price sits above the top of the range quoted by C Company and if set would likely further frustrate a sale of the D Street property.
The next element to the Wife’s proposed orders concerns the interrelationship between the D Street property and a property located at G Street, Suburb F (G Street property). The Final Orders required (at paragraph 8) that 21 days prior to settlement of the default sale, the Husband take all necessary steps to remove the D Street property as security for the Westpac mortgage encumbering the G Street property and that he also release the Wife from the guarantee and indemnity provided by her in favour of Westpac in respect of the G Street property. The Wife says that these provisions were necessary to safeguard against the prospect that upon settlement, Westpac would require all liabilities to be discharged, being the mortgage against the D Street property and the mortgage against the G Street property, with the latter being significantly more onerous than the former.
The Wife submits that the prospect of this eventuality arising is real and that if it was to occur, the remaining sale proceeds would fall well short of an amount commensurate with the settlement payment. The wife proposes that to redress this the Court should make orders that would facilitate the balance of the settlement payment to be made, in the event that the Husband failed to pay and discharge all loans secured by the D Street property. She proposes that this could be achieved in one of two ways. The first would be to require the Husband to sign authorities that would enable the Wife to sell and distribute the Husband’s share portfolios held by N Company share portfolio ending in x…07 and P Company share portfolio ending in x…44. The alternative approach would be for the Court to simply make an order that the Wife be authorised to liaise with N Company and P Company and to instruct them (instead of the Husband) to liquidate the shares.
The Wife acknowledges that the sale of shares will have tax consequences and submits that this creates the prospect that there may still be a shortfall following the disbursement of the share sale proceeds which justifies the introduction of a further mechanism to ensure that she is paid out in full. The Wife proposes that this be achieved by means of an order that would appoint her as trustee for the sale of the G Street property in the event that the combination of the sale of the D Street property and the shares from both share portfolios is insufficient to cover the settlement payment and interest (which has been accruing daily since 10 February 2024). The Wife submits that it is in the interests of justice that an order of this kind be made now, in the context of the Enforcement Application, rather than it being incumbent on the Wife to return to the Court on a future occasion to make an application that has an air of inevitability about it.
The Wife’s proposed orders deal also with what counsel described as some “ancillary matters”. The first of these would require the Husband to produce to the Wife the draft and finalised statements of account and notices of assessments and tax returns for the Wife and the three children for the 2021 to 2023 financial years and to require the Husband to pay the outstanding tax liability for these periods and to place in trust an amount referable to the projected tax liability for the 2024 financial year pending finalisation of the related tax returns. The Wife submitted that an order of this kind was of particular importance given that there was evidence before the Court that the outstanding tax liability of the parties’ son had gone to a debt collector stage.[19]
[19] Wife’s Consolidated Affidavit at [54] and annexure “MSE-16.
The second proposed order would give liberty to the Wife to file a further application to seek the sale of Motor Vehicle 1 and Motor Vehicle 2 registered to the Husband which order was said to be in aid of the enforcement of paragraph 9 of the Final Orders which requires the Husband to sell his share portfolios to fund the balance of the settlement payment. The Wife’s counsel submitted that the Court may instead – to short-circuit the need for a further application – simply make “consequential” orders of this kind as part of the present application. The Wife’s counsel submitted that she was emboldened in this proposal in circumstances where the Husband had not turned up at the hearing. The Court was invited to take a dim view of the Husband’s preparedness to participate in efforts to secure compliance with the Final Orders.
The Wife’s counsel made what she described as an oral application for two further orders which had been included in the minute of orders exchanged shortly prior to hearing but had not been identified in the Enforcement Application. These orders were directed at securing compliance with the Husband’s extant obligation to make payments to her in the amount of $11,000 per month and would allow the Wife to be compensated from the sale proceeds of whichever assets were ultimately required to be liquidated, for any shortfall in these payments.
