Langer & Griffin
[2013] FamCAFC 170
•29 April 2013
FAMILY COURT OF AUSTRALIA
| LANGER & GRIFFIN | [2013] FamCAFC 170 |
| FAMILY LAW – APPEAL – CONTRAVENTION – Whether a party was in breach of orders – where the party was imprisoned by the Federal Magistrate for non-compliance – whether sentencing principles were applied. FAMILY LAW – BANKRUPTCY – Where orders have been made for property to be dealt with before bankruptcy – where a contravention application was heard and determined after the party has become a bankrupt – where no leave pursuant to s 58(3) Bankruptcy Act 1966 (Cth) was sought. |
| Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) Bankruptcy Act 1966 (Cth) Evidence Act 1995 (Cth) |
| Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 |
| APPELLANT: | Mr Langer |
| RESPONDENT: | Ms Griffin |
| FILE NUMBER: | BRC | 8621 | of | 2011 |
| APPEAL NUMBER: | NA | 15 | of | 2013 |
| ORDERS MADE: | 29 April 2013 |
| JUDGMENT DELIVERED: | 24 October 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Bryant CJ, Strickland & Ainslie-Wallace JJ |
| HEARING DATE: | 29 April 2013 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court of Australia |
| LOWER COURT JUDGMENT DATE: | 28 February 2013 |
| LOWER COURT MNC: | [2013] FMCAfam 289 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Ms McMillan SC and Mr Middleton |
| SOLICITOR FOR THE APPELLANT: | SJP Law |
| THE RESPONDENT: | In person |
Orders as made on 29 April 2013
That appeal number NA 15 of 2013 be allowed, with reasons for the decision to be delivered and published.
That the order of FM Jarrett, as he then was, made on 28 February 2013 be set aside.
That the Warrant of Commitment dated 28 February 2013 be discharged with effect forthwith.
That the Commissioner of Queensland Corrective Services and the General Manager of [the prison] be directed to forthwith release the appellant [husband] from custody.
That there be no order as to costs.
That the Court grants to the appellant husband a costs certificate pursuant to section 9 of the Federal Proceedings (Costs) Act1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by the appellant husband in relation to the appeal.
That the Court grants to the respondent wife a costs certificate pursuant section 6 of the Federal Proceedings (Costs) Act1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by the respondent wife in relation to the appeal.
AND IT IS FURTHER ORDERED:
The application alleging contravention filed by the wife on 4 January 2013 be dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Langer & Griffin has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 15 of 2013
File Number: BRC 8621 of 2011
| Mr Langer |
Appellant
and
| Ms Griffin |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Langer (“the husband”) appeals against orders made by Federal Magistrate Jarrett (as he then was) whereby his Honour sentenced the husband to imprisonment for six months or until he complied with paragraph 26 of the order made on 30 August 2012 in the Federal Magistrates Court, whichever happened first. Ms Griffin (“the wife”) is the respondent to the appeal and she seeks to maintain his Honour’s orders.
The appeal was heard by the Full Court on 29 April 2013. At the conclusion of the appeal we allowed the appeal, set aside the orders of the Federal Magistrate, ordered the immediate release of the husband from prison and made orders granting costs certificates to both parties.
As can be seen from the orders that we made, we indicated that we would deliver reasons for those orders later. These are the reasons.
Background
On 30 August 2012 the Federal Magistrate made parenting and property settlement orders by consent. It was the property aspect of those orders that gave rise to the matter before the Federal Magistrate and the subject of this appeal. We set out the relevant property orders:
Lump Sum Payments
17. As at the date of the making of this order, the Husband will pay to the Wife, or as she may direct, the sum of ten thousand dollars ($10,000.00).
18. On or before 1 October 2012, the Husband will pay to the Wife, or as she may direct, the sum of two hundred and fifty thousand dollars ($250,000.00).
