Malloy and Ors & Stopford Malloy
[2017] FamCAFC 204
•5 October 2017
FAMILY COURT OF AUSTRALIA
| MALLOY AND ORS & STOPFORD MALLOY | [2017] FamCAFC 204 |
| FAMILY LAW – APPEAL – CROSS-APPEAL – LEAVE TO APPEAL – SPOUSAL MAINTENANCE – ENFORCEMENT – VARIATION – Where there is sufficient doubt about the decision so as to justify its reconsideration and substantial injustice would flow if the orders are not set aside, supposing those orders to be wrong – Leave to appeal granted and leave to cross-appeal granted in part – Where the primary judge did not err in finding that there was no change of circumstances sufficient to justify a variation of the spousal maintenance orders – Where the primary judge did not err in finding that there were arrears of spousal maintenance such that the application for enforcement was able to be brought – Where the primary judge found it appropriate to appoint receivers and managers to effect the enforcement of spousal maintenance – Where the primary judge applied Chapter 20 of the Family Law Rules 2004 (Cth) – Where s 109A of the Family Law Act 1975 (Cth) provides the power to make Rules which apply to the present circumstances – Where s 109A must be given a wide interpretation – Where s 80(3) of the Family Law Act 1975 (Cth) is not an exclusive source of power for the Rules made in Chapter 20 and does not impermissibly enlarge the court’s jurisdiction – Where the primary judge was not limited to s 80(1)(k) of the Family Law Act 1975 (Cth) as being the only source of power to appoint Receivers Where the primary judge erred in the exercise of her discretion in finding that it was appropriate to make the orders appointing Receivers – Appeal and the cross-appeal allowed in part. FAMILY LAW – APPEAL – FURTHER EVIDENCE – Where the further evidence sought to be adduced is controversial – Where the evidence does not buttress the findings of the primary judge – Application dismissed. FAMILY LAW – APPEAL – REOPEN – FURTHER EVIDENCE – Where the basis and the purpose of adducing the further evidence is unclear, and its relevance to the appeal and the cross-appeal is not apparent – Where the evidence does not demonstrate any error by the primary judge and nor does it buttress her Honour’s findings – Application dismissed. – Application dismissed. FAMILY LAW – APPEAL – COSTS – Where it was agreed that the question would be the subject of written submissions by the parties – Where orders are made for the filing of submissions from the date hereof. |
| Family Law Act 1975 (Cth) ss 66L, 74, 79, 80(1)(k), 80(3), 83, 105, 106, 107, 108, 109A, 114(3), 117, 123, Part VIII and Part XIII |
| Family Law Rules 2004 (Cth) r 20.47, Part 20.6 and Chapter 20 Australian Boot Trade Employees’ Federation v Whybrow & Co (1910) 11 CLR 311 |
| APPELLANT: | Mr Malloy |
CROSS APPELLANTS: | The Malloy Group |
| RESPONDENT: | Ms Stopford Malloy |
| FILE NUMBER: | ADC | 2595 | of | 2015 |
| APPEAL NUMBER: | SOA | 87 | of | 2016 |
| DATE DELIVERED: | 5 October 2017 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Thackray, Strickland and Kent JJ |
| HEARING DATE: | 22 February 2017 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 5 September 2016 |
| LOWER COURT MNC: | [2016] FamCA 748 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Whitington QC with Mr Bullock |
| SOLICITOR FOR THE APPELLANT: | Howe Jenkin Lawyers |
COUNSEL FOR THE CROSS-APPELLANTS: | Mr Harris QC with Ms Kari |
SOLICITOR FOR THE CROSS-APPELLANTS: | Barnes Brinsley Shaw Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Wells QC with Mr McGinn |
| SOLICITOR FOR THE RESPONDENT: | Piper Alderman Lawyers |
Orders
The applications in an appeal filed by the respondent wife on 22 December 2016 and 13 April 2017 be dismissed.
The appellant husband have leave to appeal orders (1) – (14) made on 5 September 2016.
The cross-appellants have leave to appeal orders (1) – (12) made on 5 September 2016.
The appeal and the cross-appeal against orders (1) – (12) made on 5 September 2016 be allowed.
The appeal against order (13) made on 5 September 2016 be dismissed.
The appeal against order (14) made on 5 September 2016 be allowed against that part of the order that provides for the appellant husband to pay the costs of the respondent wife of and incidental to the enforcement application filed by the respondent wife on 13 May 2016 but dismissed in relation to the balance of that order.
Orders (1) – (12) made on 5 September 2016 be set aside and the application filed by the respondent wife on 13 May 2016 to the extent that those orders were sought therein be dismissed.
That part of order (14) providing for the appellant husband to pay the respondent wife’s costs of and incidental to the enforcement application filed by the respondent wife on 13 May 2016 be set aside and the application by the respondent wife for an order for those costs be dismissed.
There be no order as to the costs of and incidental to the enforcement application filed by the respondent wife on 13 May 2016.
Within 21 days of the date hereof the appellant husband file and serve written submissions in relation to the question of the costs of and incidental to the appeal.
Within 21 days of the date hereof the cross-appellants file and serve written submissions in relation to the question of the costs of and incidental to the cross-appeal.
Within 14 days of the receipt of the written submissions of the appellant husband and the cross-appellants the respondent wife file and serve written submissions in relation to the question of the costs of and incidental to the appeal and the cross-appeal, including any response to the submissions filed by the appellant husband and the cross-appellants.
Within 14 days of the receipt of the written submissions of the respondent wife the appellant husband and the cross-appellants file and serve written submissions in reply.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Malloy and Ors & Stopford Malloy has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE |
Appeal Number: SOA 87 of 2016
File Number: ADC 2595 of 2015
| Mr Malloy |
Appellant
And
| The Malloy Group & Mr Q Malloy |
Cross-Appellants
And
| Ms Stopford Malloy |
Respondent
REASONS FOR JUDGMENT
Introduction
By Amended Notice of Appeal filed on 24 November 2016, Mr Malloy (“the husband”) applies for leave to appeal, and if leave is granted, appeals against orders made by Bryant CJ on 5 September 2016.
By Notice of Cross-Appeal filed on 3 October 2016, Mr Q Malloy and the Malloy Group (“the cross-appellants”) apply for leave to appeal, and if leave is granted, appeal against those orders made by Bryant CJ on 5 September 2016.
The applications and the appeals, if leave is granted, are opposed by Ms Stopford Malloy (“the wife”).
By Application in an Appeal filed on 22 December 2016, the wife seeks to adduce further evidence.
By further Application in an Appeal filed on 13 April 2017 the wife seeks to reopen the appeal to enable further evidence to be adduced.
Brief Background
The following is substantially adopted from the reasons of the primary judge.
The wife was born in 1981 and was aged 35 years at the time of the hearing before the primary judge. The husband was born in 1969 and was aged 46 years at that time.
The parties commenced their relationship in June 2010, and began cohabitation in March 2011, residing in a property purchased by the husband between 2000 and 2008 at Suburb B (“the Suburb B property”). The purchase of the property had been funded by substantial borrowings from the National Australia Bank and EE Bank.
In 2013 the husband and the wife married in the USA.
In November 2014 the husband purchased a property at Suburb E for $2,800,000 (“the Suburb E property”). That purchase was funded by funds advanced by the National Australia Bank and FF Pty Ltd, one of the companies in the Malloy Group of Companies. The amount outstanding at the time of the hearing before the primary judge secured by mortgage over the Suburb E property, was approximately $2,950,000. The National Australia Bank lent the money to another Malloy Group company, FF Pty Ltd as Trustee of Mr Q Malloy Family Trust as the borrower. The husband guaranteed the payments by FF Pty Ltd to the National Australia Bank, and FF Pty Ltd has made all repayments under the mortgage loans.
In March 2015 the parties separated, with the husband moving to the Suburb B property, and the wife remaining in the Suburb E property.
The Malloy Group of Companies was established by the husband’s father in the 1980s. The wife describes the structure of these companies as “complicated”. She says that the Malloy Group of Companies are run as a family business involving hundreds of millions of dollars in multiple states.
The wife deposed to the husband being a director and a shareholder of a number of companies in the Malloy Group of Companies.
The husband says that he left the Malloy Group of Companies in 1995, having been a director from 1987 – 1995. He then formed the AA Group, but sold a portion of that group which consisted primarily of two large properties in Adelaide in 2002. He retained various companies which owned substantial property, and he purchased land for major business operation.
Between 2000 and 2008 the husband says that he purchased a number of residential properties funded by substantial borrowings from commercial lenders. He says that from 2010 onwards his financial position deteriorated, caused mainly by inadequate cash flow. In order to reduce debt the husband says that, with the exception of the Suburb B property, all other residential properties were sold, together with the Property CC, and the proceeds of these sales were put to debt reduction.
In 2012 the husband’s father agreed to take over responsibility for the liabilities of the AA Group on the condition that he took control of parts of the business. The husband was required to guarantee payment of the debt for the funds advanced by the Malloy Group of Companies, and to provide mortgage security over the Suburb B property.
At EE Bank’s insistence the husband’s father is a co-borrower with the husband of the first mortgage loan from EE Bank. DD Pty Ltd as Trustee of the Mr Q Malloy Family Trust has met all payments in relation to the EE Bank loan and those payments are recorded as a loan to the husband.
