PINDER & SLEDGE (No.2)
[2019] FCCA 1880
•9 July 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PINDER & SLEDGE (No.2) | [2019] FCCA 1880 |
| Catchwords: FAMILY LAW – PROPERTY – Enforcement – Form of orders – where Final Orders were intended to effect a 70/30 per cent division in favour of the Respondent by way of the Respondent paying a sum certain to the Applicant– where the Applicant asserts the Respondent has defaulted in complying with the Final Orders – where the Respondent did not pay the relevant payment to Applicant by the due date – where failure to pay triggered an obligation for a sale of the Respondent’s property – where the Respondent sold her property and paid the Applicant in accordance with the Final Orders – where the Respondent’s property sold for more than the sworn valuation upon which Final Orders were based – whether the Final Orders may be corrected under the “slip rule”. |
| Legislation: Family Law Act 1975 (Cth), ss.79A, 90SM, 90SN, 90ST Family Law Rules 2004 (Cth), r.17.03 |
| Cases cited: Blackwell & Scott [2017] FamCAFC 77 Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 133 ALR 206 Gould v Vaggelas (1985) 157 CLR 215 |
| Applicant: | MR PINDER |
| Respondent: | MS SLEDGE |
| File Number: | MLC 5648 of 2018 |
| Judgment of: | Judge Small |
| Hearing date: | 1 February 2019 |
| Date of Last Submission: | 1 February 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 9 July 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Moore |
| Solicitors for the Applicant: | Callahans Lawyers |
| Counsel for the Respondent: | Ms Marshall |
| Solicitors for the Respondent: | Anthonys Solicitors |
ORDERS
The Application filed on 23 May 2018 is dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Pinder & Sledge (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 5648 of 2018
| MR PINDER |
Applicant
And
| MS SLEDGE |
Respondent
REASONS FOR JUDGMENT
Introduction
These are the second set of property proceedings arising from the breakdown in the de facto relationship between Mr Pinder (“Mr Pinder” or “the Applicant”) and Ms Sledge (“Ms Sledge” or “the Respondent”)[1] (collectively “the parties”).
[1] In the original proceedings, Ms Sledge was the Applicant and Mr Pinder the Respondent. In these proceedings the reverse is true. For the sake of clarity, where I refer in these Reasons to “the Applicant” I mean Mr Pinder, and where I refer to “the Respondent” I refer to Ms Sledge.
Background
Between 2015 and 2017, the parties engaged in proceedings for property settlement pursuant to s90SM of the Family Law Act 1975 (Cth) (“the Act”). The Applicant’s Mother, Ms Potts, joined those proceedings as Intervener on 13 January 2017.
The matter was listed for Final Hearing on 27 March 2017. The hearing ran for three days. Those proceedings were concluded on 15 December 2017 when I delivered judgment and made Final Orders (“the Final Orders”): Sledge & Pinder & Anor [2017] FCCA 3051. These Reasons for Judgment should be read in conjunction with the reasons delivered in that case.
By my judgment, a declaration was made that the Intervener held an equitable interest in the parties’ property, and orders were made to the effect that once that equitable interest had been taken into account, the overall entitlements of the parties to their non-superannuation assets were to be adjusted as to 70% in favour of Ms Sledge and 30% in favour of Mr Pinder.
In light of this, and based on the agreed valuation of the Respondent’s property at Property B (“Property B”) at the time of trial, I ordered that within 60 days of Final Orders (“the due date”), Ms Sledge was to pay to the Intervener the sum of $140,098 (“the first payment”).[2]
[2] Order 3 of the Final Orders. I note that while Ms Potts was a party to the substantive proceedings, she did not take part in the enforcement proceedings. Therefore, while all arguments and findings in relation to the Applicant would also apply to her in the current proceedings, I will not make specific reference to her again.
I also ordered that by the due date Ms Sledge was to pay to Mr Pinder the sum of $45,054.80 (“the second payment”)[3].
[3] Order 4 of the Final Orders.
I note that “the due date”, 60 days after the Final Orders were made, was 13 February 2018.
