Hogan and Cabral
[2020] FCCA 23
•10 January 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| HOGAN & CABRAL | [2020] FCCA 23 |
| Catchwords: FAMILY LAW – CONTRAVENTION – PROPERTY – Where final property orders were made on 11 April 2016 which provided for the wife to be paid 70% of the net proceeds of sale of a property in Victoria and the husband to be paid 30% – where the property was sold in June 2018 and the net proceeds of sale less the deposit were paid into the wife’s solicitor’s Trust Account – where the wife’s solicitor retained $29,836.76 of the husband’s share of the money in trust purportedly pursuant to a costs order made in the wife’s favour on 3 May 2018 – where the wife was never entitled to anything remotely like this amount pursuant to that costs order – where as a result of not receiving 30% of the money in the Trust account the husband filed an application alleging that the wife had contravened the property order – where the wife contended that her interpretation of the 3 May 2018 order was correct – where the interpretation is not correct – where the wife has contravened the order without reasonable excuse – matter adjourned for submissions about penalty and about whether an order should be made which will ensure compliance with the 2016 order. |
| Legislation: Family Law Act 1975 (Cth), ss.79A, 106, 112AD, 112AK |
| Applicant: | MR HOGAN |
| Respondent: | MS CABRAL |
| File Number: | MLC 4553 of 2013 |
| Judgment of: | Judge Terry |
| Hearing dates: | 13 September & 24 October 2019 |
| Date of Last Submission: | 24 October 2019 |
| Delivered at: | Newcastle |
| Delivered on: | 10 January 2020 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Ms Winfield |
| Solicitors for the Respondent | Paul Gowran & Co |
ORDERS
It is declared that Order (4) of the orders made on 3 May 2018 required Mr Hogan to pay the costs of Ms Cabral of and incidental to the Application in a case filed on 26 April 2018.
Ms Cabral’s application for an order pursuant to Rule 16.05 of the Federal Circuit Court Rules varying the 3 May 2018 order is dismissed.
Upon finding that on or about 11 December 2018 Ms Cabral without reasonable excuse contravened Order 7 (f) of the Orders made on 11 April 2016, the matter is adjourned to 9.30am on 28 January 2020 for submissions as to penalty and as to whether an order should be made to ensure compliance with the order contravened.
IT IS NOTED that publication of this judgment under the pseudonym Hogan & Cabral is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
MLC 4553 of 2013
| MR HOGAN |
Applicant
And
| MS CABRAL |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter involves an alleged contravention of property orders made on 11 April 2016.
Order 7 of the orders required the net sale proceeds of a property in Suburb A Victoria to be paid as to 70% to Ms Cabral (“the wife”) and 30% to Mr Hogan (“the husband”).
The property was sold on … 2018 and $190,148.95 was paid into the Trust Account of the wife’s solicitors Paul Gowran & Co.[1]
[1] See Settlement Statement contained in Exhibit 5 to the husband’s affidavit filed on 4 January 2019.
On 11 December 2018 Mr Gowran paid $27,163.24 to the husband which was $29,881.45 shy of 30% of the money in trust.[2] He informed the husband that the wife was entitled to retain the remaining amount pursuant to a costs order made in her favour on 3 May 2018.
[2] The husband said that the missing amount was $29,836.76 because he rounded his 30% share of the money in trust to $57,000.00.
The husband responded that the 3 May 2018 order properly interpreted only provided for the wife to receive her costs of and incidental to her application in a case filed on 26 April 2018 which would be nothing like the amount retained. However the wife’s solicitor refused to budge and on 4 January 2019 the husband filed a contravention application. He alleged that:
Pursuant to paragraph 7(f) of the Consent Orders made on April 11, 2016 the respondent Wife was obliged to pay 30% of the net proceeds of settlement of the Suburb A property (sic).
On December 12, 2018 the respondent wife’s solicitor paid the sum of $27,163.24 to the husband, but has failed to pay the balance of 30% in the sum of $29,836.76.
During the contravention hearing the husband in addition to maintaining that the 3 May 2018 costs order had been misconstrued pointed out that the order provided for him to pay the wife’s costs as agreed or assessed and that costs had never been agreed or assessed.
The wife denied that she had contravened the order. She contended that the 3 May 2018 order properly interpreted meant that she had been awarded costs for the entirety of the work done by her solicitor between 16 May 2016 and 3 May 2018. Her counsel conceded that costs had not been agreed or assessed but said that the husband could have applied for an assessment and that he could not now complain that no assessment had occurred.