The husband’s father has also funded the husband’s living expenses, and as a result of the mortgage repayments and the payment of those expenses, the husband was indebted to DD Pty Ltd as Trustee of the Mr Q Malloy Family Trust in the sum of $3,075,819 as at 30 June 2015. Thus in the end result, the husband retained ownership of the Suburb B property but with a substantial mortgage liability to EE Bank and to the Malloy Group of Companies secured by mortgage.
The husband says that he has “no occupation” and that his personal income tax return shows that he has no income. In short, the husband asserts that he has a shortfall of assets over liabilities, and that since approximately 2010 he has “relied entirely on the largesse of [his] father for [his] financial support. [He] therefore owe[s] the Malloy Group [of Companies] a substantial sum by way of loan for [his] living expenses”.
On 19 October 2015, consent orders were made by Dawe J for the husband to pay the wife, by way of interim spousal maintenance, the sum of $2,000 per week, with those payments being made direct to the wife, and the sum of up to $650 per week to offset the wife’s rental costs and any bond payment.
On 22 April 2016 Dawe J varied the previous orders by providing for the amount of $650 per week to be paid direct to the wife in lieu of the payment to offset her rental costs, and any bond payment, thus making the total weekly payment to the wife $2,650.
The applications before the primary judge were an application by the wife seeking orders for enforcement of those spousal maintenance orders, and an application by the husband for variation of those orders.
Bryant CJ dismissed the husband’s application, and by way of enforcement made orders for the appointment of Receivers of the property and the income of the husband “so as to give effect to ‘the orders for spousal maintenance’”. It is those orders which are primarily the subject of the appeal and cross-appeal.
Leave to appeal
Leave to appeal is required by both the husband and the cross-appellants. All parties accept that an applicant for leave must establish that there is sufficient doubt about the decision so as to justify its reconsideration, and that substantial injustice would flow if the orders are not set aside, supposing those orders to be wrong. We will proceed on the same basis.
In relation to the husband’s application for leave to appeal, we consider that leave should be granted. There is sufficient doubt as to the principal challenges raised by the husband in his appeal, namely, as to:
a)The finding of arrears of spousal maintenance.
b)The power to appoint Receivers.
c)The exercise of the discretion to appoint Receivers, if enlivened.
d)The refusal to find a change of circumstances sufficient to vary the orders for spousal maintenance.
As to the second limb of the test, there is the prospect of the husband suffering substantial injustice if the orders are not set aside, supposing them to be wrong. Subject to the discretion of the Receivers, the entirety of the husband’s assets may be sold, including his personal effects. Further, the requirement to pay to the Receivers any form of financial accommodation provided to the husband (order (10)) may also create substantial injustice.
We do not accept that, as submitted by the husband, there is a substantial injustice if his indebtedness secured over the Suburb B and Suburb E properties are crystallised. Further, we are not persuaded that if the orders are not set aside the husband will be “denied his fundamental right to legal representation”, or that “the appointment of the receivers puts the [husband] in breach of his obligations under the loan and guarantee arrangements with both the two Banks and the Malloy Group [of Companies]”, or that order (5) made by her Honour requiring the remuneration of the Receivers to be met from the husband’s financial resources, exposes the husband “to liabilities which, in turn, expose him to a sequestration order under the Bankruptcy Act”. Nevertheless, there is sufficient in the matters identified above in [26] to satisfy this aspect of the test, at least in relation to the orders appointing Receivers, and order (10).
In relation to the order dismissing the husband’s application to vary the spousal maintenance orders, although there was nothing specific put by the husband to suggest substantial injustice would flow if the order is not set aside, presuming the order to be wrong, it can readily be seen that in a dispute as to whether there are sufficient changed circumstances to justify variation, there may be injustice caused by not setting aside the order, and particularly where the first limb of the test is satisfied, resolving the doubt about the decision may also overcome any question of injustice.
The wife’s case in opposing the application for leave in relation to the appeal against the order appointing Receivers, rests primarily on the argument that “the subject matter of the proposed appeal is the enforcement of an unchallenged order of the court for the payment of spousal maintenance on an interim basis, initially consented to, and never contested as to liability, only as to quantum”. Further, the point is made that the order for the appointment of Receivers was an exercise of discretion by the primary judge to enforce an unchallenged interlocutory order.
All that is quite correct, but the issue now engaged is not the circumstances under which the initial orders were made, but the method of enforcement of those orders, and prima facie that is attended by sufficient doubt to warrant reconsideration by this Court. As to the issue of substantial injustice, plainly, as submitted by the wife, the actions of the Receivers will be subject to supervision by the court, but if there is a prospect of all of the assets of the husband being sold, then that is enough to satisfy the second limb of the test.
The wife’s case in opposing the application for leave to appeal the order dismissing the husband’s application to vary the spousal maintenance orders has more merit, but still fails. The ultimate issue was as to the amount of maintenance to be paid, and her Honour determined that there should be no change, finding insufficient change of circumstances. It is that finding which we consider is attended by sufficient doubt to warrant it being reconsidered, and we need not repeat what we have said about the question of substantial injustice.
We observe that leave to appeal is sought against all orders made by her Honour, but we fail to see how there can be any basis for the husband to appeal against order (15), namely the order dismissing the application for orders sought by the cross-appellants in their response filed on 14 June 2016. They were orders primarily seeking that certain orders sought by the wife in her enforcement application against the cross-appellants be dismissed, but her Honour did not in fact make those orders sought by the wife. Accordingly, we will not be granting leave to the husband to appeal that order.
In the circumstances, we propose to grant the husband leave to appeal against all orders except order (15).
Turning then to the application by the cross-appellants for leave, we do not consider that the cross-appellants have any standing to appeal against the order dismissing the husband’s application to vary the spousal maintenance orders (order (13)). Thus, leave to appeal that order does not come into play. For some reason order (15) is sought to be appealed as well, but as explained above that order dismissed the application by the cross-appellants seeking that certain orders sought by the wife in her enforcement application be dismissed, and her Honour did not in fact make those orders. Thus, it is difficult to see on what basis the cross-appellants seek to appeal that order, and we do not propose to grant leave to appeal the same.
Likewise, we do not propose to grant leave to appeal against order (14) which is the order providing for the husband to pay the wife’s costs. The cross-appellants have no standing to appeal against that order.
In their written summary of argument in support of leave to appeal order (13) the following is put:
6.That in relation to the refusal to vary the spousal maintenance Order of 19 October 2015 (as varied 22 April 2016), the Cross Appellants further submit:
6.1The decision is attended by sufficient doubt in circumstances where the Trial Judge did not make any finding that the Husband had the personal capacity to make the payment of any spousal maintenance payments to the Wife, and accordingly, any Order for the payment of spousal maintenance by him to the Wife is effectively an Order against a stranger to the marriage, which is beyond the power of the Court.
6.2A serious injustice would flow to the Cross Appellants as:
6.2.1The Cross Appellant cannot be compelled to make any spousal maintenance payments to the Wife whatsoever and certainly not beyond that which they are prepared to make.
6.2.2The consequences of the Husband’s default pursuant to any obligations upon him to pay spousal maintenance beyond that which the Cross Appellants are prepared to pay (if the order were not varied to that which the Cross Appellants are prepared to pay), would flow to the Cross Appellants if the Wife chooses to take enforcement proceedings (as she has done), and crystalize loses [sic] in the hands of the Cross Appellants.
In support of the cross-appeal if leave is granted, the following submissions are made:
9.The Cross Appellants however assert that they have standing to appeal the decision in circumstances where:
9.1Their rights are directly affected [r 6.02 of the Family Law Rules 2004 (Cth)] by the making of any Order for spousal maintenance both as to:
9.1.1The quantum to be paid to the Wife, as any payment to the Wife can only be met by the Cross Appellants as the Husband has no capacity to make such payments [see [136] of her Honour’s reasons]; and
9.1.2The effect upon the Cross Appellants of the enforcement of any obligation by the Husband to pay spousal maintenance to the Wife if the amount is beyond that which the Cross Appellant [sic] is prepared to pay.
9.2The position of the Cross Appellants is analogous to the position of a Trustee in bankruptcy, who has standing to intervene in spousal maintenance proceedings “if the Court is satisfied that the interests of the bankrupt’s creditors may be affected by the making of an Order…” [s 74(2) of the Act], given the Cross Appellant’s [sic] are servicing the Husband’s liabilities for the real properties staving off a foreclosure, which puts them into an entirely different category to any arms-length lender (whom the Cross Appellant’s [sic] acknowledge would not have standing).
However, these submissions are misconceived. The spousal maintenance orders are not orders against third parties, and in particular the cross-appellants, and there can be no issue about the power of the court either to make those orders, or to dismiss an application to vary them. We agree with the submission of the wife that there are no “rights” or “legally protectable interests” of the cross-appellants that are directly affected by order (13). It is beyond doubt that an appellant has no standing to appeal unless it can be demonstrated that they are aggrieved by the orders, or their interests are affected, and that is not the case here.