Paragraph 5 of the Final Orders provided that if Ms Sledge did not make the ordered payment to Mr Pinder by the due date, the parties were do all acts and things necessary to place Property B on the market for sale. I ordered the proceeds of such a sale to be distributed as follows:
a)first, to pay all costs and commissions of the sale;
b)secondly, to discharge any encumbrances over the property;
c)thirdly, to pay so much of the first and second payments as was outstanding to the Intervener and Respondent respectively, plus interest from the due date to the date of each payment at the rate of 10% per annum; and
d)fourthly, the remainder to be retained by the Respondent.
Ms Sledge did not make the ordered payment to Mr Pinder by the due date.
As a result, the obligation created by paragraph 5 of the Final Orders was enlivened and Ms Sledge was then obliged to place Property B on the market for sale. In compliance with that order, she promptly did so.
On . 2018, less than three months after the delivery of judgment in the first proceedings, and less than one month after the due date, Property B was sold at auction for $920,000.
The agreed value of Property B at the time of the Final Hearing in March 2017, after the parties had obtained a sworn valuation, was $725,000. That is, the difference between the sworn value accepted at the Final Hearing and the price realised at auction a year later was $195,000.
Settlement on the sale of Property B took place on 12 April 2018. At that time, Ms Sledge distributed the proceeds of sale in accordance with Paragraph 5 of the Final Orders. That is, she paid Mr Pinder the sum of $45,054.80 plus interest.
The Applicant now says it was only at about that time that he became aware that Property B had sold for more than the value agreed for it at Final Hearing. If he means that he did not know the sale price until the auction, then that must be correct, at least in the sense that he could not have known the sale price until the fall of the hammer on 3 March 2018.
However, if he means that he did not learn the sale price until settlement of the sale on 12 April 2018, that is a different matter. In that regard, it is Ms Sledge’s evidence, unchallenged by the Applicant, that Mr Jerome Callahan, Mr Pinder’s solicitor in these and the substantive proceedings (“Mr Callahan”), was present at the auction on … 2018. As her uncontroverted evidence establishes, Mr Callahan also acted for the purchaser of Property B in the conveyancing transaction after its sale at the auction which he attended.
The Applicant now seeks that Paragraphs 5(c) and 5(d) of the Final Orders be varied pursuant to “s79A(1)(c) of the Family Law Act 1975 (Cth)” (sic) so that they read:
“5(c) third to pay so much of the first payment as is outstanding to the intervenor plus interest from the due date to the date of payment at the rate of 10% per annum.
5(d) fourth $114,079.83 to the respondent together with interest from the 13 April 2018 to the date of payment at the rate of 10% per annum and the remainder to be retained by the applicant.
The Applicant claims that Ms Sledge defaulted in relation to her obligations under Paragraph 4 of the Final Orders in that she did not make the payment to him on the due date.
He also claims that the Reasons for Judgment published with the Final Orders on 15 December 2017 (“the Court’s Reasons”), indicated an intention that he should receive 30 percent of the parties’ non-superannuation assets, and that he did not get the settlement that was intended for him because Property B sold for $195,000 more than its agreed value.
s79A(1)(c) of the Act does not apply to this case as the parties were never married. However, as they were in a de facto relationship between 1999 and 2014, s90SN of the Act applies rather than s79A when a party seeks to vary or to set aside orders altering property interests. Despite this error in the Application for enforcement, I allowed the matter to proceed, but I note that the amendments to the Act which gave this Court and the Family Court of Australia jurisdiction to hear de facto property disputes, came into effect on 1 March 2009.
The Respondent seeks orders dismissing the Initiating Application filed by the Applicant’s solicitor on 23 May 2018. She also seeks her costs of these proceedings on an indemnity basis.
Ms Sledge claims that there was no default in relation to the Final Orders, because she complied with Paragraph 5 of those Orders. She claims that she acted quickly and promptly in ensuring compliance with Paragraph 5, and that the Orders should remain as currently stated. I note that if she is successful, then the gain in relation to the sale of Property B would lie where it falls. That is, she would not have to make any further payment to Mr Pinder.
The issues to be decided in this case are therefore:
A. Did the Respondent default in carrying out an obligation imposed on her by the Final Orders?
B. If there was a default:
(ii)were the relevant circumstances that have arisen the result of the default?
(iii)do the circumstances that have arisen from the default make it just and equitable for the Final Orders to be set aside or varied?
C.If there is not a default, was the Court’s intention to make Orders reflecting precisely the assessment of a 70/30 per cent division in favour of the Respondent whenever the payment were made, or to allow any loss or gain to lie where it fell?