19. In the event that the Husband fails to comply with his obligations in accordance with paragraph 2 [sic] of this order, the Husband will, within a further fourteen (14) days, do all such acts and things and sign all such documents as are necessary to transfer to the Wife a fifty percent (50%) interest in the property situate at and known as [the M property] in the State of Queensland … and upon such transfer, the Wife will be entitled to and will receive fifty percent (50%) of the rental income for the [M property] on a monthly basis at all times that the [M property] is rented.
…
Intervenor’s Application
25. A declaration be made by the Court that the Intervenors have a life interest in the [M property] and improvements on that property (the “life tenancy period”).
26. Within fourteen (14) days of the date of this order, the Husband, and if necessary, the Wife, will do all such acts and things and sign all such documents as are necessary to pay out and discharge the current indebtedness to [the trustee company], pursuant to mortgage … registered on the title of the [M property] and shall not again encumber the [M property] during the life tenancy period PROVIDED THAT the Husband be solely liable for meeting any such indebtedness.
Declaration and indemnities
30. As at the date of the making of this order, the Wife will be declared the sole legal and beneficial owner of all property in her name, possession, custody or control, including but not limited to the following:
…
e. The furnishings and effects listed in Attachment “A” to this order; …
31. For the purpose of paragraph 30(e), the Husband will leave the items of furnishings and effects listed in Attachment “A” at the [B property] at the time he vacates the [B property] PROVIDED THAT if he has removed all or some of those items from the [B property], he will return those items to the [B property] within fourteen (14) days of the date of this order.
On 4 January 2013 the wife brought an application claiming that the husband had contravened the orders made in August 2012, particularising contraventions of Orders 18, 26 and 30(e). We observe that Order 30(e) declared the wife to be the owner of certain items of furniture and effects in a list attached to the orders. It was Order 31 that imposed an obligation on the husband. This point was, it seems, overlooked by the Federal Magistrate, but that error is not the subject of this appeal.
The wife claimed that the husband failed to make the payments to which Order 18 referred, and had not discharged the mortgage as required by Order 26. She did concede however, notwithstanding his failure to pay the sum required by Order 18, that the husband had transferred a 50 per cent interest in the M property to her, as required (in the event of failure to pay the lump sum) by Order 19. She further claimed that the husband had not provided her with the items to which Order 30(e) related.
The wife’s application came before the Federal Magistrate on 25 February 2013. Both the husband and wife represented themselves.
The Federal Magistrate found that the husband had, without reasonable excuse contravened Order 18 in that he did not pay to the wife the sum of $250,000; that he contravened Order 26 in not paying out and discharging the indebtedness secured on the M property and that he contravened Order 30(e) by failing to return or supply the personal items to the wife in accordance with Order 30(e).
The Federal Magistrate then adjourned the matter to 28 February 2013. On that day he sentenced the husband as recorded above.
The Federal Magistrate’s reasons for judgment on the question of contravention delivered on 25 February 2013
The Federal Magistrate observed that there is no dispute that the husband did not pay the $250,000 to the wife as required by order 18. He said:
1.… He says that he did not because after the orders were signed he became aware of many other debts that he did not know about.
2. I do not believe him when he says that. I find him to be most disingenuous. His affidavit is replete with inconsistencies and deceptions. I am not satisfied that there was a reasonable excuse for breaching that order, but that does not mean that there ought to be orders by way of sanction imposed for that breach, because paragraph 19 of the Orders sets out what is to happen if paragraph 18 is not complied with.
His Honour noted at [3] that the husband had complied with Order 19, although he described it as a “hollow” compliance, presumably because the husband had merely transferred to the wife a 50 per cent interest in the then encumbered M property.
The Federal Magistrate observed that there was no dispute that the husband did not discharge and pay out the indebtedness to the mortgagee in relation to the property. He identified though a dispute between the parties as to what amount was owing to the lender over the property at the time of the orders. The wife argued that there was nothing owing under the mortgage. The husband asserted that it was known to the wife and her lawyers that the mortgage had been drawn down to the extent of $300,000 (at [6] and [7]).
