Lane and Lane
[2016] FCCA 2067
•23 August 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LANE & LANE | [2016] FCCA 2067 |
| Catchwords: FAMILY LAW – Application under section 79A to set aside final property orders – miscarriage of justice – suppression of evidence – any other circumstance – matters to be considered – miscarriage established – discretion re-exercised. |
| Legislation: Family Law Act 1975; ss.75(2), 79A, 79A(1), 79A(1)(a), 79A(1)(b),79(2) |
| Cases cited: Lane & Lane [2015] FCCA 173 Lancer & Lancer [2008] FamCAFC 112 Gebert & Gebert [1990] FLC 92-137 Simpson & Simpson [1983] FLC 91-359 Suriker & Suriker [1993] FLC 92-436 Emmett & Emmett [2010] FamCA (No2) 486 Elliott & Willcox (1996) FLC 92-687 Briese & Briese (1986) FLC 91-713 Black & Kellner (1992) FLC 92-287 Weir & Weir (1993) FLC 92-338 Luciano & Luciano [2000] FamCA 401 |
| Applicant: | MS LANE |
| Respondent: | MR LANE |
| File Number: | ADC 4391 of 2013 |
| Judgment of: | Judge Brown |
| Hearing date: | 10 May 2016 |
| Date of Last Submission: | 10 May 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 23 August 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Dillon |
| Solicitors for the Applicant: | Scales & Partners |
| Counsel for the Respondent: | Mr McQuade |
| Solicitors for the Respondent: | C M Tucker & Associates |
Upon the court being satisfied that there has been a miscarriage of justice pursuant to section 79A(1) of the Family Law Act 1975.
ORDERS
Pursuant to section 79(2) of the Family Law Act 1975 in addition to the sums already paid to the wife following the sale of the former matrimonial home located at Property B pursuant to order 3 of the orders of the court made on 4 February 2015 the husband pay the wife the sum of $132,000.00 within sixty (60) days of the date of these orders.
The wife file any written submissions in respect of her application for costs within twenty-eight (28) days of today’s date.
The husband file any written submissions opposing any order for costs within a further twenty-eight (28) days following the receipt of the submissions referred to in order 2 hereof.
Apart from the issue of costs the proceedings be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Lane & Lane is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 4391 of 2013
| MS LANE |
Applicant
And
| MR LANE |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties to these proceedings are Ms Lane “the wife” and Mr Lane “the husband”. The proceedings arise as a consequence of a judgment, delivered on 4 February 2015,[1] which was intended to resolve matrimonial property proceedings between the parties.
[1] Lane & Lane [2015] FCCA 173 hereinafter referred to as the judgment
The husband was and is a (occupation omitted), who enjoys a high income, both because of his skill and the nature of his (business omitted). He (employment omitted) in (omitted) in remote South Australia. At trial, the evidence indicated that he earned around $500,000 per annum.
The wife, who was born in (country omitted) does not speak English proficiently and has few vocational skills. At the time of hearing, she was not in the paid workforce and had significant responsibility for parenting the parties’ children particularly their youngest child, X aged ten.
Although, over many years, Mr Lane has enjoyed a significant income, this income did not translate into a large pool of property to be divided between the parties, after their marriage of some sixteen or so years. The evidence indicated that the family had enjoyed a comfortable standard of living over many years.
The parties’ major assets were two pieces of real property – their former matrimonial home at Property B and the premises, at Property G, from which Mr Lane conducted his (omitted business). Both properties were significantly encumbered by mortgages in favour of the (omitted) Bank.[2]
[2] Hereinafter referred to as the (omitted) Bank
For the purposes of the earlier round of proceedings, it was necessary for both the Property B property and the Property G (business omitted) premises to be professionally valued. The Property B property was valued at $2,100,000.00 as at October of 2014.[3] The Property G property was valued at $375,000.00 as at 31 July 2014.[4]
[3] See affidavit of Ms C filed 20 November 2014
[4] See affidavit of Ms C filed 20 November 2014
Both parties, at trial, accepted that these valuations were accurate. Accordingly, given the absence of controversy, I found the combined value of the two properties to be $2,475,000.00.[5]
[5] See judgment at paragraph 216
At trial, documentary evidence was available to indicate the parties’ level of indebtedness to the (omitted) Bank in respect of the two properties. The sum concerned was $1,994,607.00.[6] This sum was also not controversial.
[6] Ibid at paragraph 216
In the table of assets calculated by me in the reasons, the sum referrable to the mortgage owing on Property B was broken down into a building loan of $1,210,936.00 and a home loan of $318,671.00. It being common ground that the parties had purchased an old home, which they had subsequently had demolished to build their dream home. Hence the existence of two loans.
Property G and its mortgage appeared as separate items in the parties’ balance sheet. The most significant aspect of the parties’ level of indebtedness, arising from that, being that the amount of the mortgage to the (omitted) Bank, relating to the Property G property, was $465,000.00, some $90,000.00 more than its anticipated value at the time.
It was common ground that property values in (omitted) had plummeted when (omitted) announced its decision not to extend its (omitted) which is the town’s major employer and indeed its reason for existence in the first place. Mr Lane has a professional relationship with (omitted).
At trial, both the husband and wife agreed that the Property B property needed to be sold, as neither could afford to retain it. However, Mr Lane needed to retain the (omitted business) premises in order to continue to conduct his (omitted business) without disruption. The wife did not oppose such an outcome.
The major issues at trial turned on the husband’s high income earning capacity, in contrast to the wife’s limited vocational opportunities. Ms Lane wished to be able to buy a modest home for herself, in order to provide her with some modicum of security into the future.
In order to achieve this result, she sought to receive the larger proportion of the parties’ marital capital. She also wished to receive an ongoing stream of income, from Mr Lane, by way of an award of spousal maintenance, for an indefinite period.
