Court Intervention Held Necessary For General Dyshoria-Related Medical

Keywords:

Family Law – Medical Procedures – Childhood gender dysphoria – Where the child is 15 years of age – Consideration of whether the child is Gillick competent.

In Re: Quinn [2016] FamCA 617 (29 July 2016) the mother and father (“the Applicants”) were the parents of “Quinn”, who was born in 2001. Quinn, who was born a girl, but identifies as male, was seeking to have a bilateral mastectomy, which is often referred to as “top surgery”. The Applicants had requested that the Family Court determines whether Quinn was competent himself to authorise the surgery. Failing that, they sought alternatively, for the Court to make an order that they, the Applicants could authorise the surgery.

Currently Australia requires young people to seek the permission of the Family Court before undertaking any medical treatment before they transition. This is regardless of whether they have family support and the endorsement of a doctor.

The WPATH Guidelines

The Court considered the World Professional Association for Transgender Health, Standards of Care (“the Guidelines”). These Guidelines set out the generally accepted interventions:

Stage 1: Fully reversible interventions, which include therapies to suppress oestrogen or testosterone production and thus inhibit the physical changes of puberty.
Stage 2: Partially reversible interventions which include hormone therapy to either masculinise or feminise the body. Some of these changes may require reconstructive surgery to reverse the effect; and lastly
Stage 3: Irreversible interventions, these are surgical procedures.
These guidelines recommend a staged process, to enable young people to keep their options open in the first two stages. Additionally, this staged process allows for the adolescent and their parents to assimilate fully the effects of the preceding intervention before moving onto the next stage.

Quinn had not yet started Stage 2 treatment, but his treating doctors recommended that he underwent Stage 3 treatment, “top surgery” immediately.

The Law – Gillick Competency

The Court looked at an earlier case, Re Jamie [2013] FamCAFC 110, which involved an adolescent with childhood gender identity disorder. In Re Jamie, the Court had held that in cases where the intended treatment was irreversible, the issue for the Court to determine was whether the child was “competent within the decision in Gillick v West Norfolk and Wisbech Area Health Authority [1985] UKHL 7, known as “Gillick competent”. If the child was found to be Gillick competent, the authority of the Court was not required to endorse the procedure.

The Court pointed out that gender identity disorder was not a medical procedure or treatment that falls into the jurisdiction of the Family Court of Australia under section 67ZC of the Family Law Act 1975 (Cth). It would only be relevant should there be a dispute about whether treatment – in stages one or two – should be provided, and what form the treatment should take. In terms of stage 2 interventions, the Court’s recommendation to grant the parents the decision-making authority was appropriate unless the child was deemed Gillick competent.

If the child was found to be Gillick competent, the child could consent to the treatment, and the court’s authorisation was not required. The question of determining whether a child was Gillick competent was a matter for the Court. According to the Court: “The ability of a child to make his or her own decision in respect of medical treatment depends on that child having sufficient understanding and intelligence to make the decision.”

Was Quinn Gillick competent?

According to his mother, Quinn had been dressing as a boy since he was four years old. She also stated that Quinn was very aware of the implications of surgery, the pain and discomfort it would entail, and the fact that it would affect his ability to breastfeed should he change his mind. She deposed that he had never faltered in his desire to have the operation and had become increasingly depressed as surgery had been put off pending the outcome of court processes. He had also independently researched hormone therapy and wanted to start testosterone treatment within the next twelve months. She deposed that she was confident that Quinn was “taking an intelligent, mature and measured approach to his future …” Quinn’s father and some of his treating doctors also provided evidence in terms of Quinn’s Gillick competence.

The Court examined whether there was a dispute or controversy. Although Quinn wished to have irreversible surgery, termed a stage 3 intervention, prior to commencing stage 2 treatment, there were guidelines by WPATH that considered when deviation from the stages may be suitable – for instance when the circumstances of the individual child and clinical judgment would require it. In Quinn’s particular situation, he had not yet embarked on stage 2 treatment, which he wished to start once he turned sixteen, but he wished to have “top surgery” as soon as possible.

The surgery would greatly improve Quinn’s quality of life, in terms of reducing his gender dysphoria as well as decreasing the physiological and physical pain he was experiencing due to his large bust. Moreover, the stage 2 hormonal treatment would masculinise Quinn’s appearance, creating a hairy face and chest. The Court stated that “[t]his would be incongruent with a person with an E cup breast and would certainly contribute and potentially provoke abuse and stigmatisation” which could have a detrimental impact on Quinn’s mental state. Although society had begun to accept transgender individuals, the Court nevertheless felt that they may be less inclined to accept an individual with large breasts, coupled with facial and chest hair. This could create more confusion for Quinn, as he would have a mix of both male and female secondary sexual characteristics.

The primary disadvantage for Quinn in proceeding with “top surgery” prior to stage 2 treatment, is that the hormonal treatment is usually undertaken for 12 months, giving the person time to become socially accustomed to his new gender, before undertaking surgical procedures that are on the whole irreversible. However, Quinn’s case was unique in that his large breasts caused him both physical and psychological pain. And once he embarked on hormonal treatment, his breasts would still be noticeable, exacerbating his gender dysphoria. Quinn also had a history of depression and anxiety, and self-harm. The Court found that any risk of proceeding with the surgery was outweighed by the benefits that Quinn would derive from it.

The Court therefore held that it had no concerns about Quinn undergoing the surgery, rather it was concerned about the impact on Quinn were surgery to be delayed.

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Full Court of Family Court Finds No Child Support Resulting Trust Favouring the

Keywords:

child support; private agreement; school fees; repaid; trust; resulting trust; beneficial interest; administrative assessment; child support trust.