The necessity for such orders was said to arise in circumstances where the Wife had been made aware that the Husband was in the process of setting up a new trust and she was apprehensive that the Husband would divert the money distributions from M Company that were currently paid into the O Trust (of which the Wife is sole trustee) into this new trust.[20]
[20] Wife’s Consolidated Affidavit at [70].
It was also supported by the conduct deposed to by the Wife wherein the Husband had, since (and in breach of) the Final Orders and until 11 January 2024, continued to withdraw funds from Westpac account x…47 (the account into which the $11,000 was to be paid and the account for the O Trust) which caused shortfalls to the Wife in the months of September, November and December 2023 and January 2024. It was only when the Wife engaged in “self-help” by removing the Husband’s access to the Westpac account and making transfers from that replenished account by way of back-payment, that the Wife’s full entitlement was restored.[21]
[21] Wife’s Consolidated Affidavit at [65]-[68].
THE HUSBAND’S RESPONSE
A threshold submission made by the Husband was that the suite of orders sought by the Wife travelled beyond what was achievable through an enforcement application and instead would involve a variation of the property settlement that was reflected in the Final Orders because the Wife was seeking to vary the substance of the bargain. This is a matter that I will return to below.
The Husband’s counsel identified the following principal objections to the Wife’s proposed orders.
The first concerned the proposal that the G Street property liability be discharged prior to the settlement of the sale of the D Street property. The Husband submitted that such an approach was not realistic given that the securities were cross-collateralised and that, as he had deposed, Westpac had informed him that they required the payment of $200,000 to obtain the release of the security against the title of the G Street property to enable the Wife’s guarantees to be released. According to the Husband, he would have sufficient funds available to enable this payment to be made at the time of settlement of the D Street property, assuming that there was a 60-90 day settlement period and the auction took place in September.[22]
[22] Husband’s Affidavit at [16].
Relatedly, the Husband objected to the proposal that the Wife be authorised to sell his shares to discharge the liability in relation to the G Street property. The Husband noted that the sale of these shares would create tax consequences for him. He addressed this issue at [23] of his affidavit as follows:
[Ms Edelson] seeks that I sell my share portfolio. I oppose this. The sale price of $3,400,000.00 to $3,600,000.00 for [D Street] will cover most of the security and money to be paid to [Ms Edelson]. It is a tax-free transaction as it is our family home. If forced to sell my shares, it will trigger a taxable event and I will be required to pay Capital Gains Tax as well. This will impose an additional burden on me where I have no cash but a tax liability to fund. This is inequitable and will reduce the value of the property retained by me. If orders were made as sought by [Ms Edelson], she is not in a position to determined what shares are less onerous for me from a taxation position and will impose a greater taxation burden upon me. I oppose the orders sought by [Ms Edelson]. I seek that the property be sold and the shortfall be determined. I will then pay any shortfall and have [Ms Edelson] released from her guarantees.
The Husband’s counsel submitted that the foreshadowed impact on the Husband’s ultimate property distribution would necessitate a s 79A application on his behalf to vary what the property settlement would be and that without such application, the Wife’s proposal to liquidate the shares would operate punitively.
The Husband objected to the proposal that the Wife be permitted to obtain a sale of the Husband’s motor vehicles (in the event of a shortfall), describing it as an attempt to “improve the bargain”. The Husband submitted that there was sufficient security for the Wife to be paid what was owing to her under the Final Orders.
Finally, the Husband’s counsel referred the Court to evidence that upon his attendance at the D Street property, the Husband discovered that the Wife had removed part of the collection to which he was entitled under the Final Orders. He also deposed that furniture that was previously in storage had been removed and that two paintings by a famous artist, which had been in the daughter Ms J’s bedroom, had been removed.[23] The Husband’s counsel did however properly concede that the Wife disputed the allegation that she had removed part of a collection.
[23] Husband’s Affidavit at [24].
The Husband’s counsel submitted that as far as the process for the default sale was concerned, it was not appropriate, and the material did not justify orders that the Wife have sole control over the marketing and sale of the D Street property. The Husband emphasised that his overriding concern (reflected in his proposed order 7) was that the sale of the D Street property occur simultaneously with the release of the security (or refinancing) of the G Street property.
