PEROT & PEROT

[2013] FamCA 137

FAMILY COURT OF AUSTRALIA

PEROT & PEROT [2013] FamCA 137

FAMILY LAW – ENFORCEMENT – where the husband failed to comply with the terms of consent orders – where the wife seeks interest on the amount due to her – where it was held to be in the interests of justice that interest be payable – where the husband seeks interest should be prescribed at a rate lower than the statutory rate – where the wife is entitled to calculate interest at the statutory rate

FAMILY LAW – COSTS – where there is a previous costs order – where it was held a sum of money should be placed in trust in order to satisfy the wife’s costs pending agreement or assessment for costs – where the orders prescribed a method for appointing a valuer in the event of disagreement – where the husband unilaterally appointed his own valuer and seeks the wife pay half of the valuation costs – husband’s application dismissed

Family Law Act 1975 (Cth)

Stephens & Stephens & Anor (Enforcement) (2009) FLC 93-425

APPLICANT: Ms Perot

RESPONDENT: Mr Perot

FILE NUMBER: SYC 5596 of 2011

DATE DELIVERED: 6 March 2013

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 13 February 2013

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Karras Partners

SOLICITOR FOR THE RESPONDENT: Litigant in person

Orders

1. The wife be declared to be entitled to calculate and receive interest on the capital sum which she was otherwise entitled to receive pursuant to order 2 of 12 June 2012 at the rate of interest provided in rule 17.03 Family Law Rules 2004 (Cth) calculated from 10 September 2012 and that the husband’s application that she not do so be dismissed.

2. An amount in the sum of $3,500 is to be placed into trust in relation to any agreement or assessment of costs pursuant to order 6 made 14 November 2012 and any further order for costs in respect of that assessment.

3. The husband’s application that the wife pay the sum of $385 in respect of the valuation by Mr K dated 15 October 2012 be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Perot & Perot has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5596 of 2011

Ms Perot

Applicant

And

Mr Perot

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. The primary matter of controversy before me is whether or not the wife is entitled to interest on unpaid monies under a property order and if so, at what rate that interest should be calculated.

2. In her application in a case filed 29 August 2012, the wife sought:

   5. That in the event that contracts for the sale of [S suburb] have not been exchanged by 10 September, 2012, the husband shall pay interest on the capital sum outstanding to the wife in the sum of $289,140.00 at the rate of 9.5% per annum as from that date until the date the wife receives payment of the capital sum.

   “That date” means 10 September 2012.

3. The husband has applied for an order that no interest be charged pursuant to rule 17.03 Family Law Rules 2004 (Cth)(“FLR”) upon the monies owed to the wife.

4. Next, the solicitor for the wife suggested that it might be that I assess costs pursuant to a costs order already made on the basis that those costs be agreed or assessed and in the alternative, that a sum of money be set aside to secure the wife in relation to the recovery of costs once they had been assessed.

5. The third application is made by the husband who seeks that the wife be ordered to pay a sum of $385 in respect of the one half of the costs of a valuation claimed by the husband from Mr K.

IS THE HUSBAND LIABLE FOR INTEREST AND IF SO, HOW MUCH?

1. The issue of the payment of statutory interest was dealt with in Stephens & Stephens & Anor (Enforcement) (2009) FLC 93-425. There the Full Court said:

   429. Section 117B(1) of the Act is a general provision which provides that where, in proceedings under the Act, a court makes an order for the payment of money interest is payable at the rate prescribed by the Rules from the date on which the order is made, or the date on which the order takes effect whichever is later. However, the effect of s 117B(1) is subject to any order made by the court under s 117B(2). Thus, the phrase “subject to” which is added to s 117B(1) limits its operation. Section 117B(2) allows the court, by order, to vary some of the consequences which otherwise flow automatically from s 117B(1), namely by ordering that no interest be paid or by varying the rate, or the date from which it becomes payable. The wording suggests that s 117B(2) offers a divergence from the effect of s 117B(1) and thus limits its operation by working as an exception. We are also of the view that as an exception, s 117B(2) shifts the onus onto the party seeking to take advantage of the exception: see Rural Export & Trading (WA) Pty Ltd v Hahneuser (2007) 243 ALR 356 per Gray ACJ at [65].