In any event, the Federal Magistrate found that the dispute was of no moment and said:
7.… But that dispute does not matter, because the obligation cast upon the husband by order 26 is straightforward; that is within 14 days of the date of the order he was to do all such acts and things and sign all such documents as were necessary to pay out and discharge the current indebtedness to [the trustee company] pursuant to the particular mortgage.
His Honour said at [9] that the scheme of Order 26 was that the husband would pay out the mortgage, organise it to be discharged and not further encumber the property during the life tenancy. Turning to the husband’s argument that the terms of Order 26 entitled him to refinance the debt, the Federal Magistrate described it as “nonsense” [11].
His Honour found that the husband breached the order without reasonable excuse and found the contravention proved.
As to the claimed contravention of Order 30(e), the Federal Magistrate observed that the wife complained that the husband did not deliver to her the items on the list attached to the orders and that those chattels that were delivered to her were not in the state she had left them. His Honour’s findings were:
15.... I accept the wife’s evidence.
16. I reject the husband’s evidence.
17. I find the contravention proved.
The Federal Magistrate’s reasons for judgment on sentence delivered 28 February 2013
The Federal Magistrate commenced his reasons for judgment by summarising the findings that he made on 25 February 2013. It is observed that the Federal Magistrate referred to only finding two contraventions, namely, in relation to paragraphs 26 and 30(e) of the orders of 30 August 2012. However, his Honour clearly found the husband had also contravened Order 18 of the orders of
30 August 2012.
It is not at all clear why the Federal Magistrate did not mention the contravention of Order 18. Perhaps it reflects his view expressed in paragraph 2 of his reasons delivered on 25 February 2013 as follows:
2.… I am not satisfied that there was a reasonable excuse for breaching that order, but that does not mean that there ought to be Orders by way of sanction imposed for that breach, because paragraph 19 of the orders sets out what is to happen if paragraph 18 is not complied with.
However, that is speculation on our part. His Honour’s reasons are silent on this issue. Nevertheless, it is clear that his Honour found the husband to have contravened Order 26 of the orders of 30 August 2012 and that the punishment (imprisonment until he paid out the mortgage and rendered the M property unencumbered, or for six months, whichever was the shorter) was directed to the obligation under paragraph 26 to pay out the mortgage (at [23] and [24] of the reasons for judgment of 28 February 2013).
The Federal Magistrate outlined the evidence in relation to the mortgage over the M property and found at [5] that there was no dispute between the parties that at the time they were negotiating the agreement that became the consent orders, the indebtedness to the trustee company was “nil or close to nil”. However, as his Honour said:
... the husband drew against that mortgage and increased his indebtedness to [the trustee company] to its full amount. There is nothing in the material that suggests that when he did so that was done with the knowledge or consent of the wife or her lawyers.
The Federal Magistrate again considered the husband’s explanation for his actions and referred to an affidavit sworn by the husband in the proceedings in which he proffered his understanding of the effect of the orders. The Federal Magistrate again rejected the husband’s explanation, and found that his evidence as to what he did with the funds realised on the mortgage was at [10] “confused and confusing”.
The Federal Magistrate noted that he accepted the wife’s evidence in relation to the husband’s failure to provide the chattels pursuant to paragraph 30(e) of the orders of 30 August 2012.
The Federal Magistrate then referred at [13] to s 112AD of the Family Law Act 1975 (Cth) (“the Act”) and in particular sub-s (2A) which provides that the court must not impose a sentence of imprisonment “unless the Court is satisfied that the contravention was intentional or fraudulent.”
The Federal Magistrate considered a sanction was appropriate particularly because the orders were agreed by the parties and the M property was a significant focus of the property settlement orders. Given the husband’s subsequent bankruptcy and the vesting of his property in his trustee in bankruptcy, the Federal Magistrate considered a bond was inappropriate because the orders had been executed to the extent that they were able to be, and a fine was inappropriate because it was the husband’s evidence that he had only a small wage to live on and no assets. His Honour was also of the understanding that there was currently no arrangement between the Commonwealth and the State of Queensland which would allow for a community based or periodic detention order pursuant to s 112AG of the Act.
