Manning & Hardy
[2022] FedCFamC2F 125
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Manning & Hardy [2022] FedCFamC2F 125
File number(s): ADC 561 of 2016 Judgment of: JUDGE BROWN Date of judgment: 21 February 2022 Catchwords: FAMILY LAW – Property – enforcement application – where respondent has failed to comply with orders made by the court – application for costs – indemnity costs. Legislation: Family Law Act 1975 (Cth), ss.79A, 81, 105, 117.
Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), rr.4.01, 12.08, 12.13, 12.17.
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), Pt.11, Div.11.1.3, rr.11.01, 11.04, 11.05,11.07, 11.18, 12.17Cases cited: Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
In the Marriage of Kohan (1992) 16 Fam LR 245
Kerr & Kerr (1983) 8 Fam LR 1023Division: Division 2 Family Law Number of paragraphs: 114 Date of hearing: 21 January 2022 Place: Adelaide Solicitor for the Applicant: Ms Indrasamy of RI Consulting Counsel for the Respondent: Ms Pangallo Solicitor for the Respondent: Bartel & Hall ORDERS
ADC 561 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR MANNING
Applicant
AND: MS HARDY
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
21 FEBRUARY 2022
UPON NOTING:
A.That the Respondent has not complied with Orders 1.2 and 4 of the Orders made by this Honourable Court on 9 July 2021 (“the July Order”) by the stipulated timeframe.
B.That the Respondent has satisfied Order 3 of the July Order.
C.Both the Applicant and the Respondent are provided with and/or are entitled to obtain the ANZ loan account statements regarding the B Street, Town C property from the ANZ Bank.
THE COURT ORDERS:
1.That the timeframe referred to in paragraph 1 of the July Order in relation to discharge and/or refinance of the mortgage secured against the property situated at B Street, Town C, referred to in paragraph 1.2 of the July Order, be extended to 31st March 2023.
2.Until such time as the Respondent satisfies Order 1.2 of the July Order, the rights and obligations of the parties referred to in Orders 5.2 - 5.4 of the July Order (insofar as they relate to the B Street, Town C property only) shall continue until 31st March 2023.
3.In full and final settlement of the Respondent’s obligations pursuant to paragraph 4 of the July Order and the Applicant’s costs arising from these proceedings the Respondent shall pay the Applicant the sum of $13,000.00 by way of 14 equal monthly instalments of $928.57 due and payable on the last calendar day of each month, the first payment due on 28th day of February 2022 and the final payment due and payable on 31st March 2023.
4.That in the event the Respondent contravenes or otherwise fails to satisfy any of the obligations as detailed in Orders 2 and 3 of this Order (and such breach continuing for more than 14 days from the date the Applicant notifies the Respondent of such breach) then in that case:
4.1The Respondent shall vacate the B Street, Town C property within 45 days of the expiration period of the breach referred to in paragraph 4 herein;
4.2The Respondent shall consent to the Orders sought by the Applicant as detailed in paragraphs 4, 5, 6, 7, 8, 9, 10,11,12 and 13 of the Application in a Case filed by the Applicant in this Honourable Court on 2nd June 2021 (“the Application”) save and except that:
4.2.1The vacation date at paragraph 5(a) of the Application shall be the date referred to in paragraph 4.1 herein;
4.2.2The Respondent’s obligation to comply with paragraph 6 of the Application shall only extend to the B Street, Town C property.
5.All extant applications be dismissed and the proceedings are finalised.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Manning & Hardy has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These are long running enforcement proceedings, following orders of the court initially made in September of 2016, which were varied in May of 2019. The parties to the proceedings are Ms Hardy (“Ms Hardy”) and Mr Manning (“Mr Manning”).
The parties are not married. They began to live together in 2003 and finally separated on 14 February 2016. They are the parents of X (“X”) born in 2005 and Y (“Y”) born in 2007.
The parties’ financial affairs are complex to say the least. It would appear to be the case Mr Manning has experience in business. At the time of the parties’ separation, he was engaged in a commercial enterprise in Town C relating to the re-development of a store business, which had been operated through a family trust and related companies.
The re-development apparently involved the demolition of the store and the construction, in its place, of a supermarket and five other shops. The costs of the development were significant and were to be defrayed by utilising the value of the parties’ equity in the land concerned and the security of other properties, which they owned.
The parties’ traumatic and emotionally-laden separation coincided with this somewhat complex business deal and it seems to be the case that, in the aftermath of separation, the deal significantly unravelled. At the same time the parties engaged in negotiations to settle property issues. Subsequently a series of orders were made, which have been varied both formally and informally and to a large extent have been more honoured in the breach than the observance.
It seems to be the case now that Mr Manning has discharged the bulk of his obligations to Ms Hardy but some loose threads remain. The parties now fundamentally disagree about what remains to be done and how their financial relationship should now be finalised some six years after their final separation.
Not the least of the controversies centres on costs. Ms Hardy seeks indemnity costs in an amount of around $21,000.00. Mr Manning opposes such an order. Essentially, it is his position that, although he has been late in paying what Ms Hardy was initially due, there are many extenuating circumstances, not the least of which is that he believes Ms Hardy’s behaviour throughout the proceedings to date has been far from reasonable and, in any event, he has over the past six years provided her with significant financial recompense independently of the orders. In addition, he asserts that he was disadvantaged when the first order was made as it did not reflect the parties’ true intentions and was unfair to him.
