MCGAREY & STANCATI
[2015] FamCA 753
•11 September 2015
FAMILY COURT OF AUSTRALIA
| MCGAREY & STANCATI | [2015] FamCA 753 |
| FAMILY LAW – PROPERTY – Application to set aside final orders under s 79A – Undefended hearing – Where the orders provided for funds in a controlled monies account to be paid towards a joint liability with a small shortfall to remain – Where the respondent’s solicitors subsequently transferred a proportion of the funds towards outstanding legal fees owed to them – Whether it is impracticable for the orders to be carried out as intended – Whether there is default on the part of the respondent – Final orders varied. |
| Family Law Act 1975 (Cth) s 79A |
| Cawthorn & Cawthorn (1998) FLC 92-805 |
| APPLICANT: | Mr McGarey |
| RESPONDENT: | Ms Stancati |
| FILE NUMBER: | SYC | 5542 | of | 2010 |
| DATE DELIVERED: | 11 September 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland J |
| HEARING DATE: | 17 August 2015 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Ms Lewis of Manning Lawyers |
| FOR THE RESPONDENT: | No appearance for or on behalf of the respondent |
Orders
Pursuant to section 79A of the Family Law Act 1975 (Cth), Orders 1 and 2 of the orders of 22 May 2013 made by Justice Rees are varied such that the amount of $58 000 is deleted and in its place, the amount of $10 500 is inserted.
In the event that either party refuses or neglects to execute a deed and/or instrument in compliance with the provision of the Orders of 22 May 2013 by Justice Rees, as varied by these Orders, the Registrar of the Family Court of Australia at Sydney is hereby appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute all deeds and/or instruments in the name of the defaulting party and do all acts and all things necessary to give validity and operation to the deed and/or instruments.
IT IS NOTED that publication of this judgment by this Court under the pseudonym McGarey & Stancati has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 5542 of 2010
| Mr McGarey |
Applicant
And
| Ms Stancati |
Respondent
REASONS FOR JUDGMENT
Background
This matter concerns an uncontested application by Mr McGarey (“the applicant”), pursuant to section 79A of the Family Law Act 1975 (Cth) (“the Act”), for final orders made by Rees J on 22 May 2013 to be discharged to the extent that they require the applicant to pay a lump sum to Ms Stancati (“the respondent”). The orders of Rees J relate to a property settlement requiring all monies held in a controlled monies account by T Lawyers be applied against a joint liability that the parties had to the National Australia Bank (“the NAB”) in respect to a mortgage over an investment property that had been owned by the parties. This application has arisen because T Lawyers subsequently applied a portion of the monies held in the controlled monies account towards payment of legal fees owed to them by the respondent.
The relevant background concerning the parties, their children and the nature of the primary dispute between the parties is set out in the judgement of Rees J dated 22 May 2013.[1] For the present purposes, the following chronology is relevant:
[1]McGarey & Stancati [2013] FamCA 366.
·The applicant, who is currently forty-nine years of age, and the respondent, who is currently forty-three years of age, were married in 2005. In 2005, their son D was born and in 2009, their daughter E was born. The parties divorced on 5 April 2011.
·In September 2006 the parties purchased the former matrimonial home at F Street, Suburb A for $650 000.
·In April 2007 the parties purchased an investment property at G Street, Town B (“the investment property”) for $320 000.
·In July 2010 the former matrimonial home was sold and the net proceeds of $232 547 was paid into a controlled monies account held by T Lawyers. From that amount the parties received a partial property settlement.
·At the final hearing before Rees J on 16 and 17 April 2013, the remaining balance in the controlled monies account was $118 733.
·In February 2013 the investment property was sold for an amount which was not sufficient to discharge the mortgage to the NAB. The outstanding mortgage as at the date a final hearing was $124 428.82.
·In March 2014 T Lawyers applied $47 500 from the controlled monies account to meet the cost of the respondent's outstanding legal fees of $47 500. The balance of $72 020.96 was applied to the NAB loan which had been secured over the investment.
Orders made by Rees J
The applicant in these proceedings, seeks orders, pursuant to section 79A of the Act, that the following orders made by Rees J on 22 May 2013 be discharged:
(1)That the husband pay to the wife by way of property settlement within 6 months of the date of these orders the sum of $58,000.