After noting that a sentence of imprisonment could not be imposed unless the court was satisfied that it would not be appropriate to deal with the contravention pursuant to any other paragraphs of s 112AD(2) and after observing that the court could suspend a sentence, the Federal Magistrate said:
22. In my view, a term of imprisonment is appropriate. Nothing else will do. A bond is inappropriate for the reasons I have given. A fine is inappropriate for the reasons I have given. A sanction is required, and there are no arrangements between the Commonwealth and the State for the carrying out of any other form of sentence. This is a serious contravention … The respondent’s actions represent a flagrant challenge to the orders and the authority of the Court. Orders which he joined with the wife in asking the Court to make.
The Federal Magistrate sentenced the husband to serve six months in prison and ordered the sentence to take effect immediately. He indicated that, if the husband discharged the mortgage over the property he could be released at an earlier date [24].
The appeal
There were four grounds of appeal contained in the husband’s amended notice of appeal filed on 12 April 2013.
Ground 1
Ground 1 of the amended notice of appeal provided:
That as the Appellant was a bankrupt at the time the contravention proceedings were filed (and determined), His Honour erred in proceeding with the matter, contrary to section 58(3) of the Bankruptcy Act 1966, when he lacked jurisdiction to do so.
It was uncontentious that on 17 October 2012 the husband entered into bankruptcy and a trustee was appointed to his estate.
Section 58(3) of the Bankruptcy Act 1966 (Cth) provides:
(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
We accept that the rationale for the section is to prevent one creditor, by taking action, from achieving an undue advantage over the other creditors.
Although in what we regard as an extraordinarily inappropriate exchange between the Federal Magistrate and the wife to which we will later return, the wife expressed the view that the husband should be imprisoned, what she was in fact seeking was an order that the mortgage debt be discharged pursuant to the orders. So much is demonstrated by the wife’s affidavit in support of the contravention application sworn 2 January 2013 where she said:
33. It is my firm belief that during the month of September, the Respondent moved sums of money amounting to approximately $500,000.00 through various [bank] accounts in his name, and finally either withdrawing them or moving them to a [bank] account in his father’s name. This would be proven by Subpoenas on any and all [bank] accounts held in the respondents [sic] name and in the name of [the husband’s father].
34. It is my firm belief that these monies were used in part or full to go towards the purchase of the [O property]
Further during the course of the hearing on 25 February 2013, the following exchange occurred, where the Federal Magistrate asked the wife:
Let’s assume for the minute that I found that he breaches the order in that way. What do you want me to do with him?
[The wife]: I would like him to be directed to discharge that mortgage, your Honour.
His Honour: How would he do that now that he’s bankrupt?
[The wife]: That’s where I believe that the bankruptcy is a fallacy …
(Transcript 25 February 2013, page 30 line 42-page 31 line 3)
The issue then is whether the wife had a debt provable in the husband’s bankruptcy.
Various purposes behind s 58(3) have been identified but an important element is to permit the trustee in bankruptcy, if he accepts the proof of debt, to treat the claim against the estate as he treats the claims of all other creditors. The section protects the bankrupt and property of the bankrupt against the enforcement of remedies and enables the court to control proceedings in respect of a provable debt in light of the objectives of the Bankruptcy Act (Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589; Re McMaster; Ex parte
McMaster (1991) 33 FCR 70).In Melnik v Melnik (2005) 144 FCR 141 the Full Court of the Federal Court had to determine, inter alia, whether contravention proceedings brought under
s 112AD of the Family Law Act were proceedings “in respect of a provable debt” within the meaning of s 58(3) of the Bankruptcy Act. The court said at [47]:
In our judgment, the contravention proceedings initiated by the respondent in the Family Court of Australia were proceedings “in respect of a provable debt”: s 58(3)(b) of the Bankruptcy Act. Further, those proceedings were proceedings “in respect of the non-payment of a provable debt”, within
s 60(1)(b)(i), and also were proceedings “in consequence of his…refusal or failure to comply with an order of the [Family Court]…for the payment of a provable debt”, within s 60(1)(b)(ii).
