Kenyon and Hampton
[2017] FCCA 2730
•13 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| KENYON & HAMPTON | [2017] FCCA 2730 |
| Catchwords: FAMILY LAW – Refusal to set aside consent orders under section 79A(1)(c). |
| Legislation: Family Law Act 1975, s.79A(1)(c) |
| Blackwell & Scott [2017] FamCAFC 77 Monticone & Monticone [1989] FamCA 92 |
| Applicant: | MS KENYON |
| Respondent: | MR HAMPTON |
| File Number: | SYC 860 of 2014 |
| Judgment of: | Judge Henderson |
| Hearing date: | 13 October 2017 |
| Date of Last Submission: | 13 October 2017 |
| Delivered at: | Sydney |
| Delivered on: | 13 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Gardiner of Counsel |
| Counsel for the Respondent: | Mr Jones of Counsel |
ORDERS
The wife’s application to set aside the consent orders made 26 January 2016 is dismissed
Reserve the issue of costs of this application and the wife’s enforcement application.
IT IS NOTED that publication of this judgment under the pseudonym Kenyon & Hampton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 860 of 2014
| MS KENYON |
Applicant
And
| MR HAMPTON |
Respondent
REASONS FOR JUDGMENT
The matter of Kenyon & Hampton is an application by the wife seeking to set aside orders entered into by consent on 20 January 2016, due to, the wife says, the husband’s default in complying strictly with the terms of those orders. That application was resisted by the husband.
Mr Gardiner of counsel represented the wife and Mr Jones of counsel represented the husband.
The material I read for the Wife was;
a.affidavit and financial statement filed 18 September 2017
b.case outline
c.initiating application filed 4 July 2017 and an application in a case seeking enforcement of orders filed 12 April 2017.
d.The wife tendered one exhibit. Her memorandum of costs, which caused a sharp intake of breath. Her costs for pursuing the default application against her husband is $78,933, for pursuing her 79A application $38,966.
The material I read for the Husband was;
a.An affidavit, financial statement and response filed 18 September 2017
b.Exhibit 1- exhibits to his affidavit
c.Exhibit 2 - the Husband’s memo of costs which are to date $61,652.
The total available to the parties if the wife is successful is the proceeds of sale of properties the husband owned in Property A1 & A2, held on trust and amounting to $225,541. The parties have spent almost all of the monies held in trust on legal fees. That is a travesty.
The wife’s application that I set aside these orders is made pursuant to section 79A(1)(c) of the Family Law Act 1975. Her application was doomed to failure for the following reasons;
Section 79A(1)(c) is as follows:
79A(1) Where, on application by a person affected by an order made by a Court under section 79 in property proceedings, the Court is satisfied that:
c) the person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order.
The first test is has the husband defaulted in carrying out an obligation imposed by the order? The husband admitted he has, and it is clear he has. The orders obligated him to, by July 2016, discharge his wife’s obligation under the mortgage over the properties in Property A1 & A2, by obtaining a discharge of her guarantee from the (omitted) Bank. He failed to do that by that time.
The husband only complied with that order when he sold the properties in September 2017 and discharged the mortgages. He defaulted in carrying out his obligation for some 15 months. Therefore, the first limb of section 79A (1) (c) has been made out by the wife.
The wife here bears the onus of proof. The law going back in time to decisions, such as Monticone & Monticone [1989] FLC 92 and more recently, and relevantly, the decision of Blackwell & Scott [2017] FamCAFC 77 which was delivered on 28 April 2017 make that abundantly clear.
As I read the section, it is not enough to establish a mere default as a ground for setting aside an order. That is only one part of the onus. Looking at the above decisions and a logical reading of the section in question, there is a further step. The wife must also satisfy me that in the circumstances that have arisen as a result of that default, it is just and equitable that I vary the orders.
The wife says this:
We entered into consent orders, which were to be completed by July 2016. They were entered into following a conciliation conference on January 2016.
