Shafton & Shafton (No.3) [2018] FCCA 3088 (19 December 2018)

IT IS NOTED that publication of this judgment under the pseudonym Shafton & Shafton (No.3) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

1. These proceedings are an application by the wife to enforce payment by the husband of the balance owing to her pursuant to property settlement orders made on 12 September 2012.
2. The wife seeks a declaration that she is owed $85,000.00 principal and $365,892.06 interest as at 1 May 2018, a total of $450,892.06, and that interest is accruing from that date at the rate of 7.5%.
3. She proposes that this amount be paid to her by means of:
   1. Payment to her of the money remaining in the trust account of Schofield Muir Solicitors from the sale of Property A after Ms D is paid the amount owing to her.
   2. The husband utilising money he is due to receive as beneficiary of the estate of the late Mr E.
4. The wife is not presently aware of any other assets or resources in the husband's possession or control. I was informed at the hearing of the enforcement application that Bendigo Bank has withheld $75,000.00 of the proceeds of sale of Property A pending resolution of a dispute with the husband who has threatened to sue them. If this amount is released it can be paid to the wife but it is unclear when that will occur.
5. The husband did not cavil with the wife's calculation of interest save to submit that it was too high if the capital amount outstanding as at 23 January 2018 was $55,000.00 rather than $85,000.00 which he asked the court to find was the case.
6. However he submitted the court had a discretion about whether to enforce an order and that in the exercise of its discretion it should refuse to enforce payment of:
   1. The total amount owing.
   2. In the alternative the interest owing.
7. A further issue arising out of the material (although it was only briefly touched on in submissions) was whether after settlement of the sale of the Property A properties interest was payable pursuant to s.117B (1) of the Family Law Act or pursuant to Order 12(iii) of the 12 September 2012 orders and if the former whether in the exercise of its discretion pursuant to s.117B (2) the court should order that interest not be payable from that date.

1. The wife relied on a minute of order tendered at the hearing, her affidavits filed on 14 July 2017, 3 May 2018 and 27 July 2018 and the affidavit of Mr Sanders, the trustee for sale of the Property A properties, filed on 9 June 2017.
2. The husband relied on his response and affidavit filed on 14 June 2018.
3. The husband's solicitor prepared a case summary which contained a brief outline of submissions.
4. A short hearing was conducted on 23 August 2018. Some documents were tendered and the husband and wife were cross-examined. Oral submissions were later made on 30 August 2018.