Relative Law:

Family Law Act 1975 (Cth); Child Support (Assessment) Act 1989 (Cth)

Introduction

The case of Bass & Bass and Anor [2016] FamCAFC 64 (29 April 2016) was heard in the Full Court of the Family Court of Australia in front of judges Strickland, Murphy and Kent. The case considered a child support trust established pursuant to orders made between the parties. The case involved the husband appealing Judge Aldridge’s previous decision refusing the return of $300,000 held in the trust to the husband. The husband claimed the trust money was not being used for the purpose of financing the remaining children’s private school education as the children were not attending private school.

The husband argued that the beneficial interest in the monies settled by him was for the main purpose of providing private school education for the children. It was argued by the husband that $30,000 of the $300,000 was attributable to the trust’s purpose and the rest was a resulting trust for the husband. The husband’s appeal was dismissed as it was found that there was no merit in the husband’s argument and that he did not retain any beneficial interest in the child support trust.

Background

On 17 July 2008, consent orders were made to establish a child support trust for the children to undertake private school education. At the time the consent orders were made, three of the six children were aged over 18 years of age and the remaining children were 16, 14 and 10 years old. One of the children had an intellectual disability and special needs.

The consent orders included that pursuant to the Child Support (Assessment) Act 1989 the husband was to pay child support to the wife as and by way of departure from administrative assessment. As a result the husband’s annual rate of child support by administrative assessment was reduced to nil. Included in the terms of the agreement was that any arrears of child support were annulled and the wife’s application for child support maintenance be dismissed.

The husband’s intention was to establish a child support trust to eliminate any past, present or future administrative assessment of child support. The husband was ordered to pay $350,000 into a bank out of which both the husband and wife were appointed trustees.

Order 22(4) specified the five following mandatory terms of the child support trust that both parties had to follow:

22(4)(1) until the child support trust is wound up, its capital must be applied to meet the obligations in Order 16.

22(4)(2) the trustee shall pay education or tutoring expenses additional to those specified in Order 16 as agreed between the parties in writing.

22(4)(3) the trustee shall cause the child support trust to be wound up on 31 December 2015, unless the parties agree in writing to extend the date for the winding up of the trust.

22(4)(4) upon the winding up of the trust, the trustee shall hold any residual corpus in the child support trust for the child absolutely.

22(4)(5) all income of the child support trust is to be paid to the husband as and when it is received, on the basis that the Husband is solely responsible for:

1 all costs associated with the administration of the child support trust (except the costs referred to in Order 22.2); and

2 all tax arising on income received by the CST.

The Appeal

The primary ground of the husband’s appeal asserted that the main purpose of the trust was for the sole purpose of financing private school fees for the children.

Judge Aldridge concluded that from the terms that ‘the surplus is there for his [the child’s] benefit’. Judge Aldridge disagreed that the primary purpose of the trust was for education alone and therefore the trust had not failed.

Judges Strickland, Murphy and Kent agreed with Judge Aldridge that the child support trust did fulfill its primary purpose and that the child support trust had several purposes.

With the husband’s resulting trust argument, the court thought there was nothing novel nor contentious about the proposition that a resulting trust be set up in favour of the settlor as “part of the beneficial interest of the property in question which has not been disposed of by the express trust”.

Their Honours determined that with trusts, the circumstance determine the issue. They cited Byrnes v Kendle (2011) 243 CLR 253 where the legal effect of the child support trust was not affected by the secret intentions of the parties but the overall manifest intentions of the parties. The intentions of the parties was clear from the terms establishing the child support trust and reinforced by the circumstances. There was no express terms that the residue of the trust was to revert to the husband, nor was there any term alluding to such an outcome.

In their joint judgement Judges Strickland, Murphy and Kent stated that there was merit in the submissions made by the case guardian that:

The ordinary rules of construction as applied to the construction of contracts are applied in the interpretation of a Court Order: JKB Holdings Pty Ltd v de la Vega[2013] NSWSC 501 Lindsay J at 87;b. The fact that an inter partes contract/agreement was intended to be, and was in fact, given expression in orders of the Court must be taken into account: JKB Holdings Pty Ltd v de la Vega (above) at [82] citing Morgan v 45 Flers Avenue Pty Ltd(1987) 11 NSWLR 573 at 579;c. Where the terms of the Court’s order are sufficiently clear to govern the parties’ rights, the Court does not resort to extrinsic evidence of their intention: at 85 citing Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352: Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 at 3 to 5; andd. The same rules of construction of contracts apply to trusts: Byrnes v Kendle per Heydon and Crennan JJ at 102.
Judges Strickland, Murphy and Kent found no merit in the husband’s contention that he retain any beneficial interest in the child support trust. Their Honours consequently rejected the husband’s claim that the residue of the trust be held in a resulting trust in the husband’s favour.

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Convicted Paedophile Father’s Appeal Against a No Communication Order

Keywords Family Law Act, s 60CE; paedophile father; no communication order; psychological harm 

Introduction

Malak & Mairie (No. 2)[2016] FamCAFC 120 (6 July 2016) the Full Court (Murphy, Kent & Austin JJ) heard an appeal by the father who was serving an 18 year prison sentence for sexual offences. The Full Court had the difficult decision determining whether the father had a parental right to have contact with his children.

Background

The Appellant is the father of three children: a girl (“C”) aged 16 and a twin boys, (“D and E”) aged 12. The father had been serving an 18 year sentence with non- parole for a period of 13 years for a number of sexual offences. These offences were “vile and serious” in nature against his stepchild (“K”), aged 12, at the time of the offence and C.