I note the wife has been represented throughout these proceedings and that the husband was not represented at the time the orders were entered into. The orders provided relevantly that the husband would obtain, by way of a re-finance, a discharge of the wife’s obligation as a guarantor of the properties at Property A1 & A2. Those properties having been purchased by the husband well prior to the commencement of their relationship.
No money was to change hands. No percentage division was referred to in those orders. There are no notations as to what the intention of the parties was in entering into the orders. They simply say:
1. The husband will refinance the loans and mortgages pertaining to Property A1 & A2 on or before 20 July 2016.
2. The husband will procure an instrument in writing from the (omitted) Bank to state that the guarantee provided by the wife to the (omitted) Bank has been extinguished and will provide that instrument to the wife on or before 20 July 2016.
Otherwise the orders provided that the parties kept whatever they had at that time in their name.
The wife’s evidence was that at the time these orders were entered into, there were in existence valuations of the properties accepted by each of them. That the then value of the mortgages was greater than the value of the properties and that the parties agreed and believed they were in a negative asset position in respect of the properties.
The wife said in cross-examination she was most desirous of having her name taken off as guarantee and that she was most concerned about the negative net position and their respective debt situation.
These concerns were what impelled her to enter into the orders. Namely that the husband would bear any deficit in mortgages over property value, that he would be the one responsible to pay all outgoings in respect of the properties including the mortgages and that she would be clear of these obligations. This is what has occurred albeit 15 months later than anticipated.
The husband failed to comply with his obligation by the specified time and the wife quite properly made application to enforce the orders. She did so by way of a response dated 4 April 2017, supported by an affidavit.
The wife’s application in a case sought orders that;
a.The husband give her vacant possession of the land and;
b.That she be appointed trustee for sale and that the properties were to be vested in her and;
c.Each party was entitled to purchase the properties should they want to do so and;
d.That upon sale there be a discharge of the mortgages and;
e.The respondent pay the costs of sale and that after the sale any balance be then paid to the husband.
The enforcement summons came before me in June 2107 and the husband appeared by telephone. Unbeknown to the Court and most particularly, the wife, the husband was at that very time negotiating to sell the properties.
The husband failed to inform the Court of these developments. When the sale of, and the profits from the sale, became known to the wife sometime in late June/July, an application was brought by her to restrain the disposition of the proceeds of sale. I made injunctive orders on 13 July 2017, namely, that the husband sign and execute all documents to cause the proceeds of sale to be held in an interest bearing account pending further order. The basis of the injunctive orders made was that the wife had filed an application seeking to set the orders aside under section 79A.
What has transpired is that, in April 2017, the wife sought enforcement of the orders to have her name removed from the mortgages by way of appointing her trustee to sell the properties. When it became apparent that the properties had sold and that there was a surplus from the sale in excess of $200,000, she then brought an application under 79A to set aside the orders she had previously sought to enforce some 3 months earlier.
This conduct is possibly what is colloquially known as a second bite of the cherry and is impermissible under the law, unless the wife has discharged her onus and has satisfied me that in the circumstances that have arisen as a result of the default, it is just and equitable to vary the order.
The cases that have been referred to of Monticone & Monticone and Blackwell & Scott are authorities binding on me. They are authorities of the Full Court, and I accept the reasoning and their Honour’s dissertation in those matters. However, both in Monticone & Monticone and in Blackwell & Scott, the consent orders provided for a payment of money to a wife. The consent orders provided, within their terms, the percentage division the parties intended to effect of their matrimonial property in perfecting the orders. In Blackwell & Scott, the division was an equal one. In Monticone & Monticone, it was a lesser amount, but still known and quantifiable.
In Blackwell & Scott, the husband defaulted in paying the wife a cash payment of $130,000 within a specific time frame. At the time the orders were made, this reflected an equal division of the property. By the time he was ready or able to pay, some 13 months had elapsed and the property value had increased. The wife brought a 79A application, saying, that in the circumstances that had arisen as a result of the default by the husband, in carrying out his obligations under the consent orders, she would no longer receive an equal share if he were to only pay her $130,000.
