The unpredictable nature of the Australian property market is a well-known phenomenon. Often we speak of the unforeseen rise in house prices. But what about when houses sell for less than expected? This article examines the impact of Australia’s property market on family law and the situation where the parties to a case agreed upon the equal division of their assets but were disappointed when the value of one of their properties was not as predicted. 

The meaning of impracticability and miscarriage of justice in relation to such a situation are also examined. This case reaffirms the position that orders which are able to be carried out are not rendered impracticable simply because they produce a different outcome to that which was intended.

In Demeny & Ogden [2021] FedCFamC1A 21 (27 September 2021) Strickland, Ainslie-Wallace and Aldridge JJ heard an appeal from a decision of Judge Kari to vary property consent orders which the parties entered into in 2014.

The orders required the sale of four properties to discharge loans, the balance was then to be divided equally between the two parties. The respondent was to retain a property in South Australia, but pay the applicant $15,455 upon the issue of the orders and $210,877 following one of the sales.

The properties sold for unexpected amounts, which resulted in the South Australian property remaining encumbered to the sum of $110,223.  The respondent brought an application for the final orders to be varied so that he retained the liability, but that the cash adjustment amount be reduced so that an equal division between the parties would be achieved.

At first instance, Judge Kari varied the original orders to reduce the amount payable to the applicant on the basis that the orders were impracticable and that the orders had not achieved the intended division of property such that a miscarriage of justice had occurred. The applicant then appealed, arguing that any shortfall in repayments was to be borne by the respondent. 

The Full Court said:

“[108]  A long line of authority in this Court … establishes as a clear guideline for the exercise of discretion under s 79 of the Act, that, absent some special consideration (such as a desire by one spouse to retain a particular piece of property, in specie), and particularly where the value of an asset is contentious, or even where it is not but the market for the property is volatile, or there is likely to be a significant time lapse between judgment and sale, and where the value of the asset is to be divided between the parties, the Court should order its sale and the apportionment of the proceeds between the parties rather than order one party to pay to the other a fixed sum representing a notional proportion of its assessed value… 

[45] In order to derive the parties’ true intention from the consent orders, they must be looked at as a whole and terms not taken in isolation.

[46] It is telling that there was an express agreement that any surplus on the sale of the four properties to be sold, after payments of the loans …, was to be shared equally … If the agreement was, however, that there be an equal division of property and that any surplus after repayment of the loans was to be shared equally, but that any shortfall was to be borne by the respondent alone, that needed to be clearly spelt out. Such a departure from what otherwise appears to be orders designed to achieve an equal division should be obvious…

[48] We are comfortably satisfied that the intention of the parties … was for an equal division of their property. Whilst the parties turned their minds to how that would be achieved if the properties sold for more than what was expected, they did not, in the consent orders at least, address the issue of a shortfall.”

The Court concluded (from [69]):

“It remains the position that the orders can be carried out because either the respondent can pay the appellant the agreed sum of $210,877.63 or [the South Australian property] 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 [the South Australian property]. The orders are still capable of being carried out.

[70] It is well 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 (Rohde and Rohde [1984] FamCA 41…; La Rocca and La Rocca [1991] FamCA 97; Cawthorn v Cawthorn [1998] FamCA 37 and Sanger & Sanger [2011] FamCAFC 210).

[71] It follows that a finding that it was impracticable to carry out the consent orders could not have been made.”

The Full Court allowed the appeal, remitted the enforcement application for rehearing and ordered costs certificates.

This case highlights the difficulties of reaching a settlement based on the expected values of properties where the Australian property market is largely unpredictable. Further, just because a property sells for less than expected and consent orders become difficult for one party to carry out, does not mean that it is “impractical” or that a “miscarriage of justice” has occurred.  

If you find yourself in difficulties with separation at the present time and require legal advice, contact our Family Law team today. 

DISCLAIMER: The information contained in this article is general and is not intended to be advice on any matter. It is for information only and is not legal advice. In the event of a legal problem, you should seek legal advice.