WIFE’S REPLY
In reply, the Wife’s counsel clarified that her client’s proposal was not that the shares be sold 21 days in advance of the settlement of the default sale so that the debts relating to the G Street property could be paid. The point instead was that the Husband would cover those debts and they wouldn’t be discharged from the proceeds of sale. However, where the spirit of the Final Orders and the intention behind them was not being complied with, the Wife could not trust that the Husband was going to refinance those liabilities, which were in the combined amount of around $1.5 million, although the debt over the D Street property was a modest $143,000. The Wife was concerned that on settlement, the Bank would seek to be paid the amount of $1.5 million in relation to the G Street property.
Finally, the Wife’s counsel provided clarification that her client’s position was not that the Husband should not be kept apprised of the default sale but rather that he should not have a say about the sale price which she maintained should be controlled by the Wife.
LEGAL PRINCIPLES
Section 105(1) of the Family Law Act 1975 (Cth) (Act) provides the source of power to enforce orders. It states:
Subject to this Part, to the regulations, and to the applicable Rules of Court, all decrees made under this Act may be enforced by any court having jurisdiction under this Act.
Rule 11.01(1)(a) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (Rules) provides that an obligation or order to pay money is one that may be enforced under Part 11.1 of the Rules.
In McMillan & McMillan,[24] Tree J provided a helpful overview of the relevant authorities at [37]-[60] and I adopt, with respect, his Honour’s conclusions as to the applicable principles which may be summarised as follows (citations omitted):
(a)The nature of the power to enforce is discretionary as evidenced by the use of the term “may” in s 105 of the Act;
(b)Only the facts or circumstances arising since the date of order sought to be enforced will inform the discretion to be exercised pursuant to s 105 of the Act;
(c)The Court may refuse to enforce an order if it would be “inequitable” to do so;
(d)When considering whether or not it would be inequitable to enforce the order, Court is primarily concerned with “general notions of fairness”;
(e)The party submitting that it would be inequitable to enforce the order bears the onus of so establishing;
(f)Delay in bringing an application for enforcement is a relevant factor.
[24] [2016] FamCA 387.
Machinery or substantive orders
While the Court has the power to enforce orders, there are important limits that constrain the exercise of this discretion. In particular, while the Court can modify and make machinery orders to give effect to (or enforce) orders made under s 79 or to “spell out” the effect of such orders, it cannot make orders that would affect the substantive rights of a party; this being the domain instead of an application made under s 79A of the Act to set aside or vary an order on one of the narrow grounds identified in that provision.
Consistent with this approach, in Molier & Van Wyk,[25] the Full Court at 75,773 held that additional or consequential orders may be made if necessary to give effect to the clear intention of the original order, where that order failed to cover certain eventualities, including the failure to comply with an order for the settlement of a lump sum within the prescribed time.
[25] (1980) FLC 90-911.
By way of further example, in Bebbington & Bebbington[26] Kent J held at 77,122 that, in the context of substantive orders for the transfer of property, release of the mortgage and payment of money, “the mechanisms as to timing and steps were purely machinery or consequential provisions to effect the substantive alterations of property interests being carried out”.
[26] (2017) FLC 93-765.
Where the Husband contends in this case that aspects of the Wife’s proposed orders trespass on prohibited ground and where the issue goes to the jurisdiction of the Court, it is necessary that the distinction between machinery and substantive orders be explored, noting that this analysis commences not with the orders that are proposed but with the Final Orders that the Wife seeks to enforce.