As to the suggestion that “the position of the Cross Appellants is analogous to the position of a Trustee in bankruptcy”, that is also misconceived. There is no such analogy here; the cross-appellants are third parties who happen to be financially supporting the husband.
However, if we are wrong about the standing of the cross-appellants to appeal order (13), their Grounds 1 and 2 are without merit, given that they raise the same complaints as the husband in his grounds of appeal, and as will be seen we find that those grounds have no merit.
We do consider though that the cross-appellants have standing to appeal against the orders appointing the Receivers, together with order (10). Plainly, their interests are affected by those orders. Specifically, in relation to order (10), it would seem to require the husband to cause his father or the Malloy Group of Companies to pay any financial accommodation intended for the husband to the Receivers.
As to whether the cross-appellants should have leave to appeal, just as with the husband, and for much the same reasons, we consider that the first limb of the test is satisfied. As to the creation of substantial injustice, we accept the argument of the cross-appellants that if the point is reached where either one or both of the properties is sold, then that may crystallise a significant loss in the hands of the cross-appellants in circumstances where they will have no control over the size of that loss.
The appeal
Grounds 1 and 2
That the learned trial judge erred in the application of section 83 of the Family Law Act 1975, by making a finding that the husband had not established that there had been a change in his circumstances, and in particular:
a) the learned trial judge failed to consider sufficiently or at all the evidence of the husband as to the change in the husband’s financial circumstances brought about by the withdrawal of the father or the Malloy Group financial support to the husband;
b) the learned trial judge failed to consider sufficiently or at all the evidence of Mr GG as to the change in the husband’s financial circumstances;
c) the learned trial judge erred in drawing an inference:
i) that the husband consulted with his father prior to consenting to the making of the Orders on 19 October 2015;
ii) that the husband was responsible for the decision to reduce payments to the financial benefit of the wife rather than the husband’s father;
iii) apparently that the husband will be given whatever financial accommodation he requests from his father and/or the Malloy Group.
That the learned trial judge erred in finding that the husband had not met the evidentiary threshold to establish that the consent order made on 19 October 2015 for the husband to pay spousal maintenance to the wife should be varied.
Plainly the primary issue here is whether pursuant to s 83 of the Family Law Act 1975 (Cth) (“the Act”) the husband has established a sufficient change of circumstances to justify a variation to the orders for maintenance made on 19 October 2015, as amended on 22 April 2016.
The husband’s case before her Honour in this regard was that since the orders were made, the withdrawal of his father’s financial support, via the Malloy Group of Companies, to enable those orders to be met had changed his financial position such that he was unable to fully comply with them. Indeed, the wife had only been receiving the amount of $650 per week from the Malloy Group of Companies on behalf of the husband for some time prior to the hearing before her Honour.
Her Honour found against the husband, saying this in [164]:
164.I have indicated in my findings that on the evidence, the husband and his father have cooperatively and collaboratively arranged payments for the benefit of the husband (and at times for the wife) to meet his needs including his forensic needs, in the course of these proceedings. I am not satisfied that the husband has demonstrated any change in circumstances since the making of the order on 19 October 2015 as amended by the Orders of 22 April 2016. All of the matters to which the husband deposes were in place as at the date of the order of 19 October 2015, including his father switching on and off financial largesse as the fortunes of the parties’ relationship ebbed and flowed.
As can be seen, the complaint on appeal is that her Honour in so finding “failed to consider sufficiently or at all the evidence of the husband”, and “the evidence of Mr GG [the CEO of the Malloy Group of Companies]”. However, that is a complaint that cannot be maintained.
In general terms it seems that the evidence being referred to here is the evidence in relation to decisions made by the Malloy Group of Companies as to what financial accommodation was to be provided to the husband, and including what, if any, financial accommodation would be provided to the wife on behalf of the husband.
However, it is readily apparent from her reasons for judgment, that her Honour was well aware of this evidence and that she considered it. Indeed, it could even be said that she accepted the accuracy of that evidence. Nevertheless, her Honour did not decide this issue on the force of this evidence. Her Honour found that the husband’s financial position, as presented at the time of the hearing, was substantially the same as it was at the time of the consent order, and at the time of the variation of that order. In short, as her Honour said in [164], and to repeat, “[a]ll of the matters to which the husband deposes were in place as at the date of the order of 19 October 2015, including his father switching on and off financial largesse as the fortunes of the parties’ relationship ebbed and flowed”.
None of the crucial findings made by her Honour are contradicted by the evidence of Mr GG. Indeed, in certain respects it supports those findings, and in particular as to the ebb and flow of payments following the ups and downs of the relationship and the litigation. We also note that Mr GG’s affidavit was sworn the day before the hearing, and does not explain (as it could have) why the new directions as to payment to or on behalf of the wife were issued at the time they were, in circumstances where until 9 June 2016 the husband’s weekly expenses had been running at $17,153.
The earlier findings referred to by her Honour in [164] are particularly those that appear at [137], [140], [141], and [145]. It is sufficient if we set out what her Honour said at [140(e)], namely:
Whilst as a matter of law, control by the husband’s father of the money gives him the capacity to make or stop making payments as he chooses, the evidence comfortably allows me to find that the impetus for making and stopping payments, flows from the circumstances of the husband and wife, vis a vis each other, rather than from any relationship between the wife and the husband’s father. Thus, pre-separation, payments are made; following separation, payments are reduced and benefits rescinded; the husband consents to orders effectively reinstating payments; during reconciliation payments and benefits are resumed; following separation, payments and benefits are again removed or reduced. Following dismissal of the husband’s application to vary orders, payments are reduced. All this occurred in the context of the relationship of the husband and wife and the ebb and flow of payments follows the fortunes of the husband and wife’s relationship and course of their litigation.
As submitted by the wife, the “change of attitude” on the part of the father and the Malloy Group of Companies did not amount to a change in the relevant circumstances. Those circumstances were that on the basis that his father would continue to provide financial accommodation “as he saw fit”, the husband consented to the order. Plainly, when the husband consented to the order in October 2015, he did so well knowing there was a risk that his father might “turn off the tap” at some time into the future. All that has happened is that that has come to pass, and thus there is no change of circumstances.
Further, it can be said that the directions given to Mr GG in June 2016 by the husband’s father did not bring about a change of circumstances because the amount being paid to the wife prior to that was $650 per week, and that continued.
We also note that her Honour was under no illusion as to the husband’s ability to make weekly payments in accordance with the orders for maintenance. For example, her Honour said this at [138]:
… The court may not be able to force the husband to make payments to which he consented on a weekly basis, but the husband has property which can be the subject of an order for sale to meet his outstanding obligations.
We consider that it was well open on the evidence for her Honour to not only make the findings that she did, but to also draw the inferences as to the relationship between the husband and his father. Further, we find that it is significant that the father did not provide any evidence before her Honour in the form of an affidavit.
There is no merit in Grounds 1 and 2.
Ground 3
That the learned trial judge erred in determining that there were arrears of spousal maintenance owed to the wife by the husband pursuant to the Orders of 19 October 2015 at the time that the wife filed her enforcement application, and in particular:
a) the learned trial judge erred in the treatment of the handwritten document prepared by the wife and signed by the husband on 19 December 2015;
b) the learned trial judge erred in failing to bring to account payments made by the husband for the benefit of the wife between 2 November 2015 and 22 January 2016 and proximate thereto;
c) the learned trial judge in characterising the payments referred to in 3b) hereof failed to have regard to the course of conduct between the parties in relation to the discharge of the spousal maintenance obligation prior to, during and following the attempted reconciliation period.
The complaint here is that during and just after the period of attempted reconciliation between 2 November 2015 and 22 January 2016, payments were made for the benefit of the wife that should have been treated as payments of maintenance resulting in there being no arrears of spousal maintenance at the time of the filing of the enforcement application.
At the hearing of the appeal, the husband confined the argument to two payments made on behalf of the wife, and did not seek to argue for example that the credit card facilities provided to the wife during that period should be counted.
The two payments were an amount of $10,000 paid to the wife’s legal representatives for their fees in January 2016, and an amount of $10,797 paid on 27 January 2016 for the design of a website for the wife.
In addressing the issue of how to treat payments made on behalf of the wife during and immediately after the period of attempted reconciliation, her Honour accepted the contention of the wife that the spousal maintenance orders did not operate during that period, and gave rise to no arrears. Her Honour treated all payments made on behalf of the wife as not being made under the compulsion of a court order, but voluntarily under a different arrangement. Her Honour said this at [119]:
… In view of the husband’s own concessions (see [105] and [106]) as to what he put in place when the parties resumed cohabitation, it would in my view be unconscionable were he able to rely upon those payments as meeting his obligations for maintenance during a different period, and not only meeting them, but on his case putting him substantially into credit when the parties thereafter separated. I regard the husband’s admissions as to what he was prepared to arrange during the reconciliation as being admissions of a different arrangement, confirmatory of the submissions of the wife that payments during the period of their attempted reconciliation should not be taken into account in calculation of what is owing pursuant to the orders of 19 October 2015 and 22 April 2016. Nor should the period of reconciliation be part of any calculation of arrears adverse to the husband.
The husband has provided no basis to suggest that her Honour erred in taking that approach, and we find that it was open on the evidence for her Honour to do so.
