Morley and Henshall
[2014] FCCA 1993
•8 September 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MORLEY & HENSHALL | [2014] FCCA 1993 |
| Catchwords: FAMILY LAW – Property – application for enforcement of a Part VIIIAB financial agreement – where the Respondent argues that the agreement is invalid because the parties’ de facto relationship ended before the commencement of Part VIIIAB – construction of the agreement if valid – whether certain clauses stand alone or are enforceable only if other clauses have been complied with – construction of the clause concerning payment of money by the respondent to the applicant. |
| Legislation: Family Law Act 1975 (Cth), ss.90SM, 90UA, 90UD, 90UF, 90UJ, 90UN, 117B |
| Hoult & Hoult (2013) FLC93-546 Yunghanns & Yunghanns (1999) FLC92-836 |
| Applicant: | MR MORLEY |
| Respondent: | MS HENSHALL |
| File Number: | CSC 331 of 2013 |
| Judgment of: | Judge Terry |
| Hearing date: | 1 April 2014 |
| Date of Last Submission: | 1 April 2014 |
| Delivered at: | Newcastle |
| Delivered on: | 8 September 2014 |
REPRESENTATION
| Solicitor Advocate for the Applicant: | Mr Cameron |
| Solicitors for the Applicant: | Williams Graham Carman |
| The Respondent: | In person |
ORDERS
Pursuant to s.90UJ(1B) of the Family Law Act 1975 it is declared that the Financial Agreement dated 15 February 2011 is binding on the parties to the agreement.
Pursuant to s.90UN(c) of the Family Law Act it is ordered that Clause 4.10 of the agreement may be enforced as if it were an order of the court.
The Respondent shall pay to the Applicant the following sums within thirty (30) days of the date of these Orders:
a)$46,250.00 being monies due and owing pursuant to Clause 4.10;
b)Interest on the aforesaid sum calculated daily:
i)For the period 9 November 2012 to 31 December 2012 inclusive at 9.75% per annum; and
ii)For the period 1 January 2013 to 30 June 2013 inclusive at 9.00% per annum; and
iii)For the period 1 July 2013 to 31 December 2013 inclusive at 8.75% per annum.
iv)For the period 1 January 2014 to 30 June 2014 inclusive at 8.50% per annum.
v)For the period 1 July 2014 to the date of payment inclusive at 8.50% per annum.
Pending payment by the Respondent of the total amount owing by her to the Applicant:
(i)The Respondent is restrained and an injunction is granted restraining her from selling, assigning, transferring, further encumbering or dealing in any way with the property known as Property M in Queensland and described as Lot (omitted) on Registered Plan (omitted), Title Reference (omitted) (“the property”) without the prior written consent of the Applicant.
(ii)The Respondent’s interest in the property is charged in favour of the Applicant for the total debt owed to him by the Respondent and the Applicant be at liberty to lodge a caveat over that property to secure the interest created by this charge.
The parties have liberty to apply for consequential orders in respect of the enforcement of the debt owed by the Respondent to the Applicant.
If the Applicant wishes to pursue an application for costs:
(i)The Applicant must within 14 days of the date of these orders file and serve on the Respondent a document setting out the amount of costs claimed, the basis on which the costs are claimed and a summary of argument in support of his contention that costs should be awarded in the amount claimed.
(ii)The Respondent must within 14 days of service of the document on her file a summary of argument in support of any contention she makes about whether costs in the amount claimed or any amount should be paid.
IT IS NOTED that publication of this judgment under the pseudonym Morley & Henshall is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT CAIRNS |
CSC 331 of 2013
| MR MORLEY |
Applicant
And
| MS HENSHALL |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Morley (“the Applicant”) and Ms Henshall (“the Respondent”) were at one time in a de facto relationship. They are parties to an agreement dated 15 February 2011 which provides for the division of property between them and which purports to be a Part VIIIAB financial agreement.
The Applicant seeks to enforce a clause in the agreement which requires the Respondent to pay him $46,250.00.
The Respondent seeks the dismissal of the application.
The Respondent argues that the agreement is invalid and unenforceable because the parties’ de facto relationship ended prior to 1 March 2009 when Part VIIIAB commenced.