As will be demonstrated, as these reasons unfold, it has been difficult for me to reconstruct the parties’ complex financial affairs in the context of a truncated hearing. I have done the best I can in this regard. In my assessment, this was a case crying out to be resolved through sensible negotiation. It is regrettable that this has not occurred and each party has been put to significant expense in legal fees as a consequence.
BACKGROUND
Mr Manning commenced proceedings on 22 February 2016 in respect of children’s issues. At the time, it was his position that the children should return to live in Town C, where the parties had previously operated a business together, known at the Town C Store. From his perspective, his application was urgent, as he asserted that the mother had unilaterally relocated the children to City D.
This issue was speedily resolved, with the parties agreeing, on an equal time regime, based on them both living in Town C. However, in subsequent years, controversies have resurfaced regarding care arrangements for X and Y.
On 10 May 2016, Ms Hardy instituted property proceedings. She sought the following orders:
·The father vacate the former family home, located at E Street, Town C;
·The parties’ de facto property estate be divided 60%/40% in her favour.
In response, Mr Manning sought to retain the E Street, Town C property and otherwise that the asset pool be divided 60%/40% in his favour.
The parties were directed to attend a conciliation conference on 18 August 2016 and the case was otherwise adjourned to 1 September 2016. The parties were ostensibly able to reach agreement in respect of the final distribution of the property acquired during their relationship at this conference.
As a consequence, a detailed minute of proposed orders was prepared, which in its preface noted that the parties had agreed that the pool of assets available to be divided between them consisted of the following assets and liabilities:
F Street, Town C $970,000.00
Business –Store Town C 350,000.00
B Street, Town C ` 720,000.00
E Street, Town C 600,000.00
Town G Store 300,000.00
Motor Vehicle 1 9,500.00
Motor Vehicle 2 60,000.00
Motor Vehicle 3 20,000.00
Boat 20,000.00
Forklift 15,000.00
Bank accounts – ANZ Access Advantage -Respondent 9,211.00
NAB Classic Account –Respondent 14,539.00
ANZ Homeloan Interest Saver – joint 4,207.00
ANZ Business Cash Management 18,940.00
ANZ Business Classic Account 13,414.00
$3,124,811.00
Less Liabilities:
Mortgage – F Street Town C 440,000.00
Debt –Store Town C 400,000.00
Esanda Loan – motor vehicle 30,000.00
Mortgage – E Street, Town C 350,000.00
NAB Visa 1,316.00
$1,221,316.00
$1,903,495.00
Mr Manning had been legally represented by an experienced solicitor, when he had instituted the parenting proceedings. He was also represented at the conciliation conference. However, when the formal order was ratified by the court he elected to appear on his own behalf to save money. It has subsequently deposed that he was placed at a disadvantage, as a consequence, particularly as the resulting orders did not provide any clear orders in default if the case sum due to Ms Hardy was not paid.
The property located at F Street, Town C, is the real property on which the Town C Store is located. Prior to the parties’ separation, they were in discussion regarding re-developing the property to build a supermarket with five specialty shops on the site.
The property located at B Street, Town C is a residential property, which the parties rented. It was subject to a mortgage at the time of the first property order. Besides the Town C store, the parties also operated a store at Town G, which is located in the Aboriginal community of H, to the north of Town C.
The orders on which the parties agreed envisaged the following settlement of property:
·The property at F Street, Town C, on which the store was located, was to be sold, with Ms Hardy to receive an amount of $815,000.00, after the payment of costs and the discharge of the relevant mortgage.
·Ms Hardy was to transfer her interest in the former family home, located at E Street, Town C, to Mr Manning and he was to discharge the mortgage related to the property and indemnify Ms Hardy in respect of it.
·In addition, the rental property located at B Street, Town C was also to be sold, with Ms Hardy to receive any sum necessary to bring up her entitlements relating to the sale of F Street, Town C to the sum of $815,000.00. Thereafter, Mr Manning was to receive any remaining proceeds of sale.
·Otherwise, the parties agreed that they would each retain assets and financial resources owned or referable to them. In particular, each would retain their superannuation benefits and Mr Manning would retain the Town G Store business.
Counter-intuitively and confusingly, this order, expressed as a final order, also included an interim spousal maintenance order, which read as follows:
Until such time as the husband pays to the wife the sum of $815,000.00 in full and final settlement of the property matters referred to herein, the wife shall have access to and be at liberty to use the parties’ various credit cards being the NAB Visa account no. …65 and NAB Visa account no. …56, the Store Card J account no …2 and the Store Card K account for … for all the day to day living expenses, food purchases, clothing, fuel costs and extracurricular activities for the wife and the children, and such credit cards will be paid in full from the trading proceeds of the Town G Store and/or the Town C Store bank accounts.[1]
[1] See Orders of Judge Brown dated 1 September 2016.
By way of enforcement, the orders authorised the Registrar of the court to execute any necessary documents To give effect to the orders on proof of default and Ms Hardy was entitled to interest, at the rate of 9.5% if she did not receive the sum due to her of $815,000.00, which was due to her within 60 days of the date of the orders – being on my calculations, sometime around 1 November 2016. Otherwise the parties’ competing applications were dismissed.
No reference was made in the orders themselves as to what was their purported basis in percentage terms. I cannot now recall what I was told, in this respect, when I formally pronounced the orders, in the presence of each of the parties. Neither party has obtained a transcript of these proceedings. It may well be the case that no such record is obtainable at this distant remove.