D.If the answer to Issue C is in in favour of the first proposition, can the Orders be corrected pursuant to the “slip rule”?
Procedural History
On 23 May 2018, the Applicant’s solicitor, Mr Callahan, filed an Initiating Application signed by him and an Affidavit in Support sworn by him seeking enforcement of the Final Orders. The Applicant also filed a sworn Financial Statement on the same day.
On 27 June 2018, Ms Sledge filed her Response to Initiating Application, Affidavit in Support and sworn Financial Statement.
The matter came before Judge Harland in the Duty List on 4 July 2018 when Her Honour made Orders that the matter be adjourned for Mention before me on 30 July 2018.
On 30 July 2018, I adjourned the matter to 1 February 2019 for Final Hearing with an estimated hearing time of 1 day.
At the Final Hearing on 1 February 2019, the matter proceeded by way of Counsels’ submissions. The parties were not subjected to cross-examination as the salient facts of the matter before the Court were not in dispute.
Following the conclusion of submissions on 1 February 2019, I reserved my decision.
Issues, Argument, the Law and Findings
Issue A: Did the Respondent default in carrying out an obligation imposed on her by the Final Orders?
The Law
The law in relation to de facto property disputes is found in Part VIIIAB of the Act.
Section 90SN(1)(c) of the Act relevantly provides:
If, on application by a person affected by an order made by a court under section 90SM in property settlement proceedings, the court is satisfied that:
…
(c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or
…
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 90SM in substitution for the order so set aside.
The Argument
The Applicant’s case is that the default lay in Ms Sledge’s failure to make the payment to him by the due date pursuant to Paragraph 4 of the Final Orders. He accepts that the Respondent made all relevant enquiries and that she attempted to obtain the finance that would have allowed her to comply with Paragraph 4, but that she was ultimately unable to obtain that finance and was therefore unable to pay.
In his Outline of Case Document, handed up on the day of the hearing, Mr Pinder’s counsel relies on Monticone & Monticone (1990) FLC 92-114 (“Monticone”), a decision of the Full Court of the Family Court of Australia (“the Full Court”).
In Monticone, final orders required the husband to pay to the wife $325,000 on or before 25 May 1988. Upon that payment being made, the wife was to transfer title to the former matrimonial home to the husband. Default provisions in the orders provided that if the husband failed to pay by the due date, the matrimonial home would be sold and the proceeds divided equally between the parties.
At a time when the husband remained in default in paying the full amount (he had paid most of the sum), the wife sought enforcement of the default provisions.
The husband, by then being in a position to pay the balance of the sum, cross-applied under s 79A(1)(c) to set aside the default provisions.
In his Outline of Case Document, the Applicant relies on paragraphs 22 and 23 of Monticone, where the Full Court said:
22. The meaning of that provision was considered by Gee J in In the Marriage of Rohde (1984) 10 Fam LR 56. In that case the husband was ordered pursuant to section 79 to pay the wife $115,000 and was restrained from encumbering his property further till the sum was paid. During the hearing the husband had been seeking further loans to irrigate his farming property which were effected by a third and fourth mortgage registered over the property prior to judgment being delivered. At the hearing the husband did not refer to these negotiations. After judgment was delivered, the husband's financial position deteriorated due to failure to pay under the third mortgage. The husband sought to set aside the order pursuant to section 79A(1) of the Act.
23. His Honour at page 65 came to the conclusion that the husband had defaulted under the order rejecting the argument that this word should be confined to a deliberate flouting of an order. Likewise in the present case the husband by his non-compliance with the deadline as extended has defaulted.
In Rhode, the husband had deliberately breached an order restraining him from encumbering the property before payment of the sum due to the wife. As the Full Court’s reasoning in Monticone makes clear, the intent of the restraining order was to ensure that the wife’s entitlements under the orders were not defeated by the husband taking out a further mortgage or increasing the amount secured by a mortgage prior to the payment to the wife being made.
The Applicant says that although Ms Sledge did not deliberately flout the Final Orders, she should nevertheless be held accountable for what he describes as the default. That submission proceeds on an assumption that there has been a default.
The Applicant contends that the facts of Monticone are similar to the present case in that the Final Orders required the Husband in Monticone to make a payment to the Wife by a certain date and there was a subsequent order in similar terms to Order 5 providing, amongst other things, for the sale of real property in the event of non-payment by the due date.
