Wohen and Wohen

[2009] FamCA 848

FAMILY COURT OF AUSTRALIA

WOHEN & WOHEN [2009] FamCA 848

FAMILY LAW – PROPERTY – Interest payments – Costs

Family Law Act 1975 (Cth)

Cross & Beaumont (2007) FamCA 123
JEL and DDF No 2, (2001) FLC 93-083
S & S (unreported, Full Court of the Family Court of Australia, Baker, Lindenmayer & Rourke JJ, 11 December 1991)
Stephens and Stephens and Ors [2009] FamCA 156

APPLICANT: Ms Wohen

RESPONDENT: Mr Wohen

FILE NUMBER: MLC 11911 of 2007

DATE DELIVERED: 3 August 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 3 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Munt

SOLICITOR FOR THE APPLICANT: Alan J Munt

COUNSEL FOR THE RESPONDENT: Mr Stone

SOLICITOR FOR THE RESPONDENT: Richard Calley

Orders

1. That the husband pay to the wife the sum of $3484 by 4.00pm on 5 October 2009 being interest accrued on outstanding orders.

2. That there be no order for costs.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 11911 of 2007

MS WOHEN

Applicant

And

MR WOHEN

Respondent

REASONS FOR JUDGMENT

1. On 30 October 2007, the husband and wife filed an application seeking consent orders.  On 31 October 2007, Registrar Riddiford made those final orders.  The major provision of the orders was that the husband was to pay to the wife $125,000 on or before 20 November 2007.  I note that was only some 21 days after the making of the orders.  There were other orders as well, but they are not relevant for the purposes of the issue that I have to deal with today, save for one issue.  The dispute is about what interest the wife should have on the money to which she was entitled. 

2. On 6 June 2008, Dessau J, by consent of the parties, varied the original orders of 31 October, and the order she made was that the husband pay to the wife the sum of $100,000 on or before 13 June 2008, and thereafter the balance was to be paid when the transfer of the real property in fact occurred. At that stage, that was envisaged to take place on or before 28 July 2008. On 31 March 2009, the wife was paid all of her money, including some interest. On 11 May 2009, the wife filed an application in the case in which she sought three main orders. First was that the husband pay the sum of $8069.53 interest pursuant to s 117B of the Family Law Act for the period from 31 October 2007 until 31 March 2009.  Secondly, that the husband pay to the wife the mortgage instalments of $14,662 until 31 March 2009.  And, thirdly, an order for costs. 

3. In respect of the mortgage instalments, it is noted when the order is carefully examined that there was no formal application in this case for – sorry – there was no specific order in this case for the husband to pay the particular mortgage payments until settlement.  Paragraph 2(b) of the orders of 31 October talks about the wife’s indemnity of the husband.  That indemnity in fact provides that the wife was to take over whatever the liability was at the time that the settlement occurred.  If there had been a claim by the wife, it should have been resolved prior to the settlement of the money.  In addition, the application filed on 11 May 2009 was, strictly speaking, not a formal application for enforcement.

4. In the wife’s affidavit, which she filed for the purposes of these proceedings, she set out that there was a dispute between the parties about the interest component, but the parties probably sensibly agreed to facilitate the settlement, subject to both parties pursuing their rights, if they so chose, later on.  The wife then set out that she had incurred other costs, as well as the mortgage expenses.  The husband’s position was far more expansive.  He said that on 21 May 2008, the wife issued proceedings pursuing interest at the rate of 10 per cent.  That dispute settled with the orders of 6 June 2008, without reference to any interest.  However, the order was also a payment for money, and therefore it follows that interest would normally be payable on the sum outstanding.

5. The husband then referred to the fact that after the 6 June 2008 orders, there were still problems because of the refinancing issues.  In part, that was apparently because of the fact that the various properties were in various states.  The husband said that he kept the wife apprised of all of his efforts to try and resolve the impasse.  When ultimately the matter did arrive at a settlement, the parties had further difficulties because of the fact that the wife was having difficulties herself in obtaining funding approval for her part of the settlement.  There was therefore a dispute about each party’s particular entitlements as well as their readiness for settlement.