Prior to the making of the relevant orders, Mr Manning did not file a statement of his financial circumstances. No apparent exception was taken to this. Ms Hardy did file such a statement, which indicated that the property on the F Street was owned by the Manning Family Trust No 2.
Order 5 of the relevant orders, made on 1 September 2016, envisaged that, on payment to her of the sum of $815,000.00, Ms Hardy would surrender any interest which she had in the Manning Family Trust No 1 and entities related to it. Up to this stage, I had not been provided with any great detail as to which entities specifically operated the various business of which the parties had previously been the guiding hands, during their relationship.
Order 5 also provided Ms Hardy with an indemnity in respect of all debts and liabilities of this trust. Order 6 provided a similar indemnity in respect of Manning Enterprises Pty Ltd. Order 7 also provided that Mr Manning would indemnify Ms Hardy in respect of all tax liabilities in respect of any entity in which she had an interest as at the date of the orders.
Over a year passed. On 15 November 2017, Ms Hardy filed enforcement proceedings. In her supporting affidavit, she deposed as follows, in respect of the earlier final order of 1 September 2016:
Pursuant to those Orders, I was to receive the sum of $815,000.00 by way of property settlement upon the sale of an investment/development property that the husband and I jointly owned in Town C, South Australia. Pending the sale of the investment property, I was to receive Spousal Maintenance such that I was to have access to and be at liberty to use the various credit cards, as nominated for all the day to day living expenses, food purchases, clothing, fuel costs and extracurricular activities for me and the children, and those credit cards were to be paid in full from the trading proceeds of the Town G Store and/or the Town C Store bank accounts.
At the time of the Orders being made, there had been extensive negotiations between the husband and I and a developer who intended building a shopping centre on the block of land. There was a conditional contract for the sale of the property pending the purchaser being granted Development approval from the District Council of Region L to establish a retail complex at that property. The settlement was due to occur 60 days from 11 October 2016.
I say that there has been no sale of the development property, and the developers have informed me that they are not willing to go ahead with the proposed development if the husband is involved.[2]
[2] See Affidavit of Ms Hardy filed 15 November 2017 at [3]-[5].
In these circumstances, in her application in a case, filed on 15 November 2017, Ms Hardy sought to be authorised to sell the property at F Street, Town C to realise the monies due to her, in the sum of $815,000.00.
Mr Manning responded to this application on 7 December 2017, raising issues in respect of both parenting and property. In respect of arrangements for the care of X and Y, he asserted that the children had never lived in the equal time regime ostensibly agreed upon by the parties. Rather, it was his position that the children had lived predominately in his care, due to issues relating to the mother’s alcohol consumption, which he alleged severely compromised her parenting.
In respect of the property proceedings, he acknowledged that the order of 1 September 2016 envisaged the sale of the development sale and potentially the B Street, Town C property to realise a cash settlement sum of $815,000.00 due to Ms Hardy. However, in this context he pointed to the spousal maintenance provisions of the order, which he alleged Ms Hardy had abused by excessive expenditure on the credit cards, which he was funding.
Later again, he alleged that she had removed thousands of dollars’ worth of stock from the store and withdrawn cash from its turnover, whilst not providing any labour in return. It is Mr Manning’s position that Ms Hardy has never followed the spirit of the 1 September 2016 orders and much of the factual justification for their making changed after they came into effect, chiefly arrangements for the care of the children.
Again, in this context, he asserts he was disadvantaged by not receiving appropriate advice about the implications of this order, particularly the open ended nature of the spousal maintenance order and its ostensibly unlimited entitlement conferred on Ms Hardy to use credit cards to fund her living expenses.
More significantly, it is Mr Manning’s case that Ms Hardy misstated the basis on which it was agreed that she would receive the sum of $815,000.00 from the sale of the F Street property. He asserts that any such sale was always contingent upon him being involved in the redevelopment in the sense that he would retain the right to operate the store business and its related liquor licence, fuel licence and its newsagency. By necessary implication, these various licences were of significant value.
Essentially, Mr Manning was not prepared to agree to a sale of the F Street property without his on-going involvement in its re-development and the developer concerned was not prepared to be involved with Ms Hardy. Accordingly, if the court granted Ms Hardy’s application, the property would be sold at a discount to what the parties had earlier agreed in the context their negotiations, particular the quantum of the cash sum to be paid to Ms Hardy.
In this context, he deposes as follows:
It was only on that basis that [his continued operation of the store business and its related licences] that the quantum of the settlement was agreed. If I was not to be involved in the re-development of the F Street property, I would not have agreed to pay the applicant the settlement sum. I say there would be a miscarriage of justice if orders were made in terms of the application as the applicant would be unjustly enriched. [3]
[3] See Affidavit of Mr Manning filed 7 December 2017 at [51]
In addition, Mr Manning was critical of Ms Hardy for refusing to agree to the sale of B Street, Town C, for a lesser asking price than had apparently earlier been agreed. It being his position, if Ms Hardy agreed to a lesser price it would result in her receiving a significant component of the cash sum to which she was entitled.
In these circumstances, he sought that the orders of 1 September 2016 be set aside pursuant to the provisions of section 79A of the Family Law Act 1975 (Cth) (“the Act”).During the latter portion of 2017 and the entirety of 2018 the case was adjourned from time to time, whilst further information was obtained in respect of issues to do with the parenting of the children and it became clearer what any consortium proposed to do in respect of the redevelopment of the F Street property.
