Court Finds Relevant “Circumstances” Exist to Justify Setting Aside Property Consent Orders

Background

 In the recent case of Blackwell & Scott [2017] FamCAFC 77 (28 April 2007), the Full Court of the Family Court (Aldridge, Kent & Watts JJ) heard Mr Blackwell’s appeal in a de facto property case where consent orders were first made in February 2014.

 

February 2014 Consent Orders

The 2014 Consent Orders provided for the de facto male partner to retain an investment property (K Property) and pay the de facto female partner $130,000 within 90 days. Upon the appellant male partner’s non-payment, the respondent de facto female partner applied for the setting aside of the 2014 Consent Orders, the appellant ultimately paying the required sum in June 2015 with interest in November 2015.

 

Respondent’s Submission

Between the date of the 2014 Consent Orders and 26 October 2015 the Suburb K property increased in value from $860,000 to $1 million according to a valuer. The respondent argued that the 2014 Consent Orders should be set aside as the increase in value during the period of default meant that she would receive far less than an equal division of property.

 

Appellant’s Submission

The appellant argued that his default had not caused the increase in property value as the relevant section of the Family Law Act requires.

 

Section 90SN Varying and Setting Aside Orders

Kent J stated that section 90SN(1)(c)  of the Family Law Act (dealing with de facto couples) provides that if the court is satisfied that a person has defaulted in carrying out an obligation imposed on the person by the order, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the earlier order.

The counterpart of s 90SN(1)(c) is s 79A(1)(c) for married couples. But for the references in s 79A to ‘section 79’ whist s 90SN refers to ‘section 90SM’, the respective sections are identical.

Kent J’s Judgment

According to Kent J, the essence of the appellant’s contention was that the substantial increase in the value of the Suburb K property was not causally related to the his default. The appellant contended that the respondent had to prove a cause and effect between the default on the one hand, and the increase in property value on the other, for the subsection to have operation.

Specifically with respect to subsection (c) of each of s 79A(1) and s 90SN(1), these provisions are only engaged when a person is in default of a property adjustment order. Given that the usual civil remedy when default of an order occurs is enforcement, the purpose of each subsection can be seen to reflect the recognition that in some instances of default, enforcement will be an inadequate remedy to achieve justice and equity. Ensuring that justice and equity is achieved in the context of default of an order having occurred is the central purpose such provisions.

In Monticone [1989] FamCA 92, the interpretation given to s 79A(1)(c) by the Full Court did not appear to lend support to the appellant’s narrow construction. While the facts in Monticone differ substantially from the facts of this case, the focus in Monticone upon circumstances is important. No definition or prescription as to the meaning of ‘circumstances’ as it appears in s 90SN(1)(c) is contained within the subsection or in the Act. There is no reason to conclude that it is to be given other than its ordinary meaning. “Circumstances” obviously has a wide meaning capable of embracing a wide variety of things.

The subsection thus directs attention to relevant ‘circumstances’ – a potentially wide category of things – existing at the time of the making of the order to identify what relevant ‘circumstances’ can be seen to have arisen.

The relevant ‘circumstances’ when the subject consent orders of the 2014 Consent Orders, included that the orders were intended and designed to effect an equal division of the parties’ not asset. The adoption of $130,000 as the cash sum to be paid to the respondent was plainly not arbitrarily selected, but was adopted to effect an equal division given, relevantly, the value of the suburb K property at the time at %600,000 to $650,000.

By prescribing a period of 90 days for the payment the parties accepted, and the Court endorsed by making the consent orders. Had the value of the suburb K property risen or fallen within that 90 day period, the relevant circumstance was that both parties had accepted that prospect and the Court had endorsed that acceptance in making an order in those terms.

In contrast, the critically important circumstances arising upon and from the appellant’s continuing default over the 13 months period referred to, included that when the respondent finally received the payment of $130,000 even with the subsequent payment of interest, she was not then receiving an equal division by reference to the worth of the Suburb K property at the time of receipt.

In short, the relevant circumstances of and at the time of the consent order was that payment to the respondent of $130,000 in accordance with its terms, meant that the respondent would be receiving, at the time of payment, her equal entitlement to the net assets. The relevant circumstances arising as a result of the appellant’s default included that payment of $130,000 even with interest, could no longer achieve the respondent receiving anything approximating an equal entitlement at the time the payment was made.

Kent J stated that the appellant’s central contention ignores the proper meaning to be given to ‘circumstances’ as it is used in the unitary terms of the subsection. The subsection only operates if there has been default but its remedial purpose in that event is to confer a discretion to vary or set aside the order.

The formulation by the appellant of a test of causation in terms that the increase in the value of the Suburb K property was caused by the market, and is not the result of the appellant’s default, is misconceived. Property expressed by reference to the terms of the subsection, the substantial increase in the value of the Suburb K property is the reason why the appellant’s default resulted in circumstances arising to make it just and equitable to vary or set aside the orders.

 

Aldridge J

Aldrige J disagreed that Monticone lends any assistance to the determination of issues. Aldridge J stated that the question posed by s90SN is whether the property orders made under s 90SN continued to be just and equitable or appropriate, subject to the terms, in this case, of s 90SN(1)(c) being met, including the requirement that the relevant circumstances must have arisen as a result of default. According to Aldridge J, it is therefore entirely proper to look at the content and effect of the s 90SN orders to identify the relevant changed circumstances.

The primary judge found, without challenge, that the  purpose of the property settlement orders was to achieve an equal division of the property of the parties. Thus, to use the words of s 90SM, it was just and equitable and appropriate that there be such a division and that that division be effected by a payment to the wife of $130,000.

The appellant’s delay in complying with the orders was lengthy and substantial. By the time he did comply with the obligations imposed upon him by the orders, the respondent did not receive anything close to 50 per cent of the matrimonial property, which was both the intent and effect of the orders at the time the parties consented to them.

Thus whilst it is entirely correct to say that the appellant’s default did no cause house prices to rise, that is not the relevant enquiry. The relevant enquiry is whether circumstances had arisen as a result of the appellant’s default that would make it just and equitable to reconsider the earlier orders. The circumstances that arose were that, as a common sense proposition, the respondent received significantly less than an equal division of the property and the appellant received considerably more.

 

Watts J

Watts J agreed with Aldridge J and stated that the grounds in subsection (c) consist of three elements:

  1. A default;
  2. Circumstances that have arisen as a result of that default; and
  3. Having regard to those circumstances the applicant bears the onus of establishing that it would be just and equitable to change the order.

 

The central assertion in the appellant’s case was that the respondent cannot rely upon the increase in the value of the major asset as being the circumstances which have arisen as a result of the default. If that was the respondent’s case then her argument that the subsection (c) ground was made out would fail because it could not be said that the appellant’s default caused the rise of the value of real estate in the Sydney property market. That, however, was not the respondent’s contention. The circumstances to which the respondent points as having arisen as a result of the appellant’s default are that she has not got the bargain she negotiated.

Given that those were the circumstances upon which the respondent relied, the trial judge was correct in being satisfied that the respondent had established the subsection (c) ground, namely it was just and equitable to change the order because by reason of the appellant’s default the respondent did not get an equal division of the net assets.

 

Order

The appeal was dismissed with costs.

 

 

 

 

 

 

 

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