For his part, Mr Lane wished for there to be a clean financial break between the parties. He opposed the making of any ongoing order for spousal maintenance. He also sought some capital by means of which he too could re-accommodate himself, in future, in more modest premises in Adelaide. It being his custom to work at (omitted), Monday to Friday and spend the weekend in Adelaide.
Ultimately, I determined that the wife should retain 80% of the parties’ capital and the husband 20%. In addition, I determined that the husband should pay spousal maintenance to the wife, in an amount of $600.00 per week, for a period capped at three years. There has been no challenge to the legal rationale, for this decision, by way of appeal from either the wife or the husband.
In assessing the overall equity of this distribution, it was necessary for me to examine what were the consequences of the proposed orders, in practical or “dollars and cents” terms. At the time, the only figures available to me were the property values, on which the parties agreed and the amounts apparently owing to the (omitted) Bank, upon which the parties also ostensibly agreed.
In the judgment, I said as follows:
“… it is all well and good to talk in percentages, so far as orders and outcomes are concerned. But what matters to the parties is what the orders mean to them in dollars and cents and what affect they have on their long term plans and aspirations.
This leap from abstraction to the concrete must be undertaken in terms of what is just and equitable to each of the parties concerned. It will also envisage what is the overall mix of assets and superannuation, given the respective situations of each of the parties concerned.
Mr Lane will retain assets in the form of the Property G property; his (omitted business) equipment; the trust; his shares, artwork and furniture; and motor vehicle; to a value of $440,008.86. However, this figure is misleading because when the mortgage relating to Property G is factored in, his liabilities exceed his assets by -$24,915.14.
In my view, it would be inequitable, after a relationship and marriage in excess of sixteen years, given the extent of his contributions that the husband retains only debt, notwithstanding his capacity to derive an income of $500,000.00 per annum.
Notwithstanding the wife’s great need for capital, considerations of fairness dictate that the husband receive some modicum of what capital is available from the sale of the Property B property. Currently, putting aside the issue of selling costs, the potential equity in the home is around $570,393.00.
80% of this sum is represented by the figure of $456,314.40 and 20% by the figure of $114,078.60. In addition, the wife has in her possession other chattels to the modest value of $15,110.00. If the selling costs are as high as anticipated by Mr Lane, the net proceeds are likely to be around $50,000.00 less than the sum as calculated.
Accordingly, after payment of her anticipated legal costs and the selling costs, the wife will have available to her a sum of around $350,000.00. Such a sum may not be sufficient to purchase a home outright but should provide a great deal of equity and so some mark of financial security for the wife. It will also give her access to funds to cover unforeseen exigencies, particularly whilst she completes her anticipated training in hospitality.
The husband will have a far smaller sum of cash available to him but I anticipate enough to give him some financial flexibility to manage his debt level and, if he wishes to borrow a sum of money to re-house himself in Adelaide. However, the most significant factor, in this case, remains Mr Lane’s capacity to earn around $500,000.00 per annum. This alone means that he leaves the proceedings with a very significant level of financial security and flexibility.”[7]
[7] See judgment at paragraphs 341-348
Two difficulties arise from this analysis – one obvious and recognised; the other latent and not directly acknowledged. It is these difficulties, which have since become choate, which have necessitated the revisitation of the earlier proceedings by the parties.
Firstly, at the time of the initial judgment, the precise net amount to be realised by the sale of the Property B property could not be exactly known. The ultimate figure to be realised turning on what would be the actual sale price and the exact cost of its realisation.
The other issue was a more nebulous one but one, in my view, which was at least tangentially raised, in the earlier proceedings. Given Mr Lane’s negative level of equity, in the Property G property, it was a possibility that, upon releasing its charge on the Property B property, on its sale, the (omitted) Bank would wish Mr Lane to lodge further capital to reduce the bank’s exposure on its mortgage on the Property G property.
The orders made by the court on 4 February 2015 directly deal with the first issue, but not the second. The relevant orders read as follows:
“1. Within twenty-eight (28) days of the date of these orders the parties do all things necessary to put the former matrimonial home, being the property known as and situate at Property B, in the State of South Australia and being the whole of the land contained in Certificate of Title Volume (omitted) (hereinafter referred to as “the former matrimonial home”) on the market for sale with an estate agent and at a price to be agreed between them and failing agreement as nominated by the court.
2. Pending the sale of the former matrimonial home the husband be responsible for all outgoings in respect of the property, including payment of council rates and all payments in respect of mortgages secured against the property.
3. Upon the settlement of the sale of the former matrimonial home the proceeds of sale be distributed as follows:
a. In payment of the commission due to the selling agent;
b. In payment of all legal costs relating to the sale;
c. To discharge all moneys secured against the title in favour of the (omitted) Bank;
d. As to any balance remaining:
i. 80% to the wife;
ii. 20% to the husband.
4. Including but without limiting the effect hereof the husband shall retain for his sole use and benefit absolutely free from any further claim or demand of the wife:
a. The real property registered in his name located at Property G in the State of South Australia and being the whole of the land contained in Certificate of Title Volume (omitted) (hereinafter referred to as “the Property G property”).
b. The contents of the Property G property, particularly the plant and equipment relating to the husband’s (omitted business) conducted thereon;
c. The motor vehicle currently in his possession;
d. His furniture, artwork and personal effects;
e. The superannuation, standing in his name, with (omitted) Super;
f. His savings, shares and investments in his name.”
Essentially, the orders were designed to cope with fluctuations in the sale price of the Property B property and allocate the sale costs proportionally between the parties. The orders required the discharge of all moneys secured against the title in favour of the (omitted) Bank. It is, I think, implicit in the reasons for judgment, that it was anticipated that this sum would be in the vicinity of $1.5m. Certainly this is the wife’s position now. It is her contention that the intent behind the orders, arising from a proper reading of the reasons for judgment provided, is the phrase all money secured against the title referred to the items referred to as the building loan and the home loan, not the Property G mortgage.