6. The question is therefore whether interest is due and payable for the period really from 31 October 2007 until 6 June 2008, when the orders were altered. Section 117B(1) provides as follows:

   Subject to any order made by the court under subsection (2), where in proceedings under this Act a court makes an order for the payment of money, interest is payable at the rate prescribed by the applicable rules of court from:

   (a)       the date on which the order is made;  or

   (b)      the date on which the order takes effect, whichever is later, on so much of the money as is from time to time unpaid.

7. It is quite clear, when you read that particular provision, that there is no need for court intervention and interest automatically applies on the particular judgment, subject to one issue, and that is what is set out in subsection (2).  Subsection (2) reads as follows:

   A court that makes an order for the payment of money, as mentioned in subsection (1), may order that interest is not payable on the money payable under the first mentioned order, or may order:

   (a)       that interest is payable at a rate specified in the order, being a rate other than the rate prescribed by the applicable rules of court; or

   (b)      that interest is payable from a date specified in the order, being a date other than the date from which the interest would be payable under subsection (1).

8. It would seem on a literal reading of that particular subsection, that the court is at large if an application is actually made for an order. Notwithstanding the respective practitioners have given me some authorities, there are two relatively recent authorities in respect of s 117B. The first is the Full Court’s decision in Cross & Beaumont [2007] FamCA 123, which was a decision handed down on 2 March 2007. In that particular case, the trial judge provided that from 1 July 2006 interest shall accrue and be paid, together with the amount of capital outstanding, according to the rules of court that applied from time to time on the full sum. When the matter came on for appeal, the argument before the Full Court was that the trial judge had not given adequate reasons why there had been a departure from the standard rule to which I have already referred in s 117B(1).

9. The Full Court referred to the fact that there had been a number of cases involving the question of those rules, and quote S & S, which was an unreported judgment delivered on 11 December 1991, and JEL and DDF No 2, (2001) FLC 93-083. In S & S, the trial judge had ordered the husband to pay interest on the balance of the outstanding principal due to the wife.  The trial judge, in his reasons, accepted submissions made on behalf of the husband that he would in the long term need to dispose of real estate to pay the sum due to the wife, and that he did not have the long term capacity to service a substantial loan for the purpose of satisfying the wife’s award. 

10. Consequently, the trial judge ordered the payments to be made to the wife had to be made by way of instalments over a period of 18 months.  The Full Court in S & S found that, regardless of whether payments were made promptly, as and when they fell due, interest amounting to $60,750 would have accrued by the final payment.  It was accepted by the Full Court that the provision for interest on the balance due amounted to an unwarranted penalty, but that interest should be payable in the event of default of the trial judge’s orders.  In the second of the two authorities, JEL and DDF No 2, the court looked at much the same sorts of issue.

11. In Cross and Beaumont, the Full Court accepted that the trial judge had not given adequate reasons for why he had departed from the major principle in subsection (1) of s 117B. That in turn triggered the Full Court exercising its discretion. The Full Court said:

    We are satisfied that in circumstances where the husband does not have the present ability to realise his interest in the farming property, or to independently borrow against his interest in the property, the imposition of interest at the rate prescribed under the rules is not appropriate. 

12. The Full Court went on to say that it appeared to the court that it was appropriate under subsection (2)(a) to substitute interest at a rate of five per cent in lieu of the rate prescribed under the rules from time to time.  In a more recent decision of a single judge, that of Coleman J in Stephens and Stephens, [2009] FamCA 156. There was a significant argument about the fact that the husband had appealed against a judgment of Strickland J, and then had lost the argument before the Full Court, and then argued it before the High Court. What the wife was arguing was that she was entitled to interest, having regard to the delays that had occurred in respect of her receiving her money. Coleman J said, of s 117B:

    Whilst it is clear that nothing emerging from section 117B(2)suggests on what basis orders might be made pursuant to that subsection, it is reasonably apparent that the general legislative intention is revealed by subsection (1), and that subsection (2) provides exceptions to the usual practice. On what grounds a court might decide to depart from the usual rule is not assisted by the wording of subjection (2). Whilst it is undoubtedly clear that the discretion created by subsection (2) is broad, it must be exercised judicially.

