Lindt and Lindt

[2007] FamCA 1302

FAMILY COURT OF AUSTRALIA

LINDT & LINDT [2007] FamCA 1302

SETTLEMENT OF PROPERTY – ENFORCEMENT – Application for review of enforcement orders upheld – Application for enforcement of orders dismissed as the orders, although valid, are unenforceable

Family Law Act 1975 (Cth)

Harris & Caladine (1991) 172 CLR 84

APPLICANT: Mrs Lindt

RESPONDENT: Mr Lindt

FILE NUMBER: PAF 913 of 2005

DATE DELIVERED: 23 October 2007

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Coleman J

HEARING DATE: 22 & 23 October 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Judge

SOLICITOR FOR THE APLPICANT:

COUNSEL FOR THE RESPONDENT: Mr Campton

SOLICITOR FOR THE RESPONDENT:

Orders

1. That leave to inspect and photocopy documents produced by Mr G on subpoena is granted and that those documents be returned after 4pm 26 October 2007 on the undertaking of those producing them to return them to the custody of this Court or the Federal Magistrates Court on reasonable notice in writing in the future.

2. That the reviews filed 8 and 21 December 2005 are upheld.

3. That the orders of Judicial Registrar Halligan of 7 December 2005 are discharged, save for Order 2.

4. That the costs of the proceedings before Judicial Registrar Halligan of 7 December 2005 be reserved.

5. That the husband's child support applications be transferred to the Federal Magistrates Court for hearing unless by 4pm 9 November 2007 the wife has filed a further application pursuant to Pt VIII and/or Pt VIIIAA of the Family Law Act1975 (Cth).

6. That applications for the enforcement of orders of the Local Court Hornsby of 30 April 2004 be dismissed.

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

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAF913 of 2005

MRS LINDT

Applicant

And

MR LINDT

Respondent

REASONS FOR JUDGMENT

1. The proceedings before the Court arise from an application by Mrs Lindt (“the wife”) to review orders made on 7 December 2007 by Judicial Registrar Halligan (as he then was) in proceedings relating to the enforcement of orders for settlement of property made on 30 April 2004 in proceedings between the wife and Mr Lindt (“the husband”). The proceedings also encompass applications relating to child support.

2. As a reading of the transcript of the proceedings on 22 October 2007 would confirm, and partly by reason of the issues raised by Counsel for the husband in an Outline of Case document filed on that date, a preliminary issue emerged in the proceedings. That issue related to the enforceability of the orders made in the Local Court. The wife seeks to enforce those orders. Unless the order is, by its terms, enforceable, this Court cannot do so, whatever the merits of the case may be.

3. The issue can perhaps best be summarised in the terms in the husband’s Outline of Case document which provides:

   6.1.2   By way of an express agreement between the parties contained within a document entitled “Terms of Settlement” executed by the parties and dated 13^th August 2004, Order 2 made in the Local Court at Hornsby on 30^th April 2004 was to be discharged and the wife was to accept the transfer of the aforementioned properties subject to the Westpac Bank retaining its existing mortgage over the said properties. It does not appear to be in issue that the provisions of s79A(1A) of the Family Law Act are of relevant application to Order 2 made on 30^th April 2004.

4. It may be the contention of Counsel for the husband that the parties in August 2004 agreed to vary the terms of the orders of 30 April 2004 so as to provide that the wife receive the properties provided for by those orders, subject to the encumbrances secured by mortgages to Westpac Banking Corporation (“Westpac”). What is clearly asserted is that the agreement of 13 August 2004 was to absolve the husband from sole and total liability for the encumbrances thus secured in favour of Westpac. Alternatively, it is submitted that, quite apart from whatever the agreement of 13 August 2004 may have achieved, the original orders were unenforceable by reason of the uncertainty of their terms.

5. On behalf of the wife it is submitted that the events of 13 August 2004 provide no impediment to her application to enforce the orders of 30 April 2004. Further, it is submitted that, at least inferentially, to the extent that by virtue of their terms, the Terms of Settlement of 13 August 2004 might have had the capacity to constitute an agreement between the parties to vary the substance of the orders of 30 April 2004, the totality of the evidence and in particular the conduct of the husband and admissions made by him, would lead the Court to conclude that the orders of 30 April 2004 were in fact capable of being enforced. Counsel for the wife maintained that the terms of the original orders were clear and unequivocal.