Regrettably, neither party spent much time developing submissions directed at this important question although the Wife’s counsel did refer me to the judgment of Ernesta & Ernesta [2023] FedCFamC2F 1753 at [24] where Judge Blake identified several authorities that concern themselves with the parameters within which the enforcement power may be exercised. Amongst these is Ravasini and Ravasini[27] where at 78,127 the Full Court observed:
In determining whether or not an order may be varied as a machinery order, the enquiry must be firstly as to what part of the order is the substantive order and what part or parts of it merely follow that order as a necessary consequence. A Court in making a property order might do no more than order that the property be sold and the proceeds equally divided. That is the substantive order. If the Court at that time has before it sufficient evidence of the facts and circumstances it may go on and make appropriate “consequential” orders providing the machinery whereby the substantive order is to be carried out.
[27] (1983) FLC 91-312.
The appropriate test for determining whether or not a provision in an order is one of substance or one of machinery must depend on the nature and context of the order itself, and not on the nature or extent of the variation sought. What is required is an enquiry as to whether the order vests a right in a party.[28]
[28] Bray & Bray (1988) FLC 91-968 at 77,001 (Nygh J).
The task at hand therefore is to determine which of the Final Orders effected property division between the parties, that is, the substantive orders, and which orders were consequential and made to give effect to them.
The Final Orders, construed as a whole, can be seen to operate such that the Wife was to receive the fixed sum of $2.9 million, whatever the outcome of the sale of the D Street property and, if necessary, the sale of shares in one or both share portfolios (N Company and P Company). This flows from the terms of paragraph 7 and particularly paragraph 7(c) and paragraph 9 and particularly paragraph 9(c) which provide that after deductions for sale costs and payment of loan accounts (as applicable), proceeds of sale were to be distributed to the Wife in reduction of the amount owing to her with the balance (if any) going to the Husband.
It follows therefore, that the Wife was to receive $2.9 million regardless of what might be recovered from the sale of the D Street property and (if necessary) the sale of one or both share portfolios. The Husband was to retain the equity the parties held in the D Street property and the share portfolios subject to the making of that payment. Therefore, the risk resulting from any rise or fall in the value of the D Street property and the share portfolios and whether their sale would generate sufficient funds to pay the Wife lay entirely with the Husband.
This represents the substantial division of property – the Wife is to receive a fixed sum of money and the husband is to receive the equity in the D Street property and the share portfolios. The orders made to effect this division are properly characterised as consequential or machinery orders. This necessarily comprehends the orders that “facilitate the default sale” (contained in paragraph 6) and the orders that place obligations on the Husband to sell some or all of his shareholdings (contained in paragraph 9). These orders therefore are capable of being the subject of a variation if made legitimately in aid of enforcement.
Has a need for enforcement been established?
In this case, a question that looms large is whether either party has established a proper basis or a genuine need to make orders to give effect to or enforce, or to “spell out” the effect of the Final Orders.
The Final Orders are comprehensive and deal with the contingency that the Husband would not be able to fund the payment of the settlement payment without the realisation of assets. The machinery for the default sale of the D Street property is likewise set out in detail and includes a mechanism that is to apply if the agreement of the parties cannot be obtained.
The Wife’s proposed order 1 is directed at the default sale. Two elements are agreed. The first is that the Wife be permitted to engage Mr B of C Company to place the D Street property on the market for sale immediately. The second is that the Wife be permitted to appoint E Conveyancing as the conveyancing solicitor. I will make these orders.
The third aspect of the Wife’s proposed order 1 is directed at matters that are already comprehended by paragraph 6(c) of the Final Orders insofar as this makes provision for the reserve price, marketing strategy, costs and conduct of the sale to reflect the recommendations of the selling agent in the event that the parties are not able to reach agreement about such matters. The only difference is that the Wife says it should be she alone, and not “the parties”, who are responsible for following the selling agent’s recommendations. The Wife also seeks an order that would facilitate the staging of the D Street property and for the Husband to be solely responsible for any expenses related to this exercise.
The Husband on the other hand seeks largely to maintain the terms of paragraph 6(c) except that he says that the reserve price and selling price for the D Street property should be set at an amount not less than $3.6 million.