In the alternative she argued that:
i)on a proper construction of clause 4.10 of the agreement she is not required to pay the Applicant $46,250.00 but a lesser amount;
or
because the Applicant failed to comply with other clauses of the agreement within the requisite time frame he should not be permitted to enforce clause 4.10;
or
ii)she suffered loss and damage as a result of the Applicant’s failure to comply with other clauses of the agreement and the monetary value of that loss and damage should be set off against the $46,250.00.
The Respondent proposes paying the Applicant $27,750.00 if she is obliged to pay him anything at all.
The evidence
The Applicant relied on his initiating application filed on 10 June 2013 and his affidavit filed on 7 March 2014.
The Applicant’s solicitor filed an outline of case document on 28 March 2014 which contained a list of documents relied on, a chronology and submissions.
The Respondent relied on her amended response filed on 19 March 2014, her affidavit filed on 25 March 2014 and the affidavit of Ms C filed on 25 March 2014.
The Respondent’s solicitor (who ceased to act for the Respondent ten days prior to the hearing) filed an outline of case document and the Respondent asked me to read that document.
The Applicant, the Respondent and Ms C were cross-examined.
The credit of the witnesses
The Applicant is 43 and is a (omitted) by occupation. He was a generally satisfactory witness. He largely told a consistent story about factual matters and he did not give any answers in cross-examination which led me to be concerned about his credit.
The Respondent is 50. She described herself as a (occupation omitted) but she has worked as a (omitted) and as a (omitted) for (employer omitted). She said as follows in her affidavit:
In the past I have worked in a number of (omitted) firms such as (omitted), (omitted), (omitted) and (omitted) in Sydney. In all I have spent over 20 years working in the (omitted) profession. With that background, and after having been involved in buying, renovating and selling properties since I was 15 years of age and building up considerable wealth I have always been mindful of becoming involved with a person with no assets.
The Respondent was an unimpressive witness. She gave several different versions about when the parties’ de facto relationship began and ended, two in the same affidavit, and some of her evidence was frankly incredible, such as the claim that she slept with a knife under her pillow in the 2009-2010 period because she feared the Applicant.
If the Respondent’s explanation for why a Part VIIIAB agreement was signed is true she knowingly signed an agreement which was invalid to avoid paying stamp duty on the transfer of real properties. By putting forward this claim she in effect informed the court that she was prepared to be untruthful when it suited her.
I will have to assess the evidence on each issue in dispute carefully but the fact that I do not consider the Respondent a witness of credit will have a bearing on those assessments.
Ms C gave evidence about one specific issue and I will consider her evidence later in the context of that issue.
The applicable law
Part VIIIAB was inserted into the Family Law Act in 2008 by the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (the Amendment Act). It makes provision for de facto partners or former de facto partners who have the requisite connection with a participating jurisdiction to apply to the Family Court or the Federal Circuit Court for property settlement and maintenance orders. It also makes provision for those persons to enter into binding financial agreements, either before, during or after the end of their de facto relationship.
S.86 (1) of the Amendment Act provides that subject to s.86A Part VIIIAB does not apply to de facto relationships which had broken down before the date of commencement of the legislation. The date of commencement of the legislation was 1 March 2009.
S.86A makes provision for parties whose relationship had broken down prior to 1 March 2009 to “opt in” to the new regime but there was no suggestion that the parties in this case had ever gone down that route.
Former de facto partners who wish to apply for a property settlement have to satisfy at least one of four alternative criteria before they can do so, namely that the de facto relationship lasted more than two years, that they have a child, that a party made significant contributions of a kind referred to in s.90SM (4)(a) (b) or (c) and failure to make the order or declarations would result in serious injustice to the applicant or that the relationship was registered under the law of a State or Territory.
The only requirement parties have to satisfy in order to enter into a valid financial agreement (called a Part VIIIAB agreement) is that they:
are ordinarily resident in a participating jurisdiction when they make the agreement.(s.90UA)
The parties in the proceedings before me entered into a Part VIIIAB financial agreement relying on s.90UD. s.90UD provides as follows:
Financial agreements after breakdown of a de facto relationship
(1)If:
(a)after the breakdown of a de facto relationship, the parties to the former de facto relationship make a written agreement with respect to any of the matters mentioned in subsection (2); and
(b)at the time of the making of the agreement, the parties to the former de facto relationship are not the spouse parties to any other Part VIIIAB financial agreement that is binding on them with respect to any of those matters; and
(c)the agreement is expressed to be made under this section;
The agreement is a Part VIIIAB financial agreement . The parties to the former de facto relationship may make the Part VIIIAB financial agreement with one or more other people.