In addition, from time to time, the parties agreed to vary the orders of 1 September 2016 in the light of the controversies between regarding the application of the spousal maintenance orders and what Ms Hardy asserted was her impecunious position given that she was no-longer involved in the management of either the store at Town C or the one at Town G and so no longer derived income from them. She asserted that Mr Manning continued to draw a comfortable wage from the two businesses. Mr Manning denied that this was the case, asserting that he was finding it increasingly difficult to manage the two stores and parent the children and as a consequence took very modest drawings from the businesses.
Ms Hardy deposed as follows:
I compromised my position in the agreed settlement for matrimonial property and agreed to the respondent retaining these income earning businesses pending payment of the settlement sum to me on the basis that I would be paid spouse maintenance until I received the settlement sum in full.[4]
[4] See Affidavit of Ms Hardy filed 2 November 2019 at [40].
As will become apparent, relations between the parties became more and more confused and complicated in this period, with each making allegations that the other was an unsuitable parent, who had significant issues regarding the use of alcohol. In addition, SAPOL and DCP became involved in the family and an expert psychiatric report was obtained in respect of Ms Hardy.
What had apparently occurred in the aftermath of the initial instigation of proceedings is that the parties agreed that Ms Hardy would move back into the former family home at E Street, Town C, but the parties would remain separated under its one roof, whilst they parented the children jointly, as their orders envisaged.
From Mr Manning’s perspective, this arrangement soon broke down due to Ms Hardy’s alcohol dependence and unreliability. He asserts that she spent some time at the E Street, Town C property but lived elsewhere from time to time, particularly at her mother’s home at Town M, a small township some 45 kilometres west of Town C. In these circumstances care of the children devolved on to him.
In an affidavit filed by her on 2 November 2018, Ms Hardy denied the extent of alcohol consumption attributed to her by Mr Manning but conceded that the shared care regime for X and Y had broken down by May of 2018 and she had not spent time with them since.
She also alleged that Mr Manning had raped her after clandestinely administering a stupefying agent to her drink. She assert that this was the reason why her relationship with the children had broken down but she did concede that she had been apprehended for driving under the influence of alcohol and had received some treatment for alcohol dependence. A complaint to police was made in respect of the rape allegation.
In October of 2017, the parties, through their then solicitors, negotiated an alternative to the spousal maintenance order of 1 September 2016. It was agreed that, in lieu of Ms Hardy having unfettered access to the relevant credit and store cards, Mr Manning would pay her the sum of $400.00 per week and she would receive the rental from the B Street, Town C property. Ms Hardy apparently moved into the B Street, Town C property on 12 May 2018.
This agreement was not formally noted. In particular, there was no variation made to the 1 September 2016 order. In addition, in June of 2018 Mr Manning paid Ms Hardy the sum of $250,000.00. Again this arrangement was not made pursuant to any formal order and it seems to have had an ad hoc quality to it.
The evidence, as best I can glean it, regarding the source of this sum is murky. In October of 2017, Mr Manning’s solicitor wrote to Ms Hardy’s solicitor informing her that the F Street development has essentially fallen over. In these circumstances, it was proposed that both the store and the land relating to it be sold.
What subsequently happened is that Mr Manning apparently formed a consortium, of which he as a part, to purchase the F Street property from himself and subsequently developed it. I have not been provided with what any documents in respect of this transaction. However, on the day prior to the current round of enforcement proceedings he filed an affidavit which stated as follows:
In or about 2018/19, with the assistance of my accountants/financial advisor, I was able to form a consortium to purchase the F Street property and fund the development. However the subsequent sale of the F Street, Town C only achieved a sale price of $800,000.00 rather than the $980,000.0 as per the 2016 order. I was able to utilise some of the net proceeds being say $400,000.00 (noting there was a loan of $440,000.00 to be discharged) to pay the applicant $250,000.00 and I retained the balance for myself to assist with the costs associated with the development, the new businesses and my general living expenses.[5]
[5] See Affidavit of Mr Manning filed 20 January 2022 at [11].
In November of 2018, Ms Hardy changed solicitors and brought an application in a case seeking parenting orders and that Mr Manning pay all arrears of maintenance arising under the 1 September 2016 order. How this sum was to be calculated was not specified. Orders were subsequently made for the filing of responding affidavit material by Mr Manning and the appointment of a child inclusive family dispute resolution conference.
Significant controversies remained between the parties regarding Ms Hardy’s alcohol use and its impact on the children, who were reported to have become alienated from the mother as a result of her behaviour, which includes possible mental health issues, her tendency to drink to excess and to smoke, and her inability to put the needs of her children above her own.[6]
[6] See Child Inclusive Conference Memorandum to the Court dated 23 January 2019.
It was essentially Mr Manning’s position that, in much more straitened financial circumstances than he had anticipated and in a much more challenging parenting dynamic, he had done the best he could to provide financial support to Ms Hardy, whom he found extraordinarily difficult to communicate with.
It being his position that Ms Hardy had not assisted in any orderly approach to selling the B Street, Town C property and she had, as previously indicated, taken far more from the business, pursuant to the spousal maintenance order than he had envisaged. In these circumstances, he sought the dismissal of the relevant spousal maintenance order and resisted any order for him to pay arrears.
In the early part of 2019, the parties were referred to an informal conference with their legal advisors to see if the financial issues remaining outstanding could be brought to a consensual conclusion. It being readily apparent that a significant period of time had elapsed since the 1 September 2016 orders were made and much had changed in the period concerned, both in terms of parenting arrangements and financial matters.