In her reasons for judgment, her Honour specifically dealt with the payment for the design of the website. Albeit the payment was made five days after the period of attempted reconciliation ended, her Honour treated that as a payment made under the voluntary arrangement referred to above, and not as a payment of maintenance. Again, nothing that the husband put to this Court persuades us that her Honour erred in that regard.
Her Honour also specifically dealt with the payment of the wife’s outstanding legal costs. It seems one payment of $5,000 was made in December 2015, and the amount of $10,000 was paid in January 2016. Once again, her Honour found that those payments were part of the arrangement the parties entered into during the period of attempted reconciliation. Indeed, the evidence of the husband was that payments in respect of the wife’s legal fees were “a consequence of the reconciliation” (husband’s affidavit 18.3.16, paragraph 18) and “[i]n short, [his] father agreed to reinstate all of the previous accommodation that he had provided to the wife for her living expenses and to meet the wife’s outstanding legal fees” (husband’s affidavit 18.3.16, paragraph 19).
As to the hand-written note prepared by the wife and signed by the husband on 19 December 2015, that provided, inter alia, for the payment by the husband of the wife’s outstanding legal fees because the wife had returned to live at Suburb E. It is not apparent on what basis it is said that her Honour erred in the treatment of that note, but plainly it supports her Honour’s finding that the payment of the wife’s legal fees was part of an arrangement entered into during the period of attempted reconciliation, and not payment on account of maintenance.
There is no merit in this ground of appeal.
Ground 4
That the learned trial judge erred in exercising the discretionary power to appoint Receivers to receive all of the income and property of the husband, in that:
a) the learned trial judge failed to consider sufficiently or at all the evidence of the husband relevant to the issue;
b) the learned trial judge failed to consider sufficiently or at all the evidence of Mr GG relevant to the issue;
c) the learned trial judge failed to consider adequately or at all the efficacy of the appointment of Receivers in light of the limited property of the husband and costs likely to be occasioned by the appointment of Receivers relative thereto;
d) the learned trial judge erred in countenancing the sale of the Suburb B and Suburb E properties by the Receivers in circumstances where there was unchallenged evidence that the husband’s interests therein had no net monetary value and the properties were secured by mortgages to third party commercial lenders and companies in the Malloy Group whose financial interests in the properties would or would likely be adversely affected by Receivers taking possession of the properties and/or purporting to exercise a power of sale;
e) the learned trial judge erred in inferring that the financial support provided by the husband’s father through the Malloy Group for the acquisition of the Suburb B and Suburb E properties was never a commercial arrangement and that accordingly that financial support was not an impediment to an order for sale in circumstances where those parties actually advanced the funds after the first mortgage loans and stood to lose in the event of a sale over which they had no control;
f) the learned trial judge failed to have regard to the level of debt secured by mortgages registered over the Suburb B and Suburb E properties and the likely deficiency before any payment could be made rendering it highly unlikely that any payment to the benefit of the wife or the Receivers will result;
g) the learned trial judge failed to consider the effect that the Orders would have in relation to the appointment of the Receivers upon the creditors of the husband.
h) the learned trial judge erred in failing to attend to the requirements of section 80(1)(k) of the Family Law Act 1975, that it be necessary to appoint receivers.
This is the principal complaint in this appeal, namely the appointment of Receivers.
The first question raised by the summaries of argument is what power was her Honour exercising in making these orders?
The husband contends as follows in his summary of argument filed on 13 January 2017:
22. The [husband] submits that the correct position is that:
22.1.to the extent that the Act expressly empowers the Court to make rules allowing for the appointment of a receiver in particular circumstances, the case falls outside those circumstances;
22.2.to the extent that the Act implicitly empowers the Court to make an order for the appointment of a receiver in the circumstances, the source of that power is s 80(1)(k) and the relevant test is whether the Court thinks that such an order is “necessary to make to do justice”.
The husband then contends that the order was “not necessary to make to do justice”, and that her Honour applied the wrong test in finding that it was “appropriate” to appoint Receivers to effect enforcement. Further, and in any event, it is said that her Honour erred in the exercise of the discretion to appoint Receivers, should such a discretion be “enlivened”. We will address the issue of the exercise of the discretion shortly.
Her Honour applied Chapter 20 of the Family Law Rules 2004 (Cth) (“the Rules”) in appointing the Receivers, however, as can be seen, that application in respect of a person in the position of the husband is challenged by him.
There is no doubt that the Act expressly empowers the court to make rules permitting the appointment of Receivers in particular circumstances.
Section 123(1) of the Act confers the power to make Rules of Court “not inconsistent with this Act” in relation to various matters. There is then s 109A which provides, relevantly, as follows:
109A(1)The power of the Judges, or a majority of them, under section 123 to make Rules of Court extends to making Rules of Court for or in relation to, or for or in relation to anything incidental to, the enforcement by the court of:
(a) an order under this Act affecting children; or
(b)an order under this Act (within the meaning of Part XIIIA); or
(c)the Child Support (Registration and Collection) Act 1988; or
(d) the Child Support (Assessment) Act 1989;
and, in particular, for or in relation to any of the specific matters mentioned in subsection (2).
109A(2) The specific matters are as follows:
(a)requiring a person to do any one or more of the following:
(i)to attend before a court or a Registrar and answer questions or produce documents;
(ii)to deliver a document or article to, or to a person specified by, a court or Registrar;
(iii)to transfer the ownership of specified property to another person;
(iv)to give another person possession (including exclusive possession) of specified property;
(v) to deliver a specified chattel to another person;
(vi) to do, or abstain from doing, any other act;
…
(c)taking any one or more of the actions mentioned in subsection (3) in respect of a person who:
(i)fails to pay the amount of a fine imposed under Division 13A of Part VII or under Part XIIIA; or
(ii)fails to pay an amount payable under a bond entered into under Division 13A of Part VII or under Part XIIIA; or
(iii)fails to pay under section 66L an amount of maintenance for a person over the age of 18 years; or
(iv)fails to pay an amount payable under a registered maintenance liability under the Child Support (Registration and Collection) Act 1988 or the Child Support (Assessment) Act 1989; or
(v)fails to comply with a requirement made as mentioned in paragraph (a);
…
109A(3)…[T]he actions in respect of a person the taking of which may be provided for by Rules of Court as mentioned in paragraph (2)(c) are as follows:
(a) the issue of a warrant for the arrest of the person;
(b)the issue of a warrant of execution against property of the person;
(c)the making of an order authorising the taking of possession of property of the person;
(d)the making of an order for the sequestration, and if necessary the sale, of property of the person;
(e)the making of an order for the attachment, by garnishment or attachment of earnings, of debts owed to the person;
(f)the appointment of a receiver of property of the person.
…
Pausing there, it is contended by the husband that the circumstances in which the order was made here do not fall within the categories identified in s 109A(2)(c). It is argued the judges cannot make rules under s 109A that apply to orders for the payment of spousal maintenance, and Chapter 20 therefore cannot be utilised to appoint Receivers in this case to enforce the husband’s obligations.
On the husband’s argument, that leaves ss 80(1)(k) and 80(3) as providing the only possible bases for the appointment of the Receivers whether pursuant to the Act or the Rules. The former provides as follows:
80(1)The court, in exercising its powers under this Part, may do any or all of the following:
…
(k)make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
…
That paragraph has been held to permit the appointment of Receivers, and we will return to that shortly.
As to s 80(3) that section provides as follows:
The applicable Rules of Court may make provision with respect to the making of orders under this Part in relation to the maintenance of parties to marriages (whether as to their form or otherwise) for the purpose of facilitating their enforcement and the collection of maintenance payable under them.
However, the husband contends that that sub-section does not allow Rules to be made permitting the court to make orders beyond those it is empowered to make by the Act, and in relation to the appointment of Receivers, that is s 80(1)(k). In other words, any rule made thereunder must require the court, in making an order for enforcement, to consider whether it is “necessary to make to do justice”; no rule in Chapter 20 does that, and the husband argues that that impermissibly enlarges the court’s jurisdiction and any orders made thereunder are beyond power.
Thus, to return to s 80(1)(k), the husband’s contention is that that section provides the only basis for her Honour’s orders, and her Honour was required to address whether the appointment was “necessary to make to do justice” in the circumstances of the case. Instead, her Honour considered whether it was “appropriate” (at [116]), and thus she has erred.
As to the claim that s 80(1)(k) provides the only source of power to appoint Receivers, it is said that that finds support in the Full Court decision of D Pty and Ors & Sadler and Ors (2016) FLC 93-736 (“Sadler”), [23]. We will return to that shortly.
For the wife’s part she says that Chapter 20 does have application in this case, and it is authorised by s 123(1), s 109A and s 80(3).
The wife submits that s 123(1) is more than sufficient to authorise rules providing for the enforcement of an order of the court by the appointment of a Receiver, but submits that Chapter 20 is an example of Rules of Court made pursuant to s 109A. The wife explains it in this way in her summary of argument filed on 6 February 2017:
9.Section 109A(1)(b) authorises Rules of Court “for or in relation to, or for or in relation to anything incidental to, the enforcement by the Court of…(b) an order under this Act (within the meaning of Part XIIIA)”. The reference to Part XIIIA is a reference to the definition of “order under this Act”, appearing in that Part; namely “(a) An order (however described) made by the Court under this Act”. It includes an interim order for spousal maintenance.