A Part VIIIAB financial agreement is only binding if the requirements in s.90UJ are met, including the requirement that each party has received specific independent legal advice.
The husband seeks to enforce the agreement and Reg25B.08 of the Federal Circuit Court Rules provides that a party seeking to enforce a Part VIIIAB financial agreement must first obtain an order under s.90UN(c).
S.90UN is relevant in these proceedings for a number of reasons and in whole it provides as follows:
Validity, enforceability and effect of financial agreements and termination agreements
The question whether a Part VIIIAB financial agreement or a Part VIIIAB termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a)subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b)has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c) in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
Background
In broad general terms the background to the matter is as follows:
a)The Applicant and Respondent on their own admission lived in a de facto relationship in (omitted) between 2005 at the earliest and 2007 at the latest.
b)During this period they purchased Property M1 and Property M2 as tenants in common in equal shares. Property M1 & 2 is a suburb of (omitted).
c)In December 2008 the parties entered into a written agreement which provided for the transfer of Property M2 into the sole name of the Applicant, the payment of a sum of money by the Applicant to the Respondent in two instalments and the retention of Property M1 by the parties as tenants in common.
d)The Applicant paid the first instalment pursuant to the agreement but did not pay the second. The transfer of Property M2 to the Applicant did not take place and no enforcement proceedings were ever commenced.
e)The Applicant alleged and the Respondent denied that the parties resumed their de facto relationship in 2009 and separated again in 2010.
f)In late 2010 the parties had discussions about property matters and subsequently entered into the Part VIIIAB Financial Agreement dated 15 February 2011.
g)The provisions of the Part VIIIAB financial agreement have been carried into effect save for the one which requires the Respondent to pay to the Applicant a sum of money.
The background in more detail is as follows.
Neither the Applicant nor the Respondent provided any information about when and how they met but they agreed that they were in a de facto relationship in the 2006/7 period.
There was considerable dispute about exactly when the de facto relationship began and ended.
The Applicant gave a very imprecise date for the commencement of the relationship namely “2005”, and did not provide any information about the nature of the parties’ interactions in 2005 or at any other time which would allow me to assess whether the parties were in a de facto relationship rather than a relationship at any particular point.
He stated that the de facto relationship ended in 2007, which he later explained meant Christmas 2007.
It is hard to reconcile this with the statement elsewhere in his affidavit that:
At the time of the preparation of the December 2008 Agreement Ms Henshall and I had been in a relationship for about one year.[1]
[1] Applicant’s affidavit filed 7 March 2014 paragraph 13
However even on the Respondent’s evidence the parties were in a de facto relationship for longer than a year and I am prepared to accept that this is an error.
The Respondent gave several different versions about when the de facto relationship began and ended and two of these versions were in the same affidavit.
In paragraph 2 of her trial affidavit the Respondent said that the parties were in a relationship from 2005 until 2007 (which was similar to the broad general statement by the Applicant), that separation occurred in mid-2007 and that the parties were in a de facto relationship for 16 ½ months.[2]
[2] Respondent’s affidavit filed 17 March 2014 paragraph 6
In oral evidence the Respondent said that the reference in paragraph 2 of her trial affidavit to the relationship having commenced in 2005 was an error and that it should have said February 2006.
During cross-examination the Respondent was referred to the affidavit she filed on 9 July 2013 soon after the proceedings commenced in which she said that cohabitation commenced on 1 January 2006 and ended in late 2007 and was “actually for a period of two years…”
The best that I can say is that:
·I am satisfied on the balance of probabilities that the parties were in a de facto relationship for part of the 2005 to 2007 period because they both said that they were;
·the de facto relationship probably commenced sometime in 2005, firstly because both the applicant and the respondent said this at one point and also because they signed a contract to purchase their first property on 30 January 2006 and it is somewhat unlikely that they went almost immediately from cohabitation to property ownership. However at worst it commenced in January 2006 when Property M1 was purchased.