6. As the transcript of proceedings would reveal, the enforcement proceedings, the fate of which would, if not be decisive, be at least highly influential in relation to pending child support proceedings, were likely to take several days, involve very extensive cross-examination of the husband and likely to involve applications for leave to cross-examine witnesses called on subpoena and generally be in the nature, it would appear, of a tracing exercise of some complexity.

7. A combination of Counsel for the husband raising what could be described as a threshold issue, and the reality that if there is not an order capable of being enforced, hearing days of evidence at very considerable cost would be potentially a futile and academic exercise, led the Court to indicate to Counsel for the parties during the latter part of the proceedings on the first day that as soon as the evidence in relation to the threshold question concluded, Counsel would be invited to make submissions in support of the rival contentions. There was a convenience in so doing which embraces a number of dimensions.

8. At the point at which cross-examination of the wife concluded, by design or otherwise, Counsel for the husband had traversed the issues relevant to the question of whether or not there was an order capable of being enforced. Cross-examination of the husband then proceeded on that basis. To appreciate this issue, the consequences of which are in the short term potentially far reaching but in the longer term less so, it is necessary to look closely at the orders of 30 April 2004 and a number of events subsequent to their making.

9. It is common ground, and abundantly evidenced (exhibit R1) that on 30 April 2004 a Local Court Magistrate made orders in accordance with a document dated 22 March 2004 and signed by the parties. The document contained a number of recitals in paragraphs (a) to (d) inclusive, the accuracy or inaccuracy of which does not assume significance for present purposes. The actual orders provided for the transfer to the wife of the husband's right, title and interest in two properties which can conveniently be referred to as “[the N property]” and “[the C property]”. The former was the matrimonial home of the parties and, for a time after April 2004, remained the home of the wife and the three children of the marriage identified in notation (b) of the Terms of Settlement. What the C property was, or is, does not emerge readily and nothing turns on that in any event.

10. The effect of Order 1 was that the wife was to receive title to those two properties. The properties were encumbered to Westpac. Order 2 provided that upon the transfer of the properties to the wife, the husband was to do all acts and things necessary to make payment of two categories of liability. The first was all legal costs in relation to the transfer, and the second was to the discharge payout and any other fees in relation to the discharge of the mortgages secured over the properties with Westpac. By Order 3, the husband was to pay all maintenance costs in relation to the properties and mortgage repayments until the youngest child of the marriage, who was at the time aged about six and a half, attained the age of 18 years.

11. It is readily apparent that so far as mortgage repayments are concerned there is an apparent inconsistency between the terms of paragraph 2.2 and paragraph 3 of the orders. Paragraph 2.2 appears, by use of the term "discharge payout" to envisage that the capital sums and any other moneys lawfully payable to Westpac in order to cause a discharge of the mortgages would be paid in a lump sum by the husband. No documentation placed before the Local Court or any evidence before this Court gives any basis for finding on the balance of probabilities that the husband had at that time an available substitute security, or that the orders envisaged that he would provide same. Paragraph 3, by referring to mortgage repayments until a period potentially some 11 or 12 years hence is not readily reconcilable with the provisions of paragraph 2. As will be seen that is but one albeit the most significant of a number of curious aspects of the terms.

12. There were other orders made in relation to the settlement of property which the Terms of Settlement of 22 March 2004 sought to effect. Significantly, there was nothing in the nature of a default or enforcement provision in the terms then entered into.

13. It is common ground that both parties were represented prior to the making of the orders. The documentation which was placed before the Court appears to have been jointly presented but, for the purpose of this ruling and not otherwise, the Court proceeds on the basis that the author of the documentation and supplier of information contained within it were respectively the husband’s solicitor and the husband.

14. The document contained a list of property of the parties (commencing at par 24) and, under the heading “Effective Financial Orders Sought”, set out a series of figures (commencing at par 50). There are some curious aspects of that series of figures, the most apparent of which is that what was represented in the document as being the effect of the financial orders sought was quite different to what a literal reading of the orders of 30 April 2004 suggest was to be their effect, whichever interpretation of the interplay of paragraphs 2 and 3 one prefers.

