Rzetelski, L. and Johnson, J.

[1988] FamCA 4

In the marriage of RZETELSKI, L. and JOHNSON, J.

(1988) FLC ¶91-945

Other publishers' citations: (1988) 12 FamLR 304 (1988) 90 FLR 422

Full Court of the Family Court of Australia at Sydney.

Judgment delivered 22 March 1988.

Before: Ellis, Murray and Frederico JJ.

Ellis, Murray and Frederico JJ.: This is an appeal against certain orders made 12 October 1987. The relevant orders are:

``1. That the husband by way of indemnifying the wife in respect of damage suffered by reason of his breach of Orders No. 1 and 2 of the orders made on 12 March 1984 pay the wife the sum of $15,782.

2. That the wife pay the husband the sum of $8,470 interest accrued pursuant to Order 6b of the orders made on 12 March 1984 and that the husband be permitted to set off the same against the sum ordered to be paid by the husband in Order 1 above.

3. That application (c) of the cross-application filed by the husband on 19 March 1987 be dismissed.

4. That in consequence of Orders 1 and 2 above the husband pay the sum of $7,312, the same to be paid within one month of the date hereof. In default of such payment within that period the said sum will carry interest at the rate set by O. 40 r. 1 calculated as from today.

5. That the sum due by the husband and any interest accrued thereon be a charge against the sum of $16,480 and any interest accrued thereon ordered to be set aside for the payment of costs.''

The grounds of appeal primarily relied upon by notice of appeal dated 12 November 1987 were as follows:

``(1) His Honour erred in law in making Orders numbered 1 and 4 made on 12 October 1987 in that the provisions of the Family Law Act 1975-1983 do not confer jurisdiction for the purposes of making the said order or either of them.

(2) In the alternative to Ground (1) above his Honour erred in law in making the said orders or either of them in that the provisions of the said Act do not give the Court power to make the said orders.''

The relevant facts are set out in his Honour's reasons for judgment. His Honour had heard a property settlement dispute between the parties during February 1984, and had delivered judgment on 12 March 1984. On 10 February 1987 the wife filed an application seeking an order that the husband, by way of indemnifying the wife in respect of interest accumulated by reason of his breach of the orders made on 12 March 1984, pay the wife the sum of $24,424. On 19 March 1987 the husband filed a cross-application seeking dismissal of the wife's application, an order for payment by her of the interest due to the husband pursuant to the orders of 12 March 1984, and a claim for compensation for additional interest incurred by the husband as a result of failure by the wife to pay him the sum of $131,000 on time as required by the said orders made on 12 March 1984.

In his judgment of 12 October 1987 his Honour continued:

``The history of the parties and their properties is exhaustively set out in my judgment delivered on 12 March 1984. In that judgment I made a number of orders of which only the following are relevant for the purposes of these proceedings:

`1. That the applicant husband transfer within one month hereof to the respondent wife all his right title and interest in the property [at] Cronulla being the interest in the land comprised in Certificate of Title Volume 9513 Folio 12A subject to arrears of rates and existing debts to the Commonwealth Trading Bank secured thereon, and for that purpose take all necessary steps and execute all necessary transfers.
2. That the applicant transfer to the respondent wife or as she directs all or any shares in Gemline Pty. Ltd. held by him, whether as trustee or beneficiary, and execute the appropriate share transfers.'

The intended effect of those orders was to vest in the wife the whole of the block of flats situated at Cronulla which was at the time of the hearing owned by Gemline Pty. Ltd. and the husband as tenants in common in equal shares. The husband was also a shareholder in Gemline Pty. Ltd.

`4. That upon the transfer referred to in Order 1 above being effected, the wife indemnify the husband and keep him indemnified in respect of any liability to the Commonwealth Trading Bank, Barrack Street, in respect of the amount outstanding for the fully drawn loan account including any interest accrued thereon and that the wife do all things necessary to cause the said bank to release its security over the property [at] Strathfield.'

The fully drawn loan account referred to in the order was an overdraft account utilised by the parties to finance the purchase of the Cronulla property and another property, both of which went to the wife, and for which consequently she should bear sole responsibility. That loan was secured by way of collateral over a property owned by the husband at Strathfield which under the order he was to retain.

`6a. That the respondent wife pay to the applicant husband the sum of $131,000 within three months by way of property settlement under sec. 79.
6b. That the said sum shall carry interest calculated as from the date of expiry of three months aforesaid on a daily basis until paid at the rate laid down in reg. 170C.'