10.Section 109A(2)(a) goes on to provide particular examples of orders (“specific matters”) for which the Rules of Court may provide. Those examples include the making of Rules for or in relation to orders “(a) requiring a person…(vi) to do, or abstain from doing any other act”. There is no reason to suppose that the unrestricted breadth of that example does not include an order requiring a person to pay money periodically, as in spousal maintenance.
11.Section 109A(2)(c) then authorises the making of rules providing for the remedies specified in subsection (3) “in respect of a person who…(v) fails to comply with a requirement made as mentioned in paragraph (a)”. In contrast to s 80(1)(k) …, the remedies provided for in subsection (3) are remedies for failure to comply with an order. The remedies provided for in subsection (3) include (f) “the appointment of a Receiver of property of the person” – that is, of the person who has failed to comply with an order of the kind specified in paragraph (c) of subsection (2).
The wife accepts that s 80(1)(k) is wide enough in its terms to authorise the appointment of a receiver, however, submits that “the powers [under s 80(1)] are conferred on the Court as part of, or in the course of, exercising the powers of the Court under Part VIII, and are designed to facilitate compliance, not to remedy non-compliance”. That description also applies to s 80(3).
Further, the wife submits that s 80(3) is not an exclusive source of power for the Rules made in Chapter 20, and “there is no requirement that [those Rules]” should have the same necessity condition as is attached to s 80(1)(k)”.
This Court is persuaded by the submissions of the wife. We consider that s 109A does provide the power to make Rules which apply to the circumstances here; that s 80(3) is not an exclusive source of power for the Rules made in Chapter 20 and it does not impermissibly enlarge the court’s jurisdiction; and s 80(1)(k) is not the sole source of power to appoint Receivers.
Thus, her Honour was correct in applying Chapter 20 of the Rules of Court, and she was not required to find that the appointment was “necessary to make to do justice” as she would have been if she was limited to applying s 80(1)(k).
To return to Sadler, we note, of course, that the Full Court proceeded on the basis that the power to appoint Receivers arises from s 80(1)(k) (at [23]), but in so doing, the Court was not expressing the view that that paragraph was the only source of such a power. Further, in that case the issue was facilitating compliance, not remedying non-compliance, which is the issue in this case, and facilitating compliance is specifically the situation that s 80(1)(k) is designed for. In Sadler Receivers were appointed to realise interests in trust property for the purposes of property settlement, and in the two cases referred to by the Full Court, namely Jones v Jones (1968) 10 FLR 493, and Dimov v Dimov (1971) 17 FLR 462, Receivers were appointed to facilitate the winding up of partnerships for the purposes of property settlement.
In any event, it is also pertinent to observe that one of the successful complaints in the appeal in Sadler was that the primary judge appointed Receivers because it was “proper” instead of finding that the appointment was “necessary”, as strictly required by s 80(1)(k). However, the Full Court said this at [23]:
The power to appoint receivers clearly arises from s 80(1)(k) of the Act (Jones v Jones (1968) 10 FLR 493 and Dimov v Dimov (1971) 17 FLR 462). The power is to make “any other order” necessary to do justice. This enables the court to make “whatever orders it regards as appropriate” (R v Ross-Jones & Anor, Ex Parte Beaumont (1979) 141 CLR 504 at 509 per Gibbs J).
(our emphasis)
Here, her Honour found that it was “appropriate to appoint receivers and managers to effect the enforcement” (at [116] our emphasis). Thus, it could be said that in any event, her Honour’s finding was consistent with the Full Court’s interpretation of the requirements of s 80(1)(k).
As to the debate over the meaning of s 109A that was the subject of submissions before us, there is no doubt that that section addresses the making of Rules relating to enforcement, but we reject the argument of the husband that those Rules can only provide for enforcement of an order under s 66L (s 109A(2)(c)(iii)) rather than enforcement of a spousal maintenance order. The Rules in Chapter 20 can readily apply to the latter and be seen to be sourced to s 109A, and that is apparent from the following analysis:
a)The section provides for rules for the enforcement by the court of an order under the Act requiring a person to do an act (s 109A(1)(b) and s 109A(2)(a)(vi)).
b)The section provides for rules for the taking of an action, namely the appointment of a Receiver, in respect of a person who fails to comply with the requirement to do an act (s 109A(2)(c)(v)).
In that analysis, it can be seen that we also reject the contention of the husband that the reference to “specific matters” in s 109A(2) is a reference to rules only. We accept the submission of the wife that it is a reference to rules, but specifying the matters, namely the orders, that can be the subject of those rules, and that is a logical and necessary construct of s 109A(1) and s 109A(2)(a). To repeat, the natural interpretation of those sections is that subsection (1) provides the power to make rules with respect to the enforcement of certain kinds of orders, one of which is identified in paragraph (1)(b), and the power to make rules in particular with respect to orders of the kind that follow in paragraph (2)(a).
Given this debate it is opportune to look more closely at how s 109A should be interpreted.
Section 109A is a provision of the Act within Part XIII – Enforcement of Decrees containing ss 105 to 109B (inclusive). The proper interpretation of s 109A requires it to be read in the context of those provisions of which it is a part.
For example, s 105(1) provides:
Subject to this Part, to the regulations and to the applicable Rules of Court, all decrees made under this Act may be enforced by any court having jurisdiction under this Act.
It can be seen that s 105(1) gives primacy to the applicable Rules of Court.
Section 106 provides:
In determining whether to make an order enforcing a maintenance order, a court must not require that there be special circumstances that justify enforcing the maintenance order merely because the maintenance payable under it is more than 12 months in arrears.
There is no specific provision within Part XIII, or within the Family Law Regulations 1984 (Cth), as to the means of enforcement of a property order made under s 79 or an order for spousal maintenance under s 74.
Plainly then, s 109A can be seen as reflecting legislative intent that the means of enforcement of money and property orders be a matter governed by rules of court.
One interpretation of the section, given the words in subsection (1) which we have emphasised, is that the operation of subsection (1) is not confined by the following subsections. That is, that subsection (1) itself extends the rule making power under s 123 of the Act to rules “for or in relation to, or for or in relation to anything incidental to, the enforcement by the court of …” any of the items identified in (a) to (d) of that subsection.
On this interpretation, Chapter 20 of the Rules – Enforcement of Financial Orders and Obligations, are rules made in conformity with the rule making power under s 123, extended by s 109A(1) itself.
The alternative interpretation which was the approach adopted by both the husband and the wife here, is that, notwithstanding the words of subsection (1) we have placed emphasis upon, including the word “and” where it appears, subsection (1) is confined by the “specific matters” identified in subsection (2).
Given these two possible interpretations and the resulting ambiguity, it is legitimate to consider the Explanatory Memorandum to the Family Law Amendment Bill 1999 which, in Item 9 explains the insertion of s 109A into the Act as follows:
63.Item 9 will insert section 109A that will provide that Rules of Court can be made to deal with the enforcement of money and property orders made under the Act or the Child Support (Registration and Collection) Act 1988.
64.Subsection 109A(2) will provide for the types of matters that can be covered by the Rules of Court.
65.Subsection 109A(3) will specify the types of enforcement actions that can be covered by the Rules of Court.
66.Subsection 109A(4) will provide that regardless of how long an amount has been unpaid, enforcement action will be able to be taken in respect of either the whole or part of the amount.
67.Subsection 109A(5) will define property for the purposes of this section.
(our emphasis)
Given that the content of the “specific matters” in subsection (2) (leaving aside (c)(v) for the moment) does not expressly refer to requiring a person to pay “money” under a “property order made under the Act” or a requirement for a person to pay “money” under a spousal maintenance order made “under the Act”, it is counterintuitive to the intent expressed in paragraph 63 of the Explanatory Memorandum as set out above that the rule-making power conferred by the section does not extend to those requirements.
To the extent that the Explanatory Memorandum favours the alternative interpretation (itself a conclusion open to debate) it can be seen that the alternative interpretation is prone to produce absurd results if subsection (2)(c)(v) is not given a liberal construction. The juxtaposition, in subsection (3), between the types of enforcement actions as identified and the “specific matters” identified in subsection (2)(c) has the result that if subsection (2)(c)(v) is given a narrow construction, absurd results are produced. For example, one result is that it is legitimate for a rule to be made permitting the appointment of a receiver to the property of a person who “fails to attend before a court or Registrar and answer questions or produce documents” (s 109A(2)(a)(i)), or who fails to pay a fine in even a modest sum (s 109A(2)(c)(i)) but such a rule cannot be made in respect of a person who fails to comply with “money and property orders” involving potentially very substantial sums in total, and thus potentially very significant obligations imposed by orders.