The D Street property must be sold and as soon as possible. A selling agent has been appointed and a conveyancer has been agreed. The parties are in dispute as to the extent of works to be performed on the D Street property before it can be put on the market. It is unlikely that the impasse will be resolved any time soon.
The Final Orders contain the mechanism for breaking the impasse and I consider it appropriate, to the extent that this is even necessary, to make orders that will allow the marketing and sale of the D Street property to reflect the recommendations of the selling agent without there being any further need for the parties to seek agreement. The selling agent has already produced an appraisal that identifies the staging and remedial work required and has identified a selling range. These will establish the parameters of the marketing and sale of the D Street property. The reserve price sought by the Husband is not supported by the appraisal that is before the Court and if fixed at this level would create the possibility that a sale (or certainly a timely sale) of the D Street property would be frustrated.
As far as the Wife seeks to be solely responsible for dealing with the selling agent (in the implementation of recommendations) I consider that the conduct of the Husband, as documented in the Wife’s Consolidated Affidavit, provides a proper basis to make such an order. The Husband has for extended periods been unresponsive to reasonable requests communicated by the Wife and which have been directed at progressing the default sale when the need for engaging in this process was an inevitability.
The Husband should however be kept apprised of negotiations as was envisaged by the Final Orders. His behaviour as documented by the Wife does not warrant his total exclusion from the sale process and neither, it appears, was this intended by the Wife.
The Wife’s proposed order 2 is directed at the removal of the D Street property as security for the Westpac mortgage encumbering the G Street property. However, it is framed in terms which closely resemble paragraph 8 of the Final Orders such that it is difficult to understand its inclusion or how it can be said to operate “by way of enforcement of order 8”. On both form of order, the Respondent is required to remove the D Street property as security for the mortgage encumbering the G Street property by no later than 21 days prior to settlement (in fact, whether intentional or not, the Wife’s proposed form of order says “within 21 days prior to”) or contemporaneously with the settlement of the default sale. At best it might be said that what the Wife seeks to achieve by subparagraph (a) of the proposed order is to “spell out” the Husband’s obligations and in that respect, the Respondent agrees with what is proposed. In those circumstances, I will make orders that restate the obligation identified in Final Order 8 but with the additional level of specificity agreed by the parties. The Respondent must pay and discharge all loans owing to Westpac that are secured by a registered encumbrance against the D Street property by no later than 21 days prior to settlement or contemporaneously with the settlement of the sale if directed to do so by Westpac.
The Respondent sought a variation to paragraph 8 of the Final Orders that would give him the further flexibility of complying with his obligations to discharge loans secured by the D Street property “at such time as otherwise directed by the Westpac Bank”. However, I am not persuaded that the Husband has established a basis in the evidence to make this variation to the Final Orders.
As noted earlier, the Husband deposed to having been informed by Westpac that it required the payment of $200,000 to obtain the release of the D Street property security against the title of the G Street property and that he would have sufficient funds available to make this payment at the time of settlement of the D Street property assuming certain time frames that would see settlement take place towards the end of the year. There is no present need to accommodate a more flexible approach to the time for compliance with the Husband’s obligations.
The parties are in general agreement that in order to give effect to or enforce the Husband’s extant obligation under paragraph 7(b) of the Final Orders – this being the obligation upon settlement of the default sale to pay out all loan accounts owing to Westpac that are secured by registered encumbrance against the D Street property – that the Wife should be appointed as trustee for the sale in the event that the Husband fails to take the necessary steps (including to execute relevant authorities and instruments) and to take and authorise these steps herself. While it might be said that the making of this order is premature, I am satisfied that it can be made given the consent position of the parties and the fact that it does not stray outside the permissible enforcement boundaries.