1. The husband and wife have been involved in property proceedings in this court on and off since 2010. I have handed down six previous decisions about discrete issues and during cross-examination on 24 August 2018 the husband aptly described the matter as a book with many chapters.
2. The parties separated in 2007 and their financial affairs at that time were complex. The husband is a property developer and the parties owned a number of real properties in their own names or through companies and unit trusts.
3. The wife wished for a property settlement and in January 2009 the parties engaged in a collaborative law process. They were able to reach agreement and on 28 April 2009 consent orders were made by the Family Court at Newcastle which provided inter alia for the husband to pay the wife $2,166,000 in two instalments. The first instalment of $1,166,000.00 was to be paid on or before 19 January 2011 and the second instalment of $1,000,000.00 was to be paid on or before 19 January 2012.
4. The orders required the husband to make some smaller payments to the wife pending the payment of the first instalment. The parties fell into disagreement about whether he had fulfilled those obligations and on 22 May 2010 the wife filed an application seeking payment of $80,346.00.
5. The husband argued that on proper construction of the orders, this amount was not owing and in a judgment delivered on 21 January 2011, I found in the husband's favour and dismissed the wife's application.[1]
6. The next chapter in the book began with the husband failing to pay the first instalment which was due on 19 January 2011.
7. As often happened throughout the course of this matter, things went on behind the scenes before the matter returned to court but on 28 September 2011 the wife caused a Bankruptcy Notice to be served on the husband and on 11 October 2011 he responded by filing a s.79A application seeking to have the 28 April 2009 orders varied or set aside.
8. The wife filed an application for summary dismissal of the s.79A application and I heard that on 30 November 2011. I did not immediately hand down judgment as again things went on behind the scenes. In a judgment I handed down on 5 April 2012 in respect of another chapter in the book, an application by the wife seeking to extend time for the operation of some caveats, I said as follows:
   • On 30 November 2011 a hearing was conducted in respect of the summary dismissal application. Judgment is pending. On a number of occasions earlier this year the court was informed that the parties were close to agreement on all matters and in the circumstances preparation of the judgment was deferred. It will now be given priority.[2]
9. On 16 April 2012 I dismissed the wife's application for summary dismissal and the s. 79A application was listed for trial on 10, 11 and 12 September 2012.
10. The trial commenced but partway through the trial the parties entered into settlement negotiations and on 12 September 2012 fresh final orders were made by consent. They provided for the husband to pay the wife $1.2m in instalments of $200,000.00, $500,000.00 and $500,000.00 respectively and Order 12 provided that in default of payment of any one instalment Property C and Property B (referred to in the orders as "the security properties" but referred to by me in this judgment as "the properties") were to be sold.
11. The Order also provided for the husband to transfer his interest in the former matrimonial home at Property B to the wife and for the wife transfer her interest in Property A to the husband.
12. The husband devoted nine paragraphs of his affidavit filed on 14 June 2018 to arguing that he was in the right and the wife in the wrong leading up to the making of the fresh consent orders. I cannot find that this was the case. The parties settled and no determination was ever made about the merits of the matter.
13. The husband paid the first instalment of $200,000.00 which was due on or before 3 October 2012 but he failed to pay the second instalment and this triggered Order 12 which provided for the properties to be sold.
14. Order 12 required the parties to cooperatively sell the properties but they were unable to do so. The wife alleged that this was because of the husband's conduct and she applied for the appointment of a trustee for sale. The husband resisted this application but on 11 June 2013 after a hearing, I ordered that Mr Sanders of Mr Sanders Insolvency Practitioners be appointed trustee for sale.[3]
15. Disputation about the sale process was ongoing and on 25 July 2014 the trustee filed an application seeking a variation of the orders appointing him trustee. He said that he wished to list the properties for auction with a reserve price of $700,000.00 and that the husband had threatened to sue him for damages if he did so. He said that while he believed that the current orders allowed him to proceed as he proposed he sought a variation of the orders to put the matter beyond doubt.
16. The husband opposed the application and the wife supported it. I conducted a hearing on 1 October 2014 and on 28 November 2014. I made orders varying the 2 August 2013 orders and made some additional orders.[4]
17. On 10 September 2015 a contract for the sale of the properties to Company B Pty Ltd for $1,650,000.00 was entered into. Although the contract was largely unconditional, the properties were intended for development and a lengthy settlement period was allowed with a view to the purchaser being able to organise development approval before the sale settled. There were delays in this occurring and the purchaser sought an extension of time to settle. This was granted by the trustee and the sale settled on 25 May 2017.
18. The wife subsequently received a total of $915,000.00 as follows:

1. On 14 July 2017 the wife filed an application for enforcement. She sought payment of the capital then outstanding and interest pursuant to the rates prevailing in the Family Law Rules at the relevant times.
2. In her affidavit filed on 3 May 2018, the wife recalculated the amount owing to her based on receipt of the two smaller amounts in August 2017 and January 2018.
3. The husband's solicitor did not quarrel with the wife's calculation of interest and did not argue that the wife was not entitled to interest on the balance of the capital sum which remained outstanding after the properties were sold. He did however submit that given the wording of Order 12(iii), the interest payable from the date of discharge of the second mortgage appeared to arise from s. 117B (1) of the Family Law Act rather than from the 12 September 2012 orders.
4. Order 12(iii) provided as follows:
   • (iii) In payment to the wife with such outstanding sums together with interest thereon as calculated pursuant to the Family Law Rules from the date of default until the date of payment such payment to discharge the second mortgage to the wife.
5. A possible interpretation of this order is that interest is payable pursuant to the order until the debt is paid in full but an alternative interpretation is that interest was payable pursuant to that order only until the second mortgage was discharged.
6. The wife by implication seems to consider that the interest was ongoing pursuant to the orders because she used 3 June 2017, the day after she received her first payment, as a seminal date and not 25 May 2017 when the sale settled and when presumably the second mortgage was discharged.
7. The submission by the husband's solicitor was to the effect that he considered that Order 12(iii) ceased to apply when the mortgage was discharged but he seemed to accept that interest continued to accrue because of s. 117B(1) of the Family Law Act.
8. The issue was not adverted to by the wife's counsel and the interpretation of Order 12(iii) and the basis on which interest was payable following settlement of the sale of the properties was not the subject of argument before me.
9. The interest which has accrued since the mortgage was discharged is minor in the overall scheme of things, on my calculation amounting to about $9,150.00 to 1 May 2018, but because the issue was raised I, will need to consider the possible operation of s.117B(2) later in the judgment.
10. Finally it is important to record that the husband did not argue that on proper construction of the orders, the wife was restricted to receiving the amount available from the sale of the properties.
11. If he had the wife would have emphatically argued that he should be brought to account for his role in reducing the amount available due to non-payment of rates and land tax for several years prior to the sale and for entering into terms with the first mortgagee in breach of the orders which increased the amount of interest payable to the mortgagee, all of which reduced the net amount available on sale. However the husband's solicitor conceded that the wife was not precluded from bringing enforcement action in circumstances where the proceeds of sale of the properties were insufficient to fully pay her the amount to which she was entitled.

Whether the wife is owed capital of $85,000.00 or $55,000.00_**

1. The husband's obligation to pay the wife is contained in orders 5, 6 and 7 of the 12 September 2012 orders which are as follows:
   • 5. Provided that the wife has complied with Order 16 the husband shall pay to the wife the sum of $200,000.00 no later than 3 October 2012 "the first payment".
   • 6. The husband shall pay to the wife a further sum of $500,000.00 (less holding costs as hereinafter defined) no later than 12 November 2012 "the second payment"
   • 7. The husband shall pay to the wife a further sum of $500,000.00 no later than 12 May 2013 "the third payment".
2. The reference to holding costs in Order 6 relates to the fact that Order 9 permitted the husband to use the properties as security to borrow $200,000.00 for the purpose of making the first payment, $700,000.00 for the purpose of making the second payment and $1,200,000.00 for the purpose of making the third payment and Notation A provided as follows:
   • A."Holding Costs" in order 9.2 [sic][5] is defined as the anticipated interest payments on the sum of $700,000.00 for a period of six months, together with loan application, legal and the mortgagee costs with such sum in any event not to exceed $30,000.00.
3. The husband argued that the combined effect of Order 6 and Notation A was that the second instalment he was required to pay was $470,000.00 not $500,000.00 and therefore the capital now owing to the wife was $55,000.00 not $85,000.00.
4. I do not accept this argument.
5. For one thing, the amount of $30,000.00 in Order 6 is an upper limit not a fixed sum. The precise amount which the husband might have been able to deduct could not be known unless and until he borrowed the second sum of money and he never did so.
6. The best interpretation the husband could hope for would be that he was entitled to a pro-rata reduction of the capital owing to take account of the holding costs attributable to the amount of $200,000.00 which he did borrow but even if this interpretation was open (and I make no finding that it is) the husband did not provide any evidence which would allow a calculation of a pro-rata amount of holding costs applicable to the sum of $200,000.00.
7. The second payment due from the husband should be treated as being $500,000.00 and the capital owing to the wife pursuant to the orders is therefore $85,000.00.