It is trite that in construing statutes the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified so as to avoid that absurdity and inconsistency. (see Grey v Pearson (1987) 10 ER 1216 at 1234 per Lord Wensleydale; Australian Boot Trade Employees’ Federation v Whybrow & Co (1910) 11 CLR 311 at 342-2; Broken Hill South Ltd (Public Officer) v Commissioner of Taxation New South Wales (1937) 56 CLR 337 at 371 per Dixon J; Cooper Brookes (Wollongong) Pty Ltd vFederal Commissioner of Taxation (1981) 147 CLR 297 at 304 per Gibbs CJ and Minister for Immigration and Citizenship v SZJGV and Anor (2009) 238 CLR 642 at 651).
Such absurdity is avoided if, as the wife contends on the alternative interpretation, a wide interpretation is to be given to s 109A and the “specific matters” in subsection (2) and, relevant to this case, a wide meaning is given to the words in (2)(a)(vi) – “to do or abstain from doing, any other act”. Making payments of spousal maintenance pursuant to an order, on this formulation, involves the doing of (an) act(s).
In our judgment, on a proper construction of s 109A of the Act, Chapter 20 of the Rules, including the rule in relation to the appointment of Receivers, are rules made pursuant to the extension of the s 123 rule making power to make rules for the enforcement of money and property orders and these rules are available as a source of power to enforce, inter alia, an order for spousal maintenance including, inter alia, by the appointment of Receivers.
It is also our view that Chapter 20 is sourced to s 80(3) as well. However, as explained above, s 80(3), has a different reach; it primarily goes to facilitating compliance where there has not yet been non-compliance, but it can still be seen to authorise the rules in Chapter 20 to that extent.
Thus, her Honour was not limited to s 80(1)(k) as being the only source of power to appoint Receivers in this case. Further, as we have demonstrated it is not the case that the Rules relating to enforcement made pursuant to s 123(1), s 109A or s 80(3) have the effect of enlarging the court’s jurisdiction such that orders in cases such as the one here are beyond power.
The challenge here is not limited to a consideration of the source of the power to appoint Receivers, but Ground 4 specifically complains that in making the order her Honour erred in the exercise of her discretion.
We now turn to that complaint and address each alleged error seriatim.
Ground 4a)
It is not readily apparent what relevant evidence of the husband her Honour allegedly failed to take into account. In his summary of argument filed on 13 January 2017 (at paragraph 42) there is mention of evidence, presumably the husband’s, that he “had no independent financial resources and relied, in effect upon the goodwill of his father which had recently largely expired”, and yet the orders were still made by her Honour. That would certainly be relevant evidence, but plainly her Honour was aware of this evidence and gave consideration to it. Indeed, her Honour went to great lengths to detail the evidence of the husband put in response to the wife’s case at [93] – [112], and at [157] – [169] in the context of the husband’s application to vary the orders for spousal maintenance.
We can find no other reference to any specific evidence of the husband that it is said her Honour failed to consider.
It may be that the complaint is that her Honour failed to give sufficient weight to the evidence of the husband, but such a challenge must overcome significant hurdles as explained for example by Stephen J in Gronow v Gronow (1979) 144 CLR 513 at 519 – 520 as follows:
The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge…
Here, if this is indeed a weight challenge, then we are not persuaded that her Honour has erred in this regard.
Ground 4b)
This is in the same category as the previous complaint, namely it is unclear what aspect of Mr GG’s evidence her Honour failed to consider. We note that in Ground 4 of the cross-appeal specific evidence of Mr GG is referred to, but we cannot assume that the husband is raising the same issues. In any event, we are not persuaded that her Honour failed to consider any of the specific evidence identified in that ground of the cross-appeal. It is readily apparent from her Honour’s reasons that not only was she aware of that evidence, but took it into account to the extent necessary.
Mr GG swore an affidavit on 14 June 2016 which was filed on behalf of the cross-appellants. We note that much of that affidavit was inadmissible, but putting that to one side, it purported to detail the financial arrangements between the husband on the one hand and his father and the Malloy Group of Companies on the other.
Her Honour was plainly aware of that affidavit and indeed referred to it in her reasons for judgment in the context of the wife’s application for orders affecting third parties (at [156]).
However, we were not taken to any part of that affidavit in either the husband’s written summary or his oral submissions, in order to identify evidence not taken into account by her Honour. In any event, as with the evidence of the husband as to his financial position, the evidence of Mr GG as to the funds and accommodation provided to or on behalf of the husband, was largely non-contentious.
Grounds 4 c) – g)
These alleged errors by the primary judge can conveniently be dealt with together. Indeed, they comprise the primary complaint of the husband in relation to the exercise of discretion by her Honour.
In relatively simple terms, the question is whether, given all of the circumstances, was it necessary, appropriate, or proper (to include all possible scenarios) for Receivers to be appointed?
Those circumstances comprise the following:
a)The limited property and income of the husband, and the costs likely to be incurred in receiving and managing the same.
b)The level of debt secured by mortgages registered over the two properties and the likely deficiency before any payment could be made rendering it highly unlikely that any payment to the benefit of the wife or the Receivers will result.
c)The effect on the creditors of the husband.
Significantly these circumstances highlight, and mirror to a degree, the factors that a court must have regard to when considering whether to appoint Receivers (r 20.47(1)), namely:
a)the amount of the debt;
b)the amount likely to be obtained by the Receiver; and
c)the probable costs of appointing and paying a Receiver.
The amount of the arrears of spousal maintenance at the time of the hearing before her Honour was $21,197.86, and increasing at the rate of $2,000 per week, being the ongoing amount of spousal maintenance to be paid ($2,650), less the amount of $650 being paid on behalf of the husband by the Malloy Group of Companies.
We pause to note a contention of the husband that order (1) made by her Honour is strictly not an order that can be made pursuant to the Rules of Court insofar as it appoints Receivers of the income and property of the husband “so as to give effect to” the orders for spousal maintenance. The assertion is that the Rules are backward looking (e.g. see r 20.47) and do not justify allowing Receivers to get in funds in the event of future non-compliance. In other words, in this case, it can only be about the arrears and not future breaches. Indeed, it is argued that an appreciation of that can be seen in her Honour’s reasons at [135], where her Honour refers to the discretion the court has “as to whether or not to enforce those arrears”.
For the wife’s part she asserted that s 80(3) of the Act authorised the making of rules for the purpose of facilitating the enforcement of orders for maintenance, and the collection of maintenance payable under them. In other words, such rules would apply where there is not yet non-compliance, and they would justify forward looking orders such as those made by her Honour. The question then is whether the rules in Part 20.6 providing for the appointment of a Receiver can be seen as “facilitating the enforcement of orders for maintenance”. In our view they can be viewed in that light, and the requirement in r 20.47(1)(a) to have regard to “the amount of the debt” does not signify that the rule can only be applied where there is a debt. In any event, in this case there was both a debt and the prospect of ongoing breaches, adding to that debt. Further, it is readily apparent that her Honour in [135] was not thereby limiting her consideration to the enforcement of the existing arrears.
To return to the requirements of r 20.47(1).
The amount likely to be obtained by the Receivers was unknown given that it would depend whether the husband’s properties, and/or his jewellery and/or his household contents are sold, and what the net proceeds would be.
The evidence before her Honour was that the Suburb B property was worth $4,900,000 (husband’s financial statement filed 10 June 2016) with a first mortgage to EE Bank of $3,085,257, a second mortgage to FF Pty Ltd securing the guarantee liability of $3,263,133, and a third mortgage to DD Pty Ltd of $3,075,819.
The Suburb E property was said to be worth $2,800,000 (husband’s financial statement filed 9 June 2016) with a debt of $2,950,000.
The husband asserted that his jewellery was worth $50,000 and his household contents were worth $20,000 (husband’s financial statement filed 9 June 2016).
We note that none of the properties or the personal effects of the husband the subject of the order were formally valued, and the parties differed as to the estimates of their worth. For example, the wife put the Suburb E property at $3,200,000 rather than the $2,800,000 asserted by the husband.
Significantly, despite her Honour accepting, as she had to, that there was doubt about whether the husband had any equity in the properties, and indeed expressly making no finding about whether the amount of the arrears could be met from the proceeds of sale (at [146], [148], and [150]), her Honour proceeded to make the orders which could very well lead to sales of those properties.
We note at this point that the wife suggests that the prospect of there being no equity in the properties is not an impediment to the making of the orders, because it is up to the Receivers to decide whether to sell or not. That is true, but it is difficult to see the rationale of appointing Receivers if sale of the properties was not contemplated; we ask, where else was the money to come from to meet the arrears? The evidence of the husband was that he had no income, and if it was from the sale of his personal effects, we query the need to look to the real estate given the amount of the arrears.
As to the third factor, her Honour had before her details of the hourly rates that the Receivers would charge (wife’s affidavit filed 13 May 2016, annexure “OSM-7”), but no estimate was provided of what their total costs would be. Plainly though there was the prospect of those costs being substantial. We also note that her Honour ordered that the Receivers’ fees be paid “from the financial resources of the husband”, in circumstances where there was serious doubt as to whether the husband had any resources to meet that payment.
In any event, it can immediately be seen that there was an issue of proportionality present. In other words, given the amount of the debt, the amount likely to be obtained by the Receivers, and the probable costs of appointing and paying Receivers, was it necessary, appropriate, or proper to make the order? In addition, there is the effect on the husband of the appointment of Receivers; in the discretion of the Receivers all of his assets and any of his income would be received by them. Then, again in the discretion of the Receivers, any or all of those assets could be sold by them. Certainly, any actions by the Receivers would be subject to supervision by the court, but that cannot necessarily ameliorate the effect on the husband of the order.