In the lead up to this conference, Mr Manning was directed to file an updated statement of his financial affairs, which he did on 20 March 2019. This document has never been subject to any scrutiny through cross-examination. In many ways, it is a perplexing document. It does not include any reference to the E Street, Town C property; values B Street, Town C at $550,000.00; and under the heading investments list the Town C Store at $100,000.00, but notes it is soon to be demolished and has the Town G Store at $50,000.00. These properties are subject to significant charge. No reference is made to the consortium. There is reference to a self-managed superannuation fund.
In April of 2019, Ms Hardy’s then solicitor withdrew from the case. In the context of Ms Hardy being unrepresented and Mr Manning being represented by his long standing solicitor Mr Nicholls, the parties submitted a proposed final order in respect of both children’s issues and financial matters, including the vexed issue of spousal maintenance, on 21 May 2019. By necessary implication it also resulted in the finalisation of Mr Manning’s section 79A application.
The order noted that Ms Hardy had been paid $250,000.00 towards the original settlement sum of $815,000.00. It fixed arrears of maintenance in the sum of $15,000.00, which was to be paid on or before 30 September 2019. The ultimate aim of the consent order was that Mr Manning would transfer his interest in the E Street, Town C property and its contents to Ms Hardy on or before 30 April 2021, which was referred to as “the settlement date”. Prior to the settlement date and prior to it coming into effect:
·Ms Hardy would have sole use of the E Street, Town C property;
·Mr Manning would have sole use of the B Street, Town C property;
·Mr Manning would pay all the mortgage and loan repayments due in respect of both properties and all other outgoings including rates, taxes and insurance;
·On the settlement date, Mr Manning would discharge the mortgage on E Street, Town C and transfer the property to Ms Hardy:
·Concurrently, any mortgage on B Street, Town C would be discharged and Ms Hardy would transfer her interest in the property to Mr Manning;
·If Mr Manning defaulted, B Street, Town C was to be sold and its proceeds utilised to discharge any loans secured against E Street, Town C.
The May 2019 order provides, inter alia, as follows:
Order 5 of the order [of September 2016] be amended such that the settlement sum payable to the applicant be reduced to $250,000.00 upon noting the applicant (Ms Hardy) has already been paid the said amount of $250,000.00.
Specifically, various provisions of the earlier orders providing for the sale of the F Street property were discharged (Order 1), as was the order transferring the former family home at E Street, Town C from Ms Hardy to Mr Manning (Order 2); as was the order relating to the sale of B Street, Town C (Order 4). In addition to order attaching interest to the default in payment at the rate of 9.5% (Order 15) was also discharged.
Notation prefacing the May 2019 order indicated as follows:
·Orders 5 (payment order and related indemnities); 6 (indemnity in respect of Manning Enterprises Pty Ltd; 7 (general indemnity in respect of tax); 8 (transfer of a motor vehicle to Ms Hardy) and 9 (closure of a home loan account) of the orders of September 2016 had been satisfied;
·In lieu of any unpaid spousal maintenance, Ms Hardy receive $15,000.00;
·In lieu of receiving the sum of $565,000.00 Ms Hardy receive E Street, Town C in full settlement;
·Mr Manning retain B Street, Town C;
·This was said to achieve a 62/38% settlement in Ms Hardy’s favour.
The orders made no specific reference to the F Street property. All applications were otherwise dismissed. With the apparent consent of each of the parties, as a consequence of them each annexing their signature to the relevant minutes, the court made these orders on 22 May 2019.
THE CURRENT PROCEEDINGS
Ms Hardy commenced the current round of proceeding on 26 May 2021 engaging her fourth solicitor. She sought the orders to the following effect:
·Payment of the sum of $8,705.25 relating to indemnification of tax debts arising in tax years of 2016 and 2017;
·Interest at the rate of 9.5% on this debt – said to be applicable as a consequence of the September 2016 order;
·In order to secure this payment, B Street, Town C be sold;
·Mr Manning pay any arrears of mortgage payments relating to E Street, Town C.
In an affidavit filed in support of her application, Ms Hardy deposed that she had applied for a JobKeeper payment in March of 2020. In this context, she was advised by Centrelink that the ATO had recorded her as having a tax debt of $5,098.64 relating to the operation of the various entities which operated the Town C and Town G stores and in respect of which she believed she was indemnified by the 1 September 2016 orders and which attracted interest as specified by those orders.
Mr Manning responded to this application on 28 June 2021 seeking an extension of the settlement date specified in the orders of 21 May 2019 be extended to 31 October 2021. He conceded that settlement of the transfer of E Street, Town C to Ms Hardy had not occurred and neither had the inter-related transfer of B Street, Town C to him. More significantly, both still jointly held properties remained subject to joint mortgages in favour of the ANZ Bank. It would appear also to be the case that these mortgages secured other borrowings relating to the re-development of the F Street property.
In addition, Mr Manning deposed that on a purely commercial basis and without any formal admission that he was responsible for them he would pay Ms Hardy’s tax debts relating to 2016 and 2017, and other withholding tax. He further deposed that he would be in a position to re-finance the various mortgages by 31 October 2021 and given the long history of the matter it would be fundamentally unfair to him for the B Street, Town C property to be sold, given it provided shelter not only for him but the parties’ two children and Ms Hardy had been living in the E Street, Town C property securely.
The case came before me on 16 June 2021. I referred them to an urgent conciliation conference. I ordered that Mr Manning pay the tax attributable to Ms Hardy, as he had indicated he would, in an amount of $8,705.25 by 25 June 2021. The case was otherwise adjourned until 9 July 2021. On this date, yet another order was made with the hope that it would finalise the parties’ financial relationship with one another.
