Kallen & Alvin
[2013] FamCAFC 212
•20 December 2013
FAMILY COURT OF AUSTRALIA
| KALLEN & ALVIN & ANOR | [2013] FamCAFC 212 |
| FAMILY LAW - APPEAL – STAY OF ORDERS – Where the wife appeals against the refusal by the trial judge to stay property orders – Whether refusal of stay would render successful appeal nugatory - Where no contention that the trial judge made an error of law – Where no error demonstrated in the exercise of discretion by trial judge – appeal dismissed. FAMILY LAW - APPEAL – FURTHER EVIDENCE – Where the wife seeks to adduce further evidence – Where the respondents oppose application – Where the wife asserts that further evidence establishes that subject property is now substantially below value than at trial – Where evidence inadmissible – application refused. FAMILY LAW - APPEAL – COSTS – Where respondents sought wife pay their costs of the appeal and application to adduce further evidence – Where wife has been wholly unsuccessful – Where order of costs justified pursuant to Family Law Act 1975 (Cth) s 117(2) – Where no justification for an order for costs between the appellant and intervener - Wife pay husband’s costs – No order for costs between wife and intervener. |
| Family Law Act 1975 (Cth) |
| CDJ v VAJ (1998) 197 CLR 172 House v The King (1937) 55 CLR 499 |
| APPELLANT: | Ms Kallen |
| RESPONDENT: | Mr Alvin |
| INTERVENER: | Mr DD (as Trustee for the DD Unit Trust trading as B Law Firm) |
| FILE NUMBER: | BRC 11120 of 2009 |
| APPEAL NUMBER: | NA 67 of 2013 |
| DATE DELIVERED: | 20 December 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May, Strickland & Ainslie-Wallace JJ |
| HEARING DATE: | 27 November 2013 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 24 October 2013 |
| LOWER COURT MNC: | [2013] FamCA 880 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Galloway |
| SOLICITOR FOR THE APPELLANT: | Johnsons Solicitors & Attorneys |
| COUNSEL FOR THE RESPONDENT: | Mr Page QC |
| SOLICITOR FOR THE RESPONDENT: | Michelle Porcheron Lawyers |
| SOLICITOR FOR THE INTERVENER: | B Law Firm |
Orders
The appellant wife be granted leave to appeal.
The application to expedite the hearing of the appeal be allowed.
The application to adduce further evidence be dismissed.
The appeal be dismissed.
The appellant wife pay the husband’s costs of the appeal and of the application in an appeal, to be assessed failing agreement.
There be no order as to the costs of the intervener.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kallen & Alvin and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 67 of 2013
File Number: BRC 11120 of 2009
| Ms Kallen |
Appellant
And
| Mr Alvin |
Respondent
And
| Mr DD (as Trustee for the DD Unit Trust trading as B Law Firm) |
Intervener
REASONS FOR JUDGMENT
This is an appeal from the refusal of Forrest J to stay orders made between the appellant wife and respondent husband in relation to property settlement until the determination of an appeal.
On 30 August 2013 the trial judge ordered, inter alia, that the wife pay to the husband $708,971.49 by way of property settlement (“the payment order”). The wife was given 60 days to make the payment. The making of the order followed a three day trial in February 2012 and delivery of reasons for judgment in the property proceedings on 26 July 2013. The parties were given an opportunity to agree to the terms of the orders, and reached consent about some but not all matters. The trial judge heard argument from the parties again on 26 August 2013, and then made the payment and other property settlement orders on 30 August 2013.
The wife filed an appeal against the payment order on 26 September 2013 (NA 55 of 2013, “the substantive appeal”), and subsequently filed on 18 October 2013 an application for a stay of the order pending the outcome of the appeal.
On 24 October 2013 the trial judge heard the stay application and made orders dismissing the wife’s application. An application for leave to appeal against that order was filed by the wife on 11 November 2013 (NA 67 of 2013 “the stay appeal”). The notice of appeal (subject to leave being granted) asks that paragraph 1 of the order of 30 August 2013 be stayed.
Upon the filing of an application for an expedited hearing, in the absence of any objection from the respondents, on 25 November 2013 the Regional Appeals Registrar listed the hearing of the application for leave to appeal and if leave is granted, the stay appeal on an urgent basis in the Brisbane Full Court sittings on 27 November 2013.