   430. The discretion conferred by s 117B(2) of the Act is extremely wide. However, in our view it “enables such lower or higher rate of interest to be determined as the interests of justice in a particular case may require”: see Gould and Another v Vaggelas and Others [(1985) 62 ALR 527].

   431. We would not seek to prescribe the considerations that may be relevant to the exercise of the discretion conferred by s 117B(2) of the Act. We are of the view that a purpose of interest on a judgment debt is to compensate the party entitled to the benefit of the judgment until it is satisfied. However, we do not accept that this is the only purpose and are of the view that another purpose is to ensure compliance with orders. For example, there may be circumstances where a recalcitrant party liable to pay an amount of money may seek to take advantage of an interest rate which is less than the prescribed rate.

   …

   478. In our view the appeals in relation to interest can be disposed of shortly. The Wife was entitled by reason of paragraph 4 of the property settlement order of Strickland J to the benefit of interest in accordance with s 117B(1) of the Act as from the date by which the Husband was to pay the money to the Wife. On a plain reading of s 117B any exercise of the discretion conferred by s 117B(2) was a matter for Strickland J. Strickland J was not asked to exercise the discretion conferred by s 117B(2) and thus Coleman J should not have exercised that discretion. In the result the appeal by the Wife should be allowed and the appeal by the Husband dismissed. However, as we have observed, if our construction of s 117B is wrong and Coleman J was able to exercise the discretion conferred by s 117B(2) then we have to consider the matters addressed by his Honour.

   …

   481. Consideration of the reasons of Coleman J and what happened during the hearing reveal that his Honour was of the view that absent a clear direction in the legislation the purpose of an award of interest on an order to pay a sum of money is compensatory and that no other purposes are relevant. The principle to be applied in determining a rate different from that prescribed in the Rules is that the amount awarded should only be compensatory to the party entitled to the benefit of the order. His Honour determined that the “primary focus” of s 117B(1) of the Act is compensatory and with this in mind thereafter at [134] set about determining a rate that would “provide the fairest basis for compensating the wife”. With respect to his Honour we do not accept the approach which he adopted.

   482. The trial Judge was obliged to be satisfied that it was in the interests of justice that the interest rate be varied and he failed to address this fundamental issue. The purpose of an award of interest on a judgment debt includes that it be compensatory but by so confining the inquiry, the trial Judge was in error.

2. Final property orders between the parties were made on 12 June 2012.

3. Order 2 was in the following terms:

   2. The husband shall, within 42 days, do all acts and things required to pay to the wife the capital sum of $289,140.00 (“the capital sum”).

4. Order 3 provided for what would happen in the event the husband failed to pay to the wife the capital sum. The parties were to join to sell at the earliest practicable date the property known as H Street, S suburb.

5. It was a condition of that order that the parties would set a sale price by agreement or failing agreement within a period of seven days, then at such sale price as may be determined by a certified practising valuer as the current fair market price of the property such expert to be appointed by the President of the Australian Institute of Valuers at the cost of the parties equally (order 3.3).

6. There was a further order that if the property was not sold within 90 days of listing then there would be an auction and there was a further order dealing with negotiating with the highest bidder.

7. The husband failed to make the payment of $289,140 within the 42 days provided for in order 2 of 12 June 2012.

8. On 14 November 2012 I noted:

   5.  It would be my preliminary view that, upon settlement of any sale, the wife should be entitled to be paid interest in accordance with the Family Law Rules 2004 (Cth) Rule 17.03 on the amount of $289,140 from the 24 July 2012, but the husband can further address me on the 13 December 2012 as to whether or not I should make an order in those terms and he can file any additional evidence that he wants to rely upon about that issue by the 10 December 2012.

9. On 13 December 2012 the matter was further adjourned to 13 February 2013 to deal with the husband’s oral application that no interest be charged in accordance with the rules in respect of the amount of money $289,140 that had commenced to run under the primary orders since 24 July 2012.

10. The husband relied upon affidavits filed 7 November 2012, 13 December 2012, 7 February 2013 and a document entitled “economic calculation” which I marked Exhibit 2. 

11. The agreed facts are:

    16.1.The husband failed to pay the capital sum of $289,140 to the wife within 42 days of 12 June 2012 (namely 24 July 2012) and shortly prior to the expiration of that time he indicated to the wife that he was not going to do it.

    16.2.The husband, without the involvement of the wife, set about the course that maximised the return to him from the property at H Street, S suburb by putting into place arrangements to subdivide the property.