Whether the court should decline to enforce the orders either in whole or as to the interest

1. The husband's solicitor submitted that the court had a discretion as to whether to enforce its orders. He referred me to Rule 25B.11 of the Federal Circuit Court Rules in which the word "may" is used in the context of setting out the kind of enforcement orders available under the Rules. He also referred me to some Family Court decisions and in particular to the decision of Tree J in McMillan & McMillan and submitted that the court should apply a test of general notions of fairness in determining whether to enforce the order.[6]
2. The wife's counsel agreed that the court could in the exercise of its discretion decline to enforce an order and said that he had no objection to a test of general notions of fairness being used.
3. It was the husband's case that it would be unfair to lumber him with the payment of the outstanding capital and the interest when he could if he had been left to his own devices have obtained a better price for the properties than the trustee obtained and when the trustee had taken four years to sell the properties.
4. The contents of his affidavit filed on 14 June 2018 suggested that he also considered that the appointment of the trustee was unreasonable. There is no merit in such a suggestion. The wife was compelled to apply for the appointment of a trustee for sale. In my judgment dealing with the issue of a trustee for sale should be appointed I said as follows:
   • The husband has made no reasonable attempt to comply with his obligations pursuant to Order 12 and shows no sign of being willing to do so in the future. He sent unpleasant bullying threatening letters in April and May 2013 to the wife, her adult children and her sister asserting that it is the wife who is in default of the orders and asking her to agree to yet another change to the settlement overall or else face financial ruin.
   • It is imperative that the sale is taken out of the husband's hands so that it proceeds in an orderly fashion.[7]
5. After the trustee was appointed the sale was in his hands. There was nothing to suggest that the wife attempted to interfere with the sale or did anything which delayed completion of the sale. She indicated to the trustee that she consented to an extension of time for the purchaser to settle but there is nothing in the evidence to suggest that this was an irresponsible or unreasonable position to take.
6. There is also no evidence which establishes that if the trustee had pursued any of the options put forward by the husband during the time the property was on the market, it would have resulted in a quicker sale or a sale at a better price and even if either of these propositions was correct it would not be appropriate to sheet that blame home to the wife. The appropriate course if the husband feels that he has a case in that regard is to bring an action against the trustee.
7. Not only has the wife done nothing wrong, her uncontradicted evidence was that she had endured financial hardship as a result of the husband failing to comply with the orders and make the requisite payments to her by the due dates. She had to make arrangements with a creditor to defer collection action in respect of a capital gains tax debt and had to continually deal with demands by the bank over non-payment of the mortgage secured over her home; she needed the capital due to her by the husband to pay out that mortgage. Eventually in May 2013 she refinanced the home loan with Macquarie Bank but in order to effect settlement she had to take steps to have caveats registered on the home due to debts owed by the husband removed and she was charged $4,000.00 by the bank in respect of this.
8. The wife said that she also paid interest to NAB on the mortgage in the sum of $47,394.88 and repaid $47,916.06.
9. She said that in respect of the Macquarie Bank facility she incurred interest of $66,893.02 and made payments totalling $225,433.02.
10. The wife said that she had not had funds to carry out necessary repairs to the former matrimonial home and had been unable to replace her motor vehicle or appliances in the home.
11. The wife said that she was unable to repay card debt and that she paid $10,499.33 interest and an over limit fee of $10,499.33 to the Commonwealth Bank between November 2012 and August 2014. She also paid interest to the National Australia Bank on her credit card in the sum of $3,433.09 between November 2012 and August 2014.
12. I accept the wife's evidence which was supported by documents.
13. This is not a case where the wife has ever led the husband to believe that she did not intend to enforce the orders or sat on her hands as the wife did in McMillan & Millan and allowed years to pass without attempting to enforce the debt. One of the husband's repeated complaints about the wife's conduct in the early days was that she wanted a quick sale. A quick sale would have resulted in her receiving her capital earlier and have put an end much earlier to any interest payable. The wife has suffered financially as a result of the delay in payment to her and at all times did all she could to obtain payment.
14. Not only has the wife done nothing wrong and has suffered financial loss as a result of the husband's default in complying with the orders which required him to pay her money, the husband does not come to the matter with clean hands. The money available upon the sale of the properties was less than it should have been because the husband:
    1. Failed to pay land tax for the 2015, 2016 and 2017 financial years resulting in a deduction of $74,396.95 from the sale proceeds.
    2. Failed to pay council rates resulting in a deduction of $11,310.00 to pay these rates.
    3. Entered into a deed of arrangement with the mortgagee in 2015 which allowed them to charge interest at 19% per annum which added at least $80,000.00 to the deductions when the property was sold.
15. A gaping void in the husband's case is that he provided no evidence about his financial circumstances and made no effort to explain why the only way in which the wife could have been paid was from the sale of the properties, remembering that his primary obligation was to pay her money; the order for the sale of the properties was a mechanism for her to obtain her money if he failed to do so. That void strongly mitigates against a refusal to enforce payment of interest.
16. Not only did the husband fail to address the issue of why he had not paid the wife earlier, evidence emerged at the hearing which suggested that he could in fact have done so had he chosen.
17. The husband sent a letter to the trustee dated 14 April 2014 in which he offered on behalf of Company C Pty Ltd, a company of which he was the sole director and shareholder, to purchase the properties for $970,000.00. The offer was subject to some conditions including that this payment would extinguish the wife's claims against him (by implication including interest payable to that date) and the trustee was not prepared to accept it subject to those conditions but the husband confirmed in cross-examination that at the time he made the offer he had that amount of money available.
18. When he was asked in cross-examination why he had not used the money to pay the wife the best he could say was that it had been "snaffled".
19. I can understand why the wife's counsel was content to adopt a test of general notions of fairness to determine whether the court should in the exercise of its discretion refuse to enforce the orders. General notions of fairness strongly mitigate against the husband being relieved of liability to pay the amount due to the wife including interest.
20. Yet another reason why the court should not decline to enforce payment of the principal sum of $85,000.00 and interest in this case is that to do so would be tantamount to allowing the husband to obtain a s. 79A order by the back door when he had no prospect of establishing any of the matters in s. 79A which might have justified a variation of the order.
21. Nothing which has happened since the sale of the properties suggests that general notions of fairness require that the husband be relieved of paying any further money.
22. It has taken a little while to dispose of the wife's enforcement application, among other things because the trustee's costs needed to be fixed before there could be a final distribution to the wife and therefore a final determination of the amount owing and time needed to be found for a hearing given that the husband contended that the debt owing to the wife should not be enforced. None of that is the wife's fault and the husband provided no explanation for why he had failed to make any payment at all to the wife since the properties were sold or why he had not acted expeditiously to ensure that the small amount which will remain in trust from the sale of Property A was paid to the wife.
23. The wife has done nothing wrong and has continued to wait patiently for her money. There is simply no basis for me to exercise my discretion in favour of the husband and order that the debt or any part of it cannot be enforced.