·the de facto relationship ended in late 2007 not in mid-2007 as the Respondent claimed in her trial affidavit. This is consistent both with the Applicant’s evidence and with the assertion in the Respondent’s affidavit filed on 9 July 2013 that:
We commenced cohabitation in January 2006 when we purchased the house at Property M2 and I left the house late 2007.[3]
[3] Respondent’s affidavit filed 9 July 2013 paragraph 2
This would mean that the de facto relationship to this point was almost two years in duration.
The parties signed contracts to purchase Property M1 on 30 January 2006 and Property M2 in October 2006 and historical title searches show that the transfer of Property M1 was registered on 16 March 2006 and transfer of Property M2 on 3 January 2007.
After the de facto relationship ended the Respondent moved to the (omitted) while the Applicant remained living at Property M2.
The Applicant said that he visited the Respondent on the (omitted) from time to time during 2008. The Respondent denied that this ever occurred. I prefer the Applicant’s evidence but nothing turns on this.
In November 2008 the Respondent returned to (omitted) and commenced living at Property C. It was common ground that the parties had discussions about property matters at this time and that they agreed that the Respondent would transfer her interest in Property M2 to the Applicant and the parties would continue to jointly own Property M1.
It was also common ground that the Respondent instructed her solicitor to draw up an agreement and common ground that an agreement was executed in late December 2008.
Neither party produced a copy of the executed agreement; both claimed that they did not have it. The only thing produced was a draft agreement with a few handwritten markings denoting possible changes. It was common ground however that the agreement which was executed provided for the Applicant to pay the Respondent $80,000.00 in two instalments of $55,000.00 and $25,000.00 respectively and for the Respondent to transfer her interest in Property M2 to the Applicant.
The draft Agreement provided for the transfer to occur upon the payment of the first instalment. There were no handwritten amendments on the draft concerning this provision and I am prepared to infer that this was also the provision in the signed agreement.
The Applicant paid the first instalment of $55,000.00 but no transfer of property occurred and the second instalment was never paid.
The parties gave dramatically diverging evidence about what happened in 2009.
The Applicant’s evidence was that after some initial unpleasantness at the start of 2009, which included him applying for a Protection Order against the Respondent, the parties reconciled. His evidence was that they did not resume sharing a residence but that they were together most nights of the week and socialised together and had a sexual relationship. They continued to own Property M1 & M2 as tenants in common and neither party took any steps to enforce the December 2008 agreement.
The Applicant asserted that they effectively resumed their de facto relationship and that they finally separated in 2010.
The Respondent vehemently denied that she ever resumed a de facto relationship with the Applicant. She said that she decided that the Applicant was dangerous after he applied for the Protection Order and she tried to avoid having any contact with him. She said that when she did run across him he verbally abused her and that she was so fearful of him that she slept with a knife under her pillow for many months.
The Respondent alleged that she dated two other people whom she named during this period and she called Ms C to give evidence in support of her claim that there was no relationship, let alone a de facto relationship, between the parties in 2009 or 2010.
Ms C said that she became friends with the respondent in early March 2009 when she rented Property O from her for 12 months. Ms C said that the Respondent invited her to her home on many occasions to enjoy a glass of wine on the beach and dinner and that she never saw the Applicant there. She said that at a later stage she saw the Respondent almost every night and that on no occasion did she see the Applicant at the Respondent’s home
Ms C said that to her personal knowledge the Respondent dated two other people in 2009.
Ms C conceded during cross-examination that she was employed during that period and often otherwise occupied in her own activities but insisted that she had seen the Respondent frequently and that she had never seen her with the Applicant in 2009 or early 2010.
Leaving aside for the moment the issue of whether the parties resumed and then again ended their de facto relationship it was common ground that at some time in 2010 they had further discussions about the Property M1 & M2 properties and that the Respondent instructed her solicitor (the same solicitor who had drawn up the earlier agreement) to draw up a document reflecting what had been agreed.
