Family Court Confirms the Need for Clear Terms in Property Consent Orders which Particularise Parties’ Intentions

Key Words

Property settlement; consent orders; interpreting consent orders; construction of consent orders; consent orders evincing an intention; interpreting a contract.

The case of Dace & The Estate of the Late A Dace [2015] FamCAFC 215 (12 November 2015) was a Family Court of Australia (“FCA”) appeal heard by Judge May.  In this case, the Appellant Husband appealed to the FCA asking it to reverse an earlier decision made by the Federal Circuit Court of Australia (“FCC”).

Background

The Husband and Wife separated and on 23 December 2010, the Wife commenced proceedings for property settlement orders in the FCC.  The parties came to an agreement for the settlement of property by way of consent orders which were made on 26 September 2011.

The parties agreed that their net assets which included a number of parcels of land came to $2,000,000.  Out of this, the Wife would be entitled to 48% being $960,000 and the Husband 52% being $1,040,000.  The Wife was to receive an initial payment of $75,000 from the Husband and the remaining settlement was to be paid to the Wife upon sale of the various parcels of land.  If the land sold for less than expected the Husband was to make up any shortfall so the Wife would receive $960,000.

In late 2011 the Wife passed away and thereafter the property settlement was to be paid to the Wife’s Estate.  The Estate was paid various sums of money but was left short by $245,198.  On 27 October 2013, the Estate started enforcement proceedings against the Husband to recover the outstanding balance.

The Husband opposed the enforcement application on the grounds that he had incurred costs for outgoings relating to the land.  The Husband argued these costs should be split between himself and the Estate.

Evincing an Intention against Joint Liability for Costs

The Court considered the case of Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 where it was found that a right of contrition would normally apply so that parties would be jointly liable for costs.  However, in reviewing the parties’ consent orders the Court found that while they did not explicitly say who would be liable for costs they did evince an intention that the Husband was liable.

In the case of Coulls v, Bagot’s Executor & Trustee Co Ltd [1967] HCA 3; (1967) 119 CLR 460 the Court found that where parties’ evince an intention to change the default position of joint liabilities it should be interpreted as such.

The court stated the intention to change the default joint liability in the consent orders could be found by:

1. The use of the term “net assets” which signified that the settlement amount was after the payment of liabilities.
2. The consent orders stated the Wife was to receive “assets” but not “assets and liabilities”.
3. The condition that if the land sold for less than expected the Wife would still receive the same settlement amount.

The Judge found for the Estate and the Husband was ordered to pay the outstanding balance.

Appeal

The Husband appealed to the FCA stating that the FCC Judge had made orders that were not just and equitable, had made a mistake as to the facts and law, and had applied the wrong legal principles.

The Husband argued that the consent orders did not say he was liable for the costs of outgoings.

Interpreting Consent Orders

The Appellate Court looked at the case of I Limited & Chester (2010) FLC 93-456 which considered authorities dealing with consent orders interpretation.  The authorities stated that consent orders should be interpreted by considering the surrounding circumstances but not the intentions of the parties.  The Appellate Court then considered the High Court case of Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors [2004] HCA 52; (2004) 219 CLR 165 as authority that the terms of a contractual document are interpreted by “what a reasonable person would have understood them to mean”.

Appellate Court’s Findings

The Appellate Court agreed with the FCC decision.  The correct and proper interpretation of the consent orders showed an intention by the parties that the Wife would not be liable for costs.

Conclusion

In this case, the Husband and Wife entered into consent orders for the division of property between them.  Part of the settlement was to be paid after the sale of land.  The consent orders did not explicitly say who was liable for costs relating to the land or what should happen if the land took longer to sell than expected.  The Husband incurred considerable costs relating to the land before all of the lands were sold.

The court has interpreted the consent orders found they evinced an intention that the Husband was liable for costs.  This case shows the importance of ensuring consent orders are precise, clear, considering contingencies, and particularise a party’s full intentions.