The matter was not listed in court on the request of Ms Hardy’s solicitor, who in an email advised that the case had resolved and a minute of order would be forthcoming. In effect it was agreed that Mr Manning had paid the tax debt, albeit some days later than ordered.
It was also agreed that Mr Manning would have a further 60 days in which to refinance the E Street, Town C and B Street, Town C mortgages. In addition, he agreed to pay the sum of $3,000.00 towards Ms Hardy’s legal costs.
The following unusual order was made in chambers, namely:
In the event the respondent (Mr Manning) fails to satisfy order 1 hereof in so far as he is unable to refinance the mortgages specified in orders 1.1 and 1.2 then at the end of the sixty day period, he agrees to pay interest to the applicant in the sum of $10,000.00 being the agreed amount between the parties of the interest payable to the applicant (Ms Hardy) from 30 April to the end of the sixty day period.
In my view, this is analogous to a penalty clause than an interest payment.
The case was then adjourned before Registrar McDonald on 6 September 2021, who in turn directed it be listed before me given my long involvement as the docket judge. It was ultimately fixed for interim hearing on 29 November 2021.
On 24 November 2021, Ms Indrasamy filed an affidavit to which was attached an email from Mr Manning’s solicitor, which read, in part, as follows:
Settlement of the discharge of mortgage on E Street, Town C was effected on 7 September 2021…As the discharge was a stand alone discharge (ie did not include a transfer as the E Street, Town C property is already registered in your client’s name) a PEXA settlement was not possible. In any event, ANZ will of course attend to the discharge of mortgage. Accordingly the E Street, Town C property is now unencumbered and your client is now free to do with the property as she pleases.[7]
[7] See Affidavit of Rehka Indrasamy filed 24 November 2021 at Exhibit C.
I took this at its face value, namely that Ms Hardy was the sole proprietor of the E Street, Town C property and it was no longer subject to any mortgage. Accordingly, she could sell it or rent it out, as she saw fit.
On 24 November, I was told by counsel for Mr Manning, Ms Pangallo, that her client needed a further indulgence from the court to finalise his finance application to discharge the relevant mortgages in question so that Ms Hardy was no longer personally subject to them.
This application was strongly opposed by counsel for Ms Hardy, Ms Indrasamy who wished to proceed with her client’s application, which was for her to be appointed to sell the B Street, Town C property, in which Mr Manning and the children of the relationship continued to live. Not only this, but she sought to occupy the property pending its sale.
I did not consider this would be a just outcome given Ms Hardy had apparently the security of the E Street, Town C property in which to live, if she desired to do so. In these circumstance, the case was further adjourned until 21 January 2022. On the day prior to this hearing, Mr Manning filed an updating affidavit. Needless to say, it was not helpful that it was filed so close to the adjourned hearing, given the acrimonious controversy between the parties’ legal representatives, which had been readily apparent to me, at the earlier hearings.
In this affidavit, Mr Manning deposed that he had been able to borrow monies sufficient to bring the amount secured against the E Street, Town C property to nil by 31 October 2021. However the financier concerned was not willing to discharge the mortgage until November of that year. The mortgage in respect of the B Street, Town C property remained in the parties’ joint names.
Accordingly, as at January 2022, Ms Hardy had received $265,000.00 in cash and was the registered proprietor of the E Street, Town C, which was unencumbered. It was also Mr Manning’s position that he had significant tax debts, which precluded him from being able to discharge the B Street, Town C joint mortgage. He hoped that new businesses, which he had commenced in Town C in November 2020, would in due course enable to discharge the last of his obligations to Ms Hardy.
Accordingly, outstanding as at the date of the 21 January hearing were the following issues stemming from the 22 May 2019 order and the 9 July 2021 order:
·Discharge of the joint B Street, Town C mortgage;
·Payment of $3,000.00 costs ordered;
·Payment of the $10,000.00 penalty.
In addition, Ms Indrasamy sought the imposition of indemnity costs.
In support of his oral application to extend time to refinance the B Street, Town C mortgage to 31 March 2023, he deposed as to the following facts:
·Ms Hardy had moved away from Town C in 2018 and he had assumed sole responsibility for the care of X and Y in the period since with no financial support from Ms Hardy;
·Ms Hardy had rented the E Street, Town C property at a weekly rental of $300.00;
·He had discharged the mortgage on E Street, Town C in November 2021;
·To force the sale of B Street, Town C would significantly disadvantage not only him but also the children;
·There were few alternative sources of rental accommodation in Town C.
In conclusion, he deposed as follows:
The applicant has the benefit of E Street, Town C, which I say is worth at least $565,000.00 in the current market. That property is unencumbered and unoccupied. The applicant also has the benefit of the initial settlement sum of $265,000.00. With respect, I do not understand the applicant’s urgency with respect to the removal of her name from the mortgage over the B Street, Town C property given it is causing her no detriment whatsoever.[8]
[8] See Affidavit of Mr Manning filed 20 January 2021 at [52].
In these circumstance, he proposed paying the remaining cash sum of $13,000.00 in monthly instalments of $928.57 over 14 months concluding on 31 March 2023 during which period he would continue to indemnify Ms Hardy in respect of all other outgoings in respect of the B Street, Town C property. He also proposed that in the event of him breaching these proposals there be a self-executing order leading to the sale of the property.