On 21 July 2015, Berman J made parenting orders, which was to exclude the father from having parental responsibility for the children, and to prevent him from communicating with them by any means. At the time the orders were made the children had not seen their father for a period of 5 years. From those orders the father appealed.

On appeal the Father had argued that his Honour erred in considering the views of the children as the views were not ascertained by the Family Consultant.  The Family Law Act 1975, s 60CE provides specifically that ‘[n]othing in [Part VII] permits the court or any person to require the child to express his or her views in relation to any matter’. Secondly, mandatory principles for conducting child-related proceedings require the court to ‘consider the needs of the child concerned and the impact that the conduct of the proceedings may have on the child in determining the conduct of the proceedings’.

Decision

The father’s position was summarised by his Honour in that, the father viewed his incarceration as a positive feature and unlike other cases, the Court did not need to be concerned with the children’s lives being negatively disrupted according to the father.

Contrary to the father’s appeal argument, his Honour cleverly concluded the risk factors based on evidence into 3 categories, with each overlapping. They are as a follows;

  1. The nature and extent of the father’s criminal sexual behaviour; and
  2. The opinion evidence of the Family Consultant and the father’s lack of insight into the impact of his offending behaviour on the children; and
  3. The Children’s lack of knowledge of the father’s unacceptable sexual activity and such knowledge could impact them moving forward through adolescents.

The real issue then became the risk of psychological harm to the children. Whilst it was obviously unknown, the risk was real and that the evidence of the family consultant was compelling. In addition, the mother had given evidence that the children presented with a range of difficulties and developmental issues but also substantial emotional fragility, which needed to be considered by his Honour.

His Honour recognised that parenting orders have the effect of eliminating any contact or communication between a parent and his children in exceptional circumstances. However the best interests of the children always remains paramount to the court.

In this case allowing the father’s proposed orders would have exposed the children to a real risk of psychological harm. In addition, it was also found that it was not in the best interests of the children to be interviewed by the Family Consultant at the time, and therefore no miscarriage of justice was found.

Kent & Austin JJ had agreed, and the father’s appeal was unanimously dismissed.

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Insolvency – Challenging The Lender and Default Penalty Interest

The recent case in Arab Bank the importance of ensuring that default interest rate clauses are properly analysed and considered. Whilst it is open to challenge their ease becomes a question of fact and expert evidence in this case illustrates some useful starting points.

It may be that the lender has contributed to an insolvency or has over claimed the interest on interest and a legal challenge by the liquidator may lead to a suitable settlement being reached.

EXECUTIVE SUMMARY

Arab Bank provided a loan to a property developer and included in the documents a 2% default interest rate and the question was whether this 2% default interest rate was a penalty? The borrower repaid the whole of the loan but had to repay a significant extra amount

The court came to the conclusion that this default interest rate (which was added to the existing interest rate) was not a penalty because it was not seen to be punishing the borrower, it was not extravagant or unconscionable and it was not out of all proportion compared to the maximum conceivable loss that the lender could incur.

Incentive vs Penalty

The court agreed the law recognises a distinction between a clause which provides an incentive for prompt payment and a clause where the applicable rate of interest is increased upon failing to make a prompt payment.

The court further recognised that provisions which operate prospectively when the increased interest rate applied only to outstanding payable amounts post the event of default is seen not as a punishment for default, if they constitute a genuine pre-estimate of compensation to the bank for late payment.

Ultimately the court considered the imposition of the penalty rate for a minor. Arab Bank provided a loan to a property developer and included in the documents a 2% default interest rate and the question was whether this 2% default interest rate was a penalty? The borrower repaid the whole of the loan but had to repay a significant extra amount

The court came to the conclusion that this default interest rate (which was added to the existing interest rate) was not a penalty because it was not seen to be punishing the borrower, it was not extravagant or unconscionable and it was not out of all proportion compared to the maximum conceivable loss that the lender could incur.

WHY SHOULD I READ THIS. What This Means For You!

On 17 June 2011 the defendant offered an extension of the 2006 facility in the sum of $7,050,000.00. This was referred to as the “fixed interest facility”. The interest rate was fixed at 8.54% per annum, with a default rate of 10.54%.

A distinction was made in the lower courts between minor and major defaults and if such an interest rate was applied to minor defaults it could be that this may be seen as a penalty and therefore unenforceable.

The characterization of a clause as penal needs to be assessed by reference to the evidence.
Naturally there is a distinction between commercial lending contracts and those lending contracts which are provided to non-commercial borrowers (such as residential home loans).

It is important to note that in certain circumstances then the unfair contract terms legislation may apply as well.
If you are going to assert that a clause as penal in nature then you have the onus of proof in establishing the claim.

In this particular case it is useful to look at the expert evidence and the distinction between the relevant experts as to whether a clause is reasonable unconscionable and therefore may be seen as penal.

THE MEATY PART

The 24 payments referred to were made between 20 April 2009 and 21 June 2013. Of the total sum, $50,244.44 represented default interest that was charged by the defendant in respect of repayments not paid by the due date, but which repayments were paid within three working days of the due date. Those payments represent the plaintiff’s alternative claim.
The issue in the plaintiff’s primary case therefore, is whether the charges paid by the defendant for late payment, which it referred to as “penalty interest”, charged at the default rate of interest under the facilities, on the whole amount of the debt outstanding, were penal in nature and therefore repayable to the plaintiff. Determination of that issue involves a consideration of the relevant contractual arrangements between the parties, consideration of the evidence, and in particular, the expert evidence relied on by both parties, and the application of well settled legal principles.(See table- insert)The court found that the payments charged, by way of penalty interest by the defendant, on the plaintiff’s account, and paid by the plaintiff on the relevant dates set out above, constituted a penalty and therefore are repayable to the plaintiff and a verdict and judgment for the plaintiff in the amount claimed of $352,302.00.