    16.3.A purchaser was found for Lot 1 of that subdivided property at a price of $375,000.

    16.4.By way of orders I made on 14 November 2012, the wife was appointed trustee for sale. This was at a time when the most expeditious way of her receiving her money was to proceed with the course the husband had instigated; namely to complete the subdivision and exchange contracts with the buyer that had been found for Lot 1.

    16.5.In the event that both lots could be sold for $375,000, the value of H Street, S suburb is in the sum of $750,000 (less cost of subdivision and sale).

    16.6.The orders of 12 June 2012 were negotiated between the parties on the assumption that H Street, S suburb was worth $680,000.

    16.7.On the face of it, the husband has been advantaged by a gross amount of $70,000 ($750,000 - $680,000). The costs of subdivision were $16,250. The net advantage to the husband is therefore in the sum of $53,750.

    16.8.The amount of interest that the wife calculates using the statutory interest rate under the FLR has been calculated by the wife’s lawyer in an amount of $14,809. Although I am unable to replicate that calculation, I assume that calculation was done on the basis that the statutory rate was 9% per annum (as the table below demonstrates, it was not 9% for the whole period) and that interest accrued from 24 July 2012. Although that is when a date from which a claim for interest could have been made, the wife has not claimed interest from that date in her application, but from 10 September 2012. Interest from 10 September 2012 to the date of the hearing is $11,640.85 (113 days at 9.5% per annum and 44 days at 9% per annum).

    16.9.The husband is liable for capital gains tax. The husband however knew that on 12 June 2012 when he consented to the final property orders. On that basis, it should not be taken into account when the exercise of discretion is being considered. If it was to be taken into account, then I have no evidence about what the amount of capital gains tax would be, however, a rough calculation was done during submissions that there was an approximately gain of $75,000 on each of the units and that $15,000 in capital gains tax would be paid on each of the units by the husband.

    16.10.In the event that the husband received $53,750 from the sale of the two units and paid capital gains tax, $23,750 would be left. If he paid the wife interest of $11,640.85, he would have a little over $12,000 advantage from the deal that he had done to subdivide the property.

12. The husband submits that the evidence that he has provided establishes that he did everything that he possibly could in order to comply with order 3 made 12 June 2012. Overall I cannot accept that submission. The husband embarked upon a unilateral course to subdivide the property in which the wife had no involvement (until I made the order of 14 November 2012) and to which she did not consent.

13. The husband complains that the orders of 12 June 2012 did not explicitly set out that interest would run on the capital sum if there was a non payment within the time period provided by order 2. The husband was represented by counsel on the day the orders were made.

14. The husband has disclosed communication between he and his lawyers dated 13 June 2012 (Annexure C to the husband’s affidavit sworn 5 February 2013) in which his lawyers in summarising what happened on the day said:

    The settlement captures your wish to retain the property in the hope that you can obtain Strata Title and fetch a higher price. It was a risk you told us that you were willing to take. [The wife] bears no risk and, instead, will be paid a sum certain.

15. The husband apparently tenders that advice from his lawyer to demonstrate the lack of advice given to him about interest. Whilst it is true that communication does not make clear to the husband that if he did not make the payment of the capital sum within six weeks, interest would run, it does make clear that the wife was bearing no risk in relation to the husband’s wish to secure from the deal control over the property at H Street, S suburb so that he could improve its value by subdividing it. I am unaware as to what, if anything, passed between the husband and his lawyers about his ability to refinance the property so that the wife could be paid the capital sum within the time frame set out in the orders.

16. He is taken to have knowledge of rule 17.03 FLR. Any complaint made by him in relation to inadequate legal advice is a matter between him and his lawyers and not something that should be visited upon the wife. Any assertion of a unilateral failure by the husband to understand the bargain he was making is not a matter to be given weight when a discretion is to be exercised.

17. Finally, it is important to note that order 3 made 12 June 2012 is a default order which only came into operation in circumstances where the husband failed to comply with order 2 made that day. Given it was a default order, there is an onus on the husband, if he wishes to assert that interest should not run for all or part of the time after his non compliance with the order for the payment of the capital sum to the wife, to establish that the wife acted in some contrary manner in stopping the implementation of the default order. The husband has not established that she did so and in fact, I have found that the husband set off on a course of his own which led to a delay in the marketing of the property.

