MORSE & MORSE

[2011] FamCA 1076

FAMILY COURT OF AUSTRALIA

MORSE & MORSE [2011] FamCA 1076

FAMILY LAW – VARYING ORDERS – Whether the orders were substantive or machinery orders

Family Law Act 1975 (Cth)

Bray & Bray (1988) FLC 91-968
McDonald & McDonald (1976) FLC 90-047
Molier & Van Wyck (1980) FLC 90-911
Ravasini & Ravasini (1983) FLC 91-312

APPLICANT: Mr Morse

RESPONDENT: Ms Morse

FILE NUMBER: SYC 5886 of 2010

DATE DELIVERED: 1 December 2011

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Le Poer Trench J

HEARING DATE: 1 December 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Tilley

SOLICITOR FOR THE APPLICANT: McLarens Lawyers

COUNSEL FOR THE RESPONDENT: Othen

SOLICITOR FOR THE RESPONDENT: Clinch Long Letherbarrow

Orders

1. The husband’s application in a case filed on 14 October 2011 is dismissed.

2. The parties are to attend upon a further conciliation conference with the docket registrar at 9.30am on 10 January 2011.

IT IS NOTED that publication of this judgment under the pseudonym Morse & Morse is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5886 of 2010

Mr Morse

Applicant

And

Ms Morse

Respondent

REASONS FOR JUDGMENT

1. Before the Court is an application by the husband, Mr Morse, filed 14 October 2011. The application seeks orders varying the provisions of final property orders made by consent on 8 June 2011. The husband says the variations are machinery matters only and not substantive changes. The husband acknowledges the Court has no power to make substantive variations to the final property orders absent the application of section 79A. Authorities such as Ravasini & Ravasini (1983) FLC 91-312, Molier & Van Wyck (1980) FLC 90-911 and Bray & Bray (1988) FLC 91-968 are relied upon. The respondent, Ms Morse, filed a response to the application in a case filed by the husband. That response was filed on 17 November 2011. She seeks the application be dismissed. She also sought a declaration which was not pursued before me.

2. It is common ground that the only provision of the orders made on 8 June 2011 which have not been complied with by the parties is paragraph 5.  That provision is as follows:

   5(a) Upon the husband complying with orders 2 and 3 and further the husband also obtaining a refinance of the mortgage over the factory unit at [B Street, Suburb C], the parties shall do all acts and things to effect a transfer to him of the [B Street, Suburb C] property;  (b) in the event that the husband does not comply with orders 2 or 3 or not obtain a refinance such that the wife is released from obligation to the mortgagee, then the property be sold and money from sale be used as follows:  (1) payment of all costs on sale;  (2) payment out of the mortgage;  (3) payment out of [Mr D];  and then the balance held by the parties solicitors as controlled moneys pending any resolution of any claims by the husband’s mother, and after that any surplus paid to the husband.

3. There was a further order 5(c) which provides for consequential orders upon the sale of B Street being affected. 

4. The Court’s attention is drawn to paragraph 13 of the orders which provided as follows, “13:  All prior orders made in these proceedings are discharged.” 

5. The importance of Order 13 is that there was an interim order operative until that time which provided for the wife to receive all rental from the property at B Street, Suburb C, and to meet all outgoings.

6. At the time the orders were made it is common ground that the B Street was registered in the wife’s sole name and was encumbered by an interest-only mortgage to the Commonwealth Bank of Australia of approximately $364,000.  The rental receipt from the property is $4629 per month and the mortgage payment was between $2464 and $2803 per month. 

7. The husband obtained finance to discharge the mortgage on the subject property and was ready to settle on or about July or August this year.  He says, to his surprise, he discovered that the wife had continued to collect the rental proceeds from the property, which he understood and accepted would be the case, however, he did not expect that she would not meet the outgoings as she had done prior to the date of the order, namely 8 June 2011. 

8. The position is now that the outstanding balance of the mortgage is $384,000 or thereabouts.  The husband does not know what the position is with the payment of rates and other outgoings on the property.

9. The wife received the whole of the balance of the $240,000 fund provided for in paragraph four of the orders on or about 30 September 2011.  The reason for the delay is said to be the husband’s failure to provide a written authority in a timely manner.  However, the correspondence annexed to the parties’ affidavits shows that the husband’s solicitors raised the question of arrears on the mortgage with the wife’s solicitors in July of this year. 

10. The response to the concern raised by the husband was that the wife would only pay arrears on the mortgage to the date of the orders, and would apparently keep all of the rental received thereafter.

11. The husband’s case is that it is implicit in a reading of the whole of the orders that he would receive the property title from the wife and in exchange pay out the capital of the interest-only loan which the wife had represented was secured against the property at B Street.  That loan was at the time of the orders $364,000 and not $384,000. 

12. The wife says no such inference can be drawn, and even if it could be so drawn, to vary the provisions of the orders to facilitate such a result would be to effect a substantive rather than a machinery change to the orders.  Such a change is prohibited, she says, by the authorities referred to above. 

The Law

1. The question at issue is whether the orders sought by the husband are substantive orders or machinery orders (otherwise called consequential orders).  The resolution of this question determines whether or not this Court is able to vary the consent orders entered into by the parties on 8 June 2011.

2. The Court was taken to the decision of Evatt CJ, Demak and Watson JJ in McDonald & McDonald (1976) FLC 90-047, which set out the principle that:

   A distinction should be made between those parts of an order which determine and vest property rights and those which provide for the machinery to carry out the order effectively.

