Lovine and Connor

[2011] FamCA 712

FAMILY COURT OF AUSTRALIA

LOVINE & CONNOR [2011] FamCA 712

FAMILY LAW – PRACTICE AND PROCEDURE – Application for stay of proceedings

Family Law Act 1975 (Cth)

Cellante and Ors v G Callis Industries Pty Limited [1991] 2 VR 653
JEL and DDF (No 2) (2001) FLC 93-083
Kelly and Kelly (1981) FLC 91-007
Maher and Anor v Commonwealth Bank of Australia and Anor [2008] VSCA 122
Scarborough v Lews Junction Stores Pty Limited [1963] VR 129
Stephens and Stephens (Stay Application) (2010) FamCAFC 20
The Commissioner of Taxation of the Commonwealth of Australia and the Myer Emporium Limited (1986) 160 CLR 220

APPLICANT: Mr Lovine

RESPONDENT: Ms Connor

FILE NUMBER: MLC 9419 of 2009

DATE DELIVERED: 8 September 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 5 September 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Denton SC with Ms Johns

SOLICITOR FOR THE APPLICANT: Taussig Cherrie Fildes

COUNSEL FOR THE RESPONDENT: Mr St John with Mr Strum

SOLICITOR FOR THE RESPONDENT: Lander & Rogers

Orders

1. That the application by the husband for a stay (as to part of the quantum) in the orders made by the Honourable Justice Mushin on 10 June 2011 is refused.

2. That the application in a case filed by the husband on 12 August 2011 save as to any issue of costs, is dismissed.

3. That the application in a case filed by the husband on 4 July 2011 save as to any issue of costs, is dismissed.

4. That the response of the wife filed 23 August 2011 save as to any issue of costs, is dismissed.

5. That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 30 September 2011 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 14 October 2011 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9419 of 2009

Mr Lovine

Applicant

And

Ms Connor

Respondent

REASONS FOR JUDGMENT

1. In these proceedings, the husband seeks a partial stay in relation to the payment of money pending an appeal and further, orders against the wife for the return of chattels.  Both applications must fail.

2. On 10 June 2011, Mushin J made final orders and delivered written reasons after a contested trial between the parties.  There were subsequent proceedings before his Honour which are not relevant.

3. On 7 July 2011, the husband filed a Notice of Appeal against the 10 June orders. He has sought specific orders to reduce the sum to be paid to the wife. The calculations in his Notice of Appeal indicate precise consideration. Thus, it would appear that the husband has sought from the Full Court an exercise of the discretionary power under s 79 of the Family Law Act 1975 (Cth) (“the Act”) in the event that his appeal is successful. As a fallback position however, the husband has also sought a retrial.

4. The husband’s grounds of appeal allege inter alia, error in the assessments of contribution and the assessment of the adjustment made by Mushin J under s 75(2) of the Act. In both cases, acknowledging the discretionary nature of the assessment, the husband argued that his Honour’s determination was outside the reasonable ambit of that broad discretion. There is a further ground of appeal that his Honour failed to give adequate reasons.

5. On 26 July 2011, the wife filed a Notice of Cross-Appeal.  Inter alia, she sought an increase on the capital sum ordered by Mushin J and in the alternative, that the matter be remitted for rehearing. 

6. This matter came before me in the Judicial Duty List. 

7. On 4 July 2011, the husband filed an application seeking that the wife return some chattels to the husband that she took from a property in M. 

8. The husband filed a further application on 12 August 2011 seeking the stay of the orders to which I have referred. In his stay application, he proposed that he would pay a set sum reflecting his view of the wife’s entitlement to the cash payment. He also sought an order that I fix the interest rate at effectively a commercial banking rate rather than the rate which might be described as the penalty rate applicable under the Act in the event that any further capital sum had to be paid by him consequent upon the conclusion of the appeal.

9. The wife filed two responses to the husband’s applications on 23 August 2011.  The only relevant order sought related to the dismissal of the husband’s application.

10. Each party was represented by senior counsel and junior counsel.  I heard submissions and because of the size of the list, I had to adjourn the determination.  There is urgency about that determination because of the husband’s obligations under the orders of Mushin J.  Accordingly, these are my reasons.

11. In respect of the stay issue, the applicable law is found in Rule 22.11 of the Family Law Rules 2004 (“the Rules”). In addition, Rule 1.3 provides that a stay can be heard by another judge if the trial judge is unavailable. Mushin J is on leave pending his final retirement date later in 2011.