15. There does not seem to be any real doubt, and certainly it is inconceivable that Counsel for the wife would be pursuing the enforcement application in the terms in which it has been sought if there was any doubt, that the effect of the orders of 30 April 2004 was, that whether by lump sum or periodic payments, the husband was to be responsible for Westpac debts secured over the N property and the C property, totalling approximately $1.1 million. The wife, there is no doubt, was to receive assets which the parties represented to the Local Court to have a value of approximately $1.85 million.

16. The effect of financial orders thus sought was represented to be that the wife would receive approximately $750 000. In fact she was to receive $1.85 million while the husband was to receive minus approximately $1.1 million.

17. Given the income which the husband suggested he had at the time of approximately $826 per month, the husband’s capacity to service the borrowings which the consent orders obliged him to service, was at least problematic. At the most generous interest rate likely to have then been applicable, the husband would have been obliged to pay by way of interest on the Westpac liabilities rather more than his gross income at the time would have permitted. This would still be so even if he was earning $862 per week. One could be forgiven for thinking that before the ink was dry on these orders, based on the figures the parties themselves represented to the Local Court they were probably unable to be implemented.

18. The parties each swore an affidavit which was put before the Local Court, and is particularly relevant for present purposes. Those affidavits contain the representations which each party made. Particularly relevant for present purposes are those parts of the documentation relating to financial disclosure, understanding of advice and the effect of the other party's financial disclosures. A certificate signed by the legal practitioner for each of the parties was also filed.

19. The orders were then made. Not long thereafter it emerged that, perhaps unsurprisingly, Westpac was not prepared to transfer title to the wife and release the husband from liability under the security instruments which the parties had previously executed in favour of Westpac.

20. That knowledge was met with a response from the parties. Superficially there is a controversy about what then occurred. In her evidence in cross-examination, the wife denied that she was given legal advice prior to signing the Terms of Settlement document on 13 August 2004. She suggested that, in effect, the husband placed the document before her and, with some urging and haste, had her sign it without her understanding its contents or potential effect. The wife rejected the suggestion put to her in cross-examination that she had received advice from Mr Dooley, the solicitor who undoubtedly acted for her and advised her in relation to the consent orders of 30 April 2004. The wife also denied that she had signed the document in Mr Dooley's presence and denied that Mr Dooley had forwarded the documents to the husband’s solicitor on or about 11 August 2004.

21. When invited to change her evidence having seen the relevant documentation in exhibit R1, the wife declined to do so. By way of explanation for what the wife appeared to concede must have occurred, the wife suggested that the husband would have had her solicitor, Mr Dooley, do the things which the objective evidence reveals that he did. The improbability of a legal practitioner, for no apparent gain, and with no clear motive, placing himself or herself in the position of being struck from the role of practitioners, and potentially charged with a criminal offence, is readily apparent. Mr Dooley did not give evidence. It is not difficult to imagine why he did not or was not called upon to give evidence.

22. The version of the facts which the wife advanced in cross-examination was not put to the husband during the course of thorough and quite extensive cross-examination of him. The inference is inescapable, that the evidence of the wife in cross-examination was in the nature of a spur of the moment explanation of something which could not be readily explained, and certainly was not convincingly explained, in the terms which the wife advanced.

23. To the extent that there is an issue of fact in relation to the events surrounding 11 and 13 August 2004, and there may not be in a forensic sense, the evidence leads inevitably to preferring the evidence of the husband to that of the wife. With respect to her, the wife’s version of those events is simply not able to be accepted.

24. The parties on or about 13 August 2004 executed a document headed “Terms of Settlement”. The evidence is clear that on 11 August 2004, Mr Dooley forwarded that document, signed by the wife, whether in Mr Dooley's presence or not being unclear and immaterial in any event, to Mr Holmes, the solicitor then acting for the husband. Mr Holmes received the document and, it is clear, had the husband sign it, dated it 13 August 2004 and sent it to the Registrar of the Civil Claims Court at Hornsby Local Court with the inappropriate suggestion or request that the Terms of Settlement be approved. A copy of Mr Dooley's letter accompanied that request.

25. On 1 September 2004, by reference to some rule which was said to relate to the passing of 90 days since the husband's affidavit on the original application, the Registrar of the Local Court returned the document which he was "unable to process". It is common ground that there has been no further attempt to have orders made in accordance with the document.