This proposal was not accepted by Ms Indrasamy, counsel for the wife, who agitates for the immediate sale of the B Street, Town C property, which Ms Pangallo submits is out of proportion to the cash sum due to Ms Hardy and is an outcome which properly fits the appellation of draconian. Ms Indrasamy reiterates her application for indemnity costs.
LEGAL PRINCIPLES APPLICABLE
Courts have a fundamental obligation, when called upon, to enforce the orders which they make. Otherwise the orders in question become meaningless as lacking in force and the relevant court runs the risk of losing the confidence of the community which it serves.
The same principles apply to orders made by consent, given the focus the Family Law Courts place on separated partners reaching their own sensible decisions in respect of the division of their property.
It is clear that the court has a discretion as to whether or not orders should be enforced. This follows from section 105 of the Act which reads as follows:
Subject to this part, to the Regulations and the applicable Rules of Court, all decrees made under this Act may be enforced by any court having jurisdiction under this Act.
In particular, the court may refuse enforcement if, in the circumstances prevailing at the time of the application, it would be inequitable to do so. [9]
[9] See Kerr & Kerr (1983) 8 Fam LR 1023 at 1026 (Nygh J).
Pursuant to the relevant regulations, the court is provided with a complex arsenal of measures directed towards the enforcement of its orders, particularly those orders which are entitled financial orders and the obligations related to them. Chiefly, they are contained in Part 11 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
Rule 11.01(1) of the Rules defines what obligations may be enforced. They are as follows:
·An obligation to pay money;
·An obligation to sign a document;
·An order entitling a person to the possession of real property;
·An order entitling a person to the transfer or delivery of personal property.
Pursuant to Rule 11.01(2), an obligation to pay money includes a provision requiring a payer to pay money under the Act. Clearly, the July 2021 order requires Mr Manning to pay Ms Hardy a sum of money. Pursuant to Rule 11.04(a), Ms Hardy has an entitlement to enforce that obligation.
Rule 11.05 details the means by which an obligation to pay money may be enforced. They are as follows:
·An order for seizure and sale of real and personal property;
·An order for attachment of earnings and debts;
·An order for sequestration;
·An order appointing a receiver.
Rule 11.07 provides the court with a raft of general enforcement powers, which include the following:
·Declaring the total amount due;
·Stating whether such payment is to be paid in full or by instalments and when the amount is to be paid.
Significantly, in the current matter, provisions contained in Division 11.1.3 of the Rules enable the Court to issue what is known as an enforcement warrant. This in turn will lead to the appointment of a person known as an enforcement officer. Such a person, pursuant to Rule 11.18, is authorised to seize and sell property. It would appear to be Ms Hardy’s position that she be appointed as the enforcement officer in respect of the B Street, Town C property in order to secure the discharge of the mortgage, to which she is a party, and to recoup the sum of $13,000.00 to which she is entitled.
CONCLUSIONS
The proceedings between the parties have been on foot, in one form or another, since 2016. During this period, Mr Manning’s financial position has apparently changed and the parties’ relationship, as parents, has drastically altered. At significant times, in this period, each of them has been unrepresented, during which each has ostensibly consented to significant orders, which they now have cause to regret.
A significant period elapsed between the marking of the 1 September 2016 order and its discharge and its substitution by the order of 22 May 2019. In my view, Mr Manning has substantially complied with the financial provisions of the May 2019 order. The cash sum due to be paid to Ms Hardy has been paid. In addition, she had the effective benefit of the E Street, Town C property, which is now unencumbered.
The only obligations remaining to be fulfilled by Mr Manning regard the discharge of the joint mortgage on the B Street, Town C property and the more recent obligation to pay the costs order of $3,000.00 and the penalty order of $10,000.00.
Ms Hardy has not articulated the prejudice which befalls her in respect of the fact that she remains a co-mortgagor of the B Street, Town C property. She does not assert that she has been called upon to pay any monies due in respect of the mortgage or that its existence precludes her from doing as she wishes in respect of the E Street, Town C property, including using it as a source of security to borrow.
I acknowledge that there is some form of prejudice in the sense that some form of financial relationship between her and Mr Manning, at least in theoretical terms, continues to be on foot. A state of affairs which is not in keeping with the clean break principle contained in section 81 of the Act.
It is Ms Hardy’s position that she is currently unemployed and her prospects of resuming employment have been significantly impacted by the pandemic emergency. On the other hand, it is Mr Manning’s position that she has not been employed for a long period of time and her ownership of the E Street, Town C property provides her with a significant bulwark against such exigencies. I accept however that Ms Hardy has a significant liability for legal fees and, in this context, the sum of $13,000.00 must be regarded as a significant sum.
It also seems to me that both parties share some of the blame for the delay in the case being finalised. In particular, although Mr Manning is open to criticism for this delay, it cannot be said that he has been totally cavalier in respect of the discharge of his obligations towards Ms Hardy. I also accept that he has had on-going obligations in respect of the care of the parties’ two children in this period.
As I have indicated, the court’s authority to enforce a judgment is a discretionary one. As with all discretions, it must be exercised judicially. That is in keeping with the proper administration of justice. In matters relating to the disposition of property, I would go so far as to say that it is appropriate for the court to consider the overall equity or fairness of the enforcement orders sought.
In my view, for the court to ratify the sale of the B Street, Town C property, which has been the home of Mr Manning and the parties’ two children for a considerable period of time would be a grossly inequitable outcome in all the circumstances of this case. To my mind, it would be analogous to using a sledge hammer to crack a walnut and could truly be described as draconian, particularly when the extent of Mr Manning’s monetary obligation to Ms Hardy is considered.