As matters have ultimately transpired, the Property B property sold for $100,000.00 more than anticipated. The selling costs, a source of considerable controversy between the parties, were also more than anticipated, amounting to some $40,530.85.[8] The orders of 4 February 2015 were designed to deal with such fluctuations.
[8] See exhibit A being the amended vendor’s settlement statement in respect of the Property B property
However the greatest source of controversy turns on the sum apparently directed to the (omitted) Bank to secure its discharge of the mortgage on the Property B property. The sum in question was $1,705,546.72 compared to $1,529,607.00 which was the sum calculated by me in my tabulation of the parties’ relevant assets and liabilities, particularly the building loan and the home loan. The difference between the two sums is approximately $176,000.00.
Accordingly, although the property sold for more than anticipated, a significantly lesser sum was available to be divided 80/20% between Ms Lane and Mr Lane to give effect to order 3(d) of the orders of 4 February 2015 than had been anticipated by me. The actual net proceeds available were $453,234.72, of which 80% is represented by the sum of $362,587.78.
In my calculations, I had anticipated a net equity (before selling costs) of $570,393.00, of which 80% amounts to $456,314.40.[9] In addition, rather than Mr Lane leaving the proceedings with a negative equity in Property G, he has left with some equity in the property concerned.
[9] See judgment at paragraphs 345-346
Ms Lane is aggrieved at what she perceives to be the sleight of hand of Mr Lane, which has resulted in her receiving approximately $100,000.00 less than she had anticipated from the judgment in her favour.
Mr Lane denies any skulduggery on his part. It is his position that it was no secret that there was a negative equity in the Property G property and commercial reality dictated that there would be some degree of inter-relationship between the level of security relating to it and the Property B property. He denies that he has misled anyone, as he has maintained throughout these proceedings, both currently and at the original trial, that he did not know what the (omitted) Bank would actually do.
As such, Mr Lane contends that he cannot be held responsible for what the (omitted) Bank has done. He too has received less cash, from the proceeds of sale of the Property B property, than was anticipated in my calculation as set out in the judgment. However, Mr Lane contends that the strict application of the court’s orders has been followed by him. As such, as with the higher selling price of Property B, it is a case of swings and roundabouts, so far as the (omitted) Bank is concerned, which has resulted in the final cash sums received by each of the parties.
Essentially, Ms Lane contends that she has been the victim of a significant miscarriage of justice. On the other hand, Mr Lane contends that what was intended by the court, in its unequivocal orders – that the wife would receive 80% of the net proceeds of sale of the Property B property and he 20%, after the calculation of selling costs and the subtraction of the moneys owed to the (omitted) Bank – has been achieved. Thus, the outcome is true to the orders concerned and cannot be categorised as a miscarriage of justice.
The orders sought by each of the parties
In her amended application, filed on 2 October 2015, the wife seeks the following orders:
“1. That pursuant to section 79A(1) of the Family Law Act 1975 as amended the order made in these proceedings on the 4th of February 2015 be varied by discharging paragraph 3(d) thereof and substituting the following:
(d)in payment to the wife the sum of one hundred and forty one thousand six hundred dollars ($141,600.00) (in addition to any payment already received by the wife from the sale) and in payment to the husband of the remainder (if any) provided always that in the event of there being insufficient funds to pay the wife in full the husband shall forthwith make good the shortfall.
2. The husband pay the wife’s costs of and incidental to these proceedings on an indemnity basis.
3. Such further or other order as this Honourable Court deems fit.”
In his response, filed on 15 December 2015, the husband seeks the dismissal of the wife’s application and that she pay his costs incidental to these proceedings.
Each party has filed an affidavit in support of his or her position. In addition, I have been provided with a transcript of the proceedings, which led to the making of the orders of 4 February 2015. I have also been provided with some correspondence, passing between Mr Lane and the (omitted) Bank in anticipation of the settlement of the sale of the Property B property.
The relevant affidavits are as follows:
i)Affidavit of the wife filed 2 June 2015;
ii)An affidavit of the husband filed 15 December 2015.
The legal provision applicable
The wife’s application is brought pursuant to section 79A(1) of the Family Law Act 1975. The provision reads as follows:
“(1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or
(c) ….
(d) …. or
(e) ….
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.”
The Evidence
In her affidavit of evidence, filed in the current proceedings, the wife deposed as follows:
“From the sale of the home, I expected the (omitted) Bank to receive the sum of about $1,500,000.00. This was the figure which Mr Lane had indicated the mortgage secured against the home was around about at the time of Trial.
As deposed to above, Mr Lane had informed the Court, in addition to the former matrimonial home, he owned a property at Property G which was worth $375,000.00 and subject to a mortgage of $465,000.00. Mr Lane did not indicate to the Court the mortgage in respect of the Property G property was secured against the former matrimonial home.
At settlement of the former matrimonial home, upon Mr Lane's instructions, his conveyancer paid the sum of $1,705,546.72 to the (omitted) Bank.”[10]
[10] See wife’s affidavit filed 2 June 2015 at paragraphs 11-13
In his evidence in response, Mr Lane complains that he bore more of the selling costs than was anticipated by the orders of February 2015. In particular, he complains that the wife insisted on having a stylist to prepare the property for sale, which sum he bore without contribution from the wife.
In addition, Mr Lane complains that Ms Lane insisted that he pay the advertising costs of the sale prior to settlement. The stylist apparently cost approximately $30,000.00 and the additional advertising cost was between $8,000.00 and $9,000.00.