The wife also submitted that even if her interpretation of the 3 May 2018 order was not correct she had not contravened any order because Order 7 of the 11 April 2016 orders did not place an obligation on her to pay the husband any money.
I commenced hearing the contravention application on 13 September 2019 and after taking some evidence adjourned the matter and asked the wife’s solicitors to file an application seeking a declaration about the meaning of the 3 May 2018 costs order. They did so by filing an application in a case on 27 September 2019 in which they sought a declaration that:
Order 4 of the orders made on 3 May 2018 is not limited by reference only to application filed 26 April 2019 (sic), but includes work and correspondence in respect of all applications and responses filed by the wife from 11 April 2016 and including 19 September 2016 to 3 May 2018.
The wife also sought the following orders:
3. Pursuant to Federal Circuit Court Rule 16.05(2) (c) or (h), order 4 made 3 May 2018 be varied to read as follows:
“4.The Applicant Husband meet the costs of the Respondent Wife of and incidental to enforcement of consent orders made 11 April 2016 on an indemnity basis as agreed or assessed.”
4. In the alternative to Order 1, pursuant to Family Law Act 1975 section 112AK, application – contravention filed 4 January 2019 by the Applicant be dismissed and Order 4 made 3 May 2018 be varied to read as follows:
“4.The Applicant Husband meet the costs of the Respondent Wife of and incidental to enforcement of consent orders made 11 April 2016 on an indemnity basis as agreed or assessed.”
The application pursuant to s.112AK is misconceived. That section makes provision for the court to vary an order made pursuant to s. 112AD of the Family Law Act and no order pursuant to s.112AD has yet been made.
The husband submitted that R.16.05 had no application as there had been no accidental slip or omission and sought the dismissal of this application.
The issues
The issues I need to determine are:
i.Whether upon proper construction of the order made on 3 May 2018 the wife was entitled only to her costs of and incidental to the Application in a Case she filed on 26 April 2018 or whether she was entitled to her costs of and incidental to all work done in her matter from 16 May 2016 to 3 May 2018.[3]
ii.Whether if the order does not on its face entitle the wife to costs other than costs of and incidental to the Application in a Case it can and should be varied pursuant to R.16.05 of the Federal Circuit Court Rules so that it bears the meaning for which the wife contends.
iii.The significance of the fact that the 3 May 2018 order provided for the husband to pay the wife’s costs as agreed or assessed and the costs were never agreed or assessed.
iv.Whether even if the amount of $29,836.76 (to use the husband’s figure) was wrongly deducted from his share of the money in trust the wife should be found to have contravened order 7 of the 11 April 2016 orders without reasonable excuse.
[3] I have drafted this question in this way notwithstanding the manner in which paragraphs 2 & 3 of the wife’s application in a case are drafted because in support of the deduction of $29,836.76 from the husband’s share of the money in trust the wife’s solicitor submitted a bill of costs to the husband which appears to cover all work done from 16 May 2016 to 3 May 2018.
The evidence
The husband relied on his contravention application filed on 4 January 2019, his affidavit in support filed on 4 January 2019 and his affidavits filed on 29 January 2019 and 10 October 2019.
The wife relied on her affidavits filed on 24 January 2019, 6 March 2019, 11 September 2019 and 27 September 2019, her application in a case filed on 2 October 2019 and the affidavits of Paul Gowran filed on 12 June 2019 and 18 June 2019.
The husband’s contravention application originally included an application for contravention in respect of a parenting order and an application for contravention in respect of an order made on 11 April 2016 concerning the transfer to him of a property in B State Country C. A number of the affidavits referred to above contain evidence about those issues and I have had regard only to the evidence in them which is relevant to the alleged contravention in respect of the Suburb A sale proceeds.
On 24 October 2019 the parties made submissions. The husband relied on written submissions filed on 23 October 2019 and made some oral submissions. The wife’s counsel relied on written submissions and a chronology filed on 24 October 2019 and made some oral submissions.
At the end of the wife’s counsel’s oral submissions she sought and was given leave to send to my Associate some authorities on the issue of whether the 3 May 2018 order could be varied under the slip rule. She forwarded those authorities on 24 October 2019 and for ease of reference I have marked them Exhibit “C“.