12. Importantly, the Rules are silent on how any application for a stay should be determined. In Kelly and Kelly (1981) FLC 91-007, Fogarty J said that each case had to be looked at in the light of its own circumstances against the background of an approach which was followed in a number of different jurisdictions. That general approach was that special circumstances had to be shown to justify a stay. Those special circumstances included that a refusal of a stay would render an appeal nugatory (see Scarborough v Lews Junction Stores Pty Limited [1963] VR 129). Other examples given by Fogarty J (and therefore no more than a guide) were that it would be proper to grant a stay where it may prove impossible or impracticable to restore the previous existing position if the appeal proved successful or, where specific hardship could be shown.

13. Similar provisions to Rule 22.11 appear in the Victoria Supreme Court (General Civil Procedure) Rules 2005. That is, an appeal does not stay a judgment but the court may stay it. In Maher and Anor v Commonwealth Bank of Australia and Anor [2008] VSCA 122, the Victorian Court of Appeal said that prima facie, the successful party was entitled to the benefit of the judgment and there was a presumption that the judgment was correct thereby placing the onus on the appellant of demonstrating that a stay was justified. The Court of Appeal referred to Cellante and Ors v G Callis Industries Pty Limited [1991] 2 VR 653 where Young CJ interpreted the applicable rule to mean that the applicant for the stay had to show special or exceptional circumstances to take the case out of the general rule that an appeal does not operate as a stay. The Court of Appeal went on to say that the discretion of the court considering the stay was wide and all circumstances should be taken into account. Those statements are consistent with what Fogarty J said in Kelly (supra).  The Court of Appeal went on to contemplate when special circumstances might exist and in doing so, included the question of whether there was a real risk that it would not be possible for a successful appellant to be restored substantially to his former position if the judgment had been executed prior to the appeal.  There were other considerations which are not relevant here relating to the removal of property from the jurisdiction of the court. 

14. A similar type of issue was raised by the husband because he asserted there was a risk that the wife might sell a piece of real property that she received pursuant to the orders but I am satisfied that having regard to what senior counsel for the wife said, that risk is neither real nor high.

15. Accordingly, I am satisfied that to obtain a stay, the appellant must show some circumstances which could be described as special to justify removing the presumption that the judgment is correct and that the wife is entitled to her money.

16. In Stephens and Stephens (Stay Application) (2010) FamCAFC 20, a case involving an application for a stay of the Full Court orders pending a High Court special leave application, the Full Court said:

    79.The mere filing of an application for special leave to appeal to the High Court does not operate as a stay of execution of the orders in respect of which leave to appeal is sought. Further, there are no provisions in the Act or the Rules that directly address the question of a stay of orders of the Full Court pending the determination of an application for special leave. Nevertheless, it is well established that when an application for special leave to appeal is made to the High Court, the jurisdiction to grant a stay may be exercised by the court below and it is to that court (that is, the court in which the matter is pending and which is familiar with the matter) that an application to stay should be made: Fauna Holdings Pty Ltd and McGillivray v Mitchell (2000) FLC 93-024; Tate and Tate (No 4) (2003) FLC 93-139. As such, it is not controversial that this Court has the power to grant such a stay.

    80.However, the jurisdiction to grant a stay pending an application for special leave to appeal to the High Court is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted.  In Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd [No. 1] (1986) 161 CLR 681 Brennan J said at 684:

    A stay to preserve the subject-matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted.  If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending until the hearing of the application for special leave to appeal.  That was the situation to which this court adverted in Marconi's Wireless Telegraph Co. Ltd. v The Commonwealth [No 3] [(1913) 16 CLR 384]. There the Court granted an order staying the operation of one of its own orders pending the hearing of an application to the Privy Council for special leave to appeal. What the court said in that case [at 386] is applicable to this case:

    “The Court will not ordinarily grant an application of this kind unless very strong and special grounds are shown.  This is a very peculiar case.  The conditions are such that, on the one hand, if the stay is granted without more, the whole benefit of the action may be lost to the plaintiffs, while, on the other hand, unless the stay is granted on some fair terms, the defendants’ appeal will be nugatory.  It really is a question of the preservation of the rights of the parties without disregard of the balance of convenience.”

    81.In Edelsten v Ward [No. 2] (1988) 63 ALJR 346, Brennan J, emphasising the “exceptional” character of the Court’s inherent jurisdiction to preserve the subject matter of litigation pending the making of a special leave application, said at 346:

    [This jurisdiction] is one which can only be exercised in extraordinary circumstances.  It is as well to emphasise that observation again lest the impression be created that, in the conduct of litigation, the orders of this Court are available to keep matters in status quo until the litigation is finally resolved.  That is not the purpose of the inherent jurisdiction.  Something quite exceptional must be shown before that jurisdiction is exercised.