It is relevant to note that included in the trial judge’s orders made on 30 August 2013 was provision for Mr DD (intervener in the first instance and now in the appeal proceedings) to be paid the sum of $55,380.55 (plus interest) in full and final settlement of the indebtedness of the husband to that firm. That debt arose by virtue of unpaid legal fees incurred by the husband prior to the trial, and was the subject of a judgment against the husband in the Magistrates Court. By 29 October 2013 the amount of the debt had risen to $67,358.70.
The orders made on 24 October 2013 dismissing the wife’s application for a stay also provided that the order was made, “upon the undertaking of Mr [DD], solicitor, that he will abide by any order of the Full Court of this Honourable Court on the wife’s appeal filed on 26 September 2013”.
Our consideration of the appellate proceedings between the parties in this instance is limited to the issue of whether the trial judge erred in deciding to dismiss the wife’s application for a stay of the payment order. The substantive appeal against the payment order itself will be the subject of a separate hearing and determination, not before April 2014.
Incidental to the stay appeal is an application in an appeal from the wife, to adduce further evidence, filed on 25 November 2013. Together with the application, two affidavits of the wife were filed.
Leave to appeal
The wife requires leave to appeal from the refusal of the stay. In support of leave being granted, the notice of appeal states the following:
1.Serious injustice will be caused to the Appellant if a Stay is not granted because in order to meet the payment required to be made pursuant to paragraph 1 of the order made 30 August 2013, the wife has placed her home and an investment property on the market for sale and if sold, will likely be sold for a sum significantly less than the market value at the time of trial and upon the sale the Appellant will incur sale costs and capital gains tax.
2.Any prejudice caused to the Respondent by being denied the payment in the time required under the said Order, should the appeal fail, could be met by the payment of interest as proposed by the wife at the Hearing of the Application for Stay.
The intervener neither consented to nor opposed the granting of leave to appeal. We could reasonably infer that the husband took the same position. As the substantive order provided for moneys to be paid within a certain time and the failure to pay such money will affect the wife’s property holding and other rights, leave should be granted.
The trial judge’s reasons
In the stay application, the trial judge had before him two affidavits of the wife, one affidavit from Mr DD for the intervener, and written outlines of argument filed by each party on the day of the hearing.
The wife sought a stay of the payment order on the primary basis that absent a stay, a successful appeal would be rendered nugatory, or likely nugatory. She had made no form of payment to the husband when she filed the stay application and as at the date of the appeal hearing had still made no payment.
The wife’s counsel asserted that other than delay, there was no identifiable prejudice to the respondents by a stay. The submissions for the wife emphasised a range of errors to be argued on appeal.
The wife’s grounds of appeal against the payment order were considered thoughtfully and in detail by his Honour at [13] to [29] of the reasons. The trial judge considered at [27] that the wife had an arguable but not strong case on a particular limb of ground one, however was not satisfied that there was a “great deal of strength” in relation to ground two (at [29]).
The trial judge considered that the wife’s argument about the appeal being rendered nugatory if a stay was not granted, rather than the merits of the appeal, was the most significant factor in respect of the determination of the stay application (at [30]). This had been accepted by counsel for the wife and was also the main argument before us in the appeal.
The basis for the nugatory argument was that there was a risk the husband would not be able to, or would be unlikely to repay to the wife the sum of $708,971.49 should the appeal succeed. It had been submitted for the wife that if she was entirely successful on the appeal as it had been framed, she would only have to pay the husband $40,000, not $708,971.49 (reasons at [34]).
As a result of the property settlement orders ([15] of the orders of 30 August 2013), the husband will retain a residential property at Suburb G, free of encumbrance with an agreed value of $595,000 in addition to the cash payment from the wife and an interest in a commercial property.
Taking the merits of the wife’s appeal at the highest, his Honour then turned to consider, correctly in our view, the real question of whether there was a risk that $600,000 ($708,000 minus the $67,000 owed to the intervener and the $40,000 which would still be payable to the husband, according to the wife) was at risk of being lost if the stay was not granted (reasons [34] to [37]).