The parties also seek a restatement, with different qualifications, of the provisions that deal with distribution of the proceeds of the default sale. According to the Wife’s proposal (reflected in her proposed order 4) the net proceeds of sale of the D Street property should be distributed in the manner currently provided by paragraph 7 of the Final Orders save that because the position has crystallised, she seeks that the payment referred to in sub-paragraph (c) of that order be fixed in the sum of $2.9 million and that the payment of that amount, plus interest, be paid into the trust account of Nicholes Family Lawyers on her behalf. The Husband’s proposal is different only to the extent that it makes no reference to interest accruing on the settlement payment and that it makes provision for an amount of $82,000 to be withheld from the Wife’s entitlement on account of what the Husband contends is the value of the collection allegedly misappropriated by the Wife.
The Wife is entitled to interest on the settlement sum. That is part of the substantive bargain struck by the parties in the Final Orders. As far as the amount of $82,000 is concerned I am not persuaded that it is appropriate in the context of this application that a deduction be applied in the manner sought by the Husband. There is simply insufficient evidence to determine where the truth of this allegation lies. The orders directed at the reinstatement of entertainment technology, “bespoke items” and paintings fall into the same category.
I will therefore make orders substantially in the terms proposed by the Wife.
The next set of orders sought by the Wife are more problematic. By her proposed orders 5 and 6, the Wife seeks that pending the settlement of the default sale the Husband be restrained by injunction from withdrawing, transferring or otherwise disposing of any of his equities held by N Company and in his P Company shareholding portfolio and that she be given authority by the Husband to sell the entire of these shareholdings. The Huband strenuously opposes the making of these orders.
I pause to note that the Final Orders already contain a prohibition against the Husband dealing with the shareholdings so that their value falls, in each case, below $250,000. I do not consider that there is sufficient evidence of facts and circumstances that mean that these protections are presently inadequate. I consider that the same situation applies with respect to the Wife’s proposal that she take control of and sell the entirety of the shareholdings.
While the evidence before the Court is that the Husband has not been able to refinance the D Street and G Street properties as a whole, there is no evidence, save for what has been described above at [26], about the facts and circumstances that will condition the default sale scenario. While I can understand why the Wife might be apprehensive that the combination of the default sale and the sale of shares might not yield sufficient funds to compensate her fully for the settlement payment, I consider these fears to be based on conjecture.
The Final Orders (at paragraph 9) require the Husband to meet any short-fall from the default sale by authorising the sale of his equities held by N Company and, if necessary, through the sale of his P Company shareholdings. The Husband has not defaulted on this obligation and neither has he indicated an intention to do so. While it might be said that the share sale provision is mechanical in character it is also underscored, in my view, by the assumption that the Husband is best placed to make decisions about which shares should be sold (and in which order) to minimise the tax consequences. I decline therefore to make the orders sought by the Wife.
The next set of orders sought by the Wife suffer from the same difficulty. They presuppose that the current default financing arrangements will be inadequate to fund the settlement payment and seek to introduce a further set of contingent sale mechanisms to redress this scenario. The first being the sale of the G Street property (proposed orders 7-9) and the second, the sale of the Husband’s three motor vehicles (proposed order 11).
Apart from the unsatisfactory evidentiary foundation, a problem unique to the G Street property is that it is not clear that it was ever contemplated by the parties that it might be sold to fund the settlement payment; to order its sale would therefore alter the substantive bargain reflected in the Final Orders. I say this because, as noted earlier, the Final Orders are comprehensive and include the following at paragraph 26:
26. Unless otherwise provided for in these Orders and except for the purpose of enforcing payment of any money due under these or any subsequent orders: (emphasis added)
a.Each party be solely entitled to the exclusion of the other, to all property (including choses-in-action) in the possession of such party at the date of this Order;
b.The Respondent retain the following property to the exclusion of the Applicant:
i.His […] Artwork purchased at [a] Gallery;
ii.The […] collection, described within the […] valuation report of [early] 2023;
iii.The art work described within the […] valuation report of [early] 2023;
iv.All motor vehicles registered in his name; and
v.All watches and jewellery owned by him.
…
This paragraph of the Final Orders plainly contemplates that in the event that settlement funds remain outstanding the items identified might be the subject of further machinery orders authorising their sale so as to make up any shortfall. The motor vehicles are included within this paragraph. The G Street property is not.
