Greenwood and Greenwood

[2009] FamCA 787

FAMILY COURT OF AUSTRALIA

GREENWOOD & GREENWOOD [2009] FamCA 787

FAMILY LAW – ENFORCEMENT OF ORDERS – Section 79a application – Application for summary dismissal – Impracticable – Frustration – Fundamental assumptions – Fluctuation in prices – Section 79A application summarily dismissed

APPLICANT: Ms Greenwood

RESPONDENT: Mr Greenwood

FILE NUMBER: TVC 1144 of 2007

DATE DELIVERED: 26 August 2009

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Jordan J

HEARING DATE: 3 & 24 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr T Kirk SC

SOLICITOR FOR THE APPLICANT`: Murdoch Lawyers

COUNSEL FOR THE RESPONDENT: Mr J P Rivett

Orders

IT IS ORDERED

1. That the Application of the Husband pursuant to s 79A if the Family Law Act be summarily dismissed.

2. That the Wife’s Enforcement Application filed 22 July 2009 and the remaining applications in the Husband’s Application filed 17 August 2009 be adjourned for further hearing to the Judicial Duty List at 10.00 am on 5 October 2009.

IT IS DIRECTED

1. That the Husband give the Wife notice in writing of his election as to whether he wishes to proceed with the second auction within 10 days of today’s date.

IT IS FURTHER ORDERED

1. That the question of costs of and incidental to the s 79A application be reserved.

2. That the Wife have twenty-one (21) days to provide written submissions in support of her application for costs.

3. That the Husband have twenty-one (21) days thereafter to provide submissions in response.

IT IS NOTED that publication of this judgment under the pseudonym Greenwood & Greenwood is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: TVC 1144 of 2007

MS GREENWOOD

Applicant

And

MR GREENWOOD

Respondent

REASONS FOR JUDGMENT

1. This is an application for summary dismissal of the husband’s application filed on 17 August 2009, being an application brought pursuant to s 79A of the Family Law Act to set aside orders for property settlement made by consent in Townsville on 10 December 2008.  The essential terms of the property orders under review were:

   (a)That the husband pay to the wife the sum of $5,750,000 within 90 days of the order.

   (b)That upon payment, the wife transfer her interest in a number of rural properties to the husband.

   (c)That in default of payment, a regime of sale of properties be undertaken in accordance with the terms and conditions set out in Schedule “A” to the orders, which included the appointment of the wife as trustee for sale and the opportunity for associated rights of possession.

2. Within the listed terms and conditions was a clause (i), which provided:

   “Liberty to apply to the court be reserved to the Trustee to apply to the court with respect to the terms and conditions of the sale for further directions in the event that it proves necessary.”

3. It is common ground that:

   (i)       The husband failed to pay the lump sum to the wife.

   (ii)The principal property “[B property]” was unsuccessfully offered for sale by public auction in accordance with the terms in the schedule.

   (iii)The supplementary listing for public auction at a lower reserve in accordance with the schedule has not proceeded, it being acknowledged on both sides that such a listing would be likely to be a financially futile exercise, given the agreed reserve and current market factors.

4. On 22 July 2009, the wife filed an application seeking a wide range of orders, including an application for a writ of possession and for other orders facilitating the sale of properties and for the management of the farming enterprise pending sale. That application was returnable on short notice on 3 August 2009, and at that time counsel appearing for the husband indicated he held instructions to lodge a section 79A application. Counsel was afforded that opportunity and the matter was stood over to 24 August 2009. The mooted application and affidavit material in support were filed by the husband on 17 August 2009.

5. At the hearing on 3 August 2009, counsel for the wife foreshadowed that he held instructions to apply to have any section 79A application summarily dismissed, in the event that it was determined on his side that there was no merit in the section 79A application. Counsel for the wife orally renewed that application before me on 24 August. No application to that effect was filed by the wife. Counsel for the husband did not take any point on the formalities and counsel for each of the parties proceeded on 24 August to make submissions in relation to a summary dismissal application which, in the circumstances, I propose to entertain.

6. It was conceded by counsel for the wife that his application for summary dismissal had to be argued on the papers and decided on the basis of an acceptance of the husband’s sworn testimony at face value. Counsel for the wife acknowledged that, in this exercise, it is incumbent upon him to demonstrate that the husband is bound to fail in his s 79A application, even on his own material. At the same time, counsel for the husband sought to rely upon the contents of the wife’s application and affidavit material in support. He did not proceed to specify the particular portions of that material relied upon, but made reference to aspects of it from time to time.

7. Each of the parties asked the court to consider the prospect of making orders as to the future management of the properties, either in a situation of dismissal of the husband’s s 79A application, or in the event that it remained on foot, and I will return to that aspect of the case later.

