Pilot & Pilot - [2008] FamCAFC 206

FAMILY COURT OF AUSTRALIA

PILOT & PILOT

[2008] FamCAFC 206

FAMILY LAW - APPEAL – SPOUSAL MAINTENANCE – contravention of orders – where trial judge found that the husband contravened spousal maintenance orders but did not impose any sanction – whether payments by the husband to the wife were for spousal maintenance or part-property payments – appeal dismissed.

FAMILY LAW - APPEAL – COSTS – husband to pay wife’s costs of appeal.

Family Law Act 1975 (Cth) ss 112AB(1), 112AC and 112AD

APPELLANT:

Mr Pilot

RESPONDENT:

Ms Pilot

FILE NUMBER:

HBF

1990

1999

APPEAL NUMBER:

2007

DATE DELIVERED:

18 December 2008

PLACE DELIVERED:

Canberra

PLACE HEARD:

Adelaide

JUDGMENT OF:

Finn, Thackray and Strickland JJ

HEARING DATE:

13 February 2008

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

2 July 2007

LOWER COURT MNC:

[2007] FamCA 958

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Trezise

SOLICITOR FOR THE APPELLANT:

Dobson Mitchell and Allport

COUNSEL FOR THE RESPONDENT:

Mr Dixon SC

SOLICITOR FOR THE RESPONDENT:

Murdoch Clarke

Orders

That the appeal be dismissed.
That the appellant husband pay the respondent wife’s costs of and incidental to the appeal, with such costs to be assessed in default of agreement.

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

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT ADELAIDE

Appeal Number: SA 65 of 2007
File Number: HBF 1990 of 1999

Mr Pilot

Appellant

And

Ms Pilot

Respondent

REASONS FOR JUDGMENT

This is an appeal by the husband against orders made by Benjamin J on 2 July 2007 in relation to an application brought by the wife seeking that the husband be dealt with under Part XIIIA of the Family Law Act 1975 (Cth) (“the Act”) for an alleged failure on his part to pay to the wife “spouse maintenance in the sum of $4,333 for the months of April and May 2007 in contravention of Order No. 2 of the Order made on 23 July 2004”.
Benjamin J found the contravention proved, but he did not impose a sanction. He also made orders for the payment of the arrears of maintenance due to the wife and for the husband to pay the wife’s costs of the contravention application. The exact terms of his Honour’s orders will be set out later in these reasons.
In order to understand the issues raised by the husband’s appeal, it is necessary to provide some factual background to this case.