The parties may resort to this order to, for example, authorise a sale of the Husband’s motor vehicles, if the default provisions currently in place prove inadequate. However, these provisions have not yet been exhausted. The conditions for the making of further consequential orders have not yet arisen and it is my hope that they will not arise.
The parties, upon the making of these orders, can proceed with the expeditious marketing and sale of the D Street property and if the proceeds of this sale yield a shortfall, the Husband will be required to liquidate some or all of his shareholdings and bear any associated cost (including tax) associated with this exercise.
In a separate category, the Wife seeks orders that she says are directed at the enforcement of paragraphs 12(c) and 22 of the Final Orders. These orders require the Husband to (amongst other things) pay all taxation assessed against payments to the Wife under the Final Orders considered income and pay any past, present or future taxation assessed against the Wife and each of the parties’ three children arising from their involvement with or receipt of benefit from the O Trust and Q Pty Ltd.
The Wife seeks orders that would require the Husband to produce to her all draft and finalised Statements of Account, Notices of Assessment and Tax Returns for herself and the children for the past three financial years and to, within 30 days, pay the total outstanding tax liability and the projected tax liability for the 2024 financial year into her lawyer’s trust account to be held on trust pending finalisation of tax returns (as applicable) or to be applied in payment of assessed tax, penalties and interest.
As noted earlier, the Wife has produced evidence that she remains in the dark as to the tax liabilities of herself and the children and she is aware that there is at least one overdue tax debt relating to her son, Mr H. These are serious matters which in combination with the general high-handed approach demonstrated by the Husband to requests for information made by the Wife, satisfy me that the orders proposed by the Wife should be made.
Finally, the Wife sought orders that she be compensated from any residual funds to make up the shortfall of her monthly payment of $11,000. It is not clear, on the orders that I propose to make, that there will be any residual funds. More importantly, the Wife’s evidence is that these monthly payments are not presently in arrears. I am not minded to make orders that operate on an uncertain contingency that her payments may in the future be compromised.
Both parties have enjoyed a measure of success in this case. If however either party wishes to pursue an application for costs they should do so within 28 days and in the proper form.
I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 15 August 2024
Annexure A
BY CONSENT IT IS ORDERED THAT:
…
2.No later than 9 February 2024 (“the date”) the Respondent pay to the Applicant care of Nicholes Family Lawyers the sum of $2,900,000 (two million nine hundred dollars) (“the payment”) AND THAT the Respondent shall provide to the Applicant at least 75 days written notice as to when the payment shall be made.
…
5.In the event the Respondent fails to comply with his obligations pursuant to Order 3 hereof, the Applicant do all such acts and things and sign all such documents as may be required to engage jointly with the Respondent a selling agent to place the [D Street] property on the market for sale forthwith (“the default sale”).
6.To facilitate the default sale:
a. The selling agent to be agreed by the parties in writing within seven days from the date of the default, and failing agreement, the selling agent be appointed by the proper officer of the Real Estate Institute of Victoria at the expense of the Respondent;
b. The conveyancing solicitor to be agreed by the parties in writing within seven days from the date of the default, and failing agreement, the conveyancing solicitor be appointed by the proper officer of the Law Institute of Victoria;
c. Within 14 days of the selling agent being appointed, the reserve price, marketing strategy and costs and conduct of the sale to be agreed between the parties in writing, and failing agreement, the parties must follow the recommendations of the selling agent, including but not limited to:
i.any maintenance works or repairs to the [D Street] property to increase the sale price, with the parties to equally share in the expense of any maintenance or repair work;
ii.the terms of the sale;
iii.the sale price and/or reserve price of the [D Street] property.
d. The selling agent be authorised by this Order to speak with and keep the Respondent informed of all negotiations.
e. The Applicant do all acts necessary to make the property available for inspection and photography as requested by the selling agent;
f. The Applicant execute a contract for sale in the form prepared by the conveyancing solicitor at a price agreed upon by the parties in consultation with the selling agent.