Who else is this important for implications for lenders and borrowers!

• Provisions that aim to recover legitimate business costs that are not out of all proportion to the interest that it is intended to protect will not be a penalty.
• The courts will take a commercial approach in assessing similar default interest clauses. The costs that may be considered include both direct and indirect costs. These include, but are not limited to:
1. capital adequacy costs;
2. regulatory costs (compliance with Australian Prudential Standards, Basel II);
3. recovery costs;
4. provisioning costs;
5. reserve costs; and
6. head office and labour costs.

Takeaway points and follow-up

The Court adopted the commercial approach taken in the recent High Court decision in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 which affirmed ANZ’s right to charge late payment fees in relation to credit card transactions. In upholding the default interest clause by reference to evidence as to the bank’s costs arising on default, the latest decision has provided greater certainty concerning default interest charges.

Goldman lawyers are skilled and analysing these requirements under the family Law act, trusts, litigation and complex property and securities law.

Speak to a Goldman & Co senior lawyer if you are either a lender or borrower and are concerned about being overcharged or penalized or seek to review the terms of your loan agreement(s).

Technical case reference

Arab Bank Australia v Sayde Developments Pty Ltd [2016] NSWCA 328

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“The Bank Took My Estate!” Bank or credit card lending penalty clauses – is interest on interest legal?

Keywords: Family Law; parenting; artificial insemination; Family Laaw Act, section 60.

Introduction

The Family Law Act identifies children born as a result of artificial conception procedures under section 60H. The child’s parents are recognised by the following two elements:

  1. the woman was married to, or a de facto partner of, another person, that being the other intended parent; and
  2. if the intended parent provides consent to the procedure.

In the case Clarence & Crisp [2016] FamCAFC 157, a mother and her former same sex partner engaged in costly court proceedings to determine who was the rightful parent of their five year old child.

Background

 The parties commenced their de facto relationship in 2004, with the parties separating in 2011. The birth mother of the child, Ms Clarence, the Applicant, alleged that her former partner, Ms Crisp, the Respondent, had vacated the joint dwelling in March 2011, 4 months before the procedure.

The Respondent was of a different opinion, as she believed the separation date to be one month after the conception of the child. Ms Crisp had donated her eggs because she knew the importance of motherhood to the other party and had hoped for the parties to reconcile after implantation. The presiding  judge was of the opinion that:

“If the parties were in a de facto relationship on that day [of     conception] then they were both the child’s ‘parents’ for the purposes of [s 60H of] the Family Law Act 1975 … ”

In addition the court considered evidence of 850 text messages between the parties whom had exchanged their love and commitment up to the implantation of the Respondent’s eggs. Despite the parties living separately at the date of conception, they were deemed to be in a de facto relationship. Further evidence suggested that the parties remained romantic, with the respondent arguing that she continued to spend overnight stays weekly at the birth mother’s home.

Decision

Justice Berman recognised that although the parties were attempting to reconcile, though unsuccessful, did not rebut the fact that the pair were in a de facto relationship at the time of conception. For these reasons, Justice Berman ordered that the child live with the Applicant and spend time with the Respondent.

The Applicant recently appealed the decision to the Full Court alleging that Berman J had erred in law. The Full Court upheld the decision and costs were awarded.

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Husband’s Appeal Against Order To Pay $12m from Family Business to Ex-Wife Upheld

Keywords: Family Law Act, s79(2), 79(4); contributions; assessment of business assets; distribution of matrimonial property; appeal against original property orders.

Introduction

The case of Turner and Anor [2016] FamCAFC 121 (8 July 2016) (May, Ainslie-Wallace & Cronin JJ) heard the husband’s appeal against an order made by Macmillan J that the wife be paid a lump sum of $12 million following an undefended hearing, whereby the husband failed to participate in the proceedings ‘in any meaningful way’.  The order was made in respect of an asset pool of $25 million, largely comprising of the husband’s minority interests in a family-owned private company and unlisted public company.

The basis of the appeal was that the trial judge did not come to a just and equitable determination, required in family law property proceedings pursuant to s 79(2) of the Family Law Act 1975 (“the Act”), and erred in the judge’s determination of the husband’s interest in and level of control over the finances of the companies.

Background

Following a 19-year marriage and one child (age 17), the husband separated from the wife and left the matrimonial home. The husband was an employee, shareholder, director and Chairman of the Board of Turner Holdings (“TH”). He was also a director, shareholder and the Company Secretary of Turner Pty Ltd (“TPL”), which was a family-owned and controlled investment vehicle. The wife had the role of a homemaker and primary carer for their child.

The wife commenced proceedings in 2013. From the outset, the husband was totally ‘unwilling to grasp the reality and inevitability of the wife’s entitlement to property settlement’. The trial judge placed emphasis on the husband’s failure to ‘participate in the proceedings’ and his failure to meet his obligations of disclosure, particularly those in the corporate valuation exercise.

The husband appeared on first mention along with the second named defendant, TPL, which was represented by its solicitor. Three days before the final hearing the husband sent an e-mail to the trial judge’s associate concerned that the financial information presented by the wife was ‘grossly exaggerated’ and requested a telephone call to discuss the matter. Following a reply sent by the Registry explaining it was not appropriate for him to communicate with the chambers of the Judge, the husband failed to appear and was unrepresented at the final hearing.