The husband appealed from the orders I made. The Full Court dismissed his appeal with costs in the wife's favour on 15 February 1985. On 28 February 1985 the solicitors for the wife wrote to the then solicitors for the husband. That letter contained the following paragraphs:

`Because of the appeal, it was agreed with the solicitors who then represented your client that the orders be left in abeyance pending the outcome of the appeal.
As the orders of Nygh J. have been restored, we suggest that we adopt the time set out in the orders as coming into effect as at 15 February 1985.
We should be pleased if you would obtain instructions on this and advise whether you agree with this course of action.
In relation to Order 1 of the orders dated 12 March 1984 we enclosed herewith memorandum of transfer for your client's approval and execution. This transfer is in respect of your client's half interest in [the] Cronulla [property].
In relation to Order 2 of the orders, we enclose herewith a draft transfer of shares of your client's shares in Gemline Pty. Ltd. We should be pleased if you would arrange for Mr Rzetelski to execute this form of transfer and return the same to us.
Concerning Order 4 of the said orders, we would advise we have written to the Commonwealth Trading Bank of Australia, Barrack Street Branch, and have forwarded a copy of the orders to that Bank and requested them to advise their requirements to give effect to the re-leasing of Mr Rzetelski's property at [Strathfield].'

None of this was done as the husband sought leave to appeal to the High Court. On 21 June 1985 the High Court refused leave to appeal and ordered that the husband pay the wife's costs of the High Court proceedings. Pending the outcome of the application for leave, the wife did not seek to enforce the orders, although no formal stay had ever been applied for or obtained.

Following the refusal of leave by the High Court, the solicitors for the wife handed to the then solicitors for the husband completed transfer documents in respect of the Cronulla property and the transfer of shares. The husband refused to sign the same.

Nothing further appears to have been done until 15 November 1985 when the husband wrote to the wife's solicitors seeking the payment of $131,000. The wife's solicitors wrote back on 26 November 1985 requiring the husband to comply with Orders 1 and 2 and proposing that the sum of $50,000 be kept back out of the $131,000 due to him to cover the wife's costs in respect of the original hearing before me and of the Full Court and High Court appeals. On 23 December 1985 the husband replied indicating his willingness to comply with the orders made by me and demanding full compliance with the order for the payment of $131,000.

On 3 February 1986 I ordered that the wife pay forthwith the sum of $131,000 together with any interest accrued thereon into an account to which the solicitor for the wife and the solicitor for the husband were to be joint signatories and that pending the determination of the question of costs, such sum be invested at the appropriate rate of interest available from banking organisations. By another order made on that day the wife was ordered forthwith to comply with Order No. 4 made on 12 March 1984 and the husband was ordered forthwith to comply with Order No. 2 of such orders.

The first order was shortly thereafter complied with by the payment of $131,000 into a joint account. However, no payment was made in respect of the interest accrued. The second order was not complied with by either party.

The matter came again before me on 12 February 1987, when I dismissed the wife's application for costs in respect of the proceedings before me. In relation to the deadlock which had developed between the parties, I made the following comment:

`So far as the question of enforcement of the orders which I made which I have set out earlier, it was clearly envisaged in those orders that compliance with Orders No. 1 and 2 was a prerequisite to the performance of Order No. 4. I may remind the legal representatives that Order 4 provides that upon compliance with Order No. 1 the wife is to give an indemnity and to take such steps as are necessary to secure a discharge of the security. The indemnity was intended as an interim measure till such time as the wife, as a result of the transfer of the property to her, was placed in the position whereby she could discharge the security.'

I therefore made orders for the immediate execution of the relevant documents to allow the transfer of the shares in Gemline Pty. Ltd. and of the Cronulla property. Upon the husband failing to comply with the orders, the relevant documents were executed in his name by the Deputy Registrar on 5 March 1987 in accordance with my orders.

I further ordered that the money held in the joint trust account be released to the husband, subject to the retention of $16,480 to cover the Full Court and High Court costs which still remain to be taxed. The husband also received the interest accrued on that investment amounting to $6,247.93.

Following the transfer of the property at Cronulla to the effective control of the wife, she was granted a new loan facility based on the security of title to that property and the property at Strathfield was duly released from the existing security by that bank. On 26 March 1987 the Sutherland Shire Council approved a Strata Plan in respect of the eight units contained in the Cronulla property. One of those units has been listed for sale by the wife at $42,500.

