Moers and Sands
[2014] FCCA 185
•12 February 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MOERS & SANDS | [2014] FCCA 185 |
| Catchwords: FAMILY LAW – Enforcement proceedings following costs order – enforcement hearing – remedies available – implications of bankruptcy – matters to be considered. |
| Legislation: Federal Circuit Court Rules, r.25B Bankruptcy Act 1966 (Cth), s.58(3) |
| Moers & Sands [2011] FMCAfam 47 Sands & Moers [2013] FMCAfam 28 Langer & Griffin [2013] FamCAFC 170 Melnik v Melnik (2005) 144 FCR 141 |
| Applicant: | MR MOERS |
| Respondent: | MS SANDS |
| File Number: | ADC 2864 of 2007 |
| Judgment of: | Judge Brown |
| Hearing date: | 23 August 2013 |
| Date of Last Submission: | 23 August 2013 |
| Delivered at: | Adelaide |
| Delivered on: | 12 February 2014 |
REPRESENTATION
| Counsel for the Applicant: | Ms Basheer |
| Solicitors for the Applicant: | Clelands |
| Counsel for the Respondent: | In person |
ORDERS
The enforcement summons be dismissed with no other order being made.
IT IS NOTED that publication of this judgment under the pseudonym Moers & Sands is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 2864 of 2007
| MR MOERS |
Applicant
And
| MS SANDS |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment are concerned with enforcement proceedings brought by Mr Moers, against Ms Sands, following an order of the court made on the 29th June 2011 and a costs order being made in Mr Moers’ favour on 23 January 2013. The quantum of the costs award was $8,082.50.
In order to understand the award of costs, it is helpful to consider earlier published reasons for judgment concerning the parties.[1] These delineate the troubled parenting relationship between the parties in respect of their child X, born (omitted) 2002 and the vitriolic and protracted history of litigation between them.
[1] See Moers & Sands [2011] FMCAfam 47 and Sands & Moers [2013] FMCAfam 28
At this stage, it is sufficient to say that it has been determined that X should live with his father and spend no time whatsoever with his mother pending further investigation of allegations of serious emotional abuse of X by his mother.
It has previously been the finding of the court that X is a psychologically compromised child in large part due to the difficult relationship between his parents which had resulted in X experiencing problems at his school.
On 29 June 2011, orders were made by the court ostensibly with Ms Sands’ consent, that X should live predominantly with his father. In light of the child’s psychological difficulties which had manifested in his behaviour at school, it was also ordered as follows:
“The father take all necessary steps to obtain a mental health plan referral for the child so that he can continue counselling with such appropriately qualified expert as identified to the father by a medical practitioner, the cost of such health plan to be shared equally between the parties.”[2]
[2] See order 6 of the orders of 29 June 2011
The mother commenced contravention proceedings alleging that Mr Moers had breached the orders of 29 June 2011 on 30 March 2012. At a late stage she withdrew the contravention application.
For reasons provided in writing to the parties, I determined that it was just that Ms Sands pay Mr Moers’ costs incurred in defending the contravention application which as previously indicated, were calculated to be $8,082.50.
Mr Moers commenced the enforcement application on 24 May 2013. The application relates both to the expense arising from X attending on a psychologist for counselling and the costs order made on 23 January 2013.
In his affidavit filed in support of his application, Mr Moers deposes that he has expended the sum of $2,385.00, at (omitted) Psychology in respect of X. It is Mr Moers’ case that he would not have incurred this expense if order 6 of the orders of 29 June 2011 had not been made.
He seeks the payment of this sum, together with the costs awarded in his favour of $8,082.50, which on his calculation is accruing interest at the rate of $1.99 per day. Finally, he seeks costs in respect of the enforcement application in the sum of $1,841.00.
Mr Moers asserts that Ms Sands is in paid employment with (omitted) or some other corporate organisation on an income of $35,000.00 per annum. In addition, he asserts that she owns a Mazda motor vehicle which he believes is worth somewhere between $13,000.00 and $16,000.00.
If Ms Sands does not pay him the sums due by way of costs and in respect of X’s counselling, Mr Moers seeks the seizure and sale of this vehicle.
The parties have never been married to one another. They did however live in a de facto relationship for many years. The financial implications of this de facto relationship were the subject of proceedings in the District Court between them.
Mr Moers asserts that Ms Sands received a sum of $80,000.00 from him in settlement of these proceedings. He further asserts that Ms Sands provides no financial support for X. In this context he suggests that Ms Sands has funds to pay the monies which she has been ordered to pay to him.
The nature of the hearing
These proceedings are not a review of and do not constitute a challenge to the orders made on 29 June 2011 and 23 January 2013. They are enforcement proceedings in respect of an obligation imposed upon Ms Sands by the court to pay money to Mr Moers. Accordingly, they are governed by the provisions contained in division 25B.2 of the Federal Circuit Court Rules.
Pursuant to the provisions of rule 25B.11, an obligation to pay money may be enforced by one or more of the following mechanisms:
· An order for the seizure and sale of real or personal property;
· An order for the attachment of earnings and debts;
·An order for sequestration of property which is analogous to bankruptcy;
·An order appointing a receiver.