These matters continue to rankle with Mr Lane. For her part, Ms Lane has deposed that she paid significant expenses relating to necessary repairs on the property. The vendor’s settlement statement indicates that the agent’s commission was $30,800.00. The sum of $8,940.50 was also debited from the sale price under the heading “contribution towards agent’s marketing expenses”.[11] I have not been provided with an actual invoice for the stylist’s expenses.
[11] See exhibit A
In response to the specific matters raised by Ms Lane, in her affidavit, Mr Lane has deposed that he is unable to comment as to what his former wife expected the (omitted) Bank would receive at settlement of the sale of the Property B property. In this context, he deposed in his affidavit provided for the current proceedings that he:
“… understood that there were two loans secured by mortgages which were to be discharged upon settlement of the sale of the former matrimonial home.
… I say that I was told by officers of the bank that they would ‘look after me’ with respect to the loan secured by mortgage against the Property G property.”[12]
[12] See husband’s affidavit filed 15 December 2015 at paragraphs 15-16
In this context, Mr Lane denies that he instructed the conveyancer, retained to complete the sale of the Property B property, to pay the (omitted) Bank the sum of $1,705,546.72 rather than the lower figure of $1.5m or so. Rather, he deposes that he was not given any opportunity to approve or otherwise this payment to the (omitted) Bank. The Bank doing what it wished to do pursuant to the authority it believed it had under its loan agreements with Mr Lane.
In this context, Mr McQuade, counsel for Mr Lane, makes much of the following exchange, which occurred during the initial trial held in December 2014, between his client and Mr Jordan, counsel for Ms Lane, whilst he (Mr Jordan) was cross-examining the husband:
“All right. Thank you. And do you say that the (omitted) Bank are going to take – are going call in the Property G loan?‑‑‑No.
No. So you just choose to – choose to reduce the mortgage if you can?‑‑‑No, it worries me that the equity in the home ‑ ‑ ‑
It might worry you ‑ ‑ ‑?‑‑‑?‑‑‑ ‑ ‑ ‑ Yes.
‑ ‑ ‑ but the bank hasn’t said to you, “We want or money or some of our money from the sale of Property B”, have they?‑‑‑I haven’t discussed with the bank.
Well, they haven’t said that?‑‑‑No. No.
No. Are you quite sure you’ve not had any discussion with the bank about that?‑‑‑I’m sure – about Property G[13] property – no.
Well, have you had discussion with the bank about what amount they will require from the sale of the Property B property?‑‑‑They required a discharge of the mortgages.
One million five hundred and whatever it is?‑‑‑Correct.
Right. So his Honour can be confident that from the sale of Property B the (omitted) Bank are not going to come in and require more than their current mortgage commitment of 1.5 million or thereabouts; correct?‑‑‑Was that addressed to me? Sorry – didn’t – didn’t hear you.
His Honour can be confident from the sale of Property B that the (omitted) Bank won’t claim any more than was secured by that first mortgage, which is 1.5 ‑ ‑ ‑?‑‑‑I don’t pretend to speak on behalf of the bank.
Well, I thought you had said that they were calling in the – that they were just simply requiring the first mortgage to be discharged and the payment of 1.5 million to be paid. Wasn’t that your evidence a minute ago?‑‑‑My evidence is that I rang the bank and I said that I’m going through a divorce and that property will need to be sold. And they said, “That’s fine” and they would require that the mortgage is repaid.
[13] Property G is a reference to the Property G property. The husband purchased the property in 2008 in his sole name. He borrowed the entire sum required to complete the purchase.
They what?‑‑‑That they will require that the mortgages are repaid.
The mortgages?‑‑‑Yes.”[14]
[14] See transcript of proceedings 9 December 2014 at page 26 - 27
In these circumstances, Mr McQuade submits that the husband cannot be characterised as having given false evidence to the court or supressed evidence. Rather, Mr McQuade contends that Mr Lane, in his evidence, was careful to point out that he could not, in effect, speak for the Bank, which, from his perspective would take whatever was the sum it calculated was required to discharge the mortgage on the Property B property, without reference to him.
In these circumstances, Mr McQuade argues that there has been no miscarriage of justice, in the terms, envisaged by section 79A(1)(a) and the relevant order has been put into effect rendering otiose any application of section 79A(1)(b).
Mr Lane was cross-examined by Mr Dillon, at the hearing of the wife’s 79A application, regarding his (the husband’s) understanding, at the time of the initial trial, of the inter-relation between the Property B mortgage and the Property G mortgage and particularly what he considered the Bank would do about the latter, if the former was discharged.
In general terms, Mr Lane indicated that he did not know that the Property B property was security for the Property G mortgage. The transcript reveals the following interchange between Mr Lane and Mr Dillon:
“MR DILLON: ‑ ‑ ‑ I can narrow it more, I think.
Did you tell the court that the property at Property B was security against the mortgage that you held on Property G?‑‑‑I don’t believe I said that.
And why didn’t you say that?‑‑‑I didn’t know. I didn’t know what the bank would do.
So – no, I’m not asking whether you knew what the bank would do. What I’m asking you is did you tell the court that the mortgage ‑ ‑ ‑?‑‑‑I don’t – I ‑ ‑ ‑
‑ ‑ ‑ that was held against Property G was securitised against Property B?‑‑‑I don’t think I was asked that question from memory.
Were you aware, at the time you gave evidence, that the mortgage that you held at Property G was securitised against Property B?‑‑‑No, I wasn’t aware.
So you say that you came into court not aware that the Property B property securitised the loan that you had in respect of Property G?‑‑‑No, I didn’t – I didn’t remember that. I didn’t – I didn’t know it.
So the only answer you could have given at trial is that you didn’t know. Is that your evidence?‑‑‑I think I said that I don’t speak for the bank, and I don’t know.”[15]
[15] See transcript of proceedings of 10 May 2016 at pages 12-13
In this context, Mr Dillon put a letter and related document to Mr Lane, dated 1 May 2013, which had been sent from the (omitted) Bank to Mr Lane, at his postal address in Property G.[16] As such, Mr Lane did not deny that he was likely to have received the letter.