On 13 November 2019 the husband sent an email to my Associate attaching “Written submissions in response to the Respondent’s submissions on Oct 24, 2019”. He copied the wife’s solicitor into the email and later on 13 November 2019 my Associate received an email from the wife’s counsel objecting to me receiving the submissions as they were filed without leave.
I have marked those submissions Exhibit “D” and I intend to have regard to them insofar as they relate to the relevance of the cases forwarded by the wife’s counsel but I otherwise intend to disregard them.
Background
The husband and wife married on … 1993 and separated in 2012. They have one child, [X], born on … 2002.
The husband filed an application for parenting orders in the Federal Circuit Court in Melbourne on 7 June 2013 and final orders were made by consent on 22 July 2013.
The parties were divorced on 8 July 2014 and on 6 July 2015 the husband filed an application for property orders in the Federal Circuit Court in Sydney.
On 11 April 2016 final property orders were made by consent.
When the orders were made the parties owned three real properties, two in Country C and one in Victoria. The orders provided for the one property in Country C (the B State Country C property) to be retained by the husband, the other property in Country C to be retained by the wife and the property at D Street Suburb A Victoria to be sold and the proceeds divided between the parties.
Relevantly for the purposes of this application Order 1 provided for the parties to list Suburb A for sale and Order 7 provided as follows:
From the sale of the property the proceeds of sale be disbursed as follows:
a) pay any outstanding mortgage;
b) to pay the selling commission of the agent or reasonable auction expenses and promotional charges of the auctioneer who effected the sale;
c) to reimburse the party/parties who pre-paid reasonable commercial advertising and auction expenses or other expenses pursuant to these orders;
d) to adjust municipal rates and water rates with the purchase in accordance with the relevant provisions of the contract;
e) to pay the solicitor who performs the conveyancing aspect of the sale his or her proper costs and reasonable expenses including the costs and expenses of any aborted sale process;
f) To pay 70% of the balance to the Wife’s solicitor on trust for the Wife and 30% of the balance to the Husband’s solicitor on trust for the Husband.
After the orders were made the wife took some preliminary steps toward marketing Suburb A but on 28 July 2016 the husband commenced property proceedings in Country C and on 19 September 2016 he filed an application in the Federal Circuit Court at Newcastle pursuant to s. 79A of the Family Law Act seeking to have the 11 April 2016 orders set aside.
On 27 October 2016 the wife filed a response seeking dismissal of the s. 79A application and also seeking machinery orders which would facilitate the sale of Suburb A. She sought an order that the husband pay her costs of and incidental to “this application” (i.e. the application contained in her response to the husband’s application for final orders) on an indemnity basis.
On 1 November 2016 the matter came before Judge Middleton. He adjourned it to 7 March 2017 “for hearing of threshold issue in relation to s.79A”.
The matter was subsequently adjourned to 29 June 2017 and on 29 June 2017 both parties were represented by counsel and some orders were made by consent.
The orders noted the husband’s complaint that the wife had failed to comply with the order to transfer her interest in the B State Country C property to him and orders were made to facilitate that transfer. An order was also made for the Suburb A property to be listed with E Real Estate, for F Solicitors to be appointed solicitors for the sale and for each party to do all things necessary to comply with Order 1-7 of the orders made on 11 April 2016.
The matters was otherwise stood over to 11 December 2017 and an order was made “Reserve each party’s costs.”
The husband was at this point represented but he left Australia on 12 September 2017 and on 27 September 2017 his solicitors filed a Notice of Intention to Withdraw, The Notice informed the husband that they had provided an email address and phone number for him which the other party and the court could use until he appointed another lawyer and informed him that the matter was next listed on 11 December 2017 at 9.30am.
The husband did not file a Notice of Address for Service and the wife’s solicitors and Judge’s chambers thereafter used the email address to serve documents on and to correspond with him.
On 7 December 2017 Judge Middleton’s chambers sent an email to the husband and to the wife’s solicitor informing them that due to unforeseen circumstances Judge Middleton was not sitting on 11 December 2017 and that the matter had been re-listed to Wednesday 13 December 2017 at 9.30am.
On 13 December 2017 the husband appeared by telephone and the wife’s solicitor Paul Gowran appeared for the wife. The court ordered that the Suburb A property be auctioned and that G Real Estate be substituted for E Real Estate as the agent.
An order was made that “the costs of and incidental of today are reserved” and the matter was adjourned to 1 May 2018 for further directions.