Whether if interest is payable pursuant to s. 117B (1) of the Family Law Act the court should pursuant to s.117B(2) order that interest is not payable

1. S.117B(2) provides as follows:
   • (2) 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).
2. S. 117B (2) does not contain any guidance as to the matters which may be relevant to the exercise of the discretion. However if the test of general notions of fairness is applied then having regard to the matters referred to above, there is simply no basis for the court to exercise its discretion in favour of the husband.

1. The husband did not dispute the validity of the wife's calculation of interest and I intend to make a declaration about the amount owing as sought by the wife.
2. The husband's solicitor did not challenge the enforcement orders sought by the wife and I intend to make orders in those terms.

I certify that the preceding seventy four (74) paragraphs are a true copy of the reasons for judgment of Judge Terry

[1] Shafton & Shafton [2011] FMCAfam 46

[2] Shafton & Shafton [2012] FMCAfam 339

[3] Shafton & Shafton & Anor [2013] FCCA 958

[4] Shafton & Shafton & Anor (No.2) [2014] FCCA 2788

[5] The words "holding costs" appear in order 6 and not in 9.2. 9.2 refers to the loan which the husband may secure against the security properties for the purposes of paying the second instalment required by order 6.

[6] McMillan & McMillan [2016] FamCA 387

[7] Shafton & Shafton & Anor [2013] FCCA 958