26. The contents of the document itself are instructive for present purposes. The Terms of Settlement of 13 August 2004 recite the making of consent orders on 30 April 2004. They then recite:

    The parties' lender Westpac Banking Corporation has advised the parties that they require existing mortgages to remain while a transfer of ownership of the properties to the wife may proceed.

    The notations continued:

    The parties have agreed with this requirement and seek to vary the Terms of Settlement in accordance with the orders below.

27. The proposed orders then provided firstly that Order 2 of 30 April 2004 be discharged. It will be remembered that that was the order that obliged the husband to pay, it seems by a discharge payout, the encumbrances to Westpac as well as the costs of the transfer of title to the wife. The orders further provided that upon transfer of the properties pursuant to orders of 30 April 2004:

    The parties shall do all acts necessary to enable Westpac Banking Corporation to retain its existing mortgages over the properties.

    The orders otherwise reaffirmed, relevantly for present purposes, Orders 1 and 3.

28. The effect of the proposed orders is unclear, although it seems tolerably clear that the effect of the agreement was that the obligation of the husband to pay out all moneys to Westpac necessary to cause the mortgages over the N and C properties to be discharged was to be removed. But it is clear that by the reaffirmation of Order 3, the husband’s obligation to make mortgage repayments was sought to be continued until the youngest child attained 18 years of age. As the proposed orders were never made however, the original orders remained, as did the uncertainty as to their meaning.

29. The Court is satisfied on the balance of probabilities that in August 2004, the parties agreed to vary the substance of the orders of 30 April 2004. On balance, the effect of the agreement seems to have been to relieve the husband of the obligation to pay out and discharge the Westpac mortgages.

30. It is common ground that from 30 April to this day, the husband has paid nothing with respect to the Westpac mortgage over the C property. He paid, pursuant to the orders, the payments with respect to the N property until about June 2005. He also paid for a time after the orders were made, albeit the orders created no obligation to do so, $600 per week according to the evidence of the wife, until about December 2004.

31. It is clear on the evidence that the husband’s conduct in after August 2004 is neither completely consistent with a belief that the parties were going to observe the agreement reflected by the Terms of Settlement of 13 August 2004, nor is it inconsistent with that. Significantly, the wife does not contend that the agreement of 13 August 2004 impact upon the orders of 30 April 2004.

32. Reliance was placed upon the husband’s representations, both in oral evidence in this Court and in documents to banks, Child Support Agency and others, that he remained liable with respect to the Westpac liabilities. That evidence is equivocal for at least two reasons. The first is that unless and until the orders of 30 April 2004 were varied in the way that the Minutes of 13 August 2004 proposed, and they never were, the husband remained technically bound by Order 2 of the orders of 30 April 2004. Perhaps more significantly from a practical point of view, Westpac having refused, as it is common ground it did, to release the husband from the personal conveyance in the security instruments executed by the parties with respect to the other properties, N and C, the husband had a real and continuing liability to Westpac quite independent of that of the Court orders.

33. To the extent that the evidence to which Counsel for the wife referred the Court to that effect is equivocal for present purposes. What is unequivocal is that the husband at no time has ever complied with the obligation to make payments with respect to the C property.

1. The wife's actions are similarly equivocal in some respects. Notwithstanding that the husband, from the minute the orders were made, never complied with his obligations with respect to the C property, it was not until 18 months thereafter that the wife sought to do anything about that. It is able to be submitted, and was by counsel for the wife, that her priority was to maintain the payments with respect to the N property, rather than the C property which was not where she and the children were living. That submission only takes one so far, the reality being that the husband's failure to discharge the C property liability can be seen as consistent with the intention of the parties evidenced by the Terms of Settlement of 13 August 2004. On any version of the parties’ agreements, not paying anything with respect to the C property was a breach of such agreements.

2. To the extent that the wife did not commence enforcement proceedings, as clearly she did not, until late 2005, as Counsel for the wife submitted, that ought not be seen as an admission on her part, given that on any view of the evidence, the husband in fact paid moneys by way of instalment to Westpac until June of that year.

3. In January 2005, the wife, the documentation suggests, refinanced her facilities with Westpac over the C property, the effect of that being to enable her to obtain, albeit as Counsel for the wife submitted, on onerous terms, an additional and it seems much needed, $25 000. The matter of significance about that for present purposes is that the wife, the evidence fails to reveal, did not in any way regard that transaction or anything associated with the refinance as involving her dealing with her property subject to an encumbrance which could be seen as other than hers.