The 11 April 2016 orders contained an order pursuant to s. 106A of the Family Law Act permitting a Registrar of the Federal Circuit Court to sign documents if a party refused to do so and in March 2016 the wife’s solicitors submitted documents to the Registrar for signature alleging that the husband was refusing to sign them.
On 14 March 2018 the Registrar refused to sign the documents.
On 6 April 2018 the wife filed an application in a case seeking an order pursuant to s.106 A of the Family Law Act that the Registrar sign documents and “costs of and incidental to this Application on an indemnity basis.”
The Registrar refused to accept this application in a case for filing. In an email to the wife’s solicitor dated 10 April 2018 she pointed out that there was already an s.106A order and that the documents submitted by the wife had not been signed because of deficiencies with the documents which the Registrar pointed out in detail.
On 26 April 2018 the wife filed a further application in a case. This time the orders she sought were:
i.That this court appoint Ms Cabral to sign all deeds and documents necessary to sell the property at D Street, Suburb A Vic on behalf of the Respondent Mr Hogan in his stead.
ii.That this court appoint the Real Estate Agency, G Real Estate Suburb A, Vic, of Suburb A, Suburb A, VIC, to sign all Contracts on behalf of Ms Cabral and Mr Hogan on the day of the auction or any subsequent sale.
iii.Costs of and incidental to this Application on an indemnity basis.
This application in a case was accepted for filing and was given a return date of 1 May 2018 and it came before Judge Middleton that day. The husband did not appear and Ms Winfield of Counsel appeared for the wife.
Judge Middleton adjourned the matter to 3 May 2018 “for hearing of the Application in a Case.”
Later on 1 May 2018 the wife’s solicitor filed an Affidavit of Service in which he affirmed that he had served the application in a case and supporting affidavit on the husband by sending them to his email address on 26 and 27 April 2018. He noted that this was the address for service provided by the husband and he said that he had also advised the husband of the adjourned date by email.
On 3 May 2018 the husband did not appear. Mr Gowran appeared for the wife and the following orders were made:
(1)The respondent wife is appointed trustee for purpose of sale of the property at D Street, Suburb A VIC on behalf of the applicant and herself.
(2)G Real Estate, Suburb A of Suburb A, Suburb A VIC is appointed agent for the purpose of selling the property.
(3)The trustee is permitted to authorise the agent to sign any contract offered for the sale of the property on the day of auction or on any subsequent date.
(4)The applicant meet the costs of the respondent on an indemnity basis as agreed or assessed.
(5)The matter is adjourned to 9.30am on 8 August 2018 at Newcastle for a directions hearing.
It is clear from Order 1 and from the way in which the appearances are noted on the order that for the purposes of Order 4 “The Applicant” was the husband who was the applicant in substantive proceedings before the court and “the Respondent” was the wife.
The husband has since complained that he had no notice of the 3 May 2018 hearing but he does not have a valid basis to complain about the matter being dealt with in his absence. The wife’s solicitor sent the application in a case filed on 26 April 2018 and the supporting affidavit to him by email and also notified him of the adjourned date. The husband said that the emails did not come to his attention because they went to Junk in his email account but that is not the fault of the wife or her solicitors. The husband had placed himself in a position where his email address was the only address anyone could use serve him and the wife’s solicitor appropriately made use of that address.
The Suburb A property was sold on … 2018 and an amount of $190,146.95 was paid into the wife’s solicitor’s Trust Account. This was the entirety of the net proceeds of sale save for the deposit which was held by the agent.
On 4 June 2018 the wife’s solicitor sent to the husband by email a Bill of Costs covering the wife’s costs from 16 May 2016 to 16 May 2018 in the sum of $41,300.60. The bill was made up of solicitor’s fees of $30,709.60, counsel’s fees of $10,120.00 and postage of $474.00.
The covering email said:
We enclose herewith by way of service our Memorandum of Costs as per the Orders of His Honour Judge Middleton on 3 May 2018.[4]
[4] Husband’s affidavit filed 4 January 2019 Exhibit 6
The covering email did not inform the husband that the Suburb A property had been sold, did not ask him whether he agreed to the amount claimed for costs and did not suggest to him that if there was no response the wife’s solicitor would take his silence as agreement to the amount claimed and deduct the amount of $41,300.60 from his share of the money in trust.
On 8 August 2018 the substantive matter came before Judge Betts. The husband did not appear and the wife was represented by Mr Gowran. It was ordered that the husband’s s.79A application be dismissed, that husband pay the wife’s costs fixed in the amount of $330.00 and that all outstanding applications be otherwise dismissed.