He says that the Trial Judge in Monticone characterised the subsequent order as a “default order” and the Full Court held that the default in payment enlivened s79A of the Family Law Act 1975 (Cth)[4].
[4] I note that 90SN(1) of the Act is identical in its terms to s.79A(1) .
The Respondent asserts that there is no default under s90SN(1)(c) because she complied with the Orders, which provided for the sale of Property B and payment of the sum of $45,054.80 plus interest in circumstances where the sum was not paid by the due date.
The Respondent argues that the facts of this case are distinguished from Monticone.
She says that the Applicant in Monticone made the Application while the default was still running and the party in default had asked to extend time for payment.
The Respondent contends that this is not the case here and that she acted quickly and promptly in ensuring compliance with the Orders, such that the sum of money, together with the required interest, was paid in full to Mr Pinder promptly after the sale of Property B and in compliance with the Final Orders.
The Respondent says it was only when Mr Pinder was made aware that the house had been sold for $195,000 more than the valuation that he initiated these proceedings.
I find the Respondent’s argument on this issue, as a whole, persuasive.
The Husband in Monticone clearly defaulted because he did not comply with the “default order”, which required him to place the relevant property on the market for sale. Instead, he partially paid the amount owed to the Wife and asked for an extension of time to pay the remainder.
Unlike the Respondent in Monticone, Ms Sledge did not ask for an extension of time within which to make payment with respect to Order 4 of the Final Orders, nor did she make a partial payment of that sum. As she could not refinance the property and make the whole of the payment to Mr Pinder, she complied with Order 5 of the Final Orders, which required her to place Property B on the market for sale.
The Applicant’s Counsel also referred me to the judgments of the Full Court in Kenyon & Hampton [2017] FCCA 2730 (“Kenyon & Hampton”) and Blackwell & Scott [2017] FamCAFC 77 (“Blackwell & Scott”) in his oral submissions at the Final Hearing.
In Kenyon & Hampton, the Husband defaulted in carrying out an obligation imposed by the relevant order. The Husband admitted that he had done so. The relevant orders obliged him, by July 2016, to discharge his Wife’s obligation under a mortgage over two real properties by obtaining a discharge of her guarantee from the Bank. He failed to do so within the specified time.
The Husband in that case only complied with the order to discharge the wife’s obligations under the bank guarantee when he sold the properties and discharged the mortgages in September 2017, some 14 months after the due date.
The decision in Kenyon & Hampton can be distinguished on its facts because the default in that case did not relate to a payment. The default was in the Husband failing to remove the Wife as a guarantor for the mortgage loan.
In addition, the delay in the Respondent complying with the default provisions in Kenyon & Hampton was considerably longer than in this case, and the Respondent here was not in default at the time these proceedings were instituted. Kenyon & Hampton is also distinguishable on those bases.
In Blackwell & Scott, in breach of orders made by consent made on 24 February 2014, the Husband did not make an ordered payment of $130,000 to the Wife on or before 23 May 2014, and that breach continued for a very substantial period. On 11 September 2014, the Husband’s breach then continuing, the Wife filed an Initiating Application seeking to have the consent orders set aside. It was not until 18 June 2015, some 13 months after the ordered period of payment had expired on 23 May 2014, and some nine months after the Wife had instituted the subject proceedings, that the Husband paid the Wife the sum of $130,000. Further, it was not until November 2015 that the Husband paid the Wife interest on that capital sum referable to the period of default and calculated pursuant to rule 17.03 of the Family Law Rules 2004 (Cth).
Blackwell & Scott is therefore also distinguished on its facts because the Husband in that case did not make the ordered payment until 13 months after its due date, and the default was continuing at the date of institution of the proceedings.
S.90SN(1)(c) of the Act permits the Court to grant relief where certain conditions are satisfied. By extension, if those conditions are not satisfied, the power is not available for exercise. S.90SN(1)(c) makes the exercise of power to vary the Final Order conditional upon it being established that: (1) there has been default in carrying out an obligation on the person by the order and; (2) it is demonstrated in the circumstances to be just and equitable to so vary the order.
