Hodges and Rose (No. 2) - [2014] FamCA 830

FAMILY COURT OF AUSTRALIA

HODGES & ROSE (NO. 2)

[2014] FamCA 830

FAMILY LAW – PRACTICE AND PROCEDURE – Application by wife for extension of time under conditional stay order – New material indicates no basis for the stay as submitted previously when the order was made – Application for an extension of time dismissed.

FAMILY LAW – ENFORCEMENT OF ORDERS – Application by husband for enforcement of judgment – No basis to refuse order – Part of order unpaid and interest thereon.

FAMILY LAW – COSTS – Wife to pay husband’s costs.

Family Law Act 1975 (Cth)

Fitzgerald (as child representative for A) Legal Aid Commission of Tasmania v Fish and Anor (2005) 33 Fam LR 123
Muldoon and Carlyle [2012] FamCAFC 135

APPLICANT:

Mr Hodges

RESPONDENT:

Ms Rose

FILE NUMBER:

MLC

1454

2013

DATE DELIVERED:

1 October 2014

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

1 October 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Dixon SC with Ms Paterson

SOLICITOR FOR THE APPLICANT:

JH Legal Pty Ltd

COUNSEL FOR THE RESPONDENT:

Mr Hoult

SOLICITOR FOR THE RESPONDENT:

CE Family Lawyers

Orders

That paragraphs 4, 5, 6, and 7 of the husband’s application filed 22 September 2014 are withdrawn.
That the wife do all such things as may be required within seven (7) days of the date of these orders to sell such shares as may be necessary to satisfy the following:
(a)    The sum of $230,000 to the husband;
(b)    Interest on the husband’s entitlement in the sum of $8059; and
(c)    The husband’s costs fixed in the sum of $25,000.
That the wife pay the interest and costs referred to in the foregoing paragraph.
That the application of the husband filed 22 September 2014 and the wife’s response thereto filed 25 September 2014 are otherwise dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Hodges & Rose (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 1454 of 2013