[16] See exhibit B
The letter confirms that Mr Lane was to be provided with an (omitted) Bank flexible rate loan up to a limit of $465,000.00. Significantly, page four of the related document, provides details of the loan and indicate that the Property B property is to be security for it. Mr Lane acknowledged that he had not formally disclosed the letter, during the earlier proceedings, to the wife’s solicitors. It was his evidence that he did not ordinarily keep documents of this kind.[17]
[17] See transcript of proceedings of 10 May 2016 at page 14
In this context it seemed to me to be relevant to consider other aspects of Mr Lane’s earlier evidence, particularly in the context of how he wished the court to deal with the parties’ matrimonial assets. As previously indicated, at trial, it was the wife’s position that she should receive all of the proceeds of sale of the Property B property; whilst the husband wished the proceeds to be divided 80/20% in her favour.
In his evidence in chief, at trial, elicited from him by Mr McQuade, Mr Lane deposed as follows:
“Mr Lane, you’re proposing that from the sale of Property B the wife receive 80 per cent of the net proceeds?‑‑‑Yes.
Is that right? And have you made any inquiries as to what the likely selling costs will be?‑‑‑Yes.
Well ‑ ‑ ‑?‑‑‑The – the commission would be 1.5 per cent.
1.5 per cent?‑‑‑Yes.
Yes?‑‑‑And the agent that I spoke to at (omitted) said advertising and marketing would be approximately 20,000 at the premium rate of marketing, which is what we would want for a property of that value.
All right. So if it was sell at its market value of 2.1 million ‑ ‑ ‑
HIS HONOUR: 31,500.
MR McQUADE: ‑ ‑ ‑ that would be 31,000?‑‑‑So that would be the commission. Yes.
Yes?‑‑‑31,000 commission plus the marketing.
So about 51,000?‑‑‑Correct.
All right. And if that were – if it were to sell at 2000 – 2 million – 2.1 million then is it your understanding that after deduction of selling expenses and mortgages in respect of – in respect of the Property B property that there would be something like about net proceeds of 520,000?‑‑‑Correct.
Right. And you want 20 per cent of that?‑‑‑Yes.
Which is $105,000?‑‑‑Yes. I – I want around 100 so I can pay down the Property G property.
Right?‑‑‑Yes.
Okay. So my next question is – was going to be, what did you intend to do with the net proceeds and ‑ ‑ ‑?‑‑‑Yes.
‑ ‑ ‑ your – what you’ve told us is that you will pay your share of the net proceeds in discharge of or in partial discharge of the mortgage over Property G?‑‑‑Yes. I’m cognisant of what our learned friend here spoke about yesterday.
Right?‑‑‑And that is that the bank may have an issue with me owing so much money.”[18]
[18] See transcript of proceedings of 10 May 2016 at pages 24-25
A number of issues arise from this portion of the transcript. Firstly the selling costs and the commission actually deducted from the proceeds of sale are close to those estimated by Mr Lane. The exception is the controversy relating to the stylist, from the husband’s point of view; and the costs of interior repairs, from the wife’s point of view.
As I indicated during the course of the proceedings, neither party elected to return to court to agitate these issues, prior to the settlement of the Property B property. These issues have only arisen in the context of the controversy regarding the mortgage discharge figure to the (omitted) Bank.
In all these circumstances, I consider these matters to be largely extraneous to what I have to determine in this application, although I acknowledge their emotional potency for the parties concerned. It does seem unfair that Mr Lane has had to bear the entire costs of what is termed Contribution towards Agent’s marketing expenses and which amount to $8,940.50, given that the orders of 4 February 2015 envisage the payment of all legal costs relating to the sale.
Secondly, in his evidence, Mr Lane indicated his intention to use his proportion of the proceeds of sale of Property B to pay down debt on the Property G property. It also seems to be the case that Mr Lane was cognisant of potential difficulties arising from his overall level of indebtedness to the (omitted) Bank.
In this context, it should be borne in mind that all the properties concerned were registered in Mr Lane’s name and he was responsible for the parties’ financial management. I accept that Ms Lane had no dealings with the (omitted) Bank about loan arrangements during the course of the parties’ marriage.
I have not been provided with a copy of Mr Jordan’s opening remarks, at the initial trial. Mr Lane, when he said “yes. I’m cognisant of what our learned friend here spoke about yesterday” seems to be alluding to concerns, presumably raised by Mr Jordan in opening, about what would be the actual payout figure required to discharge the Property B mortgage.
Indeed, this was the first topic broached by Mr Jordan in his cross-examination of Mr Lane, which has been recorded in an earlier portion of these reasons for judgment. At this stage, Mr Lane indicated that he did not believe the Property G property was, in part, secured against the Property B property.
Significantly, in my view, in his final address to the court, at the conclusion of the property proceedings, Mr McQuade addressed the court on the basis that his client wished to receive 20% of the proceeds of sale of the Property B property. Mr McQuade calculated this sum by reference to a value of $2.1 million for the property and selling costs of about $55,000.00.
The transcript of this aspect of the proceedings reveals the following:
“MR McQUADE: I turn to the liabilities.
HIS HONOUR: And Property G is agreed at 375?
MR McQUADE: $375,000, yes. There are two building loans in respect of Property B, $1,210,936 and $318,671.
HIS HONOUR: So what was the first figure?
MR McQUADE: 1,210,000 ‑ ‑ ‑
HIS HONOUR: Yes. I thought you said 1.1, so 1.210 – 936 ‑ ‑ ‑
MR McQUADE: That’s the one, your Honour.
HIS HONOUR: Yes, I’ve got that.
MR McQUADE: And the second one – $318,671.
