Kruger and Zaio

[2010] FamCA 172

FAMILY COURT OF AUSTRALIA

KRUGER & ZAIO [2010] FamCA 172

FAMILY LAW – CONTRAVENTION – Spousal maintenance

Family Law Act 1975 (Cth)

APPLICANT: Ms Kruger

RESPONDENT: Mr Zaio

FILE NUMBER: MLC 5610 of 2009

DATE DELIVERED: 23 February 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 23 February 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Vohra

SOLICITOR FOR THE APPLICANT: Richard Calley

THE RESPONDENT: In person

Orders

1. That pursuant to s 112AB of the Family Law Act 1975 (Cth) (“the Act”), the Court finds the husband has contravened an order under the Act.

2. For the purposes of sanction, the contravention application is adjourned to 9.00am on 5 March 2010 on the question of whether the husband will enter into a bond pursuant to s 112AF of the Act.

3. That upon the said return date, the wife and her legal practitioners are excused from further attendance.

4. That the husband by 4.00pm on 19 March 2010 vacate the real property situate and known as M property in the State of Victoria (being more particularly described in Certificate of Title Volume … Folio …) (“the real property”), arrange final meter readings in relation to all utilities and ensure that the property is left in a clean, neat and proper state and thereafter the wife has sole use and occupation of the real property until it is sold and settled.

5. That the husband by 4.00pm on 19 March 2010 do all such acts and things and sign all documents as may be necessary to transfer to the wife at his expense all of his right title and interest in the said real property to be held on trust pending a sale pursuant to the provisions of paragraphs 4 and 7 hereof by 4.00pm on 19 March 2010.

6. That the husband forthwith provide to the wife a full set of keys to the said real property.

7. That the wife do all such acts and things as is necessary to sell the said real property with an agent on terms and conditions and at such price as determined by the wife or her nominee (“the sale”) and upon the completion of the sale, the proceeds be applied as follows:

   (a)first, to pay all costs, commission and expenses of the sale;

   (b)secondly, to discharge the mortgage;

   (c)thirdly, to pay to the wife at the rate of $400 per week, any outstanding arrears of spousal maintenance pursuant to the orders of this Court made in September 2008 and thereafter, a payment of $400 per week until further order to satisfy the requirements of the said spousal maintenance order;

   (d)fourthly, to pay to the wife the costs of these proceedings fixed in the sum of $3703;

   (e)fifthly, to pay the balance into an interest-bearing account in the names of the parties pending further order or agreement.

8. That the husband pay the wife’s costs fixed in the sum of $3703 to be paid as set out above.

9. That pursuant to s 106A of the Act, in the event that the husband refuses or neglects to execute any deed or instrument for the purposes of these orders, a registrar of the Court shall execute such deed or instrument in the name of the husband and do all acts and things necessary to give validity and operation to the deed or instrument and for such purpose, the registrar shall be satisfied of the necessity to execute such deed or instrument upon production to the registrar by the solicitor for the wife of an affidavit sworn by the solicitor confirming the husband’s failure to comply.

10. That save for the purposes of the sanction referred to in these orders, all outstanding contravention proceedings be otherwise dismissed.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 5610 of 2009

MS KRUGER

Applicant

And

MR ZAIO

Respondent

REASONS FOR JUDGMENT

1. On 17 September 2008 an order was made by consent of the parties that until further order the husband pay to the wife $400 per week for her maintenance, the first of such payments to be made on 18 September 2008 and weekly thereafter into a bank account as nominated by the wife. 

2. The orders went on to provide that the parties’ home in M be forthwith placed on the market for sale, and after payment of various sums, the money remain in trust pending further order of the court. 

3. Specifically relevant to these proceedings was an order that the husband have the sole right to occupy the M property and that during that right of occupation, he pay all instalments under the mortgage together with various other outgoings.  The husband says in evidence that he was told, and I accept, he believed that that was all for the short term. 

4. In December 2009, proceedings for property settlement began before Mushin J, but they were adjourned.  It is important to note what his Honour said on 3 December 2009.  He made a specific order that the Registry Manager cause a variety of documents to be forwarded to the Commissioner of Taxation and that after that, consideration be given to the matter being relisted for continuation of the proceedings.  The husband then stopped making payments under the mortgage, but he also stopped making the payments of spousal maintenance. 

5. The husband’s explanation is two-fold.  First, in respect of the mortgage, he made an arrangement with the mortgagee bank because he was in advance with the repayments, and as such he made no payments after a particular unspecified time.  His evidence was the bank was not concerned about things because of the credit he had amassed.  Insofar as the equity in the home may have been reduced, that issue can be determined at trial.  However, I stress that the order of the court provided that the husband have the right to occupy providing he made the payments. 