Mr Hodges

Applicant

And

Ms Rose

Respondent

REASONS FOR JUDGMENT

The Court granted a stay of final parenting and property orders on15 August 2014 at the request of the wife over the opposition of the husband. The stay came with conditions. The conditions were not fulfilled within the time allocated by order of the Court.
The wife who has now fulfilled those obligations, seeks by application to extend the time nunc pro tunc. For his part, the husband seeks to enforce the final property orders.
In effect, the wife seeks an indulgence which she concedes she needs. If that order is not granted, the husband seeks that he be paid the balance of what was ordered. That is, he seeks the enforcement of the order. The difference in this case is $230,000.
The history of what brought the case before the Court today only needs scant mention.
On 23 June 2014, I ordered the wife pay the husband by 4 August 2014 the sum of $730,000 and in default of that payment, she elect which of two sources of assets would satisfy the judgment. The first source was the sale of the parties’ former home worth $2.15 million. It is encumbered to the extent of $500,000 (or thereabouts) by virtue of the loan that gave rise to the second source of funds. The second source was a share portfolio which, in the proceedings, I found to be $977,133.
On 21 July 2014, and without lawyers then acting for her, the wife filed notice of appeal against the Court’s orders. It would appear to be uncontroversial that there are few, if any, recognised grounds of appeal pleaded. It is clear, and was when the matter subsequently came before the Court, that the wife had not indicated in her notice of appeal, what payment should be made to the husband if indeed the $730,000 was incorrect.
The matter came before the Court on 15 August 2014 on the wife’s application and again at a time when she was without legal representation; the husband was represented by counsel. To give the wife an opportunity to get advice because I indicated I saw problems with the notice of appeal and also her application for a stay of the orders, I adjourned the application.
On 29 August 2014, the wife’s stay application was argued by counsel briefed by her new solicitors. I gave reasons at the time for granting a conditional stay. Those reasons have not yet been formally published. However, I indicated in those reasons that counsel for the wife had submitted that in the final judgment, money or assets had been overlooked or incorrectly dealt with. I rejected that submission. That issue was canvassed again today but this time by senior counsel for the husband who pointed to part of the transcript to support his contention that there was no basis in the wife’s submission.
In August, counsel for the wife submitted that if the stay was not granted, the appeal would be rendered nugatory. As I observed in the reasons, this argument related to the capacity of the wife to keep the home as well as the share portfolio. I could see no way that the husband would not have been permitted to have a significant sum of money from assets all of which were under the control of the wife. As a condition of granting the stay, I ordered the wife to then pay the husband $500,000. If it was found by the Full Court to be too much, there was enough evidence to satisfy me that the husband could be ordered to repay some of it because he made clear he was intending to purchase a property.
The payment of $500,000 was due on 12 September.
Problems then arose all of which seem to have been of the wife’s own making.
The wife’s solicitors wrote saying that a part payment had been made but that the balance would be offset against money said to have been owed to her by the husband. That concept was rejected by the husband. Indeed, before me today, the wife’s counsel agreed that it was wrong to do that offsetting.
When correspondence between lawyers then followed, the wife indicated that the balance of money owed to the husband would “follow”. It did not within the time frame contemplated in the correspondence. In the intervening period, the husband issued enforcement proceedings. The wife’s stated position at that time was that although she was outside of the Court’s order for the timely payment, if she had to pay more than what she was offering, the house would have to be sold. Counsel for the wife conceded that the wife had not complied with the orders of the Court but she still needed the indulgence.
At the listing of the husband’s enforcement application on 25 September 2014, the wife was represented by different counsel to the counsel who appeared at the earlier stay application. An adjournment was sought and granted but the husband then sought discovery in quite specific terms. That discovery having been given, the husband today sought to re-agitate the stay issues on the basis that the wife’s basis for saying the appeal would be rendered nugatory was not correct.
In the middle of September, the wife arranged for the settling of a family trust which has all of the appearances of an asset protection trust. At the same time, the wife commercially borrowed almost $1.4 million and invested that in the share market. There is no evidence other than that from the wife that this loan has been secured against the shares that the wife has now acquired. The capital value of the trust is said to be a negative amount of about $56,000 some two weeks after the trust was settled. No details of who set up the trust, its appointer or how much it cost have been provided. In circumstances where the wife was saying that she needed the remaining share portfolio that had not been sold for the purposes of obtaining dividends to pay the house mortgage earlier mentioned, this new trust and significant investment was rather odd.
At the time of the stay application, I did not have the benefit of the wife’s most recent financial statement. I turn to that in a moment but it shows that the income from the shares could not support any mortgage commitment as claimed by the wife.
If the substantive basis for the granting of the stay was the otherwise nugatory effect as pleaded in her then affidavit, the current financial statement suggests otherwise.
The preliminary question is how either of the applications should be approached. Does the Court have power to grant the extension of time for the wife? If so, is it simply a discretionary question and on what basis should it be exercised?
Rule 1.11 of the Family Law Rules 2004 provides that the Court may set aside or vary an order made in the exercise of a power under the rules.