As for the effect on third parties, if either of the properties is sold by the Receivers, the banks will want to be certain of being paid out, but given the indication of the value of these properties, there would appear to be no possibility that the second and third mortgages secured over the Suburb B property, or the mortgages secured over the Suburb E property, will be able to be paid out in full or in significant part. We will come in a moment to how her Honour addressed that.
Thus, there is little obvious benefit to the wife but a real risk of severe prejudice to the husband arising out of the orders, and that is without even considering order (10) made by her Honour, and which is the subject of Ground 5. It must not be forgotten that courts should be extremely cautious in appointing Receivers (National Australia Bank v Bond Brewing Holdings Ltd [1991] 1 VR 386) and particularly where, as here, the Receivers are to take control of all of the assets of the husband in circumstances where there is serious doubt that sufficient funds will be able to be generated to pay the arrears.
We pause to note that in support of her Honour’s orders the wife submits that a significant reason for the appointment of Receivers was the ability of the Receivers “to identify and extract the [husband’s] interest and entitlement in a complex corporate and trust structure” (the wife’s summary of argument filed 6 February 2017, at paragraph 29(c)). However, as will be seen, that was not a reason proffered by her Honour for making the orders.
Her Honour addressed these issues by first finding, at [116], early in her discussion of the matters to be considered, that she was satisfied “that in the circumstances of this case, with the husband’s assertions that his own property involves his father and associated companies, it is appropriate to appoint receivers and managers to effect the enforcement”.
It is immediately unclear to what her Honour was referring, but her Honour then elaborated on that finding at [139] and following:
139.In general terms, (I will refer specifically to the orders sought in due course), it is my view that it is appropriate to exercise the court’s discretion to enforce the arrears of maintenance from the assets of the husband. In my view it would be unconscionable in all the circumstances not to do so.
140.The matters that I particularly take into account in relation to the exercise of this discretion are as follows:
(a)The husband’s financial affairs are enmeshed with his father and have been for many years. There is evidence of support for the husband during financial difficulties and supporting his lifestyle.
(b)None of the dealings so described by the husband suggest anything but a close financial relationship in business dealings and in personal/living arrangements.
(c)It is clear that the husband was of the view that he should and could make payments to the wife in accordance with his consent given on 19 December 2015. I draw the inference from all of the facts that he was well and truly in a relationship with his father which enabled him to confidently make that commitment, confident that if required his father would meet the payments.
(d)The fact that the car was to be removed from the wife and a letter sent from the father’s solicitors to this effect was countermanded when the parties reconciled is evidence that this was so.
(e)Whilst as a matter of law, control by the husband’s father of the money gives him the capacity to make or stop making payments as he chooses, the evidence comfortably allows me to find that the impetus for making and stopping payments, flows from the circumstances of the husband and wife, vis a vis each other, rather than from any relationship between the wife and the husband’s father. Thus, pre-separation, payments are made; following separation, payments are reduced and benefits rescinded; the husband consents to orders effectively reinstating payments; during reconciliation payments and benefits are resumed; following separation, payments and benefits are again removed or reduced. Following dismissal of the husband’s application to vary orders, payments are reduced. All this occurred in the context of the relationship of the husband and wife and the ebb and flow of payments follows the fortunes of the husband and wife’s relationship and course of their litigation.
141.If the court is asked to find that these stops and starts were solely at the husband’s father’s whim, with the husband a hapless observer, that position must be rejected on the evidence. The inference that I draw from all the unchallenged evidence is that payments that have been made and then stopped have been done so as a consequence of the husband’s attitude to the wife and the fortunes of their relationship and not for any independent economic reason connected with the husband’s father. So is, in my view, the payment of monies both directly and indirectly during the course of the reconciliation evidence of the wish of the husband to have the payments made and the willingness of his father to make them.
…
145.The genesis of the business relationship between the husband and his father in which his father assisted him when his companies were in financial difficulty attests to the close personal and financial relationship that has attended their relationship and the manner in which distributions are made to the husband from the family trust and the Malloy Group of companies. I am satisfied that the husband’s consent to payment of maintenance for the wife and child was done reasonably and that adjustments to it both during the period of reconciliation and subsequently have been made at the behest of the husband and accommodated by his father. Accordingly, in my view, it is appropriate and proper to enforce the Husband’s commitment.
146.Whether or not the amount outstanding can be entirely satisfied will remain to be seen after sale of the assets as proposed by the wife.
147.Senior Counsel for the third parties opposed an order for sale of the real property on the basis that there was no equity in the property and the husband’s father was a mortgagee. They complained that the properties have borrowings in excess of their value and that sale would “crystallise that shortfall”.
148.It remains to be seen what value the properties have and whether there is any equity. The wife has contended that the husband’s father has encumbered the properties so as to quarantine the property from claims by the husband’s former wife. I do not make any finding in that respect. However, on the submissions of the husband and his father the taking of security over the properties was never a commercial decision as according to the husband, there was insufficient equity to meet the security after the interests of the commercial lenders was taken into account. Hence, on its face these were never commercial arrangements and I see no reason why they should be an impediment to an order for sale. In addition the husband asserts that Suburb B was on the market in 2015.
149.In any event, if the equity in the properties are so insufficient then the continued payment of the mortgages by the Malloy Group of companies is itself an uncommercial arrangement and in the normal course one would have thought that the sale of the properties would be to their benefit. Of course if it were the case the father and the Malloy Group of Companies security was never to be enforced then of course that would give some reason for continuing to make mortgage payments in what otherwise looks like an uneconomic arrangement and wishing to retain the properties.
150.However, I make no finding in that regard at this stage. The fact that the father and the Malloy Group of companies are secured creditors together with third party commercial lenders is not a reason in my view to refrain from enforcing the maintenance order by way of a sale of these properties. Whether and to what extent there is funds to meet the wife’s liability at the end will remain to be seen depending upon the value of the properties and the liabilities that have to be repaid.
(Footnotes omitted)
The principal difficulty that we have with these reasons is that nowhere is the issue of proportionality addressed, and there is scant consideration given to the requirements of r 20.47(1). There was also no consideration by her Honour of what other orders might have been made, including for example, an order for the sale of the husband’s jewellery. Further, it is still unclear what her Honour meant in [116], in identifying the justification for the appointment of the Receivers.
The history and the makeup of the relationship between the husband and his father would appear to have little or anything to do with whether the appointment of Receivers will produce sufficient funds to meet the arrears of spousal maintenance.
As can be seen her Honour expressly determined not to make a finding that the husband’s father has encumbered the properties so as to quarantine the same from claims from the husband’s former wife (at [148]), and importantly did not make a finding that the securities taken out by the Malloy Group of Companies were never to be enforced. Thus, it is difficult to see how her Honour could then dismiss them as not being impediments to the appointment of Receivers with a view to sale.
Further, finding that the cross-appellants are secured creditors, together with third party commercial lenders, is not a reason to refrain from enforcing the maintenance order by way of a sale of these properties (at [150]), her Honour conceded that there was no telling whether the arrears of spousal maintenance can be satisfied after the sale of the assets, if that is what the Receivers do (at [146] and [151]). With respect, that flies in the face of r 20.47(1)(b).
As to the inference by her Honour that the taking of security over the properties was “never a commercial decision”, and that therefore should not be an impediment to appointing Receivers, that overlooks the unchallenged evidence that the monies secured by the second and third mortgages were actually advanced, and the Malloy Group of Companies stood to lose in the event of the sale of the properties over which they will have no control.
Whilst we have found that her Honour was correct in dismissing the husband’s application to vary the consent order for spousal maintenance, by taking into account the involvement of the husband’s father at the time the orders were made, and the compliance, or lack of compliance with them, it is an entirely different matter to take the relationship between the husband and his father into account in appointing Receivers to receive the husband’s assets and income.
Accordingly, we find merit in this ground of appeal.
Ground 5
That the learned trial judge erred in that the Order:
a) is obscure and ambiguous and her Honour failed to explain what was meant or intended by the Order;
b) in the event that the Order means that the husband is required to cause any credit provider who has granted an allowance of credit, such as a credit provider of a credit card arrangement, or the Malloy Group to advance him further funds so as to increase his indebtedness, such Order is either beyond power or was not justified by any exercise of discretion disclosed in the Reasons;
c) further, to the extent that the Order directs the husband to cause any person (including his father or a member of the Malloy Group) to make payment to the Receivers of a gratuity provided to the husband for his ordinary sustenance or his legal costs of the within proceedings, then such Order is beyond power or was not justified by any exercise of discretion disclosed in the Reasons.
This ground relates to order (10) which is part of the suite of orders made by her Honour in appointing Receivers, and it provides as follows:
That the husband do, and an injunction is granted directing the husband to do, all things, provide all documents and authorities, and execute all documents necessary to cause any credit provider or any person providing financial accommodation to the husband to pay any monies or the money equivalent of any accommodation to the Receivers.
First, we accept that that order is “obscure and ambiguous”, and there is nothing in her Honour’s reasons which explains the same.