However, the fact also remains that Mr Manning agreed to these financial obligations and remains obligated to fulfil them. These competing considerations must be balanced against one another to arrive at an outcome which is proper and appropriate. I consider that Mr Manning’s proposal to pay the sum due in instalments, with provision for the B Street, Town C property to be sold, is an appropriate outcome.
COSTS
Section 117(1) of the Act abolishes for the purpose of family law proceedings, the general rule that, in civil proceedings, costs follow the event. It provides that each party should bear his or her own costs in such proceedings.
However, pursuant to section 117(2), if the Court is of the opinion that there are circumstances that justify it in doing so, it may, subject to a number of stipulated considerations, make such order as to costs as it considers just.
The relevant considerations are set out in section 117(2A) of the Act and are as follows:
•The financial circumstances of each of the parties to the proceedings;
•Whether any party to the proceedings is in receipt of legal aid;
•The conduct of the parties to the proceedings, including in respect of issues of discovery and production of documents;
•Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court;
•Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
•Whether any party has made an offer in writing to settle the proceedings and the terms of any such offer;
•Such other matters as the court considers relevant.[10]
[10] Family Law Act 1975 (Cth) s 117(2A).
No doubt it is Ms Hardy’s position that she was compelled to bring these proceedings because of the inordinate delay which she attributes to Mr Manning in complying with the various orders applicable in the demonstrable circumstances of her poor financial position.
Given the inter-relation between subsections (1) and (2) and the nature of family law proceedings generally, orders for indemnity costs are extraordinary or exceptional in nature. The Full Court of the Family Court noted Inthe Marriage of Kohan that an order for indemnity costs as ‘being a very great departure from the normal standard’.[11] In this context, the Full Court said as follows:
The court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.[12]
[11] In the Marriage of Kohan (1992) 16 Fam LR 245, 254 (Strauss, Lindenmayer and Bulley JJ).
[12] Ibid 258.
There is no closed category of cases in which indemnity costs may appropriately be awarded. However, in Colgate Palmolive Co v Cussons Pty Ltd,[13] the Full Court of the Federal Court indicated that the kinds of situation in which indemnity costs might be considered included those in which a litigant had:
•Commenced or continued an action knowing it to have no chance of success;
•Made false or irrelevant allegations of fraud;
•Made groundless allegations, which prolonged the case concerned; and
•Imprudently refused an offer to compromise.[14]
[13] Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.
[14] Ibid 231-233 (Sheppard J).
The applicable regulatory regime applicable to costs is the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), which came into force on 1 September 2021. Chapter 12 thereof deals with costs. I will refer to these as the general rules.
If the court determines to make an order for costs, it has a wide discretion as to the calculation of such costs. Pursuant to rule 12.17 of the general rules, it may order costs in a specific amount or to be assessed on a particular basis, including in respect of indemnity costs.[15]
[15] Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.17.
The court may also direct that costs be calculated pursuant to a methodology prescribed in schedules attached to Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 (Cth), particularly rule 4.01, which provides that in applying Chapter 12, the court may apply the events based cost system detailed in Schedule 1. I will refer to these as the Division 2 rules.
In brief, the schedules concerned enable the calculation of costs on either a party/party basis or by reference to fixed court events. The procedure in respect of the latter methodology is clearly designed to allow the ready calculation of costs, by either the parties themselves or the court, which have been incurred following the various procedural stages of litigation from filing to finalisation with judgment.
The schedule to the Division 2 rules, provides a sum of $997.00 together with whatever is the relevant hearing fee as being costs allow on an enforcement application. A short mention attracts costs of $321.00; a half day hearing $1,178.00.
As previously indicated, Ms Hardy seeks indemnity costs. Thus the general rules apply. Pursuant to rule 12.17(3), amongst other things, the court may have regard to the reasonableness of each parties’ behaviour in the proceedings concerned and the level of expense sought and whether they are fair, reasonable and proportionate to the matter concerned.
Rule 12.08 provides a list of criteria, for the court to apply, as to whether costs have been incurred fairly, reasonably and proportionately. Pursuant to rule 12.13(4) a person seeking indemnity costs must provide to the court a copy of any relevant costs agreement with his/her solicitor. I have not been provided with any such cost schedule although I have been advised as to Ms Hardy’s current level of liability for costs personally.
Essentially, in respect of all applications for costs in respect of family law matters, the court must make the order it considers just. It must also consider the principles in the general rules which are directed toward the management of legal costs.
In my view, the costs incurred in this matter are disproportionate to the issues in dispute. It was a case calling out for compromise, particularly given the substantial compliance with the orders provided by Mr Manning. More significantly the orders of 9 July 2021 provided for the payment of $3,000.00 and a further sum of $10,000.00, which is not referrable to any earlier provision but seems to be some sort of penalty or presumptive compensation for late compliance.
Mr Manning has not sought to be released from his obligation to pay these amounts. In my view, it would not be proper to make an award for indemnity costs in the current matter in all the circumstances of the case, particularly given his on-going liability and Mr Manning’s other compliance with the orders.
In addition, given the amounts provided by reference to the schedule, an amount of $13,000.00 seems to me to be a more than reasonable amount of costs to be awarded to Ms Hardy. For all these reasons, I propose to make the orders as proposed by Mr Manning and which are set out at the commencement of these reasons for judgment.
115 I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown.
Dated: 21 February 2022
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