13. Coleman J pointed out that all the husband was doing was pursuing the avenues of address legally available to him, but in the end he was ultimately unsuccessful, and Coleman J saw no reason why interest should not accrue on the wife’s entitlement.  However, his Honour also made the following statement:

    There are, at least, three obvious ways of categorising interest rates on unpaid verdict moneys; penal, coercive and compensatory. The issue is not without uncertainty. There are contained with the Family Law Act (1975) provisions which are clearly penal, such as section 112AP and provisions, which are clearly coercive, such as section 112AD. Albeit more in the context of parenting proceedings under part 7 of the Act and in financial proceedings, the court is empowered to make compensatory orders. Whilst the rules might appear to endeavour to be penal or at least coercive, nothing in section 117B of the Act provides a legislative foundation for concluding that the imposition of interest on unpaid moneys must be penal or coercive, or that the legislature so intended.

14. Effectively, therefore, s 117B is a very widely read discretionary power. In this case, apart from the statement that the wife has incurred extra cost, there is no indication of how the loss impacted upon her, financially. It seems clear that each party enjoys the fruits of their judgment, albeit later than each thought. The wife has been paid some interest on the highest rate, under the rules, and the husband has argued that he has paid more than he should have. In the absence of a clear understanding, the best I can do is start from the premise that the orders made on 31 October 2007 were intended to be paid and the husband had an initial difficulty, which was that he could not obtain the finance.

15. Here, in those circumstances, it must be seen that the interest component was intended to be compensatory, but I have no evidence as to how the loss impacted on the wife. I see no reason to take a punitive approach, as would apply otherwise under the rules, if I took the view that s 117B was intended to be punitive. What the wife has lost is her use of the funds for approximately seven months, if I also take the period only up to 6 June 2008. The loss occasioned by the wife, if she had gone, for example, to the Westpac Banking Corporation, would have been about 8 per cent, on average, during that particular period of seven months.

16. I would therefore propose, as a starting point, to order that she have an entitlement to a fixed sum of $5833 for that period.  However, having regarded the fact that she has almost likely been paid in excess of her entitlements subsequent to 6 June, on the basis of the fact that the husband was ready and she was not, that sum, for that period, seems, on the evidence of the husband, to be a sum of $2349.  Under those circumstances, I propose to fix the sum that the wife is to be paid by the husband, by of interest, as $3484. 

17. There is an application by the wife under s 117 for costs.  Section 117 provides that each party pays their own costs, unless there are circumstances justifying the court, departing from that rule.  If the court decides that there are circumstances warranting that justification, then the matter is set out in s 117(2)(a) apply.  An unusual feature of this case is that the parties did endeavour to resolve the matters without resorting to litigation and took some pragmatic resolutions that might otherwise have not ended them back up here.  The wife pursued the whole of the interest, pursuant to the rules.  The husband always maintained that there was no basis for any order for payment.  Neither party has been wholly successful or wholly unsuccessful.

18. I do not know the financial circumstances of each of the parties, but albeit, the husband says that he has to sell some assets to pay the interest component.  I note that each of the parties does have some property.  I am not told as to whether either party is in receipt of any assistance from any legal aid fund and it seems to me that the conduct of the parties in this particular case is not relevant and I have already made an order in relation to the interest component, so there is no basis for me to, sort of, punish the husband any further.  In those circumstances, this is one case where I would decline to make any orders for costs.  I will have those orders prepared immediately.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  10 August 2009