The Respondent’s solicitor drew up a financial agreement pursuant to s.90UD of the Family Law Act. It provided in summary that:
i)The Respondent would transfer her interest in Property M1 to the Applicant within 30 days and the Applicant would simultaneously refinance the loan secured over that property into his sole name.
ii)The Applicant would transfer his interest in Property M2 to the Respondent and the Respondent would simultaneously refinance the loan over that property into her sole name.
iii)The Respondent would pay the Applicant a sum of money which the Applicant contended was $46,250.00 and the Respondent contended was some lesser amount within 30 days of the date of the agreement.
The agreement was signed and dated 15 February 2011.
The Applicant provided the Respondent with a Transfer of his interest in Property M1 within 30 days of the date of the agreement and on 24 March 2011 the Respondent registered the transfer.
On 28 March 2011 the Respondent provided the Applicant with a transfer of her interest in Property M2 but advised him that she did not intend to pay him the money until he had refinanced the loan secured over Property M2.
Due to financial difficulties he suffered as a result of the Respondent’s refusal to pay him the money and due to the value of Property M2 being very close to the amount of the loan the Applicant was unable to refinance the loan. He placed Property M2 on the market and a contract for the property was signed on 9 November 2012. Upon completion the loan was paid out and the Respondent was released from liability for the loan.
The Applicant then pressed the Respondent for payment of $46,250.00. The Respondent initially offered to pay $40,000.00 but subsequently refused to pay anything at all and as a result the Applicant commenced these proceedings.
Whether the Part V111AB agreement is valid
There was no dispute that the parties had the requisite geographical connection to allow them to make the agreement; Queensland, where the parties lived at all material times, was a participating jurisdiction as at the commencement of Part V111AB.
There was no dispute that the agreement complied with the requirements in s.90UF (Need for a Separation Declaration for Certain Provisions of a Financial Agreement to Take Effect) and s.90UJ (When Financial Agreements are binding).
However the Respondent contended that none of this mattered because the parties’ de facto relationship ended before the commencement of Part V111AB and the agreement was therefore invalid.
The Respondent has received all the benefits to which she was entitled under the agreement and she waited an unconscionable length of time to make a claim that the de facto relationship ended prior to 1 March 2009 rendering the agreement invalid. However she cannot be estopped from relying on this claim when the issue is as fundamental as whether there was power to make the agreement at all.
The Respondent is contending for the invalidity of the agreement and a broad general principal often applied is that the person making an assertion has the onus of proving it. However the Full Court has held that a person seeking to uphold a financial agreement by contending that it is binding has the onus of proving it and it is consistent with this line of authority to hold that the Applicant, who wishes to uphold the agreement as validly made, has the onus of proving that it is valid.
In Hoult & Hoult Thackray J explained what this allocation of the onus of proof meant in a case where the issue was whether a financial agreement was binding. He said as follows:
In my view, the onus of establishing that an agreement is binding falls upon the party asserting that fact because the legislation provides that an agreement is binding “if, and only, if” the prescribed matters are established. It follows that the party relying upon the agreement must establish the existence of all those matters, including the giving of the requisite legal advice to both parties.
I recognise the potential forensic difficulty faced by a party who seeks to uphold a financial agreement when the other party claims not to have received the prescribed legal advice. However, the fact there is difficulty in proving something within the knowledge of only the other party and their solicitor does not mean the legal burden of proof passes to the party who seeks not to be bound by the agreement.
Importantly, however, I consider that once the party seeking to rely upon the agreement produces in evidence the certificate signed by the other party’s solicitor, there is a forensic obligation on the other party to adduce evidence which would disprove, or at least throw into doubt, the inference or conclusion to be drawn from the certificate (especially when read with the recital in the agreement to the same effect).
This forensic obligation is properly conceptualised as the burden of introducing evidence and should not be confused with the burden of proof as a matter of law and pleading. For a discussion of the difference see Purkess v Crittenden (1965) 114 CLR 164 especially at 167-168 per Barwick CJ, Kitto and Taylor JJ and 170-171 per Windeyer J.
It is consistent with this reasoning to hold that in the case before me the Applicant has the onus of proving that the agreement is valid but that once he produces evidence which makes a prima facie case in this regard a forensic obligation is cast on the Respondent to adduce evidence which would disprove, or at least throw into doubt, the inference or conclusion which can be drawn from evidence presented by the Applicant.