In this case, Mr Moers seeks an order for seizure of Ms Sands’ motor vehicle and for a third party debt notice to attach to her earnings. Essentially, it is his position that the court should enforce the payment of the debt by Ms Sands by whatever mechanism appears expedient.
The major mechanism through which a payee can seek to enforce the payment of money is an enforcement hearing [rule 25B.17]. At such an enforcement hearing, the payee may require the payer to produce documents and answer questions following the production of a statement of financial circumstances on oath.
The proceedings before me on 18 September 2013, were an enforcement hearing. Earlier, on the direction of the court Ms Sands had filed a financial statement on 29 July 2013 to which was attached a number of her financial records. She also filed an affidavit which provided additional evidence in respect of her financial circumstances.
The evidence
As this was an enforcement hearing, it was not necessary for Mr Moers to give additional sworn evidence. The focus of the case was on Ms Sands and the means by which she could be compelled to comply with her obligation to pay the money owed by her to Mr Moers. Ms Sands was extensively cross-examined by counsel for Mr Moers, Ms Basheer.
There is no love lost between Ms Sands and Mr Moers. As such, Ms Sands has a strong motivation to avoid paying any sum no matter how paltry to Mr Moers. In addition, in the past she has demonstrated a facility to frustrate the court’s orders by whatever means are open to her.
In all these circumstances, the court must view her evidence with caution. For obvious reasons she is likely to emphasise her liabilities and minimise her income and assets. So she did in this case. It is essentially Ms Sands’ position that she has no capacity whatsoever to pay any money to Mr Moers.
In addition, at a late stage of the proceedings Ms Sands indicated that she was an undischarged bankrupt. No notification of these proceedings had been provided to her trustee (if any) and the overall issue took Mr Moers and those advising him by surprise. Ms Sands herself seemed unsure of what her situation was in regards to the bankruptcy.
Overall, Ms Sands presented herself as being a person whose finances were generally out of control and who lived hand to mouth as a result. However, she seemed unconcerned about her situation and presented as a person who did not care about money or about her situation generally.
Ms Sands is an unusual person in many ways. However, I do not consider her unworldly or blasé attitude towards money or indeed towards what might happen to her in these proceedings, to be totally feigned.
This has been her attitude throughout the proceedings which I would characterise as being one of disconnection and passive aggression. As such on balance, I believed more of her evidence regarding her financial situation than I disbelieved.
Ms Sands asserts that she owns no real property. Mr Moers accepts that this is true. She owns a (omitted) Mazda motor vehicle, which she asserts is worth $8,000.00, in respect of which she owes $2,000.00, which sum is to be paid back over three years.
Ms Sands is employed as a (omitted) by an organisation in the (omitted) suburbs of Adelaide. Ms Sands was not prepared to furnish the name of the organisation employing her to Mr Moers. She herself lives in the (omitted) suburbs of the city.
She uses her motor vehicle to get to and from work. She receives a fortnightly income of $1,468.00 net. The regular receipt of this payment is confirmed by copies of Ms Sands' (omitted) Bank bank account provided by her.
In addition, Ms Sands receives government benefits to the value of $108.05 per fortnight. She also receives a small amount of child support in respect of a child from an earlier relationship. Ms Sands’ modest income is confirmed by her most recent income tax assessment which indicates a taxable income for the year ending 30 June 2012 of $23,719.00.
Ms Sands’ evidence is that she owes her mother $4,000.00 and another friend a similar amount for moneys lent to her to pay her own legal fees. In addition, she asserts that she has no money in the bank on any regular basis, the moneys which are paid into her account being rapidly utilised on day to day expenditure.
In this context, it is her evidence that financial necessity compels her to borrow money from short-term loan agents at prohibitive rates of interest to get her through from pay to pay. This evidence had the ring of truth to me. I accept that Ms Sands struggles to stay afloat financially.
Ms Sands has accumulated traffic fines of $900.00. She is paying off her fines at the rate of $50.00 per month. In addition, she has a debt to the Housing Trust of South Australia in a sum of $1,900.00. This debt relates to a tenancy dating from 2008. Ms Sands is contesting the liability with the Housing Trust.
Ms Sands’ major recurrent weekly expense is her rent. She has provided a copy of her fixed term tenancy agreement which indicates that the rent payable by her is $340.00. As X is no longer in her care, she is no longer entitled to receive rental assistance from Centrelink.
Ms Sands estimates that her other weekly expenditure comes to about $600.00 per week. The major expenditure being food ($150.00); water ($30.00); gas ($50.00); electricity ($75.00); and telephone/internet ($100.00). She estimates the cost of her motor vehicle, both in terms of fuel and maintenance as being $100.00 per week.
I suspect that these expenses have been over rather than under estimated. However, I do not disbelieve Ms Sands’ evidence when she asserts that she has no money left over at the end of the week. In this context, it is her evidence that she has disconnected her Foxtel subscription.
Ms Sands arranges to pay her motor vehicle registration in three monthly instalments. In terms of items of expenditure which might be considered unnecessary, Ms Sands has a cat and a dog; smokes cigarettes; but does not drink.