The wife's claim for compensation is based on her allegation that the fully drawn loan of Gemline Pty. Ltd. which stood at $34,193.60 at the date of the hearing had increased due to the accumulation of interest to $58,692.80, an increase of $24,499. The wife claims that as a direct result of the husband's failure to comply with Orders No. 1 and 2, she was unable to refinance that loan. It is accepted that the wife could not refinance that loan until she had full beneficial control over Gemline Pty. Ltd. and the property owned by herself and that company.

The husband's claim for interest is based on a claim at the then applicable rate of 10% from 13 June 1984 until the date of payment of the principal sum into the joint account on 6 February 1986. The husband further claims that had the wife paid him the sum of $131,000 on the due date, he would have been able to pay off debts due to Limlaw Nominees Pty. Ltd. of $115,131.83 and the Westpac Banking Corporation Limited of $29,525.79. Both liabilities were referred to in my judgment at pp. 36 and 37.''

The primary issue which comes before us on appeal is whether the Family Court has jurisdiction to award damages consequent upon breach of a court order as distinct from enforcing obligations created by the order.

In his judgment the learned trial Judge first considered whether an action can lie in respect of the breach of an order of the Court other than by way of enforcement of such order. He referred, inter alia, to Ford-Hunt v. Raghbir Singh (1973) 2 All E.R. 700; Easton v. Brown (1981) 3 All E.R. 278. He then said:

``Although the original claim in those cases would have been based on the contract between the parties, the supplemental order could only arise out of the failure to comply with the order since the contractual rights would have merged into the judgment. It arises in courts of general jurisdiction because of their inherent power to grant equitable damages in situations where the defendant has acted in disobedience of orders of the court: See Spry, Equitable Remedies, 2nd ed., at pp. 542, 543.''

In our view, his Honour there fell into error because if a decree for specific performance is made, the contract still remains on foot. It does not merge in the decree (Johnson v. Agnew (1980) A.C. 872; JAG Investment Pty. Ltd. v. Strati (1981) 2 N.S.W.L.R. 600). We do not therefore regard the analogy between an order under sec. 79 and an order for specific performances as being an appropriate one nor does it support the proposition that an action can lie in respect of the breach of an order of the court other than by way of enforcement of such order.

Whatever may be the position in courts of general jurisdiction, this Court is not such a court. His Honour went on in the course of his judgment to point out that for the purposes of its limited jurisdiction, this Court has an inherent power to ensure that its orders are made effective. He referred to the judgment of Gibbs J. (as he then was) in Re Bell; Ex parte Lees (1980) FLC ¶90-850 at p. 75,358; (1980) 6 Fam. L.R. 208 at p. 214 as an authority for the proposition. We do not read the judgment of Gibbs J. as expressing such a wide view but rather as expressing the view that this Court has an inherent power to order a person who can give information as to the place of concealment of a child the subject of a custody order to attend before the Court and give that information. Nevertheless, a Full Court in Molier and Van Wyk (1980) FLC ¶90-911 expressed the view that this Court has an inherent power ``to make the original orders effective in accordance with the substance and intention of that order''. It is not necessary for us in this case to examine the extent of the inherent power of the court for that power clearly does not extend to an action for damages in respect of the breach of an order of the court because such an action will not make the original orders effective in accordance with the substance and intention of the original order.

In any event, in Bann v. Dalzel (1828) 3 C. & P. 376 Lord Tenterdon held that it is the duty of the person who recovers a judgment in a court of law to issue execution in the manner the law has provided and not to bring an action upon it.

There is no statutory basis for the proceedings instituted by the wife (other than a submission that such proceedings are a ``matrimonial cause'') and no inherent power of the Court to award damages in the circumstances of this case. Failure to comply with a sec. 79 order does not constitute a breach of contract, a breach of a statutory duty nor is it a tort.

His Honour then went on to say:

``The claim by the wife is a `matrimonial cause' within the definition of para. (f) and hence the Court has been invested with jurisdiction pursuant to sec. 39(1). Since the proceeding flows directly and solely from the orders made pursuant to sec. 79, it is a proceeding which can be described as being `in relation to' the completed proceedings under sec. 79, as that term was explained by Gibbs C.J. in Re Ross-Jones, Ex parte Green (1984) FLC ¶91-555 at p. 79,485; (1984) 9 Fam. L.R. 888 at p. 895.''

Paragraph (f) is in the following terms:

``any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings of a kind referred to in any of paragraphs (a) to (eb), including proceedings of such a kind pending at, or completed before, the commencement of this Act.''