His Honour ultimately concluded that the presence of real property interests which could be used to recover the funds in the event that the wife was wholly successful in her appeal (the husband retained net property interests valued at $1,562,000), and his Honour’s consideration of the prospects of success overall on the appeal as not very strong at all, meant the suggestion that the appeal would be rendered nugatory if no stay was imposed was not made out (reasons [38] to [41]).
As to the wife’s suggestion that she would be in a poorer financial position if required to comply with the order – no evidence was put before the court by the wife to support this (reasons [42] to [44]).
Grounds of appeal
The notice of appeal asserts that having found that the wife had “an arguable case in relation to at least part of the grounds” of appeal, the trial judge erred in refusing the stay in circumstances where:
(a)The Sale of the Appellant’s home and investment property would likely occur at a price significantly below the market value of the property as assessed at the date of trial;
(b)Upon sale the appellant will incur sale costs and capital gains tax which were not factors taken into account at trial;
(c)The preceding factors may render a successful appeal nugatory or make it impossible to restore the situation presently existing;
(d)Any prejudice to the respondent could be addressed by payment of interest on the money due to him under the Order from the date the Order as was offered by the wife at the hearing of the Application; and
(e)The balance of convenience favoured the granting of the Stay.
(typographical error corrected)
As to the substantive appeal against the payment order, two grounds of appeal are asserted in the notice of appeal:
1.In failing to deduct the estimated capital gains tax and realisation costs for the properties known as ‘[Building O]’ and ‘[Building P]’ from the value of those properties or in the alternative in failing to make an adjustment pursuant to section 75(2)(o) in the wife’s favour by reason of the disparity of $996,474 in relation to such costs given the property each party was to retain pursuant to the Order, the primary Judge misapplied the principles enunciated in Rosati & Rosati (1998) FLC 92-804 and thereby fell into error.
2.The determination of the ‘notional percentage division of the pool’ in the proportion [72.5%] by the wife and 27.5% by the husband was plainly wrong and manifestly unjust to the wife and accordingly the exercise of discretion has miscarried.
(typographical error corrected)
The essence of the wife’s substantive appeal is therefore that the trial judge erred by not taking account of capital gains tax (“CGT”) and realisation costs on the sale of properties (which the wife was not ordered to sell), and/or by making orders which were not just and equitable.
At trial there was no dispute about the property of the parties to the marriage. The value of the pool was agreed, having been valued by a single expert. There was also expert evidence about the realisation costs and the estimated CGT on the sale of an office building “Building O” and the Building P. The relevant parts of the substantive reasons of the trial judge are as follows:
139.I have already discussed the expert evidence of the calculation of the estimated Capital Gains Tax liability and realisation costs in respect of the [Building O] building and the [Building P] building in the event that those buildings were to be sold. As I have already observed, Mr Cooper for the wife submitted that I should deduct those amounts from the gross value of the assets to determine the value of the property interests of the parties in this case. Mr Page for the husband submitted to the contrary, relying principally on the fact that neither party led any evidence about their intentions with respect to the buildings in the future if they acquire the interests that they seek to acquire. Mr Page submitted that, consequently, I could not find it likely that any of the buildings will be sold in the foreseeable future such as to make it appropriate to take estimated CGT liability and realisation costs into account.
140.At this point in time, I agree with Mr Page. There is no evidence before the Court that either building will be sold in the near future. Furthermore, there is no evidence before the Court that causes me to be satisfied that it is likely that either building will be required to be sold in the near future as a consequence of this decision. Accordingly, I am not convinced that I must take the estimated liability for CGT and realisation costs in respect of the parties’ interests in these two buildings into account at this point in my determination of these proceedings.
The trial judge found that the value of the pool was $8,260,353 and should be divided as to 72.5 per cent to the wife and 27.5 per cent to the husband.
Although the wife made some submissions about his Honour’s assessment of the merits of her appeal as relevant to the stay decision, we need not consider the merits further other than to note that to succeed the wife would need to demonstrate that his Honour erred in the exercise of his discretion, which is to be determined in accordance with the well settled principles set out in House v The King (1937) 55 CLR 499 at 505.
It is clear that the central issue before his Honour and before us is whether or not the refusal of the stay would render a successful appeal nugatory.
Application to adduce further evidence
As can be seen from the grounds, reinforced by the submissions, it is the wife’s position that she is presently unable to pay the judgment sum but resists selling property at a potential loss in order to pay that sum.