8. The issues identified above necessitate a close evaluation of the husband’s case and the submissions made on his behalf in support of it.  The following matters represent the key assertions made by or on behalf of the husband:

   (a)The grounds to set aside the orders relied upon by the husband are those set out in s 79A(1)(b).

   (b)It is contended that there are two limbs to the husband’s case in that regard:  the first being that it is impracticable for the order to be carried out, and the second is that the doctrine of frustration should apply to the agreement leading to the consent orders.

   (c)      The essential facts relied upon by the husband are as follows:

   (i)The settlement was based upon the assumption that, under the orders, the wife would receive somewhere between 40 to 50 per cent of the pool, which pool was itself valued at somewhere between 11 million and 16 million dollars at the commencement of the trial.

   (ii)The husband had proceeded upon the basis that the National Australia Bank had promised him access to borrowed funds, sufficient to pay out the wife in accordance with the terms of the consent orders.

   (iii)That in the event that the husband was unable to pay out the wife, the terms and conditions of sale provided for two auctions at fixed reserves and that those arrangements were put in place to protect the husband.

   (iv)It was assumed by the husband that the sale of the B property would provide funds sufficient to pay out the wife, and it was further assumed that the National Australia Bank would carry that forward to the other properties.

   (v)The National Australia Bank subsequently withdrew its offer of finance and has further demanded that it be paid out in full from the proceeds of sale of B property, which would necessitate the sale of further properties to pay out the wife in accordance with the consent orders.

   (vi)It is agreed that there appears to be little commercial purpose in carrying out the second auction.

   (vii)A combination of factors, including the global financial crisis and record floods, have resulted in a significant reduction in the value of the subject rural properties.

9. It is submitted on behalf of the husband that the above combination of factors render it impracticable to carry out the order.  It is contended by counsel for the husband that the appropriate test is that events have rendered execution of the terms of the order as commercially impracticable.  Counsel further argues that it is proper to construct the terms of the agreement between the parties at the December 2008 hearing, which resulted in consent orders, as a contract between the parties, which contract is in turn subject to principles such as frustration.  He argues that the agreement in this case should be deemed to be frustrated on the grounds of commercial impracticability or where “fundamental assumptions” have become “totally invalidated”.

10. Counsel for the husband cited extensive authority for his propositions of law and it may become necessary to consider those principles and their application to this case in the event that I find that the factual premise argued for has been made out by the husband.  For present purposes, I assume the legal validity of the propositions advanced on behalf of the husband and focus upon the factual propositions upon which they are based. 

11. Counsel for the wife submits that this is where the husband is bound to fail. He rejects arguments based upon the notion of frustration and says they have no application to the s 79A proceedings. He submits further that what the husband asserts, accepted at face value, fails to meet the clear requirements of s 79A and that the husband is, therefore, bound to fail and that this application should be summarily dismissed.

12. To return to the husband’s hypothesis and the factual premise upon which it is based, firstly, I should record that I have a fundamental difficulty with any notion that the relevant assumptions can be the uncommunicated assumptions of one party only.  I take the view that, to properly invoke such exceptional relief from contractual or court ordered obligations, the assumptions would need to be recorded or agreed assumptions or, at the very least, assumptions which can be clearly inferred either from the terms of the contract, or orders, or from the conduct of the parties.  If all that was necessary was some concealed, erroneous or failed assumption of one party alone, commercial and legal processes would literally grind to a halt.  In that sense, I agree with the submissions of counsel for the wife, that the relevant assumptions must not be of the husband alone, but are the assumptions upon which the orders were made. 

13. In this case, firstly, there is no suggestion in the evidence that the husband communicated any of the fundamental assumptions to the wife.  In particular, there is no evidence that the husband informed the wife that the whole payment, the whole settlement, was subject to the National Australia Bank providing finance.  Secondly, there would have been ample opportunity to record such matters at the time of the orders, either by including a subject to finance clause in the orders or by recording notations to the orders. 

14. As to the capacity to infer such assumptions from the terms of the agreement or orders, the whole letter and spirit of the orders is inconsistent with the primary proposition advanced by the husband, as I will explain in the context of my further deliberations. 

15. For the time being, given that this is a summary dismissal application, I will, however, return to an analysis based upon the premise that all that is needed is evidence of fundamental assumptions of one party which become totally invalidated.

16. Counsel for the husband identifies the first assumption as being one where it was assumed that the wife would receive somewhere between 40 per cent and in excess of 50 per cent of the pool. The difficulty with that proposition is the fact that it is not made out on the evidence the husband filed in support of his s 79A application. Nowhere in his affidavit does the husband make any reference to such an assumption. This is a proposition advanced from the bar table by counsel alone by reference to a transcript in the December proceedings, where counsel for each of the parties was responding to questions from the trial Judge about the effect - and I underline the word “effect” for emphasis – of the orders. The responses provided by counsel were expressed in broad terms, having regard to the unresolved contingencies existing before the commencement of the trial relating to issues of value. Nowhere in his evidence before me does the husband embrace such expressions and endorse them as a basis upon which he said he proceeded to settlement. Indeed, the husband did not make any reference to percentage distribution or related matters in his evidence in support of his application.