18. I find that it is in the interest of justice that interest should run on the capital sum.

19. The husband in submissions suggested that the court should exercise its discretion not to apply the statutory rate of interest but some apply other lower rate of interest. The husband provided in Exhibit 2 a printout from the internet which indicated that a subsidiary of Westpac is currently offering fixed rate home loans at 4.99 percent for a two year period (with their normal long term home rate being 6.27 percent).

20. Rule 17.03 FLR is as follows:

    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.

21. Although liability for interest commenced on 25 July 2012, the wife has only sought it from 10 September 2012. In the relevant period the statutory rate of interest has been:

Period	RBA cash rate	Rate of interest under r 17.03
From 10.9.2012 to 31.12.2012	3.50% (published on 6 June 2012)	9.50%
From 1.1.2013 to 5.3.2013	3.00% (published on 5 December 2012)	9.00%

1. The rate set in the Rules, by the body of Judges, is not simply a compensatory rate. It is also a rate aimed at providing some level of encouragement to litigants to comply with orders that require them to pay money within certain periods. Adopting the same public policy underpinning, namely the encouragement of litigants to comply with money orders made by the court, the rate selected is uniform across most superior courts.

2. As has been demonstrated above, the husband will still receive a net advantage from what he has done, even after he pays interest at the statutory rate. The wife has been waiting for her money for a significant period of time in circumstances where she has made a commitment to an existing borrowing with an expectation that the husband would comply with the original order. In the circumstances of this case, the court need not inquire as to what amount would be needed to compensate the wife for what she has lost given that the husband’s wish to subdivide the property means that his non payment of the capital sum was deliberate and the amount of time that he took to market the property was a deliberate course taken by him. In all the circumstances he should be required to pay the statutory rate of interest.

3. The wife is trustee for the sale of the property. She therefore has control over the distribution of the settlement monies. She is entitled to calculate and take statutory interest on the amount that she was otherwise due to be paid pursuant to order 2 of 12 June 2012.

THE WIFE’S COSTS ORDER

1. Order 6 made 14 November 2012 is in the following terms:

   6.  The husband should pay the wife’s costs of the wife’s application for enforcement to date and the costs of the husband’s application in a case on a party/party basis, as agreed or assessed.

2. The wife’s lawyer wrote to the husband and indicated that the wife would be prepared to agree to receive the sum of $2,757.48 in satisfaction of the husband’s obligations under that order. The wife has calculated that amount is what the wife would recover on an assessment on a “party/party” basis (being about 40 percent of the wife’s actual costs to her lawyer). The husband was not prepared to agree to that amount. No detailed bill has been provided to the husband. It is not appropriate for me to alter the order that I have made.

3. It is appropriate however, given the extensive litigation between the parties, to secure an amount of money that would be available to the wife upon an assessment. The wife’s lawyer indicated that when a detailed bill was done it may well be that the amount will be more than $2,757. He also indicated that he would be seeking a further costs order against the husband in relation to having to carry out the assessment.

1. On 13 February 2013, on an interim basis, I ordered that a sum of $3,500 be set aside in the trust account of the solicitor who is acting on the conveyance of the sale of Lot 1 H Street, S suburb. It is appropriate to confirm that as a final order so that sum of money is available to satisfy any result the wife receives by way of an assessment pursuant to the costs order made on 14 November 2012.

MR K’S FEES

1. The husband applies that the wife pay the sum of $385 to comply with an order he says was made in June in relation to the wife paying one half of a valuation fee from the monies that the wife is entitled to receive. The starting point is order 3.3 made 12 June 2012. As indicated above, that order required the parties to set a sale price and if they were unable to, then the sale price would be a price to be determined by a certified practising valuer as appointed by the president of the Australian Institute of Valuers and that the cost of that valuation would be paid by the parties equally.

2. On 23 July 2012, the day before the husband was to pay the capital sum to the wife, the husband wrote to the wife’s lawyers indicating that the capital sum would not be paid within the time and that the husband had “activated” the machinery provisions for the sale of the property (including order 3.3).

3. The next relevant piece of communication was sent by the husband to the wife’s lawyers on 24 September 2012 (after the wife had commenced her application for enforcement). In that communication, which attached a letter dated 17 September 2012, the husband says as follows:

   In accordance with Item 3.3, a property valuer is to be appointed to establish the value of the property. I have attempted to make contact with the Australian Institute of Valuers, by sending two emails from their website and a [sic] I have sent a letter to the address listed on the website, as yet I have received no reply. The website and telephone directory does not list a telephone number to contact the AIV.