The trial Judge agreed with the wife’s submissions that the ‘way in which the husband conducted proceedings, his failure to provide full and frank disclosure and his refusal to co-operate with single experts in the case’ are relevant considerations in relation to the identification and valuation of the property. The Court therefore accepted the wife’s valuation of property and an expert forensic accountant, that the parties’ assets were valued at just over $25 million. After considering the relevant provisions of s 79(4) of the Act (dealing with contributions made during marriage in determining a property settlement), the trial judge determined that the husband should pay the wife a $12 million lump sum.

The Appeal

The husband appealed the orders made by Macmillan J arising out of property, as well as spousal maintenance and child support proceedings. Following the husband’s total lack of participation in the trial, the wife, perhaps unsurprisingly, submitted that the husband had his opportunity to participate and should not subsequently be heard to complain about the outcome.

An essential aspect of the appeal was the value of the husband’s interest and the control he held within the companies. The husband challenged two main findings of the trial judge that:

  • The husband could access funds sufficient to pay the sum ordered whilst still retaining his shareholdings, so it was not necessary to apply a discount; and
  • The husband would most likely have the support of the other shareholders for the purposes of implementing the payment to the wife.

In the reasons, the trial judge acknowledged that due to the husband’s lack of participation she had ‘no way of knowing how he proposed to meet his obligation to the wife or arrange his affairs’.

The Full Court was not clear as to how the trial judge found that the total value of the property (excluding superannuation) was approximately $25 million. The trial judge had accepted the expert’s valuation of the husband’s interest in TPL at approximately $10.6 million and his interest in TH at $3.6 million. The Parties were otherwise limited to $1.12, to which the wife already had $1.05 million. Therefore, excluding the company interests, the husband’s interests were minimal.

The husband submitted that the trial judge drew an inference that there would be no sale, and that her Honour was in error in doing so because the $12 million could not come from any source other than through the disposal of shares.

Further, it was submitted that the absence of evidence could not support the positive conclusion that the husband would retain his shares. As a minority shareholder, it was not open to conclude that the husband could access money other than through dealings with his shareholdings and there was no evidence of whether the other shareholders would assist.

The only inference open to the trial judge, according to the husband, was that the husband would have to sell his shares or alternatively borrow, as there were no other assets that could possibly provide the sum as ordered. Thus notwithstanding his absence from the proceedings before the trial judge, the husband argued that the trial judge did not come to a just and equitable determination. The wife argued that there was no onus on her to produce evidence about a possible sale of shares. She submitted that the trial judge applied her broad discretion pursuant to s 79 of the Act correctly.

Decision on Appeal

The Full Court agreed with the husband’s submission that there was some onus on the wife seeking orders in an undefended hearing to establish, on the balance of probabilities, that the fixed money order could be met from sources other than the sale of shares if she was urging the court to ignore otherwise probable deductions. The Full Court found the trial judge failed to note that access to funds in TH required co-operation from other shareholders and therefore her Honour was in error for concluding that no discount should be applied. Thus the appeal was allowed and the case remitted for re-hearing.

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Court Finds That Costs Order Against Mother In Contravention of Orders not in

Keywords: Family Law Act, sections 60CC(3)(f).  70NFB, 70NFE, section 117; contravention; parenting orders; withholding child.

Introduction

The case of Roffe & Huie [2016] FamFAFC 166 (19 August 2016), was heard in front of her Honour Judge May (“the appellate judge”).  This was an appeal brought by Mr Roffe (“the father”) against the decision of the trial judge, Her Honour Judge Demack (“the trial judge”) in a contravention of order application made against Mrs Huie (“the mother”).

In the father’s contravention application, he sought that the mother pay his legal costs on an indemnity basis as the mother contravened final parenting orders of the Court requiring the father to return to court to enforce the orders.

The trial judge found that the mother’s conduct was a contravention of the parenting orders but refused to make a cost order against the mother as this would not be in the best interest of the child.

Background

During the parties’ relationship they had one child together in 2012.  In December 2012 they separated.  Interim parenting orders were made on 28 September 2013 and final parenting orders were made by consent on 3 June 2014 providing for equal shared parental responsibility of the child.

Thereafter, the child was to live with the mother and have contact with the father on an increasing basis over time.  However, after August 2014 the mother stopped allowing the father to have contact with the child.

As the mother was withholding care of the child from the father despite the court orders requiring such contact, the father filed a contravention application in January 2015.  The father alleged that the mother was withholding the child from the father without reasonable excuse.  On 25 March 2015, the contravention application was heard before the trial judge.  However, the trial judge adjourned the hearing after the mother filed an affidavit on 20 March 2015 alleging that the father had sexually abused the child.

The father responded by making an application for costs which was to be heard at the contravention hearing scheduled before the Court in May 2016.  On 21 and 22 May 2015, the contravention application was heard before the trial judge.

During the trial, the mother was cross-examined with regard to her sexual abuse allegations made against the father.  The trial judge made the following observation:

The mother’s evidence was concerning, in that she seemed to be having difficulty in remembering any of the sequences of events; who had told who anything at any point in time; who had made notifications to the Department of Child Safety; why she had done anything at any point in time; including why she had persisted in sending the child to spend unsupervised time with the father notwithstanding having had concerns apparently since April 2014 that the child was at risk of sexual harm in the father’s care; why she then entered into final parenting Orders in June 2014 notwithstanding these apparent concerns…

On the next day of the trail, the mother collapsed in the Courtroom and the matter was adjourned.  The matter was heard later in 2015.