According to the written submissions, the wife seeks to adduce evidence that: the values of the properties the subject of the orders are now likely to be “substantially below the value of the properties at trial” (at [6]), and that the wife’s application for finance to meet enforcement proceedings filed by the respondent has “caused her bankers to require a revaluation of property owned by the parties wherein it is expected…that the valuation will be significantly below that which was given in evidence at trial” (at [7]).
In support of the application the wife filed two affidavits sworn by her. The wife deposed to enforcement proceedings having been taken by the respondent husband and the intervener solicitor since the making of the payment order on 30 August 2013. She stated at [2(b)] she has continued to try and sell the properties however has received “no further offers”. She stated at [2(c)] her belief that if a sale eventuates it will be “substantially below the value of the properties at trial” and “further, if as a result of enforcement proceedings, a trustee is appointed and forced sales result, I believe the likely realisation will be considerably less than would otherwise be achieved in the normal sale process”.
The wife explained that since the refusal of the stay she had made a formal application for finance to Westpac Bank, which has required a revaluation of the Building O property. She expects this valuation to be substantially less than the value at trial, and has instructed Messrs Taylor Byrne Valuers to prepare an updated valuation for mortgage security purposes. The wife stated at [2(d)] that she will be “seriously prejudiced if forced to proceed with forced sale of property and/or the application for finance with Westpac”.
The wife annexed to her affidavit a range of correspondence between the parties’ lawyers in relation to the stay appeal and the wife’s obligations to comply with the orders of 30 August 2013. There is no current documentary evidence from property valuers or the Westpac Bank to substantiate her claims.
The application is opposed by both the husband and the intervener. The husband suggests that the application is an attempt to “seek a variation of the orders that are sought based on the fact that an unconscionable delay in the delivery of the reasons could not have led the trial judge to take into account variations in the values of the property, either upward or downward, that might occur between the evidence at trial and the delivery of reasons.” (written submissions at [16]). The husband’s counsel also submitted that there was no existing application seeking to set aside or vary the orders based on such factors.
The intervener opposes the application on a range of bases including timing and the nature of the evidence.
In oral argument Mr Page QC for the respondent husband correctly submitted that the evidence asserting decreased values is not admissible. There was no evidence before us which would properly allow a conclusion that sale of the property in the short term would be at a price below that as contained in the expert evidence before the trial judge.
We also regard the following at [5] from the written submissions on behalf of the respondent husband as significant:
The Court record will show that on 1 August 2013 the Appellant’s lawyers sought an adjournment for the purposes of settling the form of the orders due to the illness of the Appellant’s solicitor. The same records indicate that on 12 August 2013 the Appellant’s lawyers wrote to the Court seeking that adjournment and indicating that it was the proposal of the Appellant to adduce further evidence relating to property issues occurring between the trial and the delivery of reasons. As a result the parties appeared before the trial Judge on 16 August 2013 when it was made clear to the Court that an adjournment was sought by the Appellant to obtain further evidence in relation to the valuation of properties that formed part of the asset pool of the parties. An adjournment was granted. None of the evidence that was foreshadowed was produced.
It was not suggested on the part of counsel for the wife that this is not correct. It is also of interest to observe that at the hearing before the trial judge on 26 August 2013 when submissions were made about the form of orders, counsel for the wife asked for four months to pay because she would need to sell the property to pay the cash sum. In his reasons of 30 August 2013 his Honour said of that as follows:
10.Clearly, the wife and her legal representatives prudently would have anticipated the prospect that the Court might order a larger cash figure to be paid to the husband, particularly having regard to the husband’s case. I can only conclude that they must have considered whether evidence should be adduced about how the wife might meet any such obligation in that circumstance. As I have observed, no such evidence was before the Court.
11.I cannot, in my view, now make a decision about what is a reasonable amount of time within which to require the wife to pay the husband the cash amount determined appropriate based on statements made by counsel for the wife from the bar table that are not supported by the evidence adduced by the wife at trial.
12.In the circumstances, I consider the 60 day period which the husband is clearly prepared to give the wife to pay him the cash amount of $708,971.49 to be a reasonable time frame within which the wife should be required to pay the husband pursuant to the Orders. After that period, interest will accrue, pursuant to the Act and Rules, on any part of the amount still outstanding.