    82.In The Commissioner of Taxation of the Commonwealth of Australia v The Myer Emporium Ltd [No. 1] (1986) 160 CLR 220, Dawson J noted at 222 that the High Court Rules (see now O 70 r 8(1)) provide that, unless otherwise ordered, neither an application for special leave nor an appeal shall operate as a stay. His Honour said at 222 – 223:

    It is well established by authority that the discretion which it confers to order a stay of proceedings is only to be exercised where special circumstances exist which justify departure from the ordinary rule that a successful litigant is entitled to the fruits of his litigation pending the determination of any appeal: see, e.g., The Annot Lyle [(1886) 11 P.D. 114]; Scarborough v. Lew's Junction Stores Pty. Ltd. [[1963] V.R. 129]. Special circumstances justifying a stay will exist where it is necessary to prevent the appeal, if successful, from being nugatory: see Wilson v. Church [No. 2] [(1879) 12 Ch. D. 454]; Klinker Knitting Mills Pty. Ltd. v. L'Union Fire Accident and General Insurance Co. Ltd. [[1937] VLR 142]. Generally that will occur when, because of the respondent's financial state, there is no reasonable prospect of recovering moneys paid pursuant to the judgment at first instance. However, special circumstances are not limited to that situation and will, I think, exist where for whatever reason, there is real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed: see McBride v. Sandland [No. 2] [(1918) 25 CLR 369].

    See also Bryant v Commonwealth Bank of Australia and Another (1996) 134 ALR 460 at 463-464 per Kirby J and Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 2) (1998) 72 ALJR 869 at 870 per Hayne J.

    83.As to the factors to be considered by a court in the exercise of its discretion, in considering a stay pending an application for special leave in Jennings Constructions Ltd v Burgundy Royale Investments Pty Ltd Brennan J said at 685:

    In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion.  In each case when the Court is satisfied a stay is required to preserve the subject matter of the litigation, it is relevant to consider —first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies.

    See also Bryant v Commonwealth Bank of Australia and Another at 308-9 and De Lewinski v Director General, NSW Department of Community Services (1996) 70 ALJR 532 at 534 per Gummow J.

17. Clearly in Stephens, the application was relating to a special leave application to the High Court but I consider the principles there set out remain the same in respect of an application from a trial judge to the Full Court.  The determination of whether or not the presumption has been misplaced must be determined on the balance of probabilities.

18. In this case, is there a real risk, that is, evidence of something more than speculation, that it will not be possible for the husband to be restored substantially to a former position if the judgment is executed?  Does the husband’s material show that there is a prospect (and no more than that) of his appeal being successful?

19. All of these matters must be determined on the basis of the evidence of the parties presented to the Court and the submissions made on their behalf.

20. The husband relied on affidavits filed on 12 August 2011 and 1 September 2011 and a further affidavit by a Mr C filed 1 September 2011.  Mr C is a builder. 

21. In respect of the appeal, the husband said that he had been ordered to pay $2,576,836 in part from his own resources and in part from a corporate entity.  He was not opposed to the order relating to the corporate entity but wanted his own personal obligation reduced as a condition of the stay to a payment of $1,150,661.

22. The husband pointed to the assets of the wife and what she would otherwise receive in the property settlement and said that there was no prejudice to her because she was financially comfortable.  In respect of his own position, he set out what assets he had and how he would raise the money required.  He pointed to the fact that shares would have to be sold triggering taxation implications and a requirement that he would have to persuade co-trustees of his late father’s estate to sell shares which would also trigger cost and tax implications.  He acknowledged that whilst there were other assets he had, sales were not practicable to achieve immediate payment.

23. The husband expressed concern that if the appeal resulted in a capital reduction in his favour, the costs and expense of sales including tax, not to mention lost opportunity and interest, could not be recovered.  I am not at all convinced that that is correct.

24. In respect of the interest rate issue, the husband said that he had inquired of the National Australia Bank and the respective interest rates for 90 day term deposits and 30 day term deposits were 5.5 per cent and 3.15 per cent respectively.  In respect of all financial matters, the husband made reference to the fact that there was a decline in values since the orders and that was also of concern to him.

25. The husband also relied on the affidavit of Mr C filed 1 September 2011 which dealt with the issue of Mr C’s engagement with the wife concerning construction work on the property that she was to retain under the settlement.  That affidavit has been read but it does not affect the outcome of these proceedings.