Thus, a payment to her of $130,000 would not achieve the intention of the consent orders, which had been to effect an equal division. This was the circumstance that arisen by virtue of his default. That as a payment of $130,000 now would not achieve an equal division of property it was just and equitable the order be set aside.
There was a clear nexus established by the wife between the husband’s default and the wife’s application. A clear nexus between the husband’s default and the circumstance that had arisen, namely, no longer would the consent orders, if perfected 13 months later, have achieved the stated intention in the orders of an equal division of the property.
Similarly, in the matter of Monticone & Monticone, the husband had paid some two thirds or thereabouts of moneys owing to the wife. Again, the property had increased in value and again, the intention of the orders, namely, a percentage division to the wife, would not have been affected had he been allowed to only pay the sum then owing a alter point in time than that contemplated by the orders .
These two matters are far from the facts in this case. The facts in this case are the husband was to have the wife removed as a guarantor from the mortgages. There was no amount of money reflecting a percentage division to be paid to the wife or nay amount of money to be paid. The fact that he defaulted in carrying out his obligation for 15 months has not resulted in a fact or circumstance that has now made the then intention of the parties at the time of entering into the consent orders no longer viable or able to be achieved and thus satisfy me it would be just and equitable to set the orders aside.
The intention of the parties at the time the consent orders were entered into has been perfected. The wife is no longer a guarantor on mortgages relevant to those properties because they have been sold.
I see no causal link between the husband’s default and a fact or circumstance that has arisen, namely, the husband has received a windfall upon sale that has impacted upon the intention of the parties in entering into the consent orders. I see no fact or circumstance that would enliven my discretion to set the orders aside under section 79(A)(1)( c ) .
I accept that the husband has received a windfall from the sale. He would have received that windfall if he had carried out the original orders perfectly. Any windfall or deficit was to be his and his alone when one reads the orders and hears the evidence of the intention of the wife when entering into the orders, namely to get her out of what was agreed by both at that time to be a negative asset position. The clear intention of the orders was always that he would retain and receive the properties and no payment was to be made to the wife upon his discharge of his obligation under the orders. Nor did the wife seek any such order when she sought to be appointed trustee for sale. She only sought the properties be sold, and her obligations under the mortgage discharged and any balance upon sale paid to him and that is what has happened.
The facts of this matter are clearly different to the facts in Blackwell & Scott and Monticone & Monticone. Going now, as I must, to their Honour’s decisions, paragraph 70.6 of Judge Kent’s decision:
The case of the applicant is essentially that the parties struck a bargain which was based on the values of property or their understanding of the values of property at the time, and her getting 130,000 in 90 days. Since that 90 day period expired, the value of the suburb has risen. It was valued at 860 in December 2014 and 200,000 than attributed by the parties when the orders were made. It is now worth one million.
7. In my opinion, the applicant has not got the bargain she negotiated for, which was based on assumed values for suburb K.
Their Honours were dealing with a de facto matter. Therefore, section 90SM was relevant. However, that is in similar terms to section 79A. Section 90SN(1)(c), which is the same as 79(1)(c), provides that:
Where a person is affected by an order made under section 90SM and the Court is satisfied that a person has defaulted in carrying out an obligation imposed on that person by the order, and in the circumstances that have arisen as a result of that default, it is just and equitable to vary the orders set out, or make another order as substitution for the order.
His Honour goes on to say:
“There’s no doubt there has been a default.
His Honour’s words “bargain” in his Honour’s findings plainly reflects that the wife did not receive, when paid the sum of $130,000, that which the consent orders were intended to effect, and that was an equal division.
In this matter, when the consent orders were finally perfected, the wife received that which was the intention of the bargain, namely, her name being discharged from the mortgage.