Do the proceedings instituted by the wife for damages for breach of an order of the Court made under sec. 79 bear the appropriate relationship to the completed property proceedings? Are they ``consequential on or incidental to'' the decree made as set out by Gibbs C.J. in Re Ross-Jones; Ex parte Green (1984) FLC ¶91-555?

In our view they are not. The proceedings for damages do not flow directly and solely from the orders made pursuant to sec. 79. If anything, they are consequential on or incidental to an alleged breach of the Court's orders, not the orders themselves. The breach is a causa interveniens which in itself cannot give rise to a claim for damages, as we have already pointed out.

We are therefore of the view that the claim by the wife is not a ``matrimonial cause'' within the definition of para. (f).

It was submitted on behalf of the wife that her claim for damages was a ``matrimonial cause'' within para. (ca) of the definition. The relevant part of that provides:

``proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings —

(i) arising out of the marital relationship;
(ii) in relation to concurrent, pending or completed proceedings between those parties for principal relief; or...''

It is our view that in the circumstances of this particular case, the wife's claim for damages does not arise out of the marital relationship, but arises from a breach of an order of this Court. On this aspect we refer to the Full Court decision in B and B (1985) FLC ¶91-610 at p. 79,950 wherein it says:

``... continuing rights and obligations in relation to the children arise out of the definition of `matrimonial cause' contained in para. (b) which does not employ the phrase `arising out of the matrimonial relationship'. In this and some other definitions of `matrimonial cause' it is clearly contemplated that there may be continuing obligations between the parties after dissolution of their marriage which do not necessarily arise out of the marital relationship. The restriction in para. (ca)(i) to proceedings arising out of the marital relationship is therefore especially significant in the light of these examples where the phrase does not occur; and leads to the view that events occurring after dissolution of marriage cannot constitute a `matrimonial cause' under para. (ca)(i) if they are so far removed from events surrounding cohabitation pursuant to the marriage or its dissolution that they lose any nexus with the original marital relationship.''

We also refer to the recent Full Court decision of Skoflek and Baftirovski (1988) FLC ¶91-906 at p. 76,576 where, in referring to property proceedings under (ca)(i), it said:

``the origin of the claim to adjustment of property rights must arise from the property relationship of the parties during marital cohabitation.''

The proceedings of the wife (even if the Court could grant the relief sought and assuming that such proceedings are with respect to the property of the parties or either of them) in our view are so far removed from events surrounding cohabitation pursuant to the marriage or its dissolution that they have lost any nexus with the original marital relationship.

Neither sec. 33 nor 34 takes the matter any further. ``A source of substantive law has to be found before there can be any extension of jurisdiction.'' (Harding and Gibson (1979) FLC ¶90-665; see also Re Ross-Jones; Ex parte Green (supra) at p. 70,488.) Accordingly, we are of the view that the proceedings of the wife are not a ``matrimonial cause'' within the definition of para. (ca).

Counsel for the wife acknowledged that he relied heavily on the case of Madjeric and Madjeric (1984) FLC ¶91-552 to support the wife's claim for damages.

In that case, the husband was ordered pursuant to sec. 79 to deliver certain chattels to the wife. He in fact delivered them in a damaged state. The wife applied for damages pursuant to the law of tort. Elliott J. held that the Family Court had jurisdiction to deal with such a claim on the basis:

(a) of sec. 119 which reads:

``Either party to a marriage may bring proceedings in contract or in tort against the other party.''

(b) that the wife's claim for damages constituted a matrimonial cause:

(i) as defined in para. (ca)(i) in that it was a proceeding between parties to a marriage with respect to their property, being proceedings in relation to completed proceedings for principal relief,
(ii) as defined in para. (f) of the definition.

Our view of sec. 119 in so far as it is relevant to this appeal is similar to that of the trial Judge when he says:

``... I would doubt whether the section does any more than remove the procedural immunity existing between husband and wife at common law.''

We also refer to Gee J.'s remarks to similar effect in Saba and Saba (1984) FLC ¶91-579 at p. 79,673.

In so far as his Honour interpreted para. (ca) and (f) as embracing a claim for damages consequent upon a breach of a sec. 79 order, for the reasons set out above, we are of the view that Madjeric was wrongly decided.

If the learned trial Judge in Madjeric had succumbed to the temptation as he mentioned at p. 79,461 of dealing with the wife's complaint ``perhaps by making further orders under sec. 79 within the parameters laid down by the Full Court in Molier and Van Wyk'' (supra) he may in our view have been on stronger ground.

The power to make such consequential orders was also stated by the Full Court in Ravasini and Ravasini (1983) FLC ¶91-312 in Cranage and Cranage (1981) FLC ¶91-039. However, it is not sought to support the order against the husband in the present case as a ``consequential order''.