4. What then does one make of all of this? It is clear beyond doubt that enforcement proceedings involve the exercise of the Court's discretion. Before the Court could exercise that discretion in favour of the wife in this case, the Court has to be able to find what liabilities, what obligations the husband had from time to time and to the extent that he breached them, his capacity to remedy those breaches. As noted at the outset it would be an academic exercise to spend some days exploring the capacity of the husband to meet orders if in all the circumstances the orders sought to be enforced are not now capable of being enforced.

5. The probabilities, with the benefit of hindsight, are that these orders were unenforceable from the moment they were made. The figures the parties themselves represented to the Local Court, on oath or affirmation in order to invoke the exercise of the Court's jurisdiction to make binding orders for settlement of property suggest that the orders were, from the time they were made, unable to be put into practise. Why that was put forward it is curious. Some clue can be gained from passages in an affidavit of the husband which his learned counsel carefully disavowed when asked yesterday.  A far more graphic account, albeit not relied upon by the wife, no doubt also for good reason, is set out in an affidavit of hers where the circumstances surrounding the making of the orders in April 2004 was referred to.

6. The Court finds as fact that the parties agreed in August 2004 that the husband be released from the obligation to pay by way of discharge the debts owed to Westpac and secured over the N property and the C property. Thereafter, the conduct of the parties is such that the Court cannot conclude with any confidence what the parties intended to be the contractual arrangements between themselves with respect to Westpac. As noted earlier, there is evidence which is both consistent with each party's version of events. There is evidence which is inconsistent with each party's version of events and there is evidence which is equivocal.

7. The Court must find on the balance of probabilities what it is that the husband was obliged in all the circumstances to do, this the Court cannot do to the requisite standard.  It is sufficient in all the circumstances probably only to record that the Court is not satisfied that from 13 August 2004 on the parties intended to be bound by the terms of the consent orders of 30 April 2004 and that it was only in late 2005 that, for her part, the wife sought to enforce the provisions of those orders and much later in about January 2007 that the husband, albeit by way of s 79A application which he has not pursued, sought to do something about those orders. Reverting to the orders of 30 April 2004 is similarly unhelpful. Orders 2 and 3 cannot coalesce and no construction of the orders can overcome the uncertainty their inclusion creates.

8. In those circumstances to spend the next several days exploring the husband's capacity to comply with orders which are not enforceable in any event would be a waste of the parties' time, their money and the Court's resources. In those circumstances the application must be dismissed.

9. That is probably the end of the matter for present purposes. Realistically, on the evidence, that is by no means the end of the matter in a substantive sense. It does not follow that because the orders of April 2004 are unenforceable that they are invalid. Clearly, as counsel for the wife, with respect in the Court's view correctly submitted, as Harris & Caladine (1991) 172 CLR 84 makes clear, those orders themselves were validly entered into, they remain valid, but in this Court's view unenforceable. To the lay person, that may seem an extraordinary state of affairs, but in reality it does not follow that simply because an order is made within power it will thereby necessarily be enforceable.

10. In civil litigation, as is generally known and experienced, there are two parts to the process. One is obtaining a verdict or a determination of one's entitlement. The other, which very often is the more difficult part of the exercise, is actually recovering it from the other party. Regrettably the parties probably have two choices, and realistically that applies more to the wife than the husband. Either her Counsel or attorney, having had the benefit of access to a vast amount of documentation, will have identified a path by which the wife's entitlement, whatever it ought to be, can be recovered. Alternatively, having looked at all of that documentation they may have formed the view that the cost of undertaking that exercise is unlikely to be justified by the likely outcome of so doing.

11. These are not matters about which the Court can speculate. What will happen will happen. At this stage however, the only order that the Court will make by way of preliminary ruling or orders is that the application for enforcement be dismissed. For that to happen, it is probably necessary for the orders of the Judicial Registrar, save in one respect to which reference will shortly be made, of 7 December 2005 to be set aside. That is to say the review is allowed, the orders save in one respect set aside and the application which gave rise to those orders for enforcement dismissed.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman.

Associate

Date:  7 November 2007