   And that in the former instance the Court could not vary the order while in the latter it could. 

3. It was rightly pointed in Bray & Bray (1988) FLC ¶91-968 that this matter was decided before the inclusion of s 79A to the Family Law Act, and as such its utility to the discussion is consequently somewhat limited.

4. Ravasini and Ravasini (1983) FLC ¶91-312 provides a useful outline of what a machinery order is(at 78-127). The Full Court (Ellis and Emery SJJ, McGovern J) stated:

   A consequential order then, in a property matter, would include an order following logically or of necessity from a prior substantive order.

   What a consequential order is not, is an order, the effect of which is to vary the prior order for property settlement. It is not possible to suggest that even the slightest variation of the original order is a consequence of it.

5. Further, their Honours set out the test which has been subsequently applied in relation to this question:

   In determining whether or not an order may be varied as a machinery order the enquiry must be firstly as to what part of the order is the substantive order and what part or parts of it merely follow that order as a necessary consequence. A court in making a property order might do no more than order that the property be sold and the proceeds equally divided. That is the substantive order. If the court at that time has before it sufficient evidence of the facts and circumstances it may go on and make appropriate “consequential” orders providing the machinery whereby the substantive order is to be carried out. If the court at the time does not have evidence of the necessary facts and circumstances then it may reserve liberty to apply to allow the parties to come back to the court for consequential relief if they are unable to agree as to how the substantive order should be made operative.

6. In Bray, Nygh J reiterated this test succinctly.

   The test, as I have said earlier, is the one laid down In the Marriage of Ravasini and In the Marriage of McDonald, an inquiry as to whether the order vests a right in a party, and for the reasons I have explained earlier this must be done within the context of those orders. Obviously each set of orders in each case must be analysed on its own in its own right.

7. Molier & Van Wyck (1980) FLC ¶90-047 extended the principle beyond that stated in earlier cases. Its circumstances and later treatment by the court warrant a closer consideration.

8. In that case, the wife was to transfer her interest in jointly owned property to the husband upon payment of a lump sum by the husband. When the husband did not pay the lump sum, the wife sought orders for the property to be sold in order for her to receive the payment. The Full Court (Evatt CJ, Marshall and Fogarty JJ) stated:

   The money due to the wife was not a lump sum at large. It was, in terms of the order, undoubtedly a sum which represented her interest in the joint home, an interest which had been imperfectly converted by the order into an interest in a sum of money, payment of which is secured by maintaining the wife's position as joint owner on the title. On the face of it there is a hiatus in the order in that it does not enable the wife to realise her interest in the home (now represented by the amount fixed by the order) by enforcing its sale (upon default by the husband). She cannot make any use of her position as a joint owner.

   This extraordinary result ought, in our view to be remedied by the court making good the defect or hiatus in the original order by denying to the husband an open-ended right to secure the whole interest in the home, even after he has failed to make payment to the wife within the time prescribed. To achieve this result involves some extension of the principles laid down in cases such as McDonald and McDonald

9. It was held in Bray that this set of circumstances was an extraordinary one, Lindenmayer J stating:

   In that case there were clear omissions from the original order so that the order did not of itself cover the circumstances which had arisen, and in those circumstances the court was able to conclude that it was possible, exercising the power of the court to vary machinery provisions or to make consequential orders, to make the orders operative when they would otherwise not have been so.

Conclusion

1. I accept that the order sought by the husband would, if made, create a substantive rather than a machinery order.  It would involve the wife having to pay an additional $20,000 to the husband, something not required on the face of the orders of 8 June 2011. 

2. In the absence of knowledge of all relevant background facts and the negotiations leading to the making of the order of 8 June 2011, it is impossible to draw any particular conclusions.  However, to the extent that it may be helpful to the parties I provide the following preliminary views: 

   a)If each party accurately recites their understanding of the basis of the settlement relevant to the payment by the wife of the outgoings on the subject property pending the husband’s payment of the mortgage, then there is clearly common mistake and the parties never were ad idem about their agreement and consequently the consent orders; 

   b)Given the history that there was an interim order which required the wife to meet the outgoings on the property and at the same time entitled her to receive all of the income from the property, it is reasonable that the husband considered that position would continue until the property was transferred into the husband’s name.  It may be that there was, in the absence of an explicit order to the contrary, an implied representation to that effect by the wife.  An implied representation arises, when the history of the parties’ transactions would lead an independent observer to conclude, “Why would he think otherwise?”; 

   c)It seems on the face of it that at the time the agreement was reached and embodied in the orders on 8 June 2011, each of the parties and their legal representatives were acutely aware of the small quantum of net assets available for division between the parties, and thus they searched for and found the only available practical solution which was likely to represent a far less advantageous result than either party had ever contemplated.  To allow this matter to proceed further will, it seems to me, most likely lead to a situation where each party is financially ruined; 

   d)It appears there are a number of further options available to the husband to prosecute his claim, all of which are likely to be expensive for each party and which might lead eventually to costs orders being made against one of the parties.

   e)In order to give the parties a further opportunity to resolve the matter before further litigation is instigated, I have asked the docket Registrar to convene another conciliation conference as soon as possible.

3. I make the orders set out herein.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 1 December 2011.

Associate:

Date:  29 March 2012