6. The difficulty does not end there because, with the accrued money that the husband had from not making the payments under the mortgage, he repaid money to a friend who had lent him money, and I find on the evidence, that money had gone towards the purchase of the property in the first place.  He did that because he said the friend was pressing for repayment.  He enclosed in his documents a letter proving that.  He did that however, notwithstanding his $400 per week obligation to the wife under the orders of September 2008.  In other words, he determined his priorities.  His evidence is clear that the debt to his acquaintance was supported not by mortgage but by an IOU. 

7. The IOU recorded that no repayment was to be made for five years.  His explanation for the early repayment was that his friend needed money.  Again, I find he has determined his own priorities.  Regardless of all of that, he has chosen not to make the payments under the mortgage. 

8. It is questionable whether he made to make the payments as they fell due if the bank no longer required them to be due.  However, he presented no evidence as to the arrangements with the bank. 

9. The second matter related to the maintenance.  His argument was that his income had fallen.  However, on 1 October 2009 for the purposes of the property proceedings he filed an affidavit, and in respect of that paragraph 25 reads as follows:

   As I had hoped and expected, moving and expanding the business led to healthy growth in sales turnover.  In the three years between 2006 and 2008 the business turnover increased from $138,000 in 2006 to $291,000 and $420,000 in 2007 and 2008, respectively. 

   It is in that context, and bearing in mind that affidavit was sworn on 1 October 2009, he says that he cannot now pay. 

10. In evidence he said that the position had become dire after December 2009.  There was considerable evidence about the fact that he had had heart problems and an incapacity to work, but all of that was in 2008.  The mortgage obligation order and the maintenance order has stood the test of time.

11. On 1 February 2010, the wife filed a contravention application.  In support of that contravention application she filed an affidavit.  For the purposes of that contravention application there are three relevant paragraphs.  In paragraph 4 she asserted that the husband had failed to pay the spousal maintenance on both Thursday, 3 December, and the following Thursday, 10 December 2009, as a result of which she gave instructions to her solicitors to bring the breaches to the attention of the husband’s solicitors.  She then said that on Monday, 21 December 2009 the husband had still failed to make any spousal maintenance payments to her.  By that stage he was three weeks in arrears.  Again, she sent instructions to her solicitors to raise that matter with the husband’s solicitors.

12. Later in the affidavit she said that since April 2008, the husband has had control of the business and he had continued to reside in the M home.  She asserted that he had refused to sell the M property, notwithstanding the orders made to which I have referred. 

13. It is clear, therefore, that that is the evidence upon which the wife relies.  The husband did not challenge the wife’s evidence.  It is clear on his view as follows.  First, he is no longer married and that somehow or other relieves him of the obligations to support his wife.  He said that this particular case, relating to property in particular, has gone on too long.  He said he was advised that it would all be over in a matter of months. 

14. The husband was unrepresented in these proceedings, but he had had representation up until only a matter of days ago.  He filed his affidavit on 19 February 2010 in response to the wife’s proceedings, notwithstanding that it was a contravention application.  As a matter of practicality, respondents to contravention applications do not need to file any response because the obligation is on them to prove that there has been a breach of the orders.  In this case, the husband chose to file the affidavit which was an endeavour to explain his position.  Many of the paragraphs I have struck out because of the fact that they are not relevant to the issue in dispute, that is, whether he has complied or been unable to comply with the order.  What many of the paragraphs relate to is the question of his potential to make an application to vary the orders of 2008.  I asked a number of times today whether he had done anything about that, and he indicated that he had not, and I gave him an opportunity to obtain legal advice and he took that opportunity.  No application before me has been filed therefore seeking to vary or discharge the original order.

15. In paragraph 8 of his affidavit he said the following:

    The agreement -

    by which he was referring to the spousal maintenance order -

    was based on the claims and the financial circumstances deposed by the applicant at the time and my financial circumstances at the time.  An important reason for my agreement to pay the spousal maintenance was that I was advised that the payment would be for only a brief period while the resolution would be reached expeditiously.  I now no longer have the financial ability to make any further payments.

    I make the observation in respect of that that he has had over a year, and almost a year and a half, to do something about the maintenance obligation and has chosen not to do so.  In respect of his affidavit, he went on to say that his total income from his wages in 2008-2009 was $98,590.  However, the company only made a profit of $700 in 2008-2009.  Despite a good increase in sales revenue, the increase in costs of the business removed most of the margin from the sales. 