17. The second assumption identified by counsel for the husband was that his client would buy out the wife at $5.75 million using National Australia Bank finance.  In this instance, there is at least some evidence produced to that end.  In his affidavit in support of this application, the husband indicates that he clearly had that expectation.  However, the issue then becomes, could such expectation be properly described as a “fundamental assumption”.  The balance of the agreement and the balance of the husband’s affidavit material establishes the contrary. 

18. As to the evidence itself, in paragraph 9 of his own affidavit in support of this application, the husband makes express reference to the prospect of finance falling through, with the resultant need to sell the properties. 

19. The agreement to pay and accept $5.75 million was not invalidated or rendered commercially impracticable should the husband not be able to raise or pay the $5.75 million.  The agreement entered into by the husband expressly provided for that prospect and the consequential orders for sale of property and the distributions of proceeds of sale were terms clearly designed to meet the wife’s entitlement in the event he was unable to raise finance and make the payment in a lump sum.

20. The husband may have had the hope and expectation that the properties could be preserved, but he is, in my view, unable to assert a fundamental assumption, which is, in fact, inconsistent with the express terms of an agreement executed by him, or orders consented to by him. 

21. This latter proposition also covers the fourth assumption identified by counsel for the husband, that is, the husband asserts that he assumed that the sale of the B property would be sufficient to pay out the wife.  When one again turns to the terms of the agreement, one observes clause 4 of Schedule A to express an entirely contrary proposition in the following terms:

    “Should the sum payable to the wife upon the sale of [B property] be insufficient to satisfy the monies due and owing to her pursuant to Order 4 and the interest thereon, the wife shall in addition to such other enforcement remedies that may be available to her, be entitled to apply to the Family Court of Australia at Townsville for the sale of such other property referred to in Order 5 as she may be advised.”

22. The proper construction of the agreement and of the evidence in the face of the orders, does not support the fundamental assumption contended for, to the effect that it was assumed that B property alone would be sold.  Rather, the husband may well have proceeded upon the hope and expectation that sale of other properties would be unnecessary.  Clause 4 clearly identifies that each of the parties entered into an agreement which clearly countenanced the prospect that other properties may have to be sold. 

23. In my view, the only assumption which may at least potentially meet the requirements contended for, is the third assumption identified in the submissions of counsel.

24. Firstly, in this instance, there is direct evidence from the husband as set out in his affidavit, that he entered into the agreement and the consent orders on the basis that there was a two‑stage auction and that he did so to achieve the best price and to protect himself from a fall in values.  He asserts that he assumed that the two auctions would proceed on an agreed basis.  Each of those propositions referred to in his affidavit is directly reflected in the terms of the orders and the fixing of the reserves is obviously a device designed to protect the husband’s interests, given that the wife was to receive a lump sum. 

25. However, there is, in my view, a limit to the utility of this proposition.  It may be that the husband is entitled to insist upon a second auction at the reserve specified in the orders.  In the course of submissions, the wife’s counsel expressly agreed to that proposition and informed the court of his client’s instructions to proceed with the second auction, should the husband give notice of his wish to participate in that exercise.  This is to be considered in the background that, to this point, it seemed that neither party wished to proceed with the second auction.

26. In my view, the husband may be entitled to enforcement of the agreement so as to require the second auction.  However, in the circumstances of this case, the postponement of the second auction is not a basis to justify a setting aside of the order.  The failure to hold the second auction to this time, essentially, by agreement between the parties does not, in my view, strike at the core of the terms of the agreement to sell.  The second auction can be held.

27. Further, as to the proposition to be inferred from the husband’s evidence and from his counsel’s submissions, to the effect that the two reserves would define the limits of the sale process, limited to a sale of B property only at no less than an eight million reserve, both clause 4, to which I have already earlier referred, and clause 3(i) strike at the fabric of a proposition that it was only to be B property to be sold, and only by the process of auction number one or auction number two.  Clause 3(i) reads as follows:

    “Liberty to apply to the court be reserved to the Trustee to apply to the court with respect to the terms and conditions of the sale for further directions in the event that it proves necessary.”

28. In relation to that clause, under the terms of the order, the wife is appointed trustee for the sale of B property and I accept that that clause should be construed so as to include price as part of the “terms and conditions of the sale”.  In those circumstances, it is to be inferred from the terms and conditions contained in the schedule that, in the event that the property was not sold at the second auction at the listed reserve, the wife had liberty to apply as trustee for the sale of B property and approach this court for the purposes of setting the terms and conditions of that sale, which would include fixing a reserve price different to and potentially less than the eight million reserve. 