I am satisfied that the Applicant comfortably gets over the threshold of making out a prima facie case that the agreement is valid.
The Applicant gave sworn evidence about the parties’ relationship between 2009 and 2010 which although somewhat basic supported his contention that parties resumed a de facto relationship.
The Respondent disputed that this was true but the Part VIIIAB agreement which depends on for its validity on this very fact was drawn up by her solicitor on her instructions.
This same solicitor also drew up the agreement which was signed in December 2008 and therefore knew that the Applicant and Respondent had previously ended their de facto relationship. There was no suggestion that the solicitor colluded with the Respondent in 2010 to draw up a fraudulent document. The only inference reasonably open on the evidence is that the Respondent told her solicitor that the parties had resumed their de facto relationship after the December 2008 agreement was signed and that the de facto relationship ended after 1 March 2009.
I am satisfied that these two things together, namely the Applicant’s evidence that a de facto relationship resumed in 2009 and ended in 2010 and the fact that the Respondent’s solicitor chose, in the knowledge of the past relationship between the parties and on the instructions of a legally astute client, to use the vehicle of a Part VIIIAB agreement to finalise the parties property matters, establishes a prima facie case that the parties de facto relationship ended after the date of the commencement of Part V111AB of the Family Law Act and that therefore the agreement is valid.
The issue then is whether the Respondent has introduced evidence which casts doubt on this.
In her trial affidavit the Respondent provided a detailed account of her own circumstances and the nature of her relationship with the Applicant in the 2009 – 2010 period which ran contrary to any claim that the parties resumed their de facto relationship, but why should the Respondent be believed?
When the Applicant first began pursuing the Respondent in 2012 for payment of the money due to him under the agreement the Respondent offered to pay $40,000.00. She did not suggest then, nor did she suggest in her 9 July 2013 affidavit, that the agreement was invalid. She made this claim for the first time in her trial affidavit which was filed seven days before the hearing commenced.
A matter in connection with the Part VIIIAB agreement which reflects adversely on the Respondent’s credit is that Recital C of the agreement says as follows:
Mr Morley and Ms Henshall were in a de facto relationship for no less than 2 years.
Clause 4.12 of the agreement states that:
The parties acknowledge that the Recitals are true and correct and shall form part of this Deed.
In her trial affidavit however the Respondent asserted that she and the Applicant were only ever in one de facto relationship which lasted for 16 ½ months.
The Respondent is the one who gave instructions for the preparation of the agreement. She is an astute person who is experienced in dealing with legal documents. When she was being cross-examined about the contents of the December 2008 agreement she confidently asserted that:
I would have read it and I would have pointed out to my solicitor if there were any errors in it.
Recital C cannot be a mistake and the only explanation for the conflict between Recital C and the information in the Respondent’s trial affidavit is either that the Respondent was deliberately untruthful when giving instructions to her solicitor in 2010 or is being deliberately untruthful now.
The Respondent has a powerful motive for being untruthful now because if she is successful in her claim about the validity of the agreement she will avoid being required to pay the Applicant a substantial sum of money plus interest.
The Respondent was not a witness of credit and I do not accept her evidence about the nature of the parties’ relationship in 2009 and 2010.
Ms C purported to corroborate the Respondent’s evidence to an extent but she met the Respondent for the first time in March 2009 and her evidence depends to some extent on how frank the Respondent was with her. Given my concerns about the Respondent’s evidence I cannot assume that the Respondent was frank with Ms C at all.
I am satisfied on the balance of probabilities that the parties were in a de facto relationship on or after 1 March 2009 and that the Part V111AB Agreement is valid.
The construction of clause 4.10
The next issue raised by the Respondent was whether Clause 4.10 of the agreement required her to pay $46,250.00 or some lesser amount.
Clause 4.10 of the agreement provides as follows:
Within thirty (30) days of the date of this Agreement, Ms Henshall will repay to Mr Morley the sum of FOURTY-SIX THOUSAND TWO HUNDRED AND FIFTY DOLLARS ($46,250.00), being a refund pursuant to the Agreement between the parties made December 2008 (“the December 2008 Agreement”) and LESS Mr Morley’s share of the contribution levy referred to in clause 4.6 and his share of the costs of the Deed.