Secondly, making assumptions about what the order means, as suggested in Ground 5b), is it beyond power?
Plainly it cannot be justified by any Rule in Part 20.6 of the Rules. The court has the power to appoint a Receiver of the payee’s income or property, but this order is not within that description.
However, the wife argues that it is “an unexceptional exercise of the power conferred by s 114(3)”, namely an injunction in aid of the enforcement of a decree. We agree that that subsection provides the necessary power for this injunction to be made. What is required though by that subsection is that to grant the injunction it must appear to the court to be “just and convenient”. The difficulty here is that, despite the wife’s submissions to the contrary, her Honour failed to provide any reasons for granting the injunction, and certainly there is nothing said about it being just and convenient.
In these circumstances we also find merit in this ground of appeal.
The cross-appeal
We have found that the cross-appellants do not have standing to seek leave to appeal or to appeal against order (13) dismissing the husband’s application for variation of the spousal maintenance orders, nor logically order (14) which provides for the husband to pay the wife’s costs. However, we have found that the cross-appellants have standing to appeal against orders (1) – (9), and (11) and (12) relating to the appointment of Receivers, and order (10) putting in place an injunction.
Given that we have found merit in the husband’s appeal against those orders, it is unnecessary for this Court to address the separate challenge by the cross-appellants to those orders. In any event, the basis of that challenge is almost on all fours with the basis relied on by the husband.
The application in an appeal filed by the wife on 22 December 2016
By this application the wife seeks to adduce evidence comprising the affidavit of Mr R filed on 14 October 2016, and the affidavit of Ms AH also filed on 14 October 2016, but in particular the affidavit of Mr NN sworn on 13 October 2016 and annexed thereto. Those affidavits were filed in the Family Court of Australia in relation to an application filed by the husband and the cross-appellants seeking an order for a stay of the orders the subject of this appeal and the cross-appeal.
Mr R is one of the two Receivers appointed by the primary judge, Ms AH is the wife’s solicitor, and Mr NN is a forensic accountant instructed by the wife.
The affidavit of Mr R annexed a report as to work completed by the Receivers, and the affidavit of Mr NN comprises an opinion based on his analysis of the financial statements of some of the companies in the Malloy Group of Companies.
Plainly, those affidavits were not before the primary judge when she made her orders the subject of the appeal and the cross-appeal.
The application is opposed by the husband and by the cross-appellants.
During the hearing of the appeal and the cross-appeal, the wife indicated that she was not pressing the receipt of the affidavit of Mr NN, and accordingly we need only concern ourselves with the affidavit of the Receiver.
Further, given that we propose to dismiss the husband’s appeal, and to the extent necessary the cross-appellants’ appeal, insofar as they challenge the order dismissing the husband’s application to vary the orders for spousal maintenance, the application can only now be relevant, if at all, to the challenge to the order appointing the Receivers.
The principles as to the receipt of further evidence by this Court have been well settled by the High Court in CDJ v VAJ (1998) 197 CLR 172. There, McHugh, Gummow and Callanan JJ said this:
109.One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.
…
114.No doubt the Full Court will readily admit further evidence which is not in dispute and which the Court is able to evaluate and take into account in considering the appeal without the necessity to have the proceedings re-heard. Further evidence of this kind is particularly likely to be admitted where the evidence relates to events occurring after trial. In the case of undisputed evidence which the Full Court can evaluate as part of the evidence in the appeal, the discretion to admit the evidence may even be properly exercised without the Full Court considering what effect it would have had on the trial judge's decision. In that context, the likely effect of the further evidence on the Full Court's view of the evidence before the trial judge is the important consideration. Where there is no need for a new trial or extensive taking of evidence, other discretionary factors such as the availability of the evidence at the trial and the need for finality of litigation are likely to be more relevant in the exercise of the discretion than the effect that the evidence would have had at the trial.
(Our emphasis)
Plainly the evidence here is sought to be adduced to buttress the findings made by the primary judge, however, it is not apparent how the evidence is said to achieve that purpose. Nevertheless, we understand that the further evidence is controversial, and that is usually fatal to an application to adduce that evidence. We are told that a responding affidavit was filed by the husband where he challenges in particular the opinion and the analysis of Mr NN, and we understand that that opinion has been picked up by the Receivers.
Realistically, it is only evidence where there is no controversy that can be received by this Court as further evidence, assuming of course that the other principles emanating from the High Court in CDJ are also satisfied. Plainly that is not the case here and accordingly we propose to dismiss the application.
The application in an appeal filed by the wife on 13 April 2017
By this application the wife seeks to reopen the appeal to enable further evidence to be adduced.
The further evidence comprises the documents in actions no. 156 and 157 of 2017 in the Supreme Court of South Australia commenced by members of the Malloy Group of Companies on 7 February 2017 against the husband as defendant for possession of the Suburb B and Suburb E properties, and evidence of the service of the same, and in particular when they were brought to the attention of the wife.
Neither the husband nor the cross-appellants oppose this Court receiving that evidence, but both challenge the use to which that evidence can be put.
The basis and the purpose of adducing the further evidence is entirely unclear, and its relevance to the appeal and the cross-appeal is not apparent.
Plainly, the evidence does not demonstrate any error by the primary judge, and nor does it buttress her Honour’s findings.
In the written submissions filed on behalf of the wife on 26 April 2017, it is said that the “purpose” of the application is to bring before this Court “information relevant to the appeal which … was available to the husband and the Cross-Appellants to provide to the Full Court at the hearing of the appeal on 22 February 2017 but which was not disclosed”. However, it is mystifying what this Court can do with that information once received, and no clarity around that issue is provided in the wife’s submissions.
The only hint of any relevance of this information is found in paragraph 6 of the wife’s submissions. There it is said:
In support of the appeal in this Court, both the Appellant and Cross-Appellants complained that the appointment of a receiver was inappropriate or not needed because it would place in jeopardy the sale of Suburb B and Suburb E to the detriment of the Cross-Appellants and without benefit to the Respondent wife.
However, that is not an accurate representation of the respective cases of the husband and the cross-appellants. The issue for them was having no control over the sale of the properties if Receivers were appointed.
To revert to basic principle, the appeal and the cross-appeal are about whether the primary judge made an error, and to repeat, this information cannot and does not go to that consideration.
In the circumstances we propose to dismiss the application.
Conclusion
Having found merit in Grounds 4 and 5, we consider that the appropriate course is to set aside orders (1) – (12), and dismiss the application filed by the wife on 13 May 2016 insofar as that application sought those orders. As a result of the passage of time, and the fact that there would inevitably be a need for further evidence, which we anticipate would be controversial, it would not be appropriate to attempt to re-exercise the discretion. Nor, given our findings to the effect that those orders should not have been made, is it necessary to remit the proceedings for rehearing.
In relation to order (14), namely the order providing for the husband to pay the costs of the wife, we observe that although there was no ground of appeal, nor any written or oral submissions made by either the husband or the wife specifically directed to this order, understandably it was the subject of the appeal. The order sought if the appeal was successful was its discharge, and an order that the wife pay the costs of the husband of and incidental to the enforcement application filed by her on 13 May 2016.
Plainly, the fate of order (14) was subject to the result of the appeal against orders (1) – (13) made by the primary judge. Orders (1) – (12) were made on the basis of the orders sought by the wife for enforcement of the spousal maintenance orders, and order (13) was the order dismissing the husband’s application to vary those spousal maintenance orders. As can be seen the appeal against orders (1) – (12) has been successful, but the appeal against order (13) has been unsuccessful.
In these circumstances we propose to allow the appeal against order (14), but only to the extent that it provided for the husband to pay the costs of the wife of and incidental to the enforcement application filed on 13 May 2016. Accordingly, we propose to set aside that part of order (14) but leave in place the balance of the order, namely the order that the husband pay the costs of the wife of and incidental to the husband’s application to vary the spousal maintenance orders contained in the Response filed on 9 June 2016.
As to the orders sought in the appeal, that the wife pay the costs of the husband of and incidental to the enforcement application filed on 13 May 2016, we consider that there should be no order as to those costs.
Section 117(1) of the Act provides that each party is to bear their own costs, and it is only if there are circumstances that justify it that costs may be awarded in the discretion of the court (s 117(2)). Here, although the wife has ultimately been unsuccessful in seeking the appointment of Receivers, the enforcement application was only necessary because of the husband’s non-compliance with the orders for spousal maintenance. We also know from the reasons of the primary judge (at [21]) that the wife has the primary care of the parties’ child, which limits her capacity to support herself, and that the husband does not pay child support. Further, it is the husband’s case that he has no income, but as at 9 June 2016 his living expenses were running at $17,153 per week. He says that his father funds those expenses.
It is in these circumstances that we find that each party should bear their own costs in relation to the enforcement application.
Costs
In relation to the question of the costs of the appeal and the cross-appeal, at the conclusion of the hearing it was agreed that that question would be the subject of written submissions by the parties, and we propose to set out a regime in the orders that we make for the filing and serving of those submissions.
I certify that the preceding one hundred eighty-one (181) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Strickland & Kent JJ) delivered on 5 October 2017.
Associate:
Date: 5 October 2017
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