16. I can only conclude that in respect of the year 2008-2009 his earnings were a gross taxable income of $98,590 and that that came entirely from the profit and loss statement of the business to which I have referred.  I shall turn to that in a moment.  His affidavit went on to say that due to the difficult business circumstances and cash flow problems, he has now cut his wages in order to pay costs.  He then said,

    My wages in 2007-2008 were $2000 a month.  From July 2009 I’ve reduced my wages to $1500 before tax, and subsequently reduced it further to $1000 before tax.  Now I have to reduce further to $559.  I have instructed my solicitor to inform my change of financial circumstances to the applicant.

    It will be clear that there is an inconsistency in all of that.  I do not entirely understand what he means, having regard to his earlier statement that in 2008-2009 his total income from wages was $98,590. 

17. In documents that he produced, the husband has given the court a profit and loss statement for the year ended 30 June 2009.  If I accept what he said in the paragraph in his affidavit of 1 October 2009, in fact, the turnover of the business has increased in the financial year 2009.  In a document that he has prepared in respect of the takings he has tendered to the court, he said that for the three months from 1 July 2009 to 30 September 2009 the sales were $129,925.  His expenses were $41,178.  I can only conclude that in those three months there was a substantial profit in the husband’s hands.  In the ensuing three months, from 1 October 2009 to 31 December 2009, the sales were $122,240 and the expenses $39, 670.  Again, those figures would indicate some form of profit. 

18. The third period to which he refers is that from 1 January 2010 to 13 February 2010.  The first thing to observe is that that period is exactly, or almost exactly, one half of the other two periods.  He says for that period the sales were $61,065 and the expenses $18,185.  I do not know what is going to happen for the second half of that three-month period, but if I extrapolate out what he said in October 2009 and multiple it by two, it comes up with much the same sort of figures that he earned in the three months up to September and December 2009. 

19. I do not, in this case, have any accountant’s evidence about the profit and loss statement.  I have presumed that the husband had accountants draw the documents because he told me that he had an accountant working for him.  I do not have any breakdown of the wages or, more importantly, the other expenses in the profit and loss statement.  I note in the profit and loss statement that the wages for 2008-2009 were almost $250,000 in a total gross sales of $544,000.  The husband says that he now draws a nominal wage and there is no profit, but the profit and loss statement does not indicate clearly just what the position is, particularly having regard to the vagueness of some of the expenses.  I point out that there is no evidence before me as to the nature of the vehicle expenses, nor things such as depreciation, and why those are not in the hands of the husband anyway.  I therefore do not accept his assertion that that is all he can draw in the circumstances where he has paid $8000 to his friend as a reduction of the indebtedness to her.  He also produced a solicitor’s trust account ledger which looks remarkably to me like he has paid his lawyer’s fees.  To that extent the husband has also made the determination about the use of capital funds, even if his financial position on an income basis is poor. 

20. Section 112AB of the Act sets out that a person shall be taken for the purposes of that particular part of the Act to have contravened an order under the Act if, and only if, (a) where the person is bound by the order, he or she has (1) intentionally failed to comply with the order, or (2) made no reasonable attempt to comply with the order.

21. In Fauna Holdings Pty Ltd & Mitchell (2000) FLC 93-053 the Full Court said that intentional failure to comply was quite clearly distinct from casual, accidental, or incidental. It does not require a breach the order that amounts to a defiance of the authority of the court. That becomes important in this particular case. An intentional failure to comply can occur through ambivalence or, as in this case, making a conscious choice and justifying it on philosophical grounds.

22. Section 112AC sets out that there are 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, but they are not limited to the circumstances set out in subsection (2).  Subsection (2) provides that a person shall be taken to have had a reasonable excuse for contravening an order if, in this case the husband, contravened the order because, or substantially because, he did not at the time of contravention understand the obligation imposed upon him, or for some other reason that the court ought to excuse him.  That includes a situation where payment becomes impossible because of extenuating circumstances.  In this case the husband knew what his obligation was and, as I have already indicated, he determined his priorities.  There is nothing in the evidence that he has presented to indicate to me that he ought to be excused for the purposes of s 112AC.  I say that also in the context of his very clear statement that he is of the belief that his wife has been on this payment for too long, that she has the capacity to work and has chosen not to do so.  Be that as it may, I am not dealing with an application for variation or discharge of the orders today.

23. Any determination of a case such as this requires a court to consider the standard of proof.  In this case it is the balance of probabilities.  On the basis of all of the matters I have just mentioned, I am satisfied that the husband has intentionally not made the payments.  That is, he has intentionally failed to comply with the orders. 