26. The affidavit of the wife was filed on 23 August 2011 and responded to the affidavit of the husband.  It was brief.  She sought that the husband’s application for the stay be dismissed.  She neither denied the husband’s assertions about values or taxes and costs.  She however referred to the fact that the husband had assets to sell to discharge his obligations under the orders.  She poignantly noted that the husband earned $1.5 million approximately as a professional person in Melbourne.  Her evidence was that she saw there was no reason why he could not borrow money and service the debt because of his income.

27. In an oddly worded statement, the wife said that she would be prepared if the Court ordered, to undertake not to sell or further encumber the real property that she was receiving.  I am satisfied that whilst the wording was no doubt carefully considered, there is no real risk of the wife’s financial position being such that any adjustment could not be made back in favour of the husband.  Again in a curious statement, she made reference to the fact that there had been a delay of three months from judgment until now receiving the monies under the orders but the reality was that the order did not provide for the payment to be made during that period anyway.  Notwithstanding it was the subject of considerable comment by senior counsel for the husband, my view is that nothing turns on it. 

28. Senior counsel for the husband submitted that the appeal was not likely to be heard until next year or at least that was the best information his instructors were able to glean.  That was relevant to the issue of what the husband would incur or lose which may be unrecoverable.

29. Mr Denton for the husband referred to the Notice of Appeal and in particular the ground that the decision was outside the reasonable ambit of discretion but he also attacked the judgment on the basis of lack of reasons.  Those matters were put on the basis that there was an arguable appeal.  He pointed also to the fact that the findings of the trial judge were not supported by the logic that he set out as findings.

30. Mr Denton covered all of the matters set out in the affidavit of the husband to which I have earlier referred and submitted that in the event that the husband was successful on his appeal, it is clear that he would not have had to sell anything to satisfy the entitlement in the first place.  That of course is dependent upon whether the Court allows the appeal and then agrees to exercise its discretion in the terms sought by the husband or remits the matter for retrial.

1. Mr Denton submitted that this was a case of hardship for the husband in circumstances where there was no evidence put by the wife of any detriment to her.  There had been no delay but there was a real risk that if the husband paid over the money under the existing orders and was then successful on the appeal, he would not recover against the wife.  For reasons which follow, I reject that argument.

2. In relation to the issue about interest, Mr Denton submitted that it was inappropriate in circumstances where the commercial interest rates were nowhere near the penalty rates for the Court not to fix a commercial rate now pending the appeal. I reject that argument on the basis that leaving aside the question of potentially limiting the role of the Full Court, I am doubtful whether it amounts to the alteration of an interest or entitlement of the wife in circumstances where the s 79 entitlement attracts interest under the Act from the operative date in the order. Neither party argued the question of whether there was a distinction between the substantive right and the machinery provision and in the circumstances, I do not think it appropriate for me to venture into that area. It seems to me that it is a matter more appropriate for the Full Court.

3. Mr St John for the wife referred me to a number of decisions to which I will refer briefly.  In The Commissioner of Taxation of the Commonwealth of Australia and the Myer Emporium Limited (1986) 160 CLR 220, which is referred to earlier in Stephens (supra) Dawson J referred to the requirement that an appellant establish special circumstances.  Because of the fact that I have earlier set out the authorities which I think apply, I do not think this decision is of much assistance any longer.  It is important to note however the comment of Dawson J to which the Full Court referred in paragraph 82 of the judgment mentioned above.

4. Both parties referred to that decision but it seems to be that the authorities to which I have referred are of more assistance.

5. In relation to the argument about the interest, both parties made reference to JEL and DDF (No 2) (2001) FLC 93-083 which is a decision of the Full Court of this Court. It was held in the particular circumstances of that case that the requirement to pay back money as a result of a successful appeal should commence from the date of the overpayment and run up until the time the payment was made.

6. The problem associated with the husband’s loss of economic opportunity as well as costs outlaid as a result of the borrowings or sale of assets, must also depend upon which court ultimately resolves the matter.  It seems to me that the discretionary power including in relation to interest is a matter for determination subsequent to the success or otherwise of the appeal being determined.

7. Mr Denton drew my attention to the reference in JEL (supra) in which the Full Court declined to allow the husband who had overpaid the wife as a result of the judgment, an entitlement to the penalty interest rate. Looking carefully at the judgment, I consider what the Full Court was doing was indicating how it proposed to exercise its discretion in that particular case and whilst clearly persuasive, it is not an authority to say that in every case any particular interest rate or formula should be applied. That must be the case where, if an appeal is successful, a Full Court in exercising the discretion of the s 79 must ultimately make an order which it is satisfied is just and equitable and the Court must be able to take into account a number of financial issues including those of concern as expressed by the husband.