On 13 November 2018 the husband returned to Australia.
In the affidavit he filed in support of his contravention application the husband said that he discovered in the first week of August 2018 that the Suburb A property had been sold because he happened to be on a website called realestate.com. Upon his return to Australia (and he did not explain why he did not do it earlier) he contacted the wife’s solicitors and inquired after his share of the sale proceeds. He also said he was given temporary access to the Commonwealth Courts portal at his request and found the orders of 3 May 2018 and 8 August 2018
There are gaps in the correspondence provided by the parties but at some point the wife’s solicitor must have flagged an intention to deduct $29,836.76 or thereabouts from the husband’s share of the money in trust pursuant to the 3 May 2018 order because on 3 December 2018 the husband sent the wife’s solicitors the following email:
Mr Gowran,
The application filed 26 April 2018 sought costs of the application filed that day.
The orders made in my absence on 3 May, 2018 did not order me to pay the costs of the entire proceedings.
The costs referred to in the Orders made refer to the costs sought in your application filed 26 April, 2018, rather than the costs of the entire proceedings. You sought costs of the Application filed 26 April, 2018, rather than costs of the entire proceedings.
As you are well aware, each of the parties have filed Consent Orders wherein each of the parties agreed to bear their own legal costs.
I request that you serve me a bill of costs of and incidental to the application filed 26 April, 2018.[5]
[5] Husband’s affidavit filed on 4 January 2019 Exhibit 6
The wife’s solicitors did not do as requested indeed it is unclear from the material before me if they responded to this email at all but on 11 December 2018 the husband received a cheque for $27,163.24.
On 18 December 2018 the husband wrote to the wife’s solicitors requesting that $29,836.76 which was the balance he believed was due to him be paid. That did not happen and on 4 January 2019 the husband filed a contravention application.
The husband also:
i.Lodged a complaint to the Office of the Legal Services Commissioner in New South Wales. Determination of that complaint is awaiting the outcome of these proceedings.
ii.On 8 March 2019 attempted to file an appeal against the order for costs made on 3 May 2018. The Notice of Appeal was rejected by the Appeal Registry because it was filed out of time.
The husband was advised that he could apply for an order extending time to file an appeal but he did not do so.
Issue 1 – the proper interpretation of the costs order made on 3 May 2018
The wife’s solicitor obtained a transcript of the proceedings on 3 May 2018 and it is attached to his affidavit filed on 12 June 2019. As is to be expected it does not contain Judge Middleton’s reasons and with the consent of the parties the audio was played in court on 13 September 2019.
Judge Middleton said nothing which suggested that he intended to make a costs order for the entirety of the proceedings which had commenced on 28 July 2016 and the order he pronounced does not say that either.
The wife’s counsel sought to rely on the fact that in the midst of making orders Judge Middleton said as follows:
And in circumstances where the respondent has been put to additional cost and expense as a result of the complete failure by the applicant to comply with the orders, as I said, made by consent, I’m satisfied that it is appropriate in the circumstances of the case for the applicant to meet the costs of the respondent on an indemnity basis as agreed or assessed.[6]
[6] Transcript p.2, Annexure A to the Affidavit of Paul Gowran filed 12 June 2019
I do not accept that these words assist the wife. They do not unambiguously suggest that Judge Middleton was making a costs order for the entirety of the proceedings.
Judge Middleton was not dealing with the substantive application on 3 May 2018; he adjourned that to another day. The only application before him was the application in a case in which costs had been sought of and incidental to that application. If he had made a more extensive costs order the husband would have a ground to apply to have it set aside on the basis that he had been denied procedural fairness. However I am comfortably satisfied that the only interpretation open is that on 3 May 2018 the wife was awarded the costs of and incidental to her application in a case filed on 26 April 2018.
Issue 2 – Whether the 3 May 2018 order should be varied pursuant to the slip rule
Pursuant to r.16.05(f) of the Federal Circuit Court Rules the court has the power to amend an order if it does not correctly express the intention of the court or if there is an error in the order arising from an accidental slip or omission.
The 3 May 2018 order is clear on its face and r.16.05 (f) cannot be used to turn the order into a completely different order simply because the wife has misinterpreted it and is consistent with the reasons for decision given by Judge Middleton.
The wife’s counsel also relied on r.16.05(c) which provides that the court may vary or set aside an order after it has been entered if it is an interlocutory order.