The court held that in those circumstances the contravention proceedings were incompetent as leave was required under s 58(3)(b) to commence proceedings.
In considering the words “in respect of”, the court referred to a decision of Beaumont J in Re Sutherland-Cropper (1985) 11 FCR 156 at 161 where his Honour said:
It has been said that the phrase has the “widest possible meaning of an expression intended to convey some connection or relation between the two subject matters to which the words refer” (per Mann CJ in Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111; see State Government Insurance Office v Rees (1979) 144 CLR 549 at 561).
The question is thus one of nexus. In my opinion, the application now before the Local Court does have a sufficient nexus with the non-payment of debt owed to Kuoni to justify its description as a process against the person of the debtor “in respect of” the non-payment of the debt. True it is, as the respondent contends, that the offence involved is one of obtaining property by false pretences and the process now in train is for sentence for that offence. But the breach of the condition of the recognisance to pay compensation is the circumstances [sic] which has activated the sentencing process. Without that breach, the question of sentence would not have now arisen for consideration, and it must follow that the current process should be seen as something instituted against the bankrupt “with respect to” that debt.
Order 26 required the husband to discharge the mortgage on the M property. He did not. His failure to do so created a provable debt in the wife.
We accept the argument that in this case, the Federal Magistrate, knowing that the husband was bankrupt, ought to have dismissed the application on the basis of it being incompetent.
As the wife asserted the husband’s bankruptcy was fraudulent, a potential remedy for the wife would be to seek to have the husband’s bankruptcy set aside for fraud. However, that is a matter for the wife. For now, given our finding, the application alleging contravention must be dismissed and we propose to do so.
On this ground alone, the appeal must succeed.
Grounds 2 and 3
Grounds 2 and 3 concern the sentence imposed by the Federal Magistrate and it is appropriate to consider them together.
2. That the sentencing of the Appellant to imprisonment for a period of 6 months is manifestly unjust and excessive.
3. That in fixing the term of imprisonment to six months, His Honour failed to give any, or any adequate reasons as to why he reached that conclusion.
On 25 February 2013, after his Honour delivered his reasons for finding the husband had contravened the orders of 30 August 2012, there was this exchange with the wife:
Ma’am, what do you want me to do to him?
[The wife]: Jail would be nice.
His Honour: I’m minded to do that. It’s just outrageous. How long do you say this should be?
[The wife]: The minimum of six months, your Honour. 12 would be nice.
His Honour: We wouldn’t get away with six months.
(Transcript 25 February 2013 page 32, lines 20-29)
His Honour then canvassed with the wife the other sentencing options, such as a fine or a suspended sentence.
We observe that this conversation occurred at a time before the Federal Magistrate considered any of the issues relevant to sentencing.
Further, we feel compelled to observe that the terms and tenor of the conversation between the Federal Magistrate and the wife in the presence of the husband was entirely inappropriate. The question of the imposition of a criminal sanction is a significant one to be approached with considerable caution and not to be discussed in what could only be described as a flippant aside.
Turning to the husband, his Honour said:
Why shouldn’t I jail you? This is just a blatant disregard of these orders.
[The husband]: You’re saying it’s a blatant disregard, your Honour, however, it isn’t to myself, particularly suffering PTSD. And so there are issues – you might find that it’s ridiculous and those sorts of things. In some aspects of it, I agree. However, I have no control over what was going on during some extreme periods of that illness. However, I did all I possibly can to preserve our child’s assets so that they would have a home over – a roof over their head. I still meet the financial obligations.