The term ‘default’ is not defined in the Act and so could be given its natural and ordinary or legal meaning: Collector of Customs v Agfa Gevaert Ltd (1996) 186 CLR 389. An ordinary meaning of default is a failure to perform some legal requirement or obligation: Shorter Oxford Dictionary.In Re Young and Haston’s Contract (1885) 31 Ch D 168, 174, Bowen LJ held that the term meant neither more nor less than what was reasonable under the circumstances; having regard to the relations which a person occupied towards another in the relevant transaction.
Upon that ordinary meaning of the term and the principles stated in Re Young and Haston’s Contract, I consider that the meaning of the term ‘default’ is to be construed in the context of the Final Orders as a whole and by reference, in particular, to the text of paragraphs 3-6 of those Orders. As to the question of context, the parties had conducted proceedings for an adjustment of their property interests following the breakdown of their de facto relationship. In such circumstances, the Court is required to make orders that would as far as is practicable finally determine the parties’ financial relations and end further litigation between them: s.90ST.
The Final Orders were comprised of: two declarations (Orders 1-2); orders for the making of payments to the Intervenor and Respondent respectively (Orders 3-4); orders for the sale of Property B and for the distribution of moneys, including to the Intervenor and Respondent respectively (Orders 5-6); and other orders in relation to personal property and superannuation (Orders 7-14).
In my opinion it is wrong to construe the Final Orders in a way that separates the obligation to pay the Applicant $45,054.80 pursuant to paragraph 4 from the obligation to do so pursuant to paragraph 5(c).
Accordingly, and in the absence of the word “default” in the Final Orders, I find that paragraphs 4 to 6 of the Final Orders create an obligation on Ms Sledge to pay Mr Pinder the sum of $45,054.80 either: (1) by the due date; or (2) from the net proceeds of sale of Property B, in which case interest was to be added.
Therefore, there could be no default unless or until Ms Sledge failed to pay the sum of $45,054.80 either by the due date or from the net proceeds of sale of Property B. That is, I consider it wrong, within the meaning of the Final Orders as a whole, to construe paragraph 4 as though non-compliance with its obligation to pay the Applicant by the due date means that the Respondent was in default for the purpose of s.90SN(1)(c).
In the present case, the Respondent complied with Order 5 of the Final Orders by placing Property B on the market for sale in a very short space of time after the due date (or perhaps even prior to that date given that the auction was held only 22 days after 13 February 2018), and by paying the Applicant the monies stipulated in Paragraph 4 with interest.
When crafting the Final Orders, I took into account the possibility that the Respondent may be unable to refinance Property B and make the payment required by Paragraph 4 of the Final Orders. Therefore, Paragraph 5 of the Final Orders, which made provision for interest on the payments in the event the payments were not made pursuant to Paragraph 4, was enlivened. The Respondent did not default in her obligations under Paragraph 5.
Decision: Issue A
I find therefore, that the Respondent did not fail to comply with her obligations under the Final Orders and further, that there has been no default for the purposes of s 90SN(1)(c) of the Act.
The Respondent placed Property B on the market for sale very promptly and without delay. I note again that judgment was delivered on 15 December 2017 and Property B was sold at auction on … 2018, less than 3 months later and only … days after the due date.
In light of this, I cannot find that the Applicant has defaulted in carrying out the obligations imposed on her by the Final Orders and the answer to Issue A is in the negative.
This conclusion makes it unnecessary to consider whether the Respondent has satisfied the further condition that it would be just and equitable to vary the Final Order.
However, if I am wrong on that point, and the failure to pay by 13 February 2018 is in fact a default, I find that that default was rectified by the Respondent’s timely compliance with Paragraph 5.
I will nevertheless consider the issues to be determined if I am wrong in relation to Issue A.
Issue B(i) If there was a default, were the relevant circumstances that have arisen the result of the default?
If there has been a default on the part of the Respondent, s.90SN(1)(c) of the Act requires there to be a nexus between the default and the circumstances which have arisen from it. The circumstances that have arisen must be as “a result of the default”.
That is not the case here. Essentially, the matter is only before the Court because the property sold for more than the value agreed by the parties at the Final Hearing a year earlier. The litigation has not been revived because the Respondent did not comply with the Final Orders. She paid the Applicant the full amount required by the Final Orders, including the relevant interest, at the earliest opportunity.
Decision Issue B(i)
The answer to Issue B(i) must therefore be in the negative.
Issue B(ii) Do the circumstances that have arisen from the default make it just and equitable for the Final Orders to be set aside or varied?