In oral submissions the wife’s counsel urged me to find that a costs order was always an interlocutory order. That does not sit comfortably with me but I do not need to consider it in depth because r.16.05 gives the court a discretion as to whether to vary an order and it would be a travesty of justice to use this head of power to amend Order 4 of the 3 May 2018 orders to turn it into an order which the husband had no notice might be made and which was not even explicitly sought on the day.
The wife’s application for the 3 May 2018 order to be varied pursuant to r.16.05 must be dismissed.
Issue 3 – the significance of the fact that the costs were neither agreed nor assessed
Order 4 of the orders made on 3 May 2018 provided for costs to be as agreed or assessed and neither has ever occurred.
During her cross-examination of the husband on 13 September 2019 the wife’s counsel suggested to him that he could have asked for an assessment when he received the Bill, her point being that because he did not do so he could not now complain about the amount which had been deducted from his share of the sale proceeds.
The wife’s counsel was apparently relying on the fact that at the end of the Bill which the wife’s solicitor sent to the husband there is a notice referring to s.309(1) of the Legal Profession Act which states that if the recipient wishes to dispute the bill they may:
…refer the dispute to the Legal Services Commissioner for mediation, at any time before applying (reminder cut off in the copy of the document available to me)
Apply to the Supreme Court of New South Wales, Costs Assessment Scheme, for an assessment
If an application for assessment is made, you may apply to have the costs agreement between (remainder cut off in the copy of the document supplied to me.)
However s.309 (1) or the equivalent of it which now applies relates to Disclosure of Costs to Clients.
S.74 of the Legal Profession Uniform Law Application Act 2014 deals with costs assessments and s.74(1) provides as follows:
(1) An application for assessment of the whole or any part of ordered costs may be made by--
(a) a person who has paid or is liable to pay those costs, or
(b) a person who has received or is entitled to receive those costs.
The husband is a legal practitioner. He ought to have been aware that the NSW Act applying to the legal profession would contain such a provision and he could have applied for a costs assessment pursuant to s.74(1). However so could the wife and in circumstances where the order provided for the husband to pay costs as agreed or assessed and where there had been no agreement it was incumbent on the wife to apply for an assessment of costs before an amount was retained by her solicitor and applied for her benefit without the husband’s agreement.
On this basis alone the wife’s solicitor had no right to retain on the wife’s behalf the sum of $29,836.76 from the husband’s share of the sale proceeds.
Issue 4 - whether the wife has contravened the 11 April 2016 order
S.112AB of the Family Law Act applies to the contravention of property orders and it provides as follows:
1A person shall be taken for the purposes of this Part to have contravened an order under this Act if, and only if:
a) where the person is bound by the order—he or she has:
(i)intentionally failed to comply with the order; or
(ii)made no reasonable attempt to comply with the order; or
b) in any other case—he or she has:
(i)intentionally prevented compliance with the order by a person who is bound by it; or
(ii)aided or abetted a contravention of the order by a person who is bound by it.
The wife’s primary defence to the contravention application was that the order made on 3 May 2018 justified the amount of $29,836.76 being retained by her solicitor from the husband’s share of the sale proceeds.
This is not correct but it does not automatically follow that she has contravened the order.
In the affidavit she filed on 11 September 2019 the wife also asserted that the 11 April 2016 orders provided for net the proceeds of the sale of the property to be disbursed as to 70% to the wife and 30% to the husband. She said that this did not impose any obligation on her to pay anything to the husband’s solicitor or to the husband and therefore she had not contravened the order.
I do not accept that submission.
Notwithstanding the way in which Order 7(f) is worded the orders as a whole clearly place on obligation on each party to ensure that the net proceeds of sale are distributed in accordance with Order 7 and that they each receive no more than the share of the sale proceeds to which they are entitled.
The husband created a situation where it was impossible for any of the net proceeds of sale to be paid to his solicitors as required by Order 7(f) and the fact that the wife authorised payment of the husband’s share of the money as well as her own to her solicitor’s Trust Account is understandable. It may have been the only option available to her as something had to be done with the sale proceeds.
However that did not justify the wife retaining $29,836.76 to which she was not entitled and her solicitor could only have withheld this amount from the husband on her instructions.
I am satisfied on the balance of probabilities that the wife has contravened Order 7 (f) of the orders made on 11 April 2016.