Background

On 23 July 2004 Hannon J made a range of interim orders in what were apparently ongoing financial proceedings between the husband and the wife. Those orders included the following:
2. That until further order the husband pay to the wife spousal maintenance at the rate of $1,000.00 per week by payments of $4,333.00 each month with the first payment backdated to 1 July 2004 and on the first of each month thereafter. The said payments to be made to a bank account to be nominated by the wife’s solicitors to the husband’s solicitors.
There would appear to be no dispute that the husband made monthly payments of $4333.00 from August 2004 until March 2006 (with one exception).
On 19 August 2005, a payment of $30,000.00 was deposited into the wife’s bank account by the husband, and on 9 November 2005 a further payment of $40,000.00 was deposited by him into her bank account.
On 25 May 2006 Benjamin J heard and dismissed an application by the wife that the husband be dealt with for an alleged contravention of the orders of 23 July 2004 by failing to pay the sum of $4,333.00 for the month of March 2006 by paying only the sum of $2,670.48, leaving a shortfall of $1,662.52.
In his reasons for judgment delivered on 25 May 2006, his Honour explained that the issue between the parties revolved around the payment of $40,000.00 made by the husband in November 2005. The essential passages of his Honour’s reasons were as follows:
4.The issues revolve around payments made by or on behalf of the husband to the wife on 19 August 2005 and 9 November 2005. It is uncontentious that on 19 August 2005, a sum of $30,000 was paid into the wife’s bank account. It is uncontentious that on 9 November 2005, the sum of $40,000 was paid by or on behalf of the husband into the wife’s bank account.
5.In respect of that latter payment, the husband, in correspondence through his solicitors, which I think is exhibit W2, asked the wife if she would treat this payment as being partial property settlement. In cross-examination the wife said that she had not made such a concession, and it is arguable that such payment is or is not property. Of course it does not address the treatment of the $30,000 paid by the husband on 19 August 2005.
6.It is of concern, of course, that the husband had been paying the sum of $4333 on a monthly basis until March of this year, with one exception. I believe that was one month when an Aurora bill was paid out, or power bill paid out - “an energy account”, I think it was described, and of course the assertion which is uncontested in the wife’s affidavit in annexure F, being the letter of 28 March 2006.
7.The evidence then left before me is this: an order was made on 23 July 2004. Payments have been made of $4333 since that time. A payment of $30,000 was made in August last year, which has not in any way been defined as either property or maintenance, and a payment was made some time later which the husband clearly seeks to have treated as property.
8.There is also clearly enormous conflict between these parties. For them to be here today arguing over $1600 with counsel, using the time of a superior court, perhaps reflects the depth of the conflict that exists between them, and at many levels that is sad. But my task is to determine whether to the Briginshaw standard I am satisfied that there has been a contravention of that order, and on the evidence before me I am not so satisfied, and accordingly I dismiss the application.
Again there would appear to be no dispute that the husband paid no monies to the wife between April 2006 and 2 July 2007.
On 22 May 2007 the wife filed the application (which resulted in the orders which are the subject of this appeal) and which alleged that the husband had failed to pay her spouse maintenance of $4,333.00 for the months of April and May 2007 in contravention of the order of 23 July 2004.
In her affidavit in support of that application, the wife referred to the judgment of Benjamin J of 25 May 2006 and in particular to paragraph 7. She then continued:
5.Since March of 2006 I have received no monies from the Respondent. As a result of that, on my calculation, the monies that I received as the Respondent maintains that there was ambiguity as to whether they be property and maintenance or maintenance and therefore I have taken that money and used it in accordance with the Order made by Justice Hannon.
6.That money has now expired and my solicitor wrote to the Respondent’s solicitors on the 20^th day of March 2007 together with a copy of the breakdown of the expenditure of the money, a copy of which is annexed hereto and marked with the letter “C”, and further correspondence has been sent on the 11^th day of April, 2007, a copy of which is annexed hereto and marked with the letter “D”. In respect of the expenditure of that money I state as follows: …
…
11.I now seek an Order that the Respondent comply with the Orders made by Justice Hannon from the 1^st April 2007 until this matter is completed…
The letter of 20 March 2007 from the wife’s solicitors to the husband’s solicitors, referred to by the wife in her affidavit, read as follows (omitting formal parts):
According to our client the funds paid by your client to our client which were paid by way of spouse maintenance for the express purpose of our client’s financial support support [sic] will shortly be paid out. The amount paid was $40,000.00. A break down of the expenditure of those funds is enclosed.
Please confirm that your client will re-commence the monthly payment of $4,333.00 in accordance with the Court Order on 1 April next and monthly thereafter.
The breakdown of the expenditure, which was enclosed with the letter, indicated that the wife had regarded the payment of $40,000.00 (made by the husband in November 2005) as having covered the spouse maintenance liability of $4,333.00 for the months of October, November and December 2006 and January, February and March 2007, with the balance having been spent on certain other expenditures, being legal and accounting fees, car registration and service costs, and some gate repair costs (all of which were detailed).
There was no evidence that any response was received to the letter of 20 March 2007.