The Applicant received the full payment ordered plus relevant interest from the due date to the date of payment, and he received that sum in a very short space of time after the due date.
If Property B had sold for $195,000 less than the agreed value at trial, it is very likely that there would have been no subsequent litigation in this matter.
In the context of the Court being required to decide whether it would be just and equitable to vary the Final Orders, it is worthy of mention that the Applicant made no attempt to appeal the Final Orders.
Until he learned that the property had sold in 2018 for a sum significantly more than that contained in the agreed valuation obtained in 2017, the Respondent had been content to be placed in the same position as he would have been had the stipulated sum been paid on the due date. He achieved that result by the order that that he be paid interest from the due date until payment.
Further, the corollary of the Applicant’s argument is that he should have been liable for a reduction in the sum payable to him had there been a fall in the market over the relevant period. In assessing whether it would be just and equitable to vary the Final Orders, I have no doubt whatsoever that Mr Pinder would not have agreed to accept a lesser sum than that ordered for him in such circumstances.
Other relevant considerations include the fact that the Respondent has had to sell Property B and find other accommodation for herself and the child of the parties, [X], who is now 17½ years old.
It was submitted to the Court on her behalf that if I make the Orders sought by the Applicant, the Respondent would be forced to sell the property she purchased with the monies she received from the sale of Property B, and would again be faced with having to find alternative accommodation for herself and [X]. I accept that this is also a relevant consideration under s.90SN(1).
Delay is also a relevant consideration. The Applicant did not seek to take any action in this matter until well after the auction, which was attended by his solicitor and as a result of which his solicitor knew that the sale price was considerably higher than the valuation agreed at trial. For present purposes, I am prepared to treat the knowledge of the Applicant’s solicitor as the Applicant’s knowledge: Sargent v ASL Developments (1973) 131 CLR 634, 659 (per Mason J).
The Initiating Application was filed on 26 April 2018, two weeks after the settlement of the sale and the Respondent’s compliance with paragraph 5 of the Final Orders. That is, at the time these proceedings were initiated, the Respondent was not in default of the Final Orders.
Indeed, it was not the Applicant, but his solicitor who signed the Initiating Application in these proceedings and swore the Affidavit accompanying it. Mr Pinder’s part in the proceedings was to swear a Financial Statement, although it is, of course, assumed that Mr Callahan was acting on his instructions at all times.
Decision Issue B(ii)
In all the above circumstances, where the Respondent has done absolutely nothing reproachable, where she has complied with the default provisions of the Final Orders in a timely manner, where she has been forced to sell her home of many years, and where she will be forced to do so again if the Applicant is successful in these proceedings, I cannot find that it is just and equitable, in the circumstances that have arisen as a result of any default the Respondent might have committed, for the Final Orders to be varied or set aside.
In other words, if I am wrong about the Respondent not having defaulted on her obligation under the Final Orders, I decline to vary or set those Orders aside on the grounds that it would not be just and equitable to do so.
C. If there is not a default, was the Court’s intention to make Orders reflecting precisely the assessment of a 70/30 per cent division in favour of the Respondent whenever the payment were made, or to allow any loss or gain to lie where it fell?
As my primary position is that there was no unrectified default by the Respondent, it remains to consider Issue C.
The principle espoused by the Full Court in the matter of Noetel & Quealey (2005) FLC 93-230 (“Noetel & Quealey”), may be stated as holding that, when a real property is to be sold in family law proceedings, the parties each be entitled to a percentage of the proceeds of sale rather than set dollar amounts, because the sale price may not be the same as a valuation.[5]
[5] Noetel & Quealey (2005) FLC 93-230 [143]
The Full Court in Noetel & Quealey described the principle as “well established” and “a clear guideline for the exercise of discretion under s79 of the Act” (quoting Sinclair & Sinclair [2000] FamCA 262 at [108]).
In that case, the Full Court was concerned to describe a principle that applies to the drafting of orders once it has been concluded that it is just and equitable to make an order for an adjustment of property interests under s.79(2) of the Act.
As stated in Noetel & Quealey, there will often be a discrepancy between a valuation and a subsequent sale price for reasons such as delay between the judgment date and the sale date, a volatile market, or a contentious valuation.