7.Upon the settlement of the default sale the parties shall distribute the proceeds of sale in the following manner and priority:
a. To pay all sale costs, commissions and marketing fees and legal fees associated with the sale and selling agent;
b. The Respondent pay out all loan accounts owing to Westpac that are secured by registered encumbrance against the [D Street] property.
c. To pay any amount outstanding on the payment to the Applicant under Order 2 herein, from the respective date of default together with interest as prescribed under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021; and
d. To pay the remaining balance, if any, to the Respondent.
8.By no later than 21 days prior to the settlement of the default sale, or contemporaneously with the settlement of the default sale if so directed by Westpac, the Respondent do all such acts and things, sign all documents necessary and pay any such monies to:
a. Remove the [D Street] property as security for the Westpac mortgage encumbering the [G Street] property, if required to effect the settlement of the sale; and
b. Release the Applicant from the Guarantee and Indemnity provided by her in favour of Westpac in respect of the [G Street] property.
9.In the event the balance payable to the Applicant in accordance with Order 7(c) is insufficient to pay so much of the payment as is then outstanding, contemporaneously with the settlement of the [D Street] property sale the Respondent must do all such acts and things and sign all documents as necessary to direct and authorise [N Company] to sell his Australian equities and global equities held in his share portfolio ending in #[…]07, and if necessary to authorise [P Company] to sell his shareholdings in his portfolio ending in #[…]44, and apply the proceeds as follows:
i.To pay all sale costs, commissions and accounting fees associated with the sale and broker (if applicable);
ii.To pay any amount outstanding on the payment to the Applicant under Order 2 herein, from the respective date of default together with interest as prescribed under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021; and
iii.To pay the balance to the Respondent.
…
12.Pending the whole of the payment being made by the Respondent to the Applicant pursuant to Orders 2, 7 or 9 (as the case may be):
a. The Respondent shall pay to the Applicant:
i.the sum of $11,000 (net of tax) per calendar month to the Applicant’s bank account ending #[…]47 on the 12th day of each month, AND the Husband be restrained from withdrawing or transferring such payments from that account;
ii.the regular policy premium relating to the Applicant’s private health insurance as and when it falls due; and
iii.the insurance, registration and all costs associated with the maintenance and repairs of the Applicant’s [Motor Vehicle 2].
b. To facilitate the payments pursuant to Order 12(a), the Respondent shall pay via BPAY or EFT the expenses upon receipt of the invoice from the Applicant, and the Respondent shall provide confirmation of receipt to the Applicant upon payment.
c. If payments pursuant to this Order are considered income via distributions from the [O] Trust or any other source, the Respondent shall pay, be liable for and indemnify the Applicant against any and all taxation assessed payable on the monies paid to her pursuant to this Order.
…
22.The Respondent pay when due, be solely liable for and keep the Applicant, [Ms J], [Mr H] and/or [Ms K] forever indemnified in relation to:
a. Any past, present or future taxation whatsoever assessed against the Applicant, [Ms J], [Mr H] and [Ms K] including interest and penalties arising as a consequence of any of their involvement with or having received any benefit from the [O] Trust and [Q] Pty Ltd in any capacity whatsoever for any transactions, activities or dealings that may be assessed as taxable, including:
i.Taxation assessed as a result of the implementation of these orders;
ii.Any and all taxation assessed on unpaid present entitlements owing to the Applicant, [Ms J], [Mr H] or [Ms K];
iii.Any and all taxation on income received by the Applicant, [Ms J], [Mr H] or [Ms K], including assessed as a result of capital gains taxation.
b. Any and all debts, liabilities, claims or actions against the Applicant, [Ms J], [Mr H] or [Ms K] as a consequence of any of their dealings with the [O] Trust, [Q] Pty Ltd and her involvement with any of those entities or trust;
c. Any and all debts, liabilities, claims or actions against [O] Trust, [Q] Pty Ltd that has arisen or accrued to date.
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