In the hearing the mother’s legal representatives told the court that the mother admitted she had no legal excuse for contravened the parenting orders.  On that basis, the father orally applied to have the parenting orders varied so the child could live with him and asked for costs.  The trial judge refused to vary the parenting orders.

The Trial Judge’s Decision

The trial judge decided that the mother had “behaved in a way that showed a serious disregard of her obligations under the primary order”.  The trial judge found that the mother had contravened section 70NFA(2)(b) of the Act.  As a result of the contravention, the trial judge ordered that:

  1. The mother was to enter into a bond with the Court pursuant to section 70NEB of the Family Law Act 1975 (Cth) (“the Act”).
  2. The mother was to attend upon family consultant pursuant to section 70NFB(2)(b) of the Act.

Trial Judge’s Consideration of Costs

As to the question of costs, Her Honour had regard to section 70NFB.  The relevant parts of that section state:

(1) If this Subdivision applies, the court must, in relation to the person who committed the current contravention:

(a) make an order under paragraph (2)(g), unless the court is satisfied that it would not be in the best interests of the child concerned to make that order; and…

(2) The orders that are available to be made by the court are:…

(g) to make an order that the person who committed the current contravention pay all of the costs of another party, or other parties, to the proceedings under this Division…

The trial judge emphasised that her decision as to whether she should award costs for the contravention under section 70NFB had to have regard as to whether that would not be in the best interests of the child.  In her decision, the trial judge said:

“It seems to me that in the event that I form the view that the child must live with the father and spend limited supervised time with the mother, it will be more difficult for the mother to mount the argument that a costs Order would be directly and obviously linked to something which is contrary to the best interests of the child.”

The trial judge decided that the child would remain living with the mother.  In her decision, the trial judge was not prepared to make an order for costs on an indemnity basis as it would not be in the best interests of the child.

Consideration of Cost Order and What is not in the Best Interests of the Child

In the trial judge’s consideration of what was not in the best interests of the child under section 70NFB, the trial judge considered that:

  1. The mother had little or no money;
  2. She was receiving Centrelink benefits;
  3. She was effectively unemployable;
  4. Her English proficiency was limited; and
  5. The mother was the primary carer of the child.

Based on these factors, the trial judge could not see how it would be in the child’s best interests to make an order for costs against the mother.  Such as order, the trial judge reasoned, was likely to require the mother to sell her primary home and cause considerable financial hardship which was not in the best interest of the child.

The trial judge noted, however, that there was a lack of evidence generally about the mother’s full financial resources.  This included the mother apparently owing her home in Australia and owning another property in South East Asia.  The father estimated the value of the South East Asia property at $120,000.

Appeal Hearing and the Child’s Best Interests

The father appealed the trial judge’s decision based on two grounds, being that the Trial Judge:

  1. Erred by giving inadequate reasons as to why an order for costs was not in the child’s best interests under section 70NFB(1)(a) of the Act; and
  2. Erred by failing to consider section 60CC(3)(f) of the Act and how an order for costs would affect the capacity of the mother to provide for the needs of the child.

The appellate judge noted that the purpose of section 70NFA of the Act was to “ensure future compliance with court orders” and that section 70NFB requires the court to consider what is in child’s best interests when making a cost order.

In considering the first ground of appeal, the appellate judge considered the father’s Counsel’s submission:

…It was incumbent upon the primary judge to explain how that risk manifested, or why it was neither appropriate or available to the mother to have recourse to the real property in [South East Asia] to satisfy the costs order.

The appellate judge considered the trial judge’s finding:

“In all of the circumstances, I am not prepared to make an Order that would render her financial circumstances even more difficult than they presently are. I cannot see how it would be in the best interests of [the child] for the mother to have to dispose of potentially her principal place of residence here in Australia to satisfy a costs Order on the evidence that I have before me.”

The question that was raised by the appellate judge was whether the trial judge gave reasons for the best interest exception.   Counsel for the mother argued with reference to the case of Penfold v Penfold (1980) 144 CLR 311, that the absence of a reason does not indicate an error in the cost judgement.

The appellate judge took note of the fact that the father did not provide evidence before the trial judge about whether it would be possible for the mother to sell the property in South East Asia and how long that process would take.  Also, it was noted that the mother’s position was not clear, making it difficult for the trial judge to make a decision.  On these grounds the appellate judge found the ground of appeal not met.

The appellate judge considered the reasoning in the case of Short & Trevilian (Contempt and Contraventions) [2008] FamCA 866 (“Short”), where costs orders were made in a contravention of orders hearing.  The appellate judge found that in Short, that the court considered that what was in the child’s best interests of the child could be taken into account having reference to section 60CC(3)(f) regarding the capacity of the parent to care for the child.

Further Ground of Appeal – Consideration of section 117 of the Act

Counsel for the father raised a further ground of appeal being that even if the trial judge found as per section 70NFB(1)(a) of the Act that it was not in the best interests of the child to make an order for costs, the trial judge still had to consider section 117 of the Act with regard to the father’s offer to settle the matter.

The trial judge found that section 117 operates subject to section 70NFB(1) of the Act and therefore, the trial judge was entitled to make the order made.

The appellate judge dismissed the proceedings and declined to make a further cost order against either party for bringing the appeal.

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Court Rules That It Was Not Just and Equitable to Sell Matrimonial Home after

Keywords: Family Law Act, section 79(2) and 79(8)(b); property distribution; property distribution following death; just and equitable property distribution.

Introduction

The recent case of Paxton & Paxton [2016] FCCA 1689 (7 July 2016) heard by Judge Wilson, gave insight as to when the  Court will refuse to make an family law property order on the grounds that it would not be just and equitable to do so.