As to the question of CGT, his Honour said:
13.Counsel for the wife also told the Court that he had instructions to submit to the Court that, as the wife would now be required to sell real properties to pay the cash amount determined to be appropriate and just and equitable to be paid by her to the husband, and that the sale of those real properties would give rise to liability for capital gains tax that she would now have to bear solely, it is appropriate [and] just and equitable to now take that liability into account in the framing of the Orders that the Court will make.
14.With respect to counsel for the wife who, I observe, did not appear for the wife at the trial of the matter, I refer back to paragraph 22 of my reasons for judgment published on 26 July 2013 and repeat that the wife’s solicitor who appeared for her at the trial conceded that there was absolutely no evidence before the Court as to the calculation of potential capital gains tax liability from a person properly qualified to give it. Accordingly, even if I had determined that potential capital gains tax liability should somehow be taken into account in the determination of the appropriate, just and equitable property adjustment orders, having regard to the general principles set out by the Full Court in Rosati (1998) 23 Fam LR 288, I could not have included any certain amount in my determination of the value of the relevant real property.
15.Again, as I have already observed in these reasons, there was absolutely no evidence adduced at trial for the wife of any imperative or any intention or desire on her part to sell any of the real properties, all of which she sought to retain at the trial. As already noted, the absence of such evidence must be viewed in the context of the wife and her legal representatives facing the husband’s case that sought orders for the wife to pay him a far greater cash sum than that which she sought to pay him. In these circumstances, having already delivered my reasons for judgment which include my findings as to the value of the parties’ interests in property, I do not consider that I can now somehow determine that an unknown potential capital gains tax liability be taken into account.
16.Whilst it is for each and every litigant before this Court, in conjunction with any legal representatives they may have, to determine how they run their case, the outcome in this case, as it is now presented by counsel for the wife, clearly shows there is much to be said for adducing at trial admissible evidence as to potential capital gains tax liability, where such potential liability exists, irrespective of the position the particular litigant seeks to maintain at the end of the proceedings.
It was the wife’s proposal at trial that the husband retain some property and that she not be ordered to pay him an amount of money of any significance. It seems, by reference to the reasons of the trial judge in the stay application, that the wife’s contention in the substantive appeal will be that she should pay the husband $40,000 and that a property be transferred to him.
The application to adduce further evidence should be refused. There is an absence of admissible evidence in relation to the wife’s contentions. The proposed affidavits do not accord with the well known purposes of receiving further evidence in appeals, as described by the High Court in CDJ v VAJ (1998) 197 CLR 172 (at [109]):
One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
Such evidence, if put into admissible form, may be allowed in the substantive appeal. The affidavits of the wife should not be admitted in the stay appeal.
Principles
It was not contended that the trial judge incorrectly stated the correct legal principles relating to the exercise of discretion to grant or refuse a stay of orders.
The principles guiding appellate intervention in exercises of discretion were set out by the High Court in House v The King (at 504-505):
… It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the course of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
Conclusions
It could not be said that the assessment by the trial judge at first instance of the merits of the appeal is plainly wrong. The more important consideration for his Honour was the question of whether the appeal might be rendered nugatory.
The assessment by the trial judge, based on the parties’ current financial circumstances, correctly demonstrated that should the appeal be allowed, orders could be made restoring to the wife money and property commensurate with her claim.
The third argument of the wife that the failure to grant a stay might cause a “fire sale” of the properties fails for a number of reasons, including the absence of evidence to support such an assertion.
The appeal must be dismissed. The appellant has failed to demonstrate error in the exercise of the discretion by the trial judge.
Costs
Both the respondent husband and the intervener sought that the wife pay their costs of the appeal and the application in an appeal to adduce further evidence.
As between the appellant wife and respondent husband we consider that the financial circumstances of the parties and that the fact the wife has been wholly unsuccessful justify an order for costs pursuant to s 117(2). We will order that the wife pay the husband’s costs of the appeal and of the application in an appeal, to be assessed failing agreement.
As between the wife and the intervener however, we do not consider there are factors justifying an order for costs against the wife.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 20 December 2013.
Associate:
Date: 20 December 2013
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