Clause 4.6 reads as follows:
Mr Morley and Ms Henshall acknowledge and agree that there is an outstanding and unpaid account due to (omitted) Council associated with a contribution levy for the property (of approximately $18,000.00) together with other unpaid rates and charges. Ms Henshall agreed that she will be responsible for all the levies, costs and charges due to the (omitted) Council at the date of this Deed associated with the property at Property M1
The Respondent argued that the amount she was required to pay pursuant to Clause 4.10 was $46,250.00 less the Applicant’s share of the contribution levy referred to in 4.6 and his share of the costs of the Deed.
I do not accept that this is a proper interpretation of Clause 4.
If the construction put forward by the Respondent was adopted it would not be possible on the face of the agreement to ascertain what amount the Applicant was required to pay, as the agreement does not specify the amount of the levy, what the Applicant’s share of it was intended to be or what his share of the costs of the Deed were.
This would not necessarily be fatal but I consider it abundantly clear that all of the words after the word “being” in Clause 4.10 were intended to explain how the figure of $46,250.00 was arrived at, not to derogate from the requirement to pay $46,250.00.
The Respondent gave evidence about what she thought was intended as regards payment and referred me to a letter her solicitor sent to her on 16 February 2011, the day after the agreement was signed, telling her that her obligation was to pay $46,250.00 less certain amounts.
The Respondent’s solicitor misquoted the words of the clause and what the Respondent thought was intended does not matter.
The words in Clause 4.10 are clear and as the Full Court said in Yunghanns & Yunghanns[4]:
[4] Yunghanns & Yunghanns (1999) FLC92-836
In the absence of any allegation of fraud or mistake or other vitiating circumstances in the formation, drafting or recording of the orders, extrinsic evidence is not admissible to contradict the plain words of the order, or to seek to establish the agreement between the parties which lay behind it: Langford and Coleman (1993) FLC 92-346 at 79,671 and Harrington v Lowe (1996) 136 ALR 42; FLC 92-668.
Whether the failure by the Applicant to comply in a timely fashion with other clauses of the agreement:
i) affected the Respondent’s liability to pay the amount in Clause 4.10 or
ii) entitles the Respondent to damages which could be offset against the $46,250.00
I accept the submission of the Applicant’s solicitor that Clause 4.10 is a standalone clause. Whereas the clauses relating to the transfer of the properties require the simultaneous discharge of mortgages there is nothing in Clause 4.10 or elsewhere in the agreement to suggest that the payment of money by the Respondent to the Applicant is only to occur if other clauses in the Agreement are complied with.
In any event there are now no other outstanding clauses of the agreement. It is true that the transfer of Property M1 to the Applicant did not happen exactly as set out but it did happen in substance because the Applicant dealt with the property as if it were his own and sold it and the Respondent’s liability under the mortgage was then discharged.
The Respondent submitted that the delay in releasing her from the mortgage caused her loss and damage in the amount of $11,064.30 which should be deducted from any amount she owed to the Applicant.
The difficulty I have with this is that on the state of the evidence I cannot be satisfied on the balance of probabilities that the Respondent suffered this loss and that there was nothing she could have done to mitigate any loss to which she was potentially exposed. The evidence about this issue consisted of bare assertions by the Respondent who was not a witness of credit.
There is no evidence on which I can find that the Respondent has any entitlement to damages as a result of non-compliance by the Applicant with any clause in the agreement.
The Applicant’s claim for interest
In his Application filed on 21 June 2013 the Applicant sought interest on the amount of $46,250.00 from 9 November 2012. This was the date on which the sale of Property M1 settled and the Respondent was released from liability for the mortgage registered over that property.
In his case outline filed on 28 March 2014 however the Applicant indicated that he was seeking interest from 18 March 2011, which was the date on which the money was due to him pursuant to Clause 4.10.
S.90UN(b) allows the court to order that interest be paid on money owing under an agreement in accordance with the applicable rules of court.
The Federal Circuit Court Rules make no reference to s.90UN(b) specifically and the only potentially relevant Rule is 22.01 which provides as follows:
For subsection 117B(1) of the Family Law Act, the rate of interest is the rate prescribed by the Family Law Rules for that subsection.