(2)That upon receipt of the amount of $58,000 the wife sign all documents required to effect the transfer to the husband or his nominee all her right title and interest in:
2.1M Pty Ltd ACN …
2.2M Unit Trust
2.3McGarey Family Trust
2.4N Pty Ltd ACN ...
(3)That from the date of these orders the husband indemnify the wife in relation to all liabilities arising from her having an interest in the entities referred to in order 2.
(4)The parties instruct T Lawyers to pay to the National Australia Bank (“NAB”) all money held in the controlled money account from the proceeds of sale of the property at Suburb A.
(5)That, as between the parties, the husband indemnify the wife in respect of any money remaining due to the NAB pursuant to the mortgage held by the NAB over the property at Town B.
Orders sought by the Applicant
In these proceedings, the applicant sought orders to the following effect:
(1)That pursuant to section 79A of the Act, that Orders 1, 2, 3, 4 and 5 of the orders dated 22 May 2013 by her Honour Justice Rees be discharged.
(2)That within seven(7) days the respondent do all things and sign all documents to transfer to the applicant or his nominee all her right title and interest in:
2.1M Pty Ltd ACN ..
2.2M Unit Trust
2.3McGarey Family Trust
2.4N Pty Ltd ACN ...
(3)That the respondent indemnify the applicant in relation to all his liabilities arising from her having any interest in the entities referred to in order 2 from the date of these orders.
(4)That the applicant and respondent do all things necessary including but not limited to signing all documents required for the husband to establish a Child Support Trust for the benefit of the children with the husband to be named as the Appointor.
(5)That declaration be made that the monies held by T Lawyers in their controlled monies account in the name of the applicant and respondent form part of the applicant's property settlement to the amount of the said balance as at 22 May 2013.
The Law
The legislation
In applying for the orders of Rees J to be discharged, the applicant relies on subparagraphs (b) and (c) of section 79A(1) of the Act. Those provisions relevantly provide:
(1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
.....
(b) in the circumstances that have arisen since the order was made it is impractical for the order to be carried out or impracticable for a part of the order to be carried out; or
(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as result of that before, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order;
.....
The court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
General approach
The grounds for setting aside a property order, pursuant to section 79A, “are very limited” and “only [exist] in special circumstances”.[2] This is because it is generally considered to be in the public interest, and in the interest of the parties, for litigation to be final.[3] On that basis, the Court has adopted a narrow construction of the provisions.[4]
[2]Mullane v Mullane (1983) FLC 91-303 at 78,069 and 78,071.
[3] See for example Mullane v Mullane (1983) FLC 91-303; Taylor v Taylor (1979) FLC 90-674; In the marriage of Slapp (1989) FLC 92-022 as referred to in Lenova & Lenova (2011) FLC 93-467 at 85,662.
[4]In the Marriage of La Rocca (1991) FLC 92-222 at 78,539 as approved in Cawthorn & Cawthorn (1998) FLC 92-805.
The concept of impracticability: section 79A(1)(b)
The concept of “impracticability” for the purposes of section 79A(1)(b) is not to be equated with impossibility. In Rohde & Rohde,[5] Gee J said:
The word `impracticable' means gleaning a definition from the Shorter Oxford Dictionary, `not practicable', `that cannot be carried out or done'; `practicably impossible'; `unmanageable'; `intractable'.
[5](1984) FLC 91-592 at79,769.
The Full Court has emphasised that each case concerning an application under section 79A should be determined on its own circumstances and caution is required in applying common law concepts in the context of the Act.[6] Nevertheless, in determining whether it has been “impracticable” for an order or part of an order to be carried out, some assistance may be obtained from the common law doctrine of frustration. In that respect, Kay J in the Marriage of La Rocca, by way of analogy, referred to the concept of a contract being "frustrated" by “supervening events or circumstances which are such that it is impossible to hold that reasonable men could have contemplated that event or those circumstances”.[7] Applying that analogy, his Honour said:
Now, in my view, what the appropriate application of s.79A(1)(b) ought to be is that circumstances that have arisen in which it becomes impracticable to carry out the orders are circumstances that could not reasonably have been contemplated and that in such circumstances, whilst impossibility is not the test and impracticability is, it may then become just and equitable to change the orders.[8]
[6]Cawthorn & Cawthorn (1998) FLC 92-805.