Particular emphasis was placed on the principles established in the High Court’s decision of Stanford v Stanford [2012] HCA 52 (‘Stanford’) and the Court’s interpretation of sections 79(2) and 79(8)(b) of the Family Law Act 1975 (‘the Act’) (dealing with the alteration of property interests following the breakdown of a relationship)In affirming Stanford, Judge Wilson also reiterated the importance of section 79(2) as a separate and distinct aspect in property settlements and its role in ensuring a just and equitable outcome.

Background

After a 20-year marriage, the parties separated finally when the husband left to move in with his de facto partner. The parties divorced some 10 years later in 2014. The wife remained in the matrimonial home which was owned by the parties as joint tenants. In 2014 the husband filed an initiating application seeking orders for the division of assets between himself and the wife.

The husband died early in 2015. His death fell between the dates the proceedings commenced and the trial in February 2016. In May 2015, probate of the husband’s estate was granted to the husband’s brother, Mr Paxton. Pursuant to orders made, Mr Paxon was substituted as applicant in the proceeding in his capacity of the husband’s legal personal representative. As joint tenants, the wife became the sole proprietor by survivorship of the matrimonial home.  Her status as a surviving joint tenant, however, was yet to be registered and she sought an order permitting her to ‘remain in the matrimonial home as a home for her and her children’.

Both parties agreed that the matrimonial home would have to be sold if any division of property in favour of the husband were to be ordered and agreed on the value of $380,000. The wife was of very poor health, financially destitute and had no apparent prospect of future employment. The adult son was mentally infirm, and the adult daughter suffered from a form of cerebral palsy as well as learning difficulties.

The wife continued to be the primary homemaker and care-giver to her children, although adults, who continued to reside with her. The physical and intellectual difficulties of the children meant they would likely reside with her well into the future. The ultimate question for the Court was whether it was just and equitable that the matrimonial home be sold in light of the factors above.

Decision

The Court has a broad power under s 79 of the Act to alter the interests of parties to a marriage in relation to property. Notably, s 79(2) forbids the making of an order unless the Court is satisfied that in all the circumstances it is just and equitable to do so.

Section 79(8) of the Act addresses circumstances where one party to the marriage dies before property settlement proceedings are completed. Judge Wilson’s path of reasoning was based on the High Court’s judgment in Stanford, and particularly their Honours approach to s 79(8)(b)(ii).

Ultimately, his Honour considered whether, had the husband not died, it would have been just and equitable to make an order and whether, following the husband’s death, it was still just and equitable to make an order. Judge Wilson rejected Mr Paxton’s premise that the husband (or Mr Paxton) had the right to have the matrimonial asset divided between the wife and the estate. His Honour found, that even if the husband had not died, it was similarly not just and equitable for a property settlement order to be made.

The application on behalf of the husband’s estate was dismissed with costs against the estate. His Honour found it wholly inappropriate for Mr Paxton to pursue the proceedings knowing the hardship that was likely to have been occasioned to the wife and her dependent children.

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Default Interest Rates In Home Loans And Mortgages – the interest on interest rate death spiral

The moral of the story is never to be in arrears in your loan repayments.

You should clearly understand the default interest rate which may be a significant uplift on the interest that you are now paying on your loan.

Many property investors may also be shot to learn that their loan may be considered one that is used for commercial purposes?

Therefore in a recent commercial loan that was provided by Arab Bank to a property developer, penalty interest rate clauses were held to be fair!

EXECUTIVE SUMMARY

Arab Bank provided a loan to a property developer and included in the documents a 2% default interest rate and the question was whether this 2% default interest rate was a penalty? The borrower repaid the whole of the loan but had to repay a significant extra amount

The court came to the conclusion that this default interest rate (which was added to the existing interest rate) was not a penalty because it was not seen to be punishing the borrower, it was not extravagant or unconscionable and it was not out of all proportion compared to the maximum conceivable loss that the lender could incur.

Incentive vs Penalty

The court agreed the law recognises a distinction between a clause which provides an incentive for prompt payment and a clause where the applicable rate of interest is increased upon failing to make a prompt payment.

The court further recognised that provisions which operate prospectively when the increased interest rate applied only to outstanding payable amounts post the event of default is seen not as a punishment for default, if they constitute a genuine pre-estimate of compensation to the bank for late payment.

Ultimately the court considered the imposition of the penalty rate for a minor

Arab Bank provided a loan to a property developer and included in the documents a 2% default interest rate and the question was whether this 2% default interest rate was a penalty? The borrower repaid the whole of the loan but had to repay a significant extra amount

The court came to the conclusion that this default interest rate (which was added to the existing interest rate) was not a penalty because it was not seen to be punishing the borrower, it was not extravagant or unconscionable and it was not out of all proportion compared to the maximum conceivable loss that the lender could incur.

Incentive vs Penalty

The court agreed the law recognises a distinction between a clause which provides an incentive for prompt payment and a clause where the applicable rate of interest is increased upon failing to make a prompt payment.

The court further recognised that provisions which operate prospectively when the increased interest rate applied only to outstanding payable amounts post the event of default is seen not as a punishment for default, if they constitute a genuine pre-estimate of compensation to the bank for late payment.

Ultimately the court considered the imposition of the penalty rate for a minor default was not a genuine pre-estimate of the loss which would be incurred by the Bank and awarded Sayde $352,302.00, plus costs.

Loan facilities and securities which apply a higher rate of interest, discounted upon the client making prompt payment will not generally be considered a penalty.