HIS HONOUR: Yes.
MR McQUADE: There’s – and the investment loan with Property G is $465,000.
HIS HONOUR: Yes.
MR McQUADE: The husband has a Mastercard liability of $1728, a AMEX liability of $355 and a Visa liability of $11,530 and an AMEX – a second AMEX liability of $8414.90. Those figures are clearly set out. The husband’s trial affidavit in ending his financial statement and he wasn’t cross-examined on them. The husband’s overdraft of 15,343 – I’ve taken the view that that’s subsumed into the value of the husband’s (business omitted)‑ ‑ ‑
HIS HONOUR: Into the (business omitted). And that – so not relevant.
MR McQUADE: ‑ ‑ ‑ and not to be taken into account. And we know that the husband’s proposal – the proposal of both the parties is that the house be sold and that the proceeds be divided in some way or another. So I want to turn to what’s likely to be left, assuming what is likely that the net proceeds will be, if the house is sold at its value – 2.1 million. The husband gave evidence that there were roughly selling costs of about $55,000. We know what the liabilities are, and, it would appear from the husband’s evidence, that there will be – if it were to sell at present- day value, there would be assets – there would be net proceeds of $520,000. Now, the husband’s proposal is that that be divided as 80 per cent to the wife and 20 per cent to him. And, I can tell your Honour that 80 per cent of $520,000 is $416,000 and 20 per cent is $104,000.”[19]
[19] See transcript of proceedings of 9 December at page 45
As a reading of the reasons for judgment indicates, too a very large extent, I adopted Mr McQuade’s formulation, in the approach I took in the final orders framed. It was not suggested to me, by counsel for either party, that it would be imprudent for me to do so. The major issue between the parties was whether Ms Lane would receive $520,000.00, from the proceeds of sale of Property B, or $416,000.00. These sums being fluid, not in respect of the monies to go the (omitted) Bank but so far as the ultimate sale price and selling costs.
There was, in my view, a clear implication that, in retaining Property G, Mr Lane would assume liability for the monies which had expressly been borrowed against it, which he explicitly accepted to be $465,000.00. In my view, the clear implication of Mr Lane’s evidence and the submissions of his counsel in closing, was that he (the husband) would be able to accommodate a negative equity in the Property G property, with his financier. This I take it, is the implication of his statement contained in his most recent affidavit that he considered that the (omitted) Bank would “look after [him]”.[20]
[20] See husband’s affidavit filed 15 December 2015 at paragraph 16
As previously indicated the net proceeds of sale from the sale of the Property B property amounted to $453,234.72. The settlement statement, compiled by the conveyancer, concludes with the following statement.
“Ms Lane – sale price less (omitted) Bank payout figure less agent’s commission 80% equals $370,922.62.
Mr Lane – sale price less (omitted) Bank payout figure less agent’s commission and less remaining costs equal $82,312.10.”
In cross-examination, Mr Lane conceded that none of the $82,000.00, received by him, was applied to the Property G loan. Rather, Mr Lane indicated that he applied the sum towards other expenses, which included school fees, home styling, credit card and tax.
In the lead up to the settlement of the sale of the Property B property, Mr Lane was advised by the (omitted) Bank that it would require him to reduce his business debt, secured against both properties, in the sum of $177,000.00, from the sale proceeds of the Property B property.
The (omitted) Bank wrote to Mr Lane, on 15 May 2015, in the following terms:
“With residential security, the bank is able to lend up to 80% of the market value of the property and with commercial lending we are able to lend up to 70% of the Market Value. The bank was able to lend you (in effect) 105% of the purchase price of Property G as they used the equity held in Property B. Without using Property B the bank would have only been able to lend you $308,000 to purchase this property.
Therefore when Property B is removed as security you are left with debts totalling $485,000 (Property G Loan of $465k plus Overdraft of $20,000) supported by the Property G Property which has a Market Value of $440,000. The (omitted) Bank or any other bank will not allow, therefore as I mentioned we would need to either reduce the Property G Loan by $177,000 (or combination of removing the overdraft of $20k and loan by $157k) or holding the equivalent dollar for dollar amount on deposit in support of the debt (keeping debt at $485k).
I understand there is a court order in place but the bank has a first mortgage over all properties and it needs to be satisfied before it will release the security.
How much needs to be paid to Ms Lane at settlement? If it is simply 80% of the surplus funds then I would assume that it would be the sale price less what the bank needs (inclusive of the $177k) with Ms Lane receiving 80% of the remaining funds. If this is not correct and it is a set amount please let me know so I can work on getting a good result for all parties.”[21]
[21] See exhibit D
Discussion
Pursuant to section 79A(1)(a) of the Act, in circumstances where the court is satisfied that there has been a miscarriage of justice, a discretion is provided to set aside any orders considered to be vitiated by any such miscarriage. The burden falls on Ms Lane to establish that there has been a miscarriage of justice, in all the circumstances of the current case.
In Lancer & Lancer[22] Bryant CJ noted that the section 79A contained two aspects. The first being a fact finding exercise, that is whether the applicant concerned could establish, to the relevant evidentiary standard – the balance of probabilities – that there had been a miscarriage of justice by reason of one of the matters set out in sub‑section (1). The second part being what followed from such a positive finding, namely whether the court, in its discretion, should set aside or vary the original order.
[22] Lancer & Lancer [2008] FamCAFC 112
In Gebert & Gebert[23] the Full Court discussed the meaning of the expression miscarriage of justice, in the context of section 79A. It determined that the expression was not to be interpreted in an unduly restrictive fashion. The court said as follows:
“We consider that the words ''any other circumstance'' appearing in section 79A(1)(a) whilst not to be read ejusdem generis with fraud duress suppression of evidence or the giving of false evidence, are intended to cover other situations where, for one reason or another, a miscarriage of justice has occurred. The important matter that must be established for an application under this part of the section to succeed is that there has been a miscarriage of justice. It is, we think, clear as counsel for the applicant argued that the words ''miscarriage of justice'' should not be given a restrictive meaning, particularly when coupled with the words ''any other circumstance'' and that justice means justice according to law.”