[7](1991) FLC 92-222 at 78,539 referring to Re Badische Co Ltd (1921) 2 Ch. 331 at 379.
[8]Ibid at 78,539.
As an extension or, more accurately, qualification of the frustration analogy, it is clear that section 79A(1)(b) of the Act does not apply to circumstances which are the “result of that party's own default unless such default was due to circumstances quite beyond that party's control.”[9]
[9]Cawthorn & Cawthorn (1998) FLC 92-805 at 85,062.
The concept of default: section 79A(1)(c)
The concept of default for the purposes of section 79A(1)(c) requires default by a party who is subject to an obligation imposed by the order which is the subject of the application.
Again, a useful analogy is provided in the decision of Kay J in the Marriage of La Rocca where his Honour said:
The second [ground] as to a default by one of the parties in carrying out their obligations enables the innocent party to come along and say, well, he was ordered to transfer to me the motor vehicle; he has burnt the motor vehicle, I now want something else, because it is unjust and unfair to require me to be left with nothing.[10]
[10](1991) FLC 92-222 at 78,539.
In determining whether it is “just and equitable” to vary or set aside an order pursuant to 79A(1)(c), the Court will, consistent with the Court's approach to section 79A(1)(b), have regard to whether the applicant for the orders was themselves a defaulter or otherwise contributed to the circumstances that led to the default.[11]
[11]See discussion in Cawthorn & Cawthorn (1998) FLC 92-805.
Consideration
The primary argument of the applicant is that the action of T Lawyers in transferring the amount of $47 500 from the controlled monies account (referred to in Order 4 of the orders of Rees J) is a circumstance that has arisen since the order was made and it has made it impracticable for that order to be carried out.
In that context, Order 4 required the transfer of “all money held in the controlled money account from the proceeds of sale of the property at [Suburb A].”(Emphasis added)
It was argued that the reference to the monies held in the controlled monies account was a reference to the point of time that the orders were made. It was further submitted that the intention of the parties and the Court is made clear by paragraph 9 of her Honour’s reasons where her Honour noted:
In November 2011 the [Town B] property was placed on the market for sale. The property was ultimately sold in February 2013. The proceeds of sale were not sufficient to discharge the mortgage with NAB and at the date of the hearing the amount outstanding pursuant to the mortgage was $124,428.82. In the course of the hearing of the parties agreed that any monies held in the controlled money account from the proceeds of sale of the [Suburb A] property should be applied against their joint liability to NAB. This will result in a shortfall of approximately $6,000 which will remain their joint liability. (Emphasis added)
The passage makes it clear that the point of time contemplated by the parties as identifying the amount held in the controlled monies account is the date of final hearing before Rees J.
Further, it was argued that the paragraph clearly states that the relevant monies to be paid to the NAB are those monies held in the controlled monies account as at the date of the final hearing before Rees J. This amount is referred to in paragraph 6 of her Honour’s judgment where she noted: “At the time of trial, the balance of the controlled money account was agreed to be $118,733.”
As further noted, her Honour referred to the amount of approximately $6000 remaining as a joint liability after the monies held in the controlled monies account were paid to the NAB. That is, the difference between the sum of $124 428.82 (referred to as the outstanding debt to the NAB in paragraph 9) and the amount of $118 733 (referred to as the balance in the controlled monies account in paragraph 6).
In summary, there is merit in the applicant’s submission that it was clearly contemplated that the total amount of monies held in the controlled monies account as at the date of final hearing were to be paid to the NAB in order to satisfy the mortgage debt. This, as noted by her Honour, left an outstanding balance of only approximately $6000.
It was therefore contrary to the clear intention of the parties, which was communicated to and noted by her Honour, and which formed the basis of her decision, for the amount of $47 500 to subsequently be taken from the controlled monies account and applied to satisfy the respondent’s legal fees. Instead, the total amount held in the controlled monies account as at the date of the final hearing before Rees J should have been paid to the NAB.
If depletion of the funds as a result of payment of the respondent’s legal fees had been contemplated then, instead of there being a shortfall of only $6000, the shortfall would have been in the order of $53 500. This was not the amount contemplated by the parties which, as noted by her Honour, was the amount of $6000.