Sometimes in contravention matters the respondent claims that they had a reasonable excuse for contravening an order and if they can establish that they may be excused and no penalty may follow. I intend to consider this out of an abundance of caution even though the wife did not rely on reasonable excuse.
S.112AC of the Family Law Act deals with reasonable excuse in the contexts of a property contravention and it provides as follows:
(1) The circumstances in which a person may be taken to have had, for the purposes of this Part, a reasonable excuse for contravening an order under this Act include, but are not limited to, the circumstances set out in subsection (2).
(2) A person (in this subsection called the respondent) shall be taken to have had a reasonable excuse for contravening an order under this Act if:
(a) the respondent contravened the order because, or substantially because, he or she did not, at the time of the contravention, understand the obligations imposed by the order on the person who was bound by it; and
(b) the court is satisfied that the respondent ought to be excused in respect of the contravention.
As can be seen the matters which may provide a reasonable excuse are not limited to the matters in s. 112AC (2) but the wife did not claim that her solicitor had acted contrary to her instructions. Her response to the contravention application was to say that she was not in breach of the order because withholding $29,836.76 and applying it to payment of her legal costs was permitted by the 3 May 2018 order or alternatively that the order did not place a personal responsibility on her to ensure that the husband received 30% of the sale proceeds.
The wife could only have relied on s.112AC(2) but the onus would have been on her to establish on the balance of probabilities that she had a reasonable excuse and to satisfy the court that she should be excused and I could not have been satisfied that she should be excused.
The wife has had the opportunity since the contravention application was filed to reconsider her position about the meaning of the 3 May 2018 order and to reflect on the fact that costs were never agreed or assessed. She has failed to change her position and make financial recompense to the husband and it would not have been appropriate to excuse her contravention of the order on the basis that at the time of the contravention she did not understand the obligation imposed on her.
The consequences of finding that the wife has contravened the 11 May 2016 order
S.112AD of the Family Law Act sets out the sanctions which the court can impose for failure to comply with orders and it provides as follows:
(2) The sanctions that are available to be imposed by the court are:
to require the person to enter into a bond in accordance with section 112AF; or
to impose a sentence by order on the person, or make an order directed to the person, in accordance with section 112AG; or
to fine the person not more than 60 penalty units; or
subject to subsection (2A), to impose a sentence of imprisonment on the person in accordance with section 112AE.
(2A) The court must not impose a sentence of imprisonment on the person under paragraph (2)(d) in respect of a contravention of a maintenance order unless the court is satisfied that the contravention was intentional or fraudulent.
(3) An order under subsection (1) may be expressed to take effect immediately, or at the end of a specified period or on the occurrence of a specified event.
(4) Where a court makes an order under subsection (1), the court may make such other orders as the court considers necessary to ensure compliance with the order that was contravened.
I intend to adjourn the matter to a future date to hear submissions about penalty because in my view careful consideration should be given to s.112AD (4). The decision which the parties make about this will have an impact on the overall outcome.
It is important at this juncture to note that the husband’s contravention application complained only about how the money paid into wife’s solicitor’s Trust Account had been dealt with. The settlement statement makes clear that at the time of settlement the agent was also holding $58,500.00. The agent’s commission was 2.5% and something like $45,000.00 should have been available from the deposit to distribute to the parties.
The wife’s solicitor sent the husband a Bill for $41,300.60 and only $29,836.76 was withheld from the money in trust. Rough arithmetic suggests that the wife may have retained the whole of the deposit rather than 70% of it to make up the costs of $41,300.60.
The husband could have filed an enforcement application instead of a contravention application and he could still do so, both in respect of the $29,836.76 and in respect of 30% of the balance of the deposit if it has been wrongly withheld from him.
However that would cause more stress and cost for the parties and I would strongly urge them to attempt between now and the next mention date to reach agreement about the amount the wife is entitled to pursuant to the 3 May 2018 order and then reach agreement about how the husband is to be paid the balance of the sale proceeds to which he is entitled.
I intend to adjourn the matter to 9.30am on 28 January 2020 for submissions as to penalty and the operation of s.112AD (4).
Otherwise the orders will be as set out at the beginning of this judgment.
I certify that the preceding ninety nine (99) paragraphs are a true copy of the reasons for judgment of Judge Terry
D/Associate:
Date: 10 January 2020
Key Legal Topics
Areas of Law
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Civil Procedure
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Family Law
Legal Concepts
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Costs
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Jurisdiction
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Penalty
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Remedies
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