She acknowledged taking a trip for herself and X to Melbourne earlier in 2013. The trip involved a visit to the zoo and aquarium. Her evidence is that she took the trip instead of paying her rent. Given my assessment of Ms Sands, this does not appear to me to be improbable.
Ms Sands conceded that she had received a significant sum of money from Mr Moers in settlement of the de facto property issues between the two. However, it was her further evidence which again does not seem improbable, that the entirety of the sum in question has been spent in reimbursing legal costs and loans. Certainly Mr Moers has been unable to locate where the sum (or significant parts of it) currently resides.
As previously indicated, Ms Sands appeared somewhat cavalier or dismissive of her uncertain financial circumstances. Nowhere was this more demonstrated than in her attitude towards her potential bankruptcy. During the case in an off-hand comment, she indicated to counsel for Mr Moers that she thought she might be bankrupt.
This indication led to the adjournment of the proceedings in order to allow those advising Mr Moers to search the relevant public records and for Ms Sands herself to produce any relevant documentary material.
This adjournment led to Ms Sands providing a document which indicated that a sequestration order was made against her on 1 November 2010, which was scheduled to be discharged on 4 November 2013. Her trustee was named as Mr G.
The solicitors for Mr Moers provided a search from the Insolvency & Trustee Service Australia (ITSA) National Personal Insolvency Index Database which indicated that as at 11/9/2013, no bankruptcy was indicated in respect of Ms Sands. They now no longer act for Mr Moers.
Other than these pieces of documentary evidence, no evidence was provided from Mr G as to the level of his involvement if any, with Ms Sands’ financial affairs. In my view, the issue of whether Ms Sands is or is not an undischarged bankrupt remains shrouded in uncertainty.
Conclusions
Mr G has not been advised of these proceedings and his attitude towards them is accordingly unknown. Section 58(3) of the Bankruptcy Act 1966 (Cth) provides:
“(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.”
The rationale of the section is to prevent one creditor of a bankrupt through taking action from achieving an undue advantage over other creditors.[3] Given the circumstances in which the issue of Ms Sands’ bankruptcy arose in these proceedings, no leave to proceed has been given. In addition, no clarification has been sought from Mr G regarding Ms Sands’ level of liability to any other of her creditors.
[3] See Langer & Griffin [2013] FamCAFC 170 at [30]
The Full Court of the Family Court considered the expression provable debt in the case of Langer & Griffin. The Full Court referred to the case of Melnik v Melnik,[4] where it was held that contravention proceedings initiated in the Family Court of Australia, were proceedings in respect of a provable debt as envisaged by section 58(3) of the Bankruptcy Act.
[4] See Melnik v Melnik (2005) 144 FCR141
In Langer & Griffin, it was therefore accepted that contravention proceedings brought by one spouse against another spouse who was bankrupt, should be dismissed as being incompetently initiated.
This aspect of the case troubles me. If Ms Sands was an undischarged bankrupt at the time of the commencement of the enforcement proceedings, it appears necessary for me to dismiss Mr Moers’ application on the basis that it is incompetent.
As matters currently stand, I do not believe that I am able to resolve the issue of whether Ms Sands is or is not bankrupt definitively on the balance of probabilities. However, I do not propose to dismiss the case on this basis alone.
I accept that Ms Sands is a person of limited means. She is also a somewhat stubborn person who is likely to manage her affairs in order to ensure that Mr Moers is unable to receive the moneys due to him, even if this means that she herself must live in penury.
The only mechanisms by which Mr Moers is likely to be able to secure payment of the moneys due to him is through a third party notice directed to Ms Sands’ employer directing that employer to garnish a specified sum from Ms Sands’ wages; or through the seizure and sale of Ms Sands’ motor vehicle. I have discretion in respect of both such remedies which Mr Moers is not entitled to as a matter of right.
If the court was to make an order for the seizure and sale of Ms Sands’ motor vehicle, she would have no means of getting to and from work. In the absence of a motor vehicle, she would either have to take some form of public transport; obtain a lift with a friend or colleague; or walk or cycle.
These matters were not canvased with Ms Sands directly. However, in my assessment, it is highly probable that she would find each such option highly unpalatable and would opt for unemployment in lieu thereof.
In my view, access to a motor vehicle in this day and age is no longer to be regarded as a luxury. Rather, like access to television and the internet, it is to be regarded as an essential necessity of life.
In all these circumstances, I decline to make an order for the seizure and sale of Ms Sands’ motor vehicle which in any event, I find to have a modest value and as such, it cannot be regarded as an extravagance on Ms Sands’ part.
Ms Sands is a modest income earner. I find her financial circumstances to be straitened. It has been submitted that she has a capacity to pay a sum of $50.00 per week from her wages to satisfy the liability against her. I do not accept this to be the case.
If Ms Sands was directed to pay off the debt at the rate of $25.00 per week on my calculations, it would take somewhere in the vicinity of eight years to pay back the moneys in question. In all these circumstances, including the uncertainty regarding Ms Sands’ bankruptcy, I have come to the conclusion that the enforcement summons should be dismissed with no other order being made.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 12 February 2014
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