There is no suggestion that the action of T Lawyers in transferring the amount of $47 500 from the controlled monies account to their office account in satisfaction of their legal fees[12] was as a result of any act or omission on the part of the applicant.
[12] Annexure B to the affidavit of the applicant filed 15 June 2015.
The act of so transferring the funds has meant that it is now impracticable for the amount of $118 733, as contemplated by the parties and her Honour, to be transferred to the NAB from the controlled monies account.
Accordingly, subject to considering issues of discretion, the grounds for setting aside or varying the orders of Rees J are established.
Had it been necessary, the Court would have also concluded that the action of T Lawyers in transferring the amount of $47 500 from the controlled money account to their office account in satisfaction of the respondent’s legal fees also amounted to a default on the part of the respondent.
In that context, it is noted that Order 4 of the orders of Rees J required the parties to instruct T Lawyers to pay to the NAB “all money held in the controlled money account from the proceeds of the property at Suburb A.”
Based on the presumption of business regularity,[13] it is reasonable to assume that T Lawyers acted in accordance with that firm's professional obligations. Specifically it can reasonably be assumed that T acted in accordance with instructions from their client, the respondent, in transferring the said sum of $47 500 from the controlled monies account to their office account in respect to the respondent’s legal costs.
[13] Morris v Kanssen [1946] AC 459 at 475.
Such instructions were clearly contrary to the instructions that the parties were required to give T Lawyers, pursuant to Order 4 of the orders of Rees J.
Exercise of discretion
Even if the grounds for setting aside or varying an order pursuant to section 79A are established, it remains a matter for the Court’s discretion as to whether it will make any orders to set aside or vary the orders as made by Rees J pursuant to section 79 on 22 May 2013.
In exercising its discretion, the Court will be informed by the “finality principle” discussed above. Having regard to that principle, the Full Court have said:
It is not sufficient that it appears that circumstances have arisen of an exceptional nature resulting in hardship to the applicant, the court must consider in the exercise of its discretion whether that hardship is of such a serious nature and results in such inequity that it can only be rectified by the extreme step of setting aside or varying an existing order of the court.[14]
[14]In the Marriage of Simpson & Hamlin (1984) FLC 91-576 at 79,660.
Having regard to the financial circumstances of the applicant, which are discussed in the judgment of Rees J in respect to the period prior to 22 May 2013 and which are updated in the balance sheet filed by the applicant on 14 August 2015, the Court is satisfied that failure to vary the orders of Rees J would result in a serious hardship to the applicant.
The Court will therefore vary Orders 1 and 2 of the orders made by Rees J on 22 May 2013 such that the amount of $58 000 is deleted and the figure of $10 500 is inserted.
As noted, the applicant sought orders to discharge Orders 1 through to 5 of the orders of Rees J and replace them with orders that would have the effect of removing the requirement for the applicant to pay any monies to the respondent. The solicitor for the applicant explained that the basis of the orders sought was the fact that the applicant had incurred legal fees in the order of $17,000 as a result of the events which are the subject of this application.
To make the orders sought by the applicant, on the basis of legal fees he has incurred, would require the Court to be satisfied of the matters set out in section 117 of the Act.
As neither the respondent nor the Trustee in Bankruptcy were aware that such an argument would be advanced, the Court does not consider that it is appropriate to vary the orders of Rees J such that the legal fees incurred by the applicant, subsequent to 22 May 2013, are deducted from those monies which her Honour intended the applicant to pay to the respondent.
As further noted, the applicant also sought orders requiring the respondent to do all things necessary to enable the husband to establish a “Child-Support Trust” for the benefit of the children with the applicant to be named as “the Appointor”. Again, the Court is not satisfied that the respondent has received adequate notice that such an application would be made. Without deciding upon the merits of that application, the Court is not prepared to deal with that matter at this point in time.
The Court will, however, make an order pursuant to section 106A of the Act in respect to the orders of Rees J as varied by these orders.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 11 September 2015.
Associate:
Date: 10.09.2015
Key Legal Topics
Areas of Law
-
Family Law
-
Civil Procedure
Legal Concepts
-
Remedies
-
Jurisdiction
-
Procedural Fairness
0
3
1