WHY SHOULD I READ THIS
What This Means For You!

On 17 June 2011 the defendant offered an extension of the 2006 facility in the sum of $7,050,000.00. This was referred to as the “fixed interest facility”. The interest rate was fixed at 8.54% per annum, with a default rate of 10.54%.

A distinction was made in the lower courts between minor and major defaults and if such an interest rate was applied to minor defaults it could be that this may be seen as a penalty and therefore unenforceable.

The characterization of a clause as penal needs to be assessed by reference to the evidence.

Naturally there is a distinction between commercial lending contracts and those lending contracts which are provided to non-commercial borrowers (such as residential home loans).

It is important to note that in certain circumstances then the unfair contract terms legislation may apply as well.

If you are going to assert that a clause as penal in nature then you have the onus of proof in establishing the claim.

In this particular case it is useful to look at the expert evidence and the distinction between the relevant experts as to whether a clause is reasonable unconscionable and therefore may be seen as penal.

THE MEATY PART

The 24 payments referred to were made between 20 April 2009 and 21 June 2013. Of the total sum, $50,244.44 represented default interest that was charged by the defendant in respect of repayments not paid by the due date, but which repayments were paid within three working days of the due date. Those payments represent the plaintiff’s alternative claim.

The issue in the plaintiff’s primary case therefore, is whether the charges paid by the defendant for late payment, which it referred to as “penalty interest”, charged at the default rate of interest under the facilities, on the whole amount of the debt outstanding, were penal in nature and therefore repayable to the plaintiff. Determination of that issue involves a consideration of the relevant contractual arrangements between the parties, consideration of the evidence, and in particular, the expert evidence relied on by both parties, and the application of well settled legal principles.

(See table- insert)

The court found that the payments charged, by way of penalty interest by the defendant, on the plaintiff’s account, and paid by the plaintiff on the relevant dates set out above, constituted a penalty and therefore are repayable to the plaintiff and a verdict and judgment for the plaintiff in the amount claimed of $352,302.00.

WHO ELSE IS THIS IMPORTANT FOR

Implications For Lenders And Borrowers!

• Provisions that aim to recover legitimate business costs that are not out of all proportion to the interest that it is intended to protect will not be a penalty.

• The courts will take a commercial approach in assessing similar default interest clauses. The costs that may be considered include both direct and indirect costs. These include, but are not limited to:

1. capital adequacy costs;

2. regulatory costs (compliance with Australian Prudential Standards, Basel II);

3. recovery costs;

4. provisioning costs;

5. reserve costs; and

6. head office and labour costs.

TAKEAWAY POINTS AND FOLLOW-UP

The Court adopted the commercial approach taken in the recent High Court decision in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28 which affirmed ANZ’s right to charge late payment fees in relation to credit card transactions. In upholding the default interest clause by reference to evidence as to the bank’s costs arising on default, the latest decision has provided greater certainty concerning default interest charges.

Goldman lawyers are skilled and analysing these requirements under the family Law act, trusts, litigation and complex property and securities law.

Speak to a Goldman & Co senior lawyer if you are either a lender or borrower and are concerned about being overcharged or penalized or seek to review the terms of your loan agreement(s).

TECHNICAL CASE REFERENCE

Arab Bank Australia v Sayde Developments Pty Ltd [2016] NSWCA 328

The New South Wales Court of Appeal

CROSS POSTING TO OTHER MEDIA INSTRUCTIONS

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Family Court Rules with Mum as Primary Caregiver And Allowed Her to Relocate to

Introduction

 In the case of  Warner [2016] FCCA 1887 (29 January 2016), the Court considered an interim application for relocation which was filed by the mother who was planning on moving from Sydney to Perth with her new partner, “with or without” her school age children.  The children had been primarily cared for by their mother since their father lived in Sydney but was involved in deployment overseas for at least two to three months a year for work. The father was opposed to the children moving to Perth and preferred they remain in Sydney with the mother.

Background

It was  clearly the view of the father that the children remain with the mother. The fact that the father had a preference that the children remain with their mother in Sydney shows the Court that the father has a sensible, proper and realistic approach to who the children should remain with. The children had always been cared for by their mother while the father pursued his career and financially supported the family. The Court recognised that the father can only purse his employment in Sydney. The mother’s partner is now pursuing his career, which is taking him to Perth.  The mother never contemplated for one moment the father would challenge her taking the children to Perth and the children all along believed they would move to Perth to be with their mother. The mother gave clear reasons for moving which were not malicious and all which were acceptable to the Court.

QUESTION AT HAND

Was it more detrimental to these children to remain in Sydney under the care of their father without their mother or move to a new city with the adjustment of making new friends, a new school but still being under the care of their mother?

If they were to remain in Sydney under the care of their father full time, which has never occurred, he would also have needed the assistance of his parents due to the nature of his work. The children had never been cared for full time by their grandparents and the longest they had been with their father is 10 days. Allowing the children to move to Perth would cause the children to change schools, make new friends, miss out on usual activities and miss seeing their father. The mother had always been the children’s constant, their primary caregiver.

DECISION

The children were said to be excited about moving to Perth with their mother, being something new. They will miss their friends and family as well as school. However, based on the evidence presented from the family consultant, the mother and the children’s point of view, NOT living with their mother would have a negative and potentially detrimental impact upon them. The mother had an impressive capacity when it comes to parenting her children and positively promoting their relationship with their father and extended family.

On an interim basis, the Court found there to be a significant risk to separate the children from the mother at this point.  The Court determined that the children shall be permitted to live/relocate to Perth with the mother pending the final determination of the Court.

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