24. Section 112AD provides various sanctions for the failure to comply with orders.  Subsection (1) provides as follows:

    If a court having jurisdiction under this Act is satisfied that a person has, without reasonable excuse, contravened an order under this Act, the court may make an order for the imposing, in respect of the person, of one or more of the sanctions available to be imposed under subsection (2), being a sanction or sanctions that the court considers to be the most appropriate in the circumstances.

    Subsection (1A) provides that the power given to the court under subsection (1) in respect of the contravention of a maintenance order applies even if the order has not been complied with before the matter of the contravention comes before the court.  Subsection (2) provides the various sanctions. 

25. In this case, the appropriate course is the requiring of a person to enter into a bond requiring future compliance with orders of the court.

26. Subsection (4) provides as follows:

    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. 

27. In this case, there is a significant dispute about the payment of the mortgage.  It is clear from the order in 2008 that the husband had the right to occupy the property on the basis that he made the payment of the mortgage.  There was evidence given that there had been endeavours to sell the property but the parties could not reach agreement about the sale price.  The wife’s position seems to be not remarkably different from that of the husband, and I suspect that the husband is in control of the property.  When I asked the husband about the sale of the property he was not prepared to agree to the wife selling it, but certainly prepared for the court to undertake that role.  That is not the function of the court.  In my view, the only way that the order can be complied with is if its tenure is carried out to the absolute letter.  It seems the only way that will occur is if the control of the property is given to the wife for the purposes of the sale.  That is in fact what the wife proposed;  that is what the husband opposed.  It is the only logical order in the circumstances. 

1. If the property is sold and the mortgage is discharged, then the obligation under the 2008 orders on the husband is removed.  That does not remove the obligation on the husband to continue to pay maintenance until further order.  It is logical in the circumstances, having regard to the position adopted by the husband, that even if I made an order that he comply with it he would maintain stoically that he either cannot or will not make the payment.  It seems in the circumstances that whilst the order ought not be discharged, the sensible solution is that on the sale of the house the proceeds be placed in a trust account, as was anticipated by the 2008 orders, and payments be made at the rate of $400 per week as the order requires if the husband does not make the payments, from the capital sum until such time as the ultimate proceedings are determined, or otherwise the order for maintenance is discharged. 

2. The problem in relation to the bond, to which I have referred as a sanction, is that I do not propose to order the husband to enter into a bond until such time as he has had legal advice.  I cannot force someone to get legal advice, but I do not propose to ask the husband with his English difficulties, notwithstanding the expert assistance he has had from an interpreter, to understand the obligations of entering into a bond to comply with court orders without first obtaining some legal advice.  If he chooses not do so, then the matter can be reconsidered if it occurs.  What I propose to do is to give the husband some time to decide whether he enters into that bond and to adjourn the proceedings to a 9 o’clock mention before me within the foreseeable future, and I will excuse the wife from attending on that particular occasion because it will simply be a matter between the court and the husband. 

3. I have also had an application made for costs by the wife. 

4. Section 117 of the Act provides that each party shall pay their own costs unless the court is satisfied that there are circumstances justifying it in making order for costs. In other words, the court has to be satisfied that there are circumstances in the particular case that justify a departure from the principal rule. If the court decides in the circumstances to make an order for costs it must consider the matters set out in subsection (2A).

5. In this case I am satisfied that the position adopted by the husband having regard to the findings I have made justifies an order for costs.  I then turn to the considerations that are otherwise relevant.  I am satisfied that whilst the husband’s position might be that he has dire financial circumstances at the moment, there appears to be sufficient equity in the home and he has made the priority determinations to which I have referred in the judgment.  The wife’s evidence is that she is a student and otherwise dependent upon Social Security benefits.  I’m satisfied in this particular case as to the fact that the husband, at least, is not eligible for Legal Aid and I have not been told of anything in terms of the wife being entitled to such a grant.

6. One of the considerations in relation to making costs is the conduct of the parties in relation to the proceedings.  In this case the husband’s evidence was at least vague and certainly not assisting me in respect of making the findings that I have had to make.  However, I could not find that he has deliberately delayed the proceedings by not providing the proper documentation.  It is important to also take into account subsection (d) which provides that whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous court orders.  That is a very significant issue in this case for the reasons I have already articulated.  I also find that the husband has been wholly unsuccessful in these proceedings.  In those circumstances it is appropriate that the husband pay the wife’s costs of these proceedings.  The figure sought is $3703.  I am told that that accords with the scale, including the cost of counsel being within the range that is reasonable in the circumstances and for which I will certify. 

I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  9 March 2010