The power to grant the stay pending an appeal lies in rule 22. That provides that if an appeal has been started, a party may apply for an order staying the operation or enforcement of all, or part, of the order to which the appeal or application applies. Thus, there is a power to vary any order made under that provision.
The rules do not set out the basis on which the power in either of those rules should be exercised.
The husband’s application for enforcement also lies in the rules.
It is not disputed that the power to be exercised is discretionary in all of these applications but that means it must be exercised judicially and according to law.
Whilst each party had a discrete basis for their application, they are essentially a request for the Court to exercise its discretion to vary what occurred on 29 August. To exercise that discretion, I consider it appropriate to look at the basis upon which the stay was granted. If the application was inappropriately founded by virtue of the revelation of recent material, the Court does have the power to reconsider the matter because of rule 1.11.
If the extension of time sought by the wife is granted, there is nothing to enforce because the stay is in operation until the appeal and the husband has received his due.
The fundamental basis for the stay lay with the wife’s submission in August and repeated by her different counsel today, again. That is, if the remaining share portfolio is ordered to be sold, there will be insufficient income to fund the mortgage and that will make the appeal nugatory because the house will be sold. The flaw in that submission lies in the wife’s own evidence.
In the financial statement filed this very day, the wife swore that her income was estimated at $1,507 per week. However, of that sum, $146 was from the family tax benefit, the husband was to be paying $500 by way of spousal maintenance and the husband was also paying child support of $664. Bearing in mind the wife’s submission was that the dividends were funding the mortgage, she declared that income to be an estimated $197 per week. When I turn to her personal expenditure pages, she deposed to the fact that she paid $90 per week on the overdraft and mortgage and $518 per week on the share portfolio loan. It is clear that the dividends are nowhere near meeting the loans just mentioned. The loans are being funded out of spousal maintenance and child support. Importantly it must be said in case it is suggested that this is just smoke and mirrors, the wife’s household expenses total $4,362 per week. She cannot make ends meet. The dividends are not contributing at this stage to the loans.
In her liabilities, the wife showed that the newly settled trust is in a negative position so I conclude that the limited income is also somehow funding any excess charges and interest there. Apart from the house and the shares, the wife has no other assets of significance.
The argument therefore about the need for the dividends from $400,000 worth of shares is fallacious.
Indeed, absent the stay, the wife’s current obligation to the husband is $230,000. She has other financial commitments and it is difficult to see how they are to be met. For example, she deposes to owing her former lawyers over $100,000 and her current lawyers $25,000. No indication appears as to how those commitments will be met.
I appreciate her wish to retain the home but absent an amended and concise set of appeal grounds, I cannot assess the merits of her appeal. I still do not know what the correct answer is that she will argue if indeed she maintains that the determination I made was wrong. What I can say is that the sale of the shares would not render the sale of the house but some other payment of her debts to lawyers just might.
I find in the circumstances that it is not reasonable to deny the husband the fruits of his judgment in circumstances where the evidence does not support the asserted submission that the refusal of the stay renders the appeal nugatory.
The husband sought interest and that was not disputed. The amount calculated to date is $8,059 and I shall make that order.
The husband sought costs. That was opposed by the wife.
In proceedings in this Court, s 117 of the Act provides that each party shall bear their own costs unless the Court finds there are circumstances to justify a departure from that principle. If indeed, a justifiable circumstance is found, the Court must take into account the matters set out in s 117(2A) before it can make any such costs order. It is the overall circumstances that must be considered to justify an order for costs (see Muldoon and Carlyle [2012] FamCAFC 135).
I am satisfied that the wife has caused this litigation by her non-compliance with orders and her unilateral action to offset money she argued was owed by the husband. There is a justifiable reason for considering an order for costs. The Court must then consider the matters in s 117(2A).
In respect of s 117(2A), the wife conceded the problems just mentioned. The various factors that are relevant are the financial circumstances of the parties, their compliance with orders, legal aid considerations and any other matters relevant. Although the wife wished to keep the house, it must be borne in mind that it is worth over $2million albeit encumbered and the wife has managed to convince a lending institution the provide her new trust with over $1 million. She may wish to keep the house but she may have to cut her cloth according to her means in circumstances where the husband has virtually none of the significant assets. There are no other considerations than those mentioned earlier which are relevant. All factors are to be considered and no one factor is determinative (see Fitzgerald (as child representative for A) Legal Aid Commission of Tasmania v Fish and Anor (2005) 33 Fam LR 123).
In my view, this is a case where an order should be made. It is not intended as a punishment but rather to compensate the husband for having to pursue through litigation that which he was entitled to.
The parties agreed that if an order was made, the costs should be fixed at $25,000. I shall make that order.
I shall make an order in terms of the husband’s application that the wife sell such shares within seven days as may be necessary to satisfy the outstanding $230,000, the interest referred to and the costs.
The applications are otherwise dismissed.

I certify that the preceding Forty One (41) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 1 October 2014.

Associate:

Date: 1 October 2014