[23] Gebert & Gebert [1990] FLC 92-137 at 77,935
In Simpson & Simpson[24] O’Leary J (as he then was) considered the meaning of miscarriage of justice. He considered that the expression did not have a fixed meaning and by necessary inference was incapable of an exhaustive description. With respect, I agree. His Honour said as follows:
“The term itself, of course, means no more than that, in a particular case, justice has miscarried, that there has been a failure by a court to attain justice. But ‘justice’ means ‘justice according to law’.”
[24] Simpson & Simpson [1983] FLC 91-359 at 78,351
More recently, in Suriker & Suriker[25] the Full Court has taken a similar view. The court determined that the expression “miscarriage of justice” did not refer exclusively to the integrity of the judicial process. Rather, the expression had a multifarious application. The court said as follows:
“It is neither necessary nor desirable to attempt to define the matters which may amount to a miscarriage of justice by reason of any other circumstance in the relevant sense.”
[25] Suriker & Suriker [1993] FLC 92-436 at 80,472
Accordingly, in my view, I must assess what has happened in the current case and whether it amounts to a miscarriage of justice and then determine whether it is appropriate to rectify the relevant order or orders through a re-exercise of the discretion arising under section 79.
Mr McQuade, on behalf of Mr Lane, contends that there can have been no miscarriage of justice arising in this case because necessarily the incident characterised as constituting the miscarriage must have arisen at or before the making of the relevant order said to have miscarried.
In this context, Mr McQuade submits that the various events, which arguably have caused what the wife wishes to characterise as a miscarriage, clearly happened after the orders were made, namely the (omitted) Bank determined to call in a greater amount in respect of its various loans than was anticipated at trial. Accordingly, they are a series of events which occurred after the trial process had concluded with the making of a comprehensive set of orders.
In my view, this submission cannot be sustained after a proper analysis of the evidence available. To my mind, it is clear that the issue of what the bank might or might not do, in respect of the various loans, was, to paraphrase the terminology of the former United States Secretary of State, Mr Rumsfeld a known unknown at the time of the trial.
Certainly, it seems apparent that Mr Jordan was alive to the issue because he chose to cross-examine Mr Lane about it. Although Mr Lane did indicate that he could not speak for the Bank, in my view, he unequivocally represented to both the court and Ms Lane that he was content to retain the Property G property, subject to what he understood to be the full amount of the mortgage secured against it, provided he received 20% of the proceeds of sale of the Property B home. His counsel, Mr McQuade in closing submissions, calculated what both he and his client anticipated this sum would be.
Clearly, what Mr Lane represented at trial would happen, vis-à-vis the mortgage on the Property G property, did not occur. Mr Lane did not retain the property subject to the full amount of the mortgage owing on the property. In my view, this state of affairs represents a failure of the trial process sufficient to satisfy the non-exhaustive description of miscarriage of justice contained in section 79A(1)(a).
In Emmett & Emmett,[26] Watts J considered, after referring to Simpson and Suiker that a miscarriage of justice could occur as a result of events that are unconnected with the other party to the proceedings. Accordingly, although Mr Lane contends that the intent of the orders of 4 February 2015 miscarried due to the actions of the (omitted) Bank, rather than of him, it does not necessarily entail that there has not been a miscarriage of justice for the purpose of section 79(A)(1).
[26] Emmett & Emmett [2010] FamCA (No2) 486
In my view, prior to the settlement of the sale of the Property B property, the (omitted) Bank presented Mr Lane with a number of options in respect of his loan arrangements with it. One of these options was to do as Mr Lane indicated he would do in his evidence at trial, namely direct his 20% share of the proceeds of sale of the property towards reducing his indebtedness on the Property G property. His verbatim evidence being:
“I want around 100 so I can pay down the Property G property.”
Clearly what Mr Lane postulated did not occur, although it was anticipated by the orders of the court and the reasons for judgment which supported to them. In my view, the import of the February 2015 orders was clear. Both the husband and wife would benefit (or suffer the detriment) of any change in the anticipated selling price of Property B in the percentages allocated in the orders; and the husband would retain exclusive responsibility for the level of debt referrable to the Property G property.
Section 79A(1)(a) provides a non-exhaustive list of incidents, which have the potential to lead to a miscarriage of justice. The list concludes with the phrase any other circumstance. In Elliott & Willcox the Full Court of the Family Court rejected the submission that this expression should be read ejusdem generis with the other matters contained in the section – that is the phrase any other circumstance was not to be coloured by the nature of the matters which preceded it and could encompass a procedural irregularity in appropriate circumstances.[27]
[27] Elliott & Willcox (1996) FLC 92-687 at 83,134
I am satisfied that Ms Lane and those advising her were subject to a misconception that Mr Lane would be able to maintain the Property G property, subject to its existing level of mortgage commitment. Mr Lane may have been subject to the same misconception. Certainly, he did nothing to allay it. To the contrary, he indicated that he would use any proceeds coming to him, from the sale of the Property B property, to reduce his indebtedness in respect of Property G.
I am satisfied that Mr Jordan, counsel for the wife, was desirous of examining, with Mr Lane, any possibility that the (omitted) Bank would seek to reduce his exposure in respect of the Property G loan, in the event that the Property B property was sold. The transcript, in my view, indicates that Mr Jordan raised the issue fair and square with Mr Lane.
Documents subsequently obtained from the (omitted) Bank, by Ms Lane, indicate that the Property G property was cross securitised with the Property B property. This is apparent from the letter sent to Mr Lane by the (omitted) Bank in May of 2013, which Mr Lane accepted he would have received but not necessarily retained. As matters have transpired, it was a seminal document, of which Mr Jordan was unaware.