His Honour went on at paragraph 72:
The finding the trial judge expressed was, in my view, because of the change in the landscape in relation to the value of the property, it is just and equitable to set the order aside.
Kent J said:
The principle properly stated is this. The findings readily characterise as a finding that the extent of the increase in value of the property by reference to the husband’s default satisfied the just and equitable requirement of the subsection.
His Honour says at paragraph 76, quoting the decision of Monticone & Monticone:
Judicial discretion is informed by the feature that the setting aside of an order may, as it was foreshadowed to occur here, lead to a determination of a further order under 90SM, that is, at the time of its making, appropriate if it is just and equitable to make an order.
Aldridge J says at paragraph 15:
It’s not the point that the wife got the bargain to which she agreed. The point is that by reason of the husband’s default, the agreed equal division of the parties’ property did not take place.
His Honour says at paragraph 14:
The relevant inquiry is whether circumstances have arisen as a result of the husband’s default that would make it just and equitable to reconsider the earlier order.
Further:
The circumstances that arose were that as the common sense proposition, the wife received significantly less than an equal division of the property and the husband considerably more. The difference resulted directly from the husband’s delay in complying with the orders. The judge was entitled to find the position of the wife had arisen as a result of the husband’s breach.
A second ground was raised by the wife in relation to the consideration of circumstances had arisen as a result of the husband’s default, namely, that as the husband defaulted for 15 months in complying with his obligation under the order, she was thereby prevented from obtaining finance and/or purchasing a home.
That is the most flimsy of positions. The parties have never had sufficient money to fund even renovating the properties at Property A1 & A2 to a standard of a home. No money was to be paid to the wife under the orders to provide a deposit or part deposit for a home. The parties were in a negative asset position as at the date of the consent orders and today the wife has no savings of any consequence or access to money.
The wife continues to live on her income as a (occupation omitted). Her own financial statements indicate at best she has assets of $11,000, being $2000 in furniture, $7000 in shares and money in the bank, which she could call upon at any time to use to as a deposit for the house.
The wife’s own evidence was that she had made no loan application to any organisation for a loan to purchase a house between July 2016 and today’s date, let alone at the time of bringing the enforcement application. The wife has no deposit saved to put towards the purchase of a house. There was no refusal or acceptance of any loan or offer of loan due to her being a guarantor on the mortgages. The wife’s evidence about her inquiries and what she thought she could or could not do or borrow did not satisfy me that she was unable to borrow money to buy a home due to the failure of the husband to comply with the consent orders. It is her income and financial circumstances that have her prevented her from so doing. Her evidence supports her inability to borrow money at all relevant times.
The wife said she had had difficulties in applying for a loan, because she had a credit card application refused in 2012. Paragraph 107 of her affidavit states:
I was refused a credit card in 2012 and it was extremely difficult for me to obtain a personal loan in 2015, and the mortgage calculators indicated to me that my borrowing capacity is not large enough to finance a purchase of property in Sydney. I did not formally approach a bank for a loan.
And she never has. There is simply no evidence that the husband’s default has been the reason why this mother of two young children has not been able to purchase a home in Sydney. The reality is she does not have sufficient funds.
At every level, the wife’s case for 79A is not made out. It would not be just and equitable for me to set these orders aside. The wife obtained the bargain she struck, or to put it in Justice Aldridge’s terms, the wife obtained that which the parties agreed she would, albeit 15 months later in time than ordered, namely she would be released from the guarantees in relation to the mortgage over the properties and that has occurred. No money was to change hands.
No percentage of the sale or a transfer of funds to the wife was provided for in the orders. It was simply that the husband would take over the debts and she would be left free from of those debts from that time. No other circumstance has arisen due to the husband’s default, which leads me find that it is just and equitable to set the orders aide even though I accept the husband defaulted in carrying out the orders.
The wife has failed to discharge her onus of proof and her application to set the orders aside pursuant to 79A is dismissed.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge Henderson.
Date: 8 November 2017