8. Mr St John referred me to the decision of Maher and Anor and the Commonwealth Bank of Australia and Anor (supra) relating to the exceptional circumstances test and I have dealt with that above.  His submission was if that was the law, the husband could not have made out the case that he was putting.  I agree.  Mr St John referred me to paragraph 127 of the judgment of Mushin J which indicates the view that his Honour took of the financial circumstances of the party.  On those findings, any money paid over by the husband could be restored to him if he was successful in relation to the appeal.  Having carefully considered what his Honour said, I would have to agree.

9. Mr St John pointed to the fact that there was no evidence about the husband’s capacity to raise funds by means other than those referred to in his affidavit.  He pointed to the financial position of the husband and submitted that he had the capacity to borrow the necessary funds without being obliged to sell anything.  On that issue, it is noticeable that the husband’s evidence is silent.

10. Mr St John also pointed to the fact that there can be no argument about the husband’s complaint of the impending costs of capital gains tax occurring on a sale of assets because that was in fact exactly what Mushin J anticipated and made allowance for in the relevant orders.  Again, it is hard to argue with that submission.

11. It was put by Mr St John that the reference by the husband to having to make arrangements with co-trustees of the testamentary trust of his late father’s estate was designed to be misleading.  I do not find that the husband was doing that.  My understanding of what he was putting in his affidavit was that he had a variety of options.  There does not seem to be any basis upon which I could make such a finding as submitted by Mr St John.

12. Mr St John submitted that there was nothing special about this case particularly as the sale of assets about which the husband complained were not irreplaceable.  Effectively therefore, this is an argument about the quantum of money and the husband was in a position where he could effectively determine how the amounts were met.  I am satisfied that there is no hardship to the husband for the reasons I have earlier outlined and therefore this is not a case where exceptional circumstances are made out.  I also find that there is no risk to the husband that he could not recover from the wife that to which he was entitled if he overpaid and was successful on the appeal.

13. I turn then to the argument about chattels.

14. The parties had a holiday home in M.  Such was the bitter nature of their contest that they had to have interim orders about its occupancy.  It was to be shared.

15. The M property is and always has been owned by a family trust.

16. In the orders of Mushin J, a division of property occurred such that the husband was to retain the family trust and the wife was to relinquish any interest in it.  His Honour’s orders however required the wife to so relinquish that interest upon the payment of the now disputed capital sum which is the subject of the appeal.  It is open to argument therefore when the relinquishment of the wife’s interest will operate.  There can be no doubt however that his Honour intended that the husband be the ultimate beneficiary of the all of the assets of the trust.

17. Subsequent to the orders being made, the wife attended at the M property and took a number of chattels which included curtains, furniture and things such as gumboots.  All of the items appear to be personal property.

18. The husband’s submission was that the earlier right of occupancy which would have entitled the wife to be in the premises (and therefore presumably to take items from it), was discharged by the final orders made by Mushin J.  I am not at all convinced that that is the case having regard to the conditional nature of paragraph 18 of the orders of Mushin J.

19. There can be no doubt that the wife took the chattels because she left a note for the husband indicating that she considered what she was taking was a fair division of the chattels.  Senior counsel for the wife submitted that there was no evidence to suggest that the wife was doing anything wrong. 

20. A case such as this has to be determined on the balance of probabilities.  The question is who was the owner of the chattels on the day that the orders were made by Mushin J.  It is not at all clear.  The first problem is that the real property was owned by the trust.  The second problem is that the husband only becomes the absolute owner of, and the wife relinquishes any interest in, the trust upon the payment of the capital sum.  The third problem is that the husband asks me to draw an inference that by virtue of the fact that he became the absolute owner of the trust property, he should have the right to the contents of that real property.  Having regard to the fact that the real property is owned by the trust, I am not sure that I could conclude who was the owner of the chattels.  There was certainly no evidence presented by the husband that a balance sheet or depreciation schedule showed that the chattels were owned by the trust nor was there any evidence indicating that those assets specifically belonged to him personally.

21. I agree with senior counsel for the wife that the husband has not made out his case.  In those circumstances, his application must be dismissed.

22. Neither party addressed me on the question of costs and because of the busy nature of the list, I did not have sufficient time to deal with that matter.  I propose to make an order that if there is to be an application for costs, it be by written submissions and the matter to be determined in chambers.

I certify that the preceding Fifty Two (52) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 8 September 2011.

Associate: 

Date:  8 September 2011