· 2021-10-15T09:31:55+0000 · 750 posts

Appellant Opposes the Primary Judge's Varying of Consent Orders

Demeny & Ogden [2021] FedCFamC1A 21 (27 September 2021)

The judge of the Federal Circuit Court of Australia made consent orders requiring four properties to be sold to pay off loans by the parties, with any funds remaining being divided equally between them. The respondent opposed such orders and as such, the primary judge varied the consent orders. The appellant opposed the same alleging that the relevant criteria for varying the orders under s 90SN of the Act were not met. The Court, in adjudicating this dispute, assessed whether or not the orders were impracticable to carry out and whether there was a miscarriage of justice.

Facts:

The respondent owned Property C which was said to have been valued at $450,000. Under the consent orders he was to retain it unless he defaulted in his obligations to pay the appellant the sum of $210,877.63 within 28 days after the sale of the second Australian property. The parties owned two properties in Australia and two in the United States. The parties had borrowed funds to obtain the properties and four loans from the Commonwealth Bank of Australia (“CBA”). The loans were secured by a mortgage against the properties including Property C.

On 12 May 2014 a judge of the Federal Circuit Court of Australia made a suite of property orders by consent (“the consent orders”) in proceedings between the parties to achieve “something like” an equal division of their property. The consent orders required four properties to be sold, two of which are located in Australia, and the other two in the United States of America (“the United States”). The proceeds of sale were to be used to retire a number of loans, with any funds remaining being divided equally between the parties. Unfortunately, the properties that were required to be sold did not sell for the price that was expected and the loans that were intended to be repaid by the proceeds of sale were not fully repaid.

The respondent contended that if he was required to bear the burden of the unpaid loan and also pay the appellant the fixed sum of $210,877.63 agreed upon, he would receive much less than the intended 50 per cent division of property. As such, he sought to have the consent orders varied. On 22 March 2021, the primary judge, varied the amount payable by the respondent to the appellant pursuant to the consent orders by reducing the fixed sum of $210,877.63 by one half of the outstanding loan amount of $110,223.73 because the consent orders had not achieved the intended division of property and a miscarriage of justice had occurred. Furthermore, the consent orders were said to be impracticable to be carried out.

The appellant submitted that the primary judge erred because the relevant criteria for varying the orders under s 90SN of the Act were not met. Furthermore, any shortfall in repayments of the loans caused by the properties that were to be sold not reaching the expected price was to be borne by the respondent alone.

Issue:

Whether or not the appeal should be allowed.

Applicable law:

Family Law Act 1975 (Cth) s 79 - provides for the conduct of alteration of property interests.

Family Law Act 1975 (Cth) s 79A - a remedial section designed to avoid a miscarriage of justice.

Family Law Act 1975 (Cth) s 90SN - provides for the means of varying and setting aside orders altering property interests.

Federal Proceedings (Costs) Act 1981 (Cth) - provides for the means of adjudicating costs certificates.

Barker v Barker(2007) 36 Fam LR 650; [2007] FamCA 13 - the Full Court said that a miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which “for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process”.

Harris v Caladine(1991) 172 CLR 84; [1991] HCA 9 - provides that a little more than consent may be required to satisfy a court that proposed orders meet that standard where the parties are represented.

Molier and Van Wyk(1980) FLC 90-911; [1980] FamCA 85 -held that s 79A(1) of the Act “is intended to apply only to circumstances occurring before or at the time of the making of the order” and that “[t]he term ‘miscarriage of justice’ does not seem apt to apply to matters which arise after the order has been made”.

Noetel and Quealey(2005) FLC 93-230; [2005] FamCA 677 - the Full Court said that the practice of drafting orders based on a percentage entitlement rather than a fixed sum to achieve fairness between parties in the event of a sale is subject to many authorities.

Public Trustee (as executor of the estate of the late Gilbert) v Gilbert (1991) FLC 92-211; [1991] FamCA 10 - declined the correctness of Molier stating that the term miscarriage of justice relates to the judicial process which resulted in the order sought to be set aside.

Rohde and Rohde (1984) FLC 91-592; [1984] FamCA 41 - established that orders which can be put into effect are not rendered impracticable simply because they produce a different outcome to that which was intended.

Ullrich & Kraft [2014] FamCA 266 - where Kent J observed that a miscarriage of justice by reason of “any other circumstance” within the meaning of s 79A(1) has occurred because of the manner in which the subject consent orders were framed or constructed having regard to the real effect or outcome of those orders, or the operative effect of those orders, in the circumstances of this case.

Analysis:

The primary judge found there had been a miscarriage of justice because the consent orders were intended to effect an equal division of property and that neither the parties nor their legal advisors had contemplated the possibility that after the sale of the four properties there would be a shortfall in the repayment of the loans, the repayment of which would continue to be secured over Property C.

The appellant submitted that there was no miscarriage of justice because the sale of the four properties occurred after the making of the orders. The primary judge failed to look at the financial effect of the respondent’s retention of Property C under Order 1.5 or its sale under Order 1.6 and the “shortfall” was not of such a magnitude as to give rise to a miscarriage of justice.

It was also contended that on the true construction of the consent orders, it was clear that any shortfall in the payment of the mortgages was to be borne by the respondent. Order 1.4 casts the obligation on the respondent to pay $210,877.63 to the appellant upon the sale of the second Australian property. Thus, it is submitted, the obligation to pay the lump sum could arise before all properties are sold and before the loans are fully repaid. The obligation to pay is an independent obligation and not connected with the proceeds of sale of the four properties.

Still, orders can be carried out because either the respondent can pay the appellant the agreed sum of $210,877.63 or Property C can be sold so as to realise the funds in order to make the payment. All that has occurred is that the burden of the outstanding mortgages has fallen onto Property C.

Conclusion:

The Court concluded that there was no miscarriage of justice, that the orders were not impracticable and can be put into effect. The Court allowed the appeal. The orders made on 22 March 2021 are to be set aside. The appellant’s application for enforcement is remitted for rehearing. The respondent’s application to vary the consent orders made on 12 May 2014 is dismissed.

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