Course of the hearing on 2 July 2007 and Benjamin J’s decision

This second contravention application was heard by Benjamin J on 2 July 2007. At the commencement of the hearing, the wife’s counsel was granted leave to amend the contravention application to cover the month of June 2007 (as well as April and May 2007), resulting in total alleged arrears of maintenance of $12,999.00.
After the husband had denied the contravention charge when it was read to him by his Honour, and after the wife had given brief oral evidence, his Honour received submissions from each party’s counsel.
Counsel for the husband submitted that his client had “no case to answer” on the basis that he had paid the sum of $40,000.00, which would cover the period of the alleged breach, but that the wife had chosen to use part of that sum on other expenses.
Having then heard from counsel for the wife, his Honour ruled that he was “satisfied there is a prima facie case”.
Counsel for the husband then said that he did not seek to adduce any evidence from his client, and in response to a query from his Honour as to whether he would make further submissions, counsel made the following submissions:
I will press the point I made before, your Honour, that this is exactly the same hearing that we had in May last year. The wife had received a lump sum. She was ambiguous then about whether it was property settlement or spouse maintenance. So as a result my client decided that it should be spouse maintenance. Similarly with the $40,000. She even says in her own affidavit - this is at the end of paragraph 5 - “Therefore I have taken that money and used this in accordance with the order made by the judge.” It is not open, we say, to her to now choose to say, “Well part of that I have used for other reasons and now creating a shortfall in spouse maintenance.” My client has not intentionally failed to comply with the order. If anything, the clock starts to run about now.
The transcript records that a judgment was then delivered. We assume that that is a reference to the first six paragraphs of his Honour’s settled reasons for judgment, in which, having set out Hannon J’s order of 23 July 2004 in the first paragraph, his Honour continued:
2.This matter came before me on 25 May 2006 and there was an issue as to two sums: one a sum of $30,000 and the second sum of $40,000.
3.At that time I found that the sum of $30,000 had been treated by the husband as property. My recollection is - and I think the evidence is, that I did not define the sum of $40,000. What has happened since that time is that it has been treated as property and the wife has deducted from that sum a spousal maintenance of $4333 per month for the months of October, November, December 2006 and January, February and March 2007. She has also made other deductions in respect of that property, to the extent that by 20 March 2007, that property had been to all intents and purposes, extinguished, the amount left at that stage was $296.36.
4.How that sum is treated in a property settlement will be no doubt argued in terms of the property, but it has been treated by the parties as property; the wife in terms of deductions of maintenance and other expenses from it and the husband in terms of allowing the maintenance to be deducted from it.
5.On 20 March 2007 the solicitor for the wife wrote to the husband's solicitors, requiring the commencement of the payment of $4333 per month in accordance with the order of Justice Hannon. The solicitors wrote again on 11 April 2007 and the evidence of the wife, which is not challenged, is that she has not been paid that money for April, May and June 2007.
6.I am satisfied to the Briginshaw standard, firstly, that the money was payable for the months of April, May and June 2007 and it has not been paid by the husband. Accordingly, I find the breach established.
Some discussion then ensued between his Honour and counsel for the husband as to the course then to be followed, and particularly as to whether it was necessary for his Honour to consider whether under s 112AC of the Act the husband had “a reasonable excuse for contravening” the order. It appears from the following passage of the transcript that his Honour was of the view, and it appears to have been accepted by counsel for the husband, that he had already determined the issue of reasonable excuse, and thus he moved to the issue of sanctions under s 112AD:
HIS HONOUR: In terms of the matter, where does it go from here, Mr Trezise? I have found the breach established?
MR TREZISE: Section 112AD.
HIS HONOUR: Is that the reasonable excuse?
MR TREZISE: Well that’s section 112AC.
HIS HONOUR: I think you alluded that when I went from a prima facie case to the - and I asked if you wanted to call evidence.