(Transcript 25 February 2013 page 33, lines 34-43)
The Federal Magistrate indicated to the husband that he would adjourn the matter to Thursday and the husband could “make further submissions about penalty. But I am minded to imprison you for, at least, three months.” (Transcript 25 February 2013 page 34, lines 40-41)
On Thursday 28 February 2013, the husband appeared with a lawyer, Ms Stannett who made sentencing submissions on the husband’s behalf. It is important to set them out.
Ms Stannett said:
I received quite an amount of material which I’ve had the opportunity to read. [The husband’s] main concern, and the reason that I am here, is to plead with you not to imprison him. From the material that [the husband] has provided me, I would like to point out to the court that it would appear that he may be a suicide risk should he imprisoned.
His Honour: Don’t they have processes for that?
Ms Stannett: They have some limited processes is my understanding your Honour
His Honour: I thought it was more than limited
…
His Honour: I thought it was a serious concern of the Corrective Services Commission.
Ms Stannett: I can’t comment on that any further your Honour.
(Transcript 28 February 2013 page 2 line 33-page 3 line 5)
Ms Stannett tendered to his Honour an affidavit of the husband’s mother who was ill with terminal cancer and who said that the husband cared for her when his father was working.
Ms Stannett then said:
If it might assist the court also, your Honour, I do have – it was handed this morning by my client – a current letter from [a medical practitioner] of 27 February in relation to his current mental health status.
His Honour: Well do you intend to put it into evidence?
Ms Stannett: Yes. Unfortunately it’s not in affidavit form, your Honour.
His Honour: All right. Well I won’t take it. Anything else?
(Transcript 28 February 2013 page 3, lines 37-45)
His Honour then imposed a sentence of six months’ imprisonment on the husband.
Nowhere in the reasons on sentence does his Honour consider any of the matters put by Ms Stannett. We are at a loss to understand why he refused to accept a medical opinion simply because it was not on affidavit and especially where it was asserted that the husband was at risk of suicide.
We accept the submissions on behalf of the husband that nowhere in his Honour’s reasons does he indicate why a sentence of six months is appropriate, nor did he make reference to comparable sentences (see Tate, JRD & Tate, MT (No 3) (2003) FLC 93-138, Dobbs & Brayson (2007) FLC 93-346). We further note that he did not address any of the well known and well accepted matters that are seminal considerations to the sentencing procedure such as an assessment of the objective seriousness of the conduct, general or specific deterrence, rehabilitation, mitigation or aggravating factors. To fail to even mention them reflects in our opinion a scant regard for the liberty of the citizen and a failure to appreciate the purposes for which sentences of imprisonment are imposed.
Both of these grounds are made out.
Ground 4
Ground 4 of the amended notice of appeal provided:
His Honour failed to identify which standard of proof he applied.
Nothing in the reasons on the issue of contravention or anything said by the Federal Magistrate during the hearing shows that he turned his mind to the standard of proof necessary to satisfaction of the issues before him.
Although, in written submission, the husband referred to an authority that suggested that the standard of proof should be a finding beyond reasonable doubt, it was not so asserted in oral submissions.
We observe that the Evidence Act 1995 (Cth) in s 140(1) requires proof on the balance of probabilities but sub-s (2) enables the court to take account of the nature of the cause of action or defence, the nature of the subject matter of the proceeding, and the gravity of the matters alleged. However, his Honour failed to refer to this section and given the gravity of the consequences for the husband (his imprisonment) we cannot be sure that his Honour turned his mind to the standard of proof.
This ground is made out.
Costs
In the circumstances of this case an order for costs would not be appropriate. The appeal having been allowed in circumstances which would enliven the provisions of the Federal Proceedings (Costs) Act 1981 (Cth), the Court is of the view that the parties should receive cost certificates with respect to the appeal and will so order.
I certify that the preceding sixty two (62) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Bryant CJ, Strickland & Ainslie-Wallace JJ) delivered on 24 October 2013.
Associate:
Date: 24 October 2013
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