The Family Law Rules do not refer to s.90UN(b) either but Rule 17.03 of the Family Law Rules provides that:
The prescribed rate at which interest is payable under paragraphs 87 (11) (b) and 90KA (b) and subsection 117B (1) of the Act is:
(a)in respect of the period from 1 January to 30 June in any year--the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced; and
(b) in respect of the period from 1 July to 31 December in any year--the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced.
Note: For the date from which interest is payable, see paragraphs 87 (11) (b) and 90KA (b) and subsection 117B (1) of the Act.
It is curious that s.90KA (b) is specifically mentioned Rule 17.03 but s.90UN(b) is not, because s.90KA and s.90UN are identical in their terms. This must be a drafting oversight.
S.117B of the Family Law Act provides:
(1)Subject to any order made by the court under subsection (2), where, in proceedings under this Act, a court makes an order for the payment of money (other than an order for the payment by way of maintenance of a periodic sum), interest is payable, at the rate prescribed by the applicable Rules of Court, from:
(a) the date on which the order is made; or
(b) the date on which the order takes effect;
whichever is later, on so much of the money as is from time to time unpaid.
(2)A court that makes an order for the payment of money as mentioned in subsection (1) may order that interest is not payable on the money payable under the first-mentioned order or may order:
(a)that interest is payable at a rate specified in the order, being a rate other than the rate prescribed by the applicable Rules of Court; or
(b) that interest is payable from a date specified in the order, being a date other than the date from which the interest would be payable under subsection (1).
I am satisfied that I should order that the Respondent pays interest on the amount owing to the Applicant. The Applicant has been kept out of his money for three years and it would be unjust if he now received only the original sum.
The omission in R.17.03 is a problem but it seems to me that s.117B(2)(b) allows me to order that interest be payable on the amount that I intend to order that the Respondent pay to the Applicant from either 18 March 2011 or 9 November 2012.
The issue is the date from which interest should be ordered.
I have found that Clause 4.10 is a stand-alone clause and that there was no justification at any time for the Respondent failing to comply with this clause.
From that perspective there is no justification for ordering that interest be paid only from 9 November 2012, but the Applicant by his conduct in 2011 and 2012 led the Respondent to believe that he would not be pressing for payment until he had complied with the order for her release from liability for the mortgage secured over Property M1. Until just prior to the hearing he was only seeking interest from that date.
I consider it just and equitable to order that interest run from 9 November 2012 and not from 18 March 2011.
The orders
I intend to order that the Applicant may enforce Clause 4.10 as if it were an order of the court and to order that the Respondent pay the Applicant $46,250.00 plus interest from 9 November 2012.
The Applicant sought an order that the Respondent pay this money within 30 days and a consequential order for the sale of Property M2.
I am satisfied that it is appropriate to make an order that the money be paid within 30 days and appropriate to restrain the Respondent from dealing with Property M2 pending compliance with that order. I do not however intend to make an order for Property M2 to be seized and sold if payment is not made within 30 days because I do not know sufficient about the Respondent’s circumstances to be sure that this would not work an injustice on her or that there may not be more effective ways of obtaining prompt payment of the money for the Applicant.
I will give the parties liberty to apply for consequential orders in relation to enforcement if payment is not made within the specified time.
Costs
The Applicant sought an order that the Respondent pay his costs of and incidental to the proceedings on an indemnity basis.
The costs issue was not the subject of argument at the hearing. I do not know how much the Applicant is seeking or whether costs will be based on a Costs Agreement between the Applicant and his Solicitor and I have heard no submissions by the Respondent about whether she should be obliged to pay costs.
I will make orders for the Applicant to file additional material if he wishes to pursue an application for costs and for the Respondent to file a submission in response to the material filed by the Applicant. The matter can then be listed for mention by telephone to determine the costs issue.
For all of the above reasons the orders of the court will be as set out at the beginning of this judgment.
I certify that the preceding one hundred and twenty-three (123) paragraphs are a true copy of the reasons for judgment of Judge Terry
Associate:
Date: 8 September 2014
Key Legal Topics
Areas of Law
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Family Law
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Contract Law
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Property Law
Legal Concepts
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Injunction
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Remedies
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Costs
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Contract Formation
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Charge
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