MR TREZISE: Yes. Well, you have reached the conclusion that you have, your Honour, at - if we can now move to consideration of section 112AC. I will put to you, your Honour, that it is ambiguous. If the wife was in doubt as to what the true situation was, my client was just as equally been [sic] in doubt.
HIS HONOUR: Haven’t I made the finding? I mean, I found the prima facie case and invited the husband to call evidence. He didn’t call evidence therefore the finding is that it’s established to that standard.
MR TREZISE: That follows, sir. Yes.
HIS HONOUR: The issue now, is it not, is whether there is reasonable excuse under the - is that what you are talking about under [s] 112?
MR TREZISE: Well, I think ---
HIS HONOUR: I will dig the section out so we are talking about the same ---
MR TREZISE: The reasons which you have outlined - you have made your determination so I would suggest that we now have to move to section 112AD.
His Honour then sought submissions from counsel for the wife as to the appropriate sanction. The ultimate position of counsel for the wife was that a bond with a surety of $20,000.00 should be imposed. Counsel for the husband then submitted that there should be no more than the finding of the contravention recorded, which was the course his Honour adopted. His Honour’s reasons for imposing no sanction as they appear in his settled reasons for judgment were as follows:
7.In terms of sentence, this is dealt with under section 112AD of the Family Law Act. The available options to the court are set out in subsection (2) of that section which says the sanctions available are:
a)To require a person to enter into a bond in accordance with section 112AF.
b)To impose a sentence by order under section 112AG.
c)To fine a person not more than 60 penalty units.
d)Subject to subsection (2)(a) to impose a sentence of imprisonment.
8.I accept the submissions of Mr Trezise that this is at the very lower end of those matters to be dealt with under section 112AD.
9.The breach is in relation to spousal maintenance for three months in circumstances where there is great conflict between the parties.
10.On the evidence before me the husband clearly has the capacity to meet the order if he chooses to do so, but on the finding I have made he has chosen not to do so.
11.This is not a matter where I would contemplate a bond with a surety. It is a matter where I would contemplate a bond without surety. Reflecting on that question of the bond I do not believe it is warranted. If there is a bond without surety and there is a breach, it is probably no different to a second breach of this order which would take it up into the higher category in any event.
12.It seems to me that the appropriate penalty in this case is to make the adverse finding and not impose a particular sanction which course is envisaged by the Act where at section 112AD it provides:
If a court having jurisdiction under this act is satisfied that a person has without reasonable excuse contravened an order under the section, the court may make an order for imposing in respect of the person one or more of the sanctions available under subsection (2) being a sanction or sanctions that the court considers most appropriate in the circumstances.
13.The section gives the court a discretion as to whether to impose a sanction. In the circumstances of this case I determine that a sanction should not be imposed that a costs order could also be properly made, and if there is a subsequent breach of the order it would be treated as a second breach, even though no sanctions apply with the first breach.
14.In those circumstances, I intend to make the finding but not impose a sanction.
Counsel for the wife then sought an order under s 112AD(4) that the husband pay maintenance up until the end of July 2007, together with an order for costs in the sum of $3,500.00.
The transcript indicates that little was put on behalf of the husband in opposition to those orders other than that a period of time to pay was sought.
In the event, his Honour made both orders. He expressed himself satisfied that an order under s 112AD was “appropriate”. In relation to the costs order his Honour canvassed the various matters in s 117(2A) of the Act.
It is clear from the following paragraph of his Honour’s reasons that in making the order for costs, he relied particularly on the issues of the husband’s conduct and his lack of success in the contravention proceedings:
19.This is a contravention where I have found that both on a prima facie and a final level that there has been an intentional breach of the order. The proceedings were necessitated by the failure of a party to comply with the orders and the husband in these proceedings has been wholly unsuccessful.