The general principle stated in Noetel & Quealey may be accepted where the Court has found it just and equitable under s.79(2) (or s.90SM(3)) to adjust the parties’ interests in their property. However, the orders made in that case did not include an order for the payment of a sum certain. Rather, the orders provided for the adjustment of property interests such that the wife would retain the matrimonial home and receive an adjustment in her favour of $118,778 from the division of the proceeds of sale of another property[6]. The substantive issue on that appeal concerned the availability of the slip rule as a means of addressing an error in the decision of the trial judge.
[6] Noetel & Quealey (2005) FLC 93-230 [46]
The principle in Noetel & Quealey was extended by the Full Court in Trask & Westlake [2015] FamCAFC 160 (“Trask & Westlake”).
In Trask & Westlake, the value of the real properties which were to be sold had been agreed between the parties at $2,319,000. At trial, however, the Husband contended that they were actually worth $3,150,000.
The Trial Judge found that the Wife was entitled to a 60/40 division of the property in her favour. Under the Orders, the Wife was to receive 87.43% of the assumed sale prices at the agreed values. This would have resulted in an overall division of 60/40 in her favour if the two real properties were to sell at their agreed valuations.
However, if the real properties sold for the figures that the husband contended, the Wife would receive $2,745,045 from the sale rather than $2,027,511 which the Trial Judge had calculated using the earlier agreed values. She would therefore receive, inconsistent with the Trial Judge’s findings, 62.8% rather than 60% of the overall pool.
The question which arose in Trask & Westlake was whether the Trial Judge intended to achieve a result reflecting precisely his assessment of 60/40 in favour of the Wife, or whether he intended the gain or loss to lie where it fell. The Full Court stated that His Honour made it clear that the purpose of calculating the 87.43%/12.57% formula in relation to the sale of the properties was “in order [for the wife] to receive 60% of the total net assets”. The Full Court upheld the appeal, finding that the Trial Judge erred as His Honour’s orders did not reflect the result intended.
As the judgment of the Full Court demonstrates, the orders made in that case were intended to achieve a division of property interests as to 87.5% to the wife and 12.5% to the husband, and to do so in circumstances where the trial judge well recognised that there may be a fluctuation in the value of the property by the time a sale was achieved: Trask & Westlake [33]. However, in contrast with the present case, no order had been made for the payment of a sum certain to the husband (or the wife). Critically, the Full Court endorsed that while it was open to the trial judge to effect an ultimate division of property interests expressed in percentage terms, such orders must acknowledge that the subject property may sell for a price different to its current estimated value: Trask & Westlake [33]-[37]. Equally, Thackray, Ryan and Murphy JJ recognised that by s 79(2) of the Act, the court was ultimately to arrive at orders that were just and equitable: Trask & Westlake[36].Their Honours recognised that the issue in that appeal was whether the orders sought to be varied or set aside were intended to depart from a stated result by allocating interests as expressed in percentage terms, and to allow for a final result that the ultimate effect of the orders may be affected by a rise or fall in the auction price of a property with a corresponding loss or gain to the parties. The Full Court considered the reasons of the trial judge as whole and concluded that the trial judge had not intended the final orders would result in allowing for any loss or gain to lie where it fell[7]. In paragraph 37 of Trask & Westlake, the Full Court stated:
If orders are intended to reflect with precision the judgment expressed in percentage terms, those orders must acknowledge that the property may sell for a price different to the current estimated value.
[7] Ibid [39]
At paragraph 40 of Trask & Westlake, the Full Court stated:
The respondent’s argument that His Honour intended the gain or loss to lie where it fell is not sustainable. The consequence is that there is error if His Honour’s orders do not reflect the result, which His Honour intended.
At paragraph 41 of Trask & Westlake, the Full Court said:
His Honour’s percentage formula makes no allowance for the fact that, as the assumed values of the two properties rise or fall they bear a greater or lesser proportion of the total value of the pool. That is, using his Honour’s formula would produce the assessed percentage entitlement only if the new values bore the same proportion to the total value of the pool as the original agreed values. Axiomatically, if they have risen or fallen, and the values of the balance of the property remain the same (as is assumed) they do not.
The Applicant asserts that the effect of my judgment in the substantive proceedings was that Ms Sledge should have retained 70% of the non-superannuation property and Mr Pinder 30%. He relies on paragraphs 232, 238, 239 and 240 of the Court’s Reasons.