I am satisfied that the non-disclosure of this document, whether inadvertent or otherwise, given its moment, is sufficient to constitute a miscarriage of justice by reason of any other fact or circumstance, within the parameters envisaged by section 79A(1). In particular, I accept that both Mr Lane and Ms Lane are likely to have conducted their respective cases in a significantly different manner if the letter had been before the court.
The parties to property proceedings, brought under the Family Law Act, in this court, are under a duty to make a “full and frank disclosure” of their financial circumstances.[28] This duty has been described as being “fundamental to the whole operation of the Family Law Act in financial cases…”[29]
[28] See Federal Circuit Court Rules 2001 at Rule 24.03
[29] Per Smither J in Briese & Briese (1986) FLC 91-713 cited with approval by the Full Court in Black & Kellner (1992) FLC 92-287 at 79,133
In Weir & Weir the Full Court of the Family Court said as follows:
“…the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contributions, or to properly assess section 75(2) factors.”[30]
[30] Weir & Weir (1993) FLC 92-338
Accordingly, the duty to make a full and frank disclosure, in financial matters brought under the Family Law Act, does not arise merely by virtue of the rules or practice of the court but rather is a fundamental rule of law, which arises because of the necessity for the court, in each property proceeding arising before it, to consider all aspects of the financial circumstances of the parties concerned..[31]
[31] See Luciano & Luciano [2000] FamCA 401 at paragraph 373
I accept that Mr Lane is a busy professional person with many calls on his time. I do not suggest that he deliberately suppressed the letter from the (omitted) Bank. However, in my view, the absence of the document and Ms Lane’s obvious ignorance of its potential consequences has caused a miscarriage in the exercise of the court’s discretion in the orders of February 2015. It follows therefore that the court must re-exercise the relevant discretion in the light of the fresh evidence available.
Re-exercise of discretion arising under section 79(2)
As previously indicated, it was the clear import of the February 2015 orders that the parties would share 80/20 per cent in respect of either any increase or diminution arising from the anticipated selling price of the Property B property, after payment of selling costs. The selling price was anticipated to be about $2.1m and the liability to the relevant mortgagee was thought to be, by both parties, around $152,000.00.
What the orders did not anticipate was that the net proceeds would be reduced by the sum of approximately $176,000.00. In effect, the (omitted) Bank directed this sum in a manner which benefitted Mr Lane and which the final orders did not anticipate. It had the effect of significantly increasing his equity in the Property G property. In my view this payment is analogous to a premature distribution of assets having been made in Mr Lane’s favour. As such, in re-exercising the discretion arising under section 79(2) it will be necessary for this sum to be taken into account.
I have no reason to revisit my earlier view that considerations of justice and equity dictate that Ms Lane should receive 80% of the net proceeds of sale of the Property B property. This percentage figure was based on Ms Lane’s significant need for capital to re-house herself in circumstances where she had a modest income earning capacity, particularly in contrast to Mr Lane, who was able to earn up to $500,000.00 per annum.
It is a positive thing that the Property B property has sold for more than was anticipated. However, in my view, the additional sum is not a huge one, when all the circumstances of the case are considered. Certainly, I do not think the increased sum is of sufficient magnitude to justify me re-visiting my original assessment of how the proceeds of sale of the home are to be divided in percentage terms.
I propose to follow the following methodology, in determining how the orders of 4 February 2015 are to be revised, given my finding that a miscarriage of justice has occurred:
Item
$ DR
$ CR
Gross sale price Property B
2,200,000.00
Building loan (as at trial)
1,210,936.00
Home loan (as at trial)
318,671.00
Commission on sale
30,800.00
Additional marketing expenses
8,940.50
LTO costs
152.00
Council rates due at settlement
888.80
Rates adjustment favouring Purchaser
386.59
Conveyancer’s costs
826.98
Adjustments in favour of Vendor for rates
776.31
Totals
1,571,601.87
2,200,776.31
As a consequence of this exercise, I calculate that the division of 80/20%, in Ms Lane’s favour is to be applied to a nominal sum of $629,174.44. 80% of this sum equates to an amount of $503,339.55 and 20% to the sum of $125,834.88.
At settlement, Mr Lane received the sum of $82,312.10. However to this sum must be notionally added the sum of $175,939.72,[32] being the sum advanced to his benefit, by the (omitted) Bank, prior to settlement. In total this amounts to a figure of $258,251.82. On my calculations, this has resulted in an overpayment to Mr Lane of $132,416.94.
[32] The difference between the mortgage as calculated at trial ($1,529,607.00) and at settlement ($1,705,546.72)
At settlement, Ms Lane received the sum of $370,922.62. Accordingly, to achieve her proper entitlements it is necessary for her to receive an additional sum in an amount of $132,416.94. In my view, consideration of justice and equity dictate that Ms Lane this sum to give effect to the intentions of the orders of 4 February 2015. I propose to round this sum down to $132,000.00 for ease of calculation.
These proceedings have been bitterly contested. The wife seeks the payment of her cost on an indemnity basis. I had hoped that the parties would be able to work through the misconceptions, which I believe have inadvertently, to some extent, arisen between them and reach a mutually agreed compromise. Sadly that has proven to be a naïve expectation.
The issue of costs is likely to be similarly contentious. I will direct that the wife submit any further submissions in respect of her application for costs within 28 days of the date of these orders, with the husband to file any answering submissions within a further 28 days of that, unless the parties are able to agree the issue of costs in the meantime.
I will direct that the husband pay the sum of $132,000.00 to the wife’s solicitors within 60 days of the date of these orders. In my view, this is a sufficient period of time for him to secure the necessary sum.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and one (101) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 23 August 2016
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