Part XIII of the Act sets out the provisions relating to enforcement of decrees and includes provisions relating to contempt.

Section 105(1) provides:

``Subject to this Part, to the regulations and to the Rules of Court, all decrees made under this Act may be enforced by any court having jurisdiction under this Act.''
(The emphasis is ours.)

Nowhere in Pt XIII, the regulations or the rules, is any mention made of a power to order damages. Order 33 makes extensive provisions for the enforcement of decrees. It provides for payment of fines, garnishment, seizure and sale of personal property, sale of real property and sequestration of estate.

Section 117(b) provides for payment of interest on any sum of money ordered by the court save and except on payment by way of maintenance of a periodic sum, such interest to be paid at the rate prescribed by the Rules of Court, which pursuant to O. 40 r. 1 was set at the time of hearing at 10%. This is clearly one way envisaged by the legislation that a party may be compensated for failure by the payer to make the payment ordered within the time prescribed.

The only reference in the Act to damages is obliquely made in sec. 87(11)(a) which reads as follows:

``... the court —

(a) subject to paragraph (b), has the same powers, may grant the same remedies and shall have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction;''

We regard it as significant that this reference is confined to the subsection dealing with the enforcement of contractual provisions.

In any event, we are of the view that Parliament has made its intention clear as to the remedies available to a party who suffers from a breach of a court order.

Counsel for the wife argued with some force that unless the wife could claim damages in these proceedings, there was nowhere else for her to go to gain relief for the loss she had suffered. That is as may be. Without expressing any concluded view on the matter, it may be that had she framed her claim within the parameters of sec. 108, this Court would have jurisdiction to grant relief for that loss. There are very wide powers given to the court by the provisions relating to contempt and in particular by sec. 108(5)(a). On this aspect we note the words of Windeyer J. in Australian Consolidated Press v. Morgan (1965) 112 C.L.R. 483 at p. 502 where he said that the American practice of imposing a fine payable to the complainant for civil contempt —

``corresponds to English doctrine in which a contemnor in order to purge his contempt must make reparation to the party injured by it. The American fine for civil contempt thus corresponds to our assessment of damages or account of profits. Its purpose is primarily compensatory.''

See generally Jendell Australia Pty. Ltd. v. Kesby (1983) 1 N.S.W.L.R. 127 per McLelland J.

The wife's rights are now contained in the terms of the judgment. She is entitled to enforce that judgment by appropriate proceedings. Whereas the husband had the advantage of a self-operative provision within the terms of the order whereby he would obtain specified interest in the event that the wife failed to comply with her obligations under the order, the wife was not similarly protected. Whilst this may be unfortunate from her point of view, the absence of such a provision cannot of itself justify her present claim.

It follows from all of this that we are of the view that his Honour fell into error in awarding damages to the wife and that such an order was not within jurisdiction. Having thus found, we see no need to deal with the other grounds of appeal.

At the conclusion of his address, counsel for the wife submitted that in the event of the appeal being allowed and the award for damages in favour of the wife being set aside, this Court in the exercise of its discretion should relieve the wife of the obligation to pay the interest ordered by the learned trial Judge. In all the circumstances we do not consider that such a course would be appropriate. The original order provided in clear terms the obligation of the wife to pay such interest and in this regard her obligation has always been beyond dispute.

On the question of costs, we accept the submissions of counsel and order pursuant to sec. 9 of the Federal Proceedings (Costs) Act 1981 that each party be granted a costs certificate in respect of the appeal.

We therefore order:

1. That the appeal be allowed.
2. That para. 1 and 4 of the order made on 12 October 1987 be set aside.
3. That para. 2 of the order made on 12 October 1987 be varied by deleting all words appearing after ``12 March 1984''.
4. That para. 5 be set aside and the following paragraph inserted in lieu thereof:

``That the wife be at liberty to set off the sum due by her against any liability of the husband for costs.''

5. That the Court grants to the appellant husband a costs certificate in respect of the appeal pursuant to sec. 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that in the opinion of the Court it would be appropriate for the Attorney-General to authorise a payment under the said Act to the appellant husband in respect of the costs incurred by the Appellant in relation to the appeal.
6. That the Court grants to the respondent wife a costs certificate of the appeal pursuant to sec. 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that in the opinion of the Court it would be appropriate for the Attorney-General to authorise a payment under the said Act to the respondent wife in respect of the costs incurred by the respondent in relation to the appeal.