On the other hand, the Respondent asserts that the Court intended the gain or loss to lie where it fell.
The Respondent states in her Affidavit filed on 27 June 2018 (“the Respondent’s Affidavit”) at paragraph 18:
At no time before the auction of my home did Mr Callahan raise the issue of the increased value of the property and seek extra monies for his client. If the auctioned value of my home had been less than the valuation for trial of $720,000 as per the Court Orders I would have had to still pay [Mr Pinder] the sum specified by Order 4, being $45,054.80.
In paragraph 21(a) of the Respondent’s Affidavit, she asserts that I made final orders that specifically stated the exact sum of money she had to pay Mr Pinder, being $45,054.80.
In my opinion, the argument advanced by the Applicant should be rejected. Reading the Court’s Reasons fairly and as a whole, it is plain that the court was concerned, relevantly, to: (1) ascertain whether it was just and equitable for there to be an adjustment of property interests: Reasons at 170-174; (2) identify the parties property interests and their value: Reasons at 175; (3) evaluate the parties’ contributions: Reasons 176-222; (4) consider whether there should be a adjustment of contribution based entitlements: Reasons, 223-231; (5) consider what orders should be made: Reasons, 232-241.
I concluded that the parties’ overall entitlements (for non-superannuation assets) were reflected by a finding that 70% of the property ought to be retained by the Respondent and 30% by the Applicant: Reasons at 232.
Having identified the parties’ asset pool at trial, I determined that it was just and equitable for the Applicant to retain Property B: Reasons at 235. I also determined that the Intervenor should be paid an amount reflecting the monies that she was owed: Reasons at 235. As concerned the Applicant, I determined that after payment of joint debts, Mr Pinder ought be paid “a sum equalling 30% of the net non-superannuation assets of the parties when all of the above debts have been paid”: Reasons at 235.
The Orders which were made reflected my determination that it was just and equitable for the Respondent to be paid a sum certain based upon my finding of the value of the net asset pool as at the date of trial: paragraph (4) of the Final Orders. To reinforce the Respondent’s performance of that substantive obligation, provision was made for payment by one of two means: first, that the stipulated sum be paid within 60 days: paragraph (4) of the Final Order; or secondly, that the stipulated sum be paid with interest in third order of priority from the net proceeds of sale of Property B: paragraph 5(c) of the Final Order.
Had I intended that the Respondent would be paid an amount representing 30% of the net proceeds of sale, paragraph 5(c) of the Final Order would not have provided for payment of the stipulated sum. Instead, it would have made provision for the Respondent to be paid an amount equal to 30% of the net proceeds after payment of the monies owed to the Intervenor.
The Final Order did not say and should not be construed as providing that the Respondent was to be entitled to 30% of the net proceeds of sale of the property.
Insofar as the question of the Court’s intention is concerned, it is of great importance to recognise that any question of subjective intention is irrelevant – what is of decisive significance is what the Reasons and Final Orders provided: Pacific Carriers (2004) 218 CLR 451, [22]. The Final Orders expressly provided that the Respondent was to be paid a stipulated sum and that he was to be paid that sum in one of two ways.
Decision Issue C
For the reasons above, I find that it was not the Court’s intention to make Orders reflecting precisely an assessment of a 70/30 per cent division in favour of the Respondent whenever the payment were made. To the contrary, it was the intention that the Applicant would be paid a sum certain, either within 60 days, or, with interest, in third order of priority from the net proceeds of sale of Property B. Further, it was the intention that, in relation to any possible sale of the property, any loss or gain should fall on the Respondent.
Issue D: Can the Orders be remedied by the slip rule?
In circumstances where I have decided that it is not just and equitable to vary or set aside the Final Orders, the question of whether they can be “remedied” by the slip rule does not arise.
Conclusion
In my Reasons published with the Final Orders, I made the following observation at paragraph 244:
Neither the Applicant nor the Respondent was a particularly impressive witness and both presented as “having an eye on the main chance”.
Nothing that has occurred since that observation was made has changed that view, although I make no finding as to the motives of either Mr Pinder or Mr Callahan in bringing this Application.
It is to be hoped that this will be the end of proceedings between these litigants, and that both can now look to the future with some certainty.
I certify that the preceding one hundred and fifteen (115) paragraphs are a true copy of the reasons for judgment of Judge Small
Date: 9 July 2019
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