The terms of the order of 2 July 2007

The terms of the orders (other than procedural orders) then made by his Honour on 2 July 2007 were as follows:
1.THAT THE COURT IS SATISFIED that … the respondent [husband], has without reasonable excuse contravened an order under the Family Law Act 1975 in that he failed to pay to the applicant wife spousal maintenance of $4,333.00 for each of the months of April 2007, May 2007 and June 2007 which he was required to pay under an order made in this Court on 23 July 2004.
2.THAT the Court does not impose a sanction under s112AD(2) of the Family Law Act.
IT IS ORDERED
3.THAT the husband pay to the wife the sum of $12,999.00 by

31 July 2007
(being the spousal maintenance due under the said order made 23 July 2004) and that time is extended for the husband to make the July 2007 payment of spousal maintenance under that order to Friday 6 July 2007.
3.[sic]THAT the husband pay the wife’s costs of the contravention application of $3,500.00 on or before 31 July 2007.

The appeal

The husband’s notice of appeal states that orders “1, 3 and 4” are appealed. However the outline of argument filed on his behalf states that the appeal is “against all orders”. Although his counsel appeared to confirm that all orders were appealed, we proceed on the basis that the appeal is against the finding of a contravention (at least to the extent that a finding can be appealed); the order for the payment of $12,990.00 on account of the maintenance due; and the costs order of $3,500.00.

The notice of appeal contains only two grounds of appeal which, as expressed in the husband’s outline of argument, are as follows:
(1)the Judge erred in finding that the Husband had contravened the Order within the meaning of Section 112AB of the Act, as he impliedly did; and
(2)the Judge erred in concluding that the Wife was at liberty to designate payments received by her from the Husband as part-property settlement payments and not as payments received from the Husband by way of spouse maintenance.
It will be useful to set out at this point the terms of s 112AB(1) (as did counsel for the husband in his written submission):
(1) A person shall be taken for the purposes of this Part to have contravened an order under this Act if, and only if:
(a) where the person is bound by the order--he or she has:
(i) intentionally failed to comply with the order; or
(ii) made no reasonable attempt to comply with the order; or
(b) in any other case--he or she has:
(i) intentionally prevented compliance with the order by a person who is bound by it; or
(ii) aided or abetted a contravention of the order by a person who is bound by it.
The submissions made by counsel for the husband in support of the appeal can be briefly summarised in the following way. The nature of the payment of $40,000.00 made by the husband in November 2005 had been left unresolved by his Honour’s previous judgment in May 2006, with the wife then making no complaint until March 2007 that she was not receiving any maintenance payments. In these circumstances the husband was entitled to assume that she was treating the payment made in November 2005 as spousal maintenance, and it was not open to her to use the money for other purposes, and then claim a breach of the spousal maintenance orders. In the context of contravention proceedings, the result arrived at by his Honour was submitted to be plainly unjust.
In opposition to the appeal, counsel for the wife relied on the letter from the husband’s solicitor referred to by his Honour in paragraph 5 of his judgment of 25 May 2006, in which the husband sought to have the November payment treated as part-payment of the wife’s ultimate property entitlement. Counsel also relied on the absence of any further evidence from the husband which would indicate that he considered that the November payment was on account of spousal maintenance.

Conclusion

The circumstances of this case are extremely unfortunate. It might well have been thought that once his Honour had in his judgment of 25 May 2006, exposed the uncertainty surrounding the nature of the payment made in November 2005, that both parties, and most particularly the husband, would have taken steps to ensure that each party was well aware of the other’s understanding of the intended nature of that payment. We consider this to be particularly so in the case of the husband, given his Honour’s statements in paragraphs 5 and 7 of his judgment of 25 May 2006, that the husband sought to treat the payment as property. Yet it was the husband who, in the proceedings before his Honour in July 2007, sought to have the payment regarded as spousal maintenance.
There must also be a question arising in relation to the position of the wife. This is because the absence of any contravention or enforcement proceeding being initiated by her between May 2006 and May 2007, would suggest that she was treating the November 2005 payment as spousal maintenance. Yet she elected to regard some of that payment as not being for spousal maintenance, but rather for other purposes of her own choosing (some of which do in fact have a maintenance quality).
Despite these unsatisfactory aspects of the case, we have not been persuaded that his Honour was wrong in reaching the conclusion that the husband was in breach of the spousal maintenance order, if only for the period May, June and July 2007.
It must be emphasised that there is no evidence to suggest that, at any time after his Honour had identified (in May 2006) that the husband’s position was that the November 2005 payment was on account of property, did the husband take any steps to make clear to the wife that that payment was in fact for spousal maintenance.
As we have said, we are not persuaded that his Honour erred in making the contravention finding. Nor are we persuaded that he erred in then making orders for the payment of the maintenance arrears and for costs for the reasons which he gave.
The appeal must therefore be dismissed.
In the event that the appeal was to be dismissed, the wife sought an order in her favour for her costs incurred in the appeal. Counsel for the husband conceded that in such an event, a costs order would be difficult to resist.
We are of the opinion that the circumstances justify the making of an order for costs in the wife’s favour.

I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court

Associate:

Date: 18 December 2008