29. I have concluded that the evidence relied upon by the husband fails to establish each of the fundamental assumptions argued for and, as those matters stand as the foundation for the case advanced on behalf of the husband, based on considerations of frustration, that aspect of the case must fail.  I need not turn to consider issues relating to the subsequent invalidation of those assumptions if the assumptions themselves cannot be made out. 

30. Counsel for the husband contended that there was much common ground, both in an evidentiary and a legal sense, between matters to be argued in support of propositions based upon principles of frustration and those based upon considerations of impracticability under s 79A. I have, therefore, already addressed much of that common ground.

31. Counsel’s arguments based upon the doctrine of frustration did appear to be the real emphasis of the case he advanced on behalf of his client. In comparison, the submissions on impracticability appeared to be more faintly put. In any event, I am satisfied that such a case based on s 79A(1)(b), as it is expressed, is not made out on the evidence.

32. The evidence may establish that there has been an unexpected downturn in value, probably produced by a combination of factors including floods and the global financial crisis. The consequences may have satisfied me that the process of carrying out the orders has become more truncated and problematic and, unfortunately, it may well be the case that the husband will suffer hardship and may secure significantly less than he had anticipated from the property settlement because of these matters. However, such factors cannot be a basis to set aside property orders pursuant to s 79A.

1. The evidence does not establish that circumstances have arisen since the making of the order which make its implementation impracticable, whether commercially or otherwise.

2. The primary property remains available to be sold.  Should the second auction proceed and fail to meet that reserve, the wife can apply to the court and the husband can be heard about the terms and conditions of the sale of B property and other properties in accordance with the schedule. 

3. The reality is that the sale can proceed and the wife can be paid.  Even if one accepts the worst case scenario highlighted by counsel for the husband by reference to evidence produced by an accountant, the reality is that there is going to be sufficient to meet the orders made in this case.  It may well be that, on a worst case scenario, the husband will receive substantially less than had been anticipated by him, but there is ample authority for the proposition that a drop in value is not a basis for setting aside property orders and, in fairness, counsel for the husband conceded that point.

4. In my view, the husband’s grievance, in reality, is that he may now not receive a fair and just and equitable portion of the property, but even that is not the test.  His grievance is that, with the benefit of hindsight, it has proven to be commercially unprofitable to agree to pay the wife a fixed lump sum.  Given his time again, the husband might well have included subject to finance clauses, rise or fall clauses or percentage distribution clauses, in lieu of or in addition to the terms appearing in the orders.  He had an expectation of securing finance and that did not come to pass and the market has fallen.  He took the risk of a lump sum order and the bargains he struck have failed him and have not borne fruit.  He is disappointed and he may suffer a not insignificant financial consequence.  However, in my view, these are nothing more or less than the exigencies of life and litigation.  Both parties assumed risks by opting for a lump sum order.

5. If the good rains had doubled the value of the property and if the wife’s expectation of receiving a 40 per cent share became a mere 20 per cent entitlement, she could not avoid her bargain by use of s 79A. Changes of fortune after a bargain is struck and final orders made do not constitute impracticability and do not otherwise constitute a ground to set aside orders properly made by this court.

6. In my view, the case brought by the husband pursuant to s 79A is, on his own material, bound to fail and I therefore make the orders sought by the wife to summarily dismiss that application.

7. As to the wife’s enforcement application and those parts of the husband’s application which appear to either relate to the wife’s enforcement application or represent the husband’s own discrete application for orders relating to the operation of the rural properties pending sale, they will need to go over to another day for a variety of reasons.

8. Firstly, the parties, and particularly the husband, are entitled to some little time to reflect upon this decision and to determine what course he might now pursue. 

9. Secondly, as I have said in the body of this judgment, I am satisfied that, prior to considering alternate means of enforcement, the husband remains entitled to insist upon enforcement in terms of pursuing the express terms of the order which provided for a second auction at the fixed reserve.  It may be, with the improving markets and the past rains, that exercise may be worth pursuing.  In any event, I am satisfied that that option remains an entitlement under the order and the husband should be given the opportunity to consider his options prior to the Court proceeding to hear the wife’s enforcement application.  I am satisfied, having read the material of each of the parties, that they are each finding the current situation intolerable and there is a need to address these issues promptly.  I, therefore, propose to direct that the husband give the wife notice in writing of his election as to whether or not he wishes to proceed with the second auction within 10 days of today’s date.  I propose to list the wife’s application filed on 22 July 2009 and the remainder of the husband’s application filed on 17 August 2009 for determination in the Duty List at 10 am on 5 October 2009.  In the event that the husband elects to proceed with the second auction, that date could be vacated by agreement between the parties.

10. They will be the orders I intend to make.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Jordan

Associate: 

Date:  31 August 2009