   I have however made other enquiries, and I have been highly recommended to a registered valuer, having practiced in this area for the past 14 years, with the appropriate qualifications. I requested a proposal from him, copy attached for your perusal.

   I seek your approval to appoint [Mr K] of [K Valuations], to carry out a valuation of the property.

   I would like you to confirm that your client will pay half of the fees.

4. Attached to the communication was Mr K’s quote to carry out a valuation for a fee of $770. The husband received no immediate response to that request.

5. On 3 October 2012 he again wrote to the wife’s lawyers in the following terms, inter alia:

   I have not received a reply to my letter dated 19 September 2012 [sic], with respect to my proposal to appoint [K Valuations] to carry out a valuation of the property. In accordance with Item 3.3 of the Term [sic] of Settlement, I have now appointed [K Valuations] to carry out the valuation. Upon receipt of their report, a copy will be forwarded to you.

   I have also not received a reply from you, that your client will pay half of the valuation fees.

6. On 9 October 2012 the wife’s lawyers responded (see Exhibit 1) in a letter which said, inter alia:

   Moreover, you have no authority to obtain a valuation report from [K Valuations] (or any other valuer) for the purposes of implementing the Court Order as the appointment of a valuer must be undertaken through the President of the Australian Institute of Valuers.

   Any valuation that you accordingly obtain from [Mr K] will be irrelevant for the purposes of the Orders, and will be at your expense solely.

   We again invite you to sign a letter to the Australian Institute of Valuers as required by the Orders.

7. Annexure G to the wife’s affidavit sworn 27 August 2012 is a letter from the wife’s solicitors to the husband dated 10 August 2012. The letter says, inter alia,:

   We place you on notice that if the parties are unable to agree to an appropriate listing price, our client will take steps to determine the fair market price of the property by a certified practicing valuer as appointed by the President of the Australian Institute [of] Valuers, which shall be at the cost of the parties equally.

8. I note the letter does not purport to annex any documents for the husband to sign to forward to the President of the Australian Institute of Valuers.

9. Annexure H to the wife’s affidavit sworn 27 August 2012 is a “proposed letter” to the President of the Australian Institute of Valuers. This does not appear to have been sent to the husband.

10. The valuation report prepared by Mr K dated 15 October 2012 sets out its methodology at page 7 and the valuation at page 8. Under general remarks, the following appears, inter alia:

    “Within our assessment and in terms of our instructions we have considered the property on the basis of two separate titles held under Strata Title. Adoption of this approach is considered relevant to reflect the highest and best use of the property. Due consideration of costs to subdivide the property has also been made within our assessment. We are aware that a plan of subdivision has been created and that registration of such is imminent.” [emphasis added]

11. The remarks go on to say that if the two units were offered in the one line then some discount would be expected. The valuer recommended a listing price of each unit at $380,000 and valued each unit at $365,000. The unit that has been sold, has been sold at $375,000.

12. The wife submits that what the husband did was without reference to her. He proceeded to delay the listing of the property for sale in order to allow a plan of subdivision to be registered in order to maximise to himself the return from the sale of the properties. In doing so, he instructed the valuer that that is what he was doing and the valuer, Mr K, valued the property in accordance with those instructions. The wife complains that firstly that was not consistent with the terms of the order and secondly even if it was, it was done without proper consultation with her. Accepting the husband’s case at its highest and his evidence that he was unable to make contact with the president of the Australian Institute of Valuers, the wife’s submission has force. What the husband did was not in accordance with the orders in as much as he did not move to place the property on the market in an unsubdivided state, which is what order 3 of the order of 12 June 2012 provided, if the husband defaulted on the payment of the capital sum. The husband unilaterally sought to maximise his return on these properties by subdividing them and it was on that basis he instructed Mr K to carry out the valuation.

13. Given that the valuation was obtained by the husband in those circumstances, order 3.3 made 12 June 2012 in as much as it requires the costs of the valuation to be paid by the parties equally, is not enlivened and it is not otherwise appropriate to order the wife to pay one half of the costs of Mr K’s valuation.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 6 March 2013.

Associate: 

Date:  6.3.13