Calculating interest on judgment debts in Family Law Proceedings – it is simple

When the Court makes an order for the payment of money by one party to another, unless otherwise ordered, interest is payable on that sum of money. The Court has the discretion to set the rate of interest and the date on which interest is to accrue. If the order does not specify the interest rate or the date on which interest is payable, then interest is calculated in accordance with section 117B of the Family Law Act 1975 (Cth) and r.17.03 of the Family Law Rules 2004 (Cth).1 The rate of interest for the Federal Circuit Court Rules 2001 (Cth) is the same as the Family Law Rules.2

These provisions shed light on three aspects of the calculation of interest:

1. Interest is payable from the date on which the order is made or the date on which the order takes effect, whichever is later;
2. Interest is calculated in six-month periods: 1 January to 30 June; and 1 July to 31 December; and
3. The rate of interest is 6% above the cash rate last published by the Reserve Bank of Australia prior to the commencement of the six-month period for which interest is being calculated.

What is not explicit in the provisions, however, is whether interest is compounded daily, weekly, monthly, annually, or at all. There is limited authority on whether in the absence of specificity in an order for a payment of money, interest should be calculated as simple interest or compound interest.

In W & H [2004] FMCAfam 67, Baumann FM, as his Honour then was, was called upon to determine on what basis should interest on childbearing expenses be assessed. Prior to the issue of interest arising, the parties agreed that the father would pay to the mother $11,319.16 for child support arrears. After identifying the power to make an order determining the method of calculation of interest attracted to a judgment debt, his Honour commented that it is “usual for interest to be calculated on a simple interest basis on the amount unpaid from time to time”. Relevantly, his Honour “found no authority which would support a view that over such a long period of time interest on a compounding basis is appropriate.

In Stelzer & Wallace (2017) 56 Fam LR 547 Benjamin J considered an argument that money paid to reduce a judgment debt to which interest is attracted, must be directed first to pay any outstanding interest before the principal debt. In rejecting that argument, his Honour applied the “first in, first out” principle deriving from Devaynes v Noble [1815] EngR 77 (Clayton’s Case), noted that interest does not generally accrue on interest, and, referring to the Federal Court decision of Jackson v Conway [2000] FCA 1530, his Honour denounced the application of compound interest:

37. The effect of applying payments first to interest then to principal must, in effect, compound the interest.

Carchar & Hbenum [2011] FamCA 496 concerned a consent order made in 1991 which provided for the husband to pay the wife the sum of $25,000 by a specified date and, failing payment, after which interest would accrue at a rate of 18 per cent per annum adjusted monthly. Cronin J considered an argument that failing payment by the specified date the interest payable on the sum ought to be calculated as compounding monthly. In rejecting that argument his Honour said (at [64]):

… the appropriate provision of interest is a flat rate rather than compound interest. Compound interest has always been described as interest upon interest (see Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337). Nothing in the order in 1991 provided for compound interest and nothing in s 117B to the extent that it might apply indicates that such a provision should apply when interpreting orders such as this.

His Honour’s position was that “If it were otherwise, a capitalization process would give rise to an interest on interest arrangement. The order did not contemplate that or if it did, it would have to be clearly articulated and it was not”.3

The summation of the above is simple. Without an order specifying the method of calculation of interest, you are stuck with simple interest. That is, if you have an order for the payment of money by one person to another, then you have interest calculated in accordance with s.117B and r.17.03 based on simple interest. If you are yet to obtain an order for the payment of money, then consider applying for compounding interest on whatever payment of money is ordered. The Court has the power to make an order for compounding interest, although it will need to be satisfied that an exercise of its discretion to do so is warranted (for example, for punitive measures). It might be necessary to establish why compound interest is preferable to a higher interest rate.

1. Stephens & Stephens & Anor (2009) FLC 93-425, [413]. In our view, where a property settlement order provides for the payment of money, then in the absence of an order to the contrary, interest is payable at the rate prescribed by the Rules from the date on which the order is made, or the date on which the order takes effect, whichever is later, on so much of the money as is from time to time unpaid. However, the court that made the property settlement order may order that interest is not payable or may order that interest is payable at a rate specified in the order, being a rate different from the rate prescribed by the Rules, or that interest is payable from a date specified in the order.
2. Federal Circuit Court Rules 2001 (Cth), r.22.01.M

I am a marketer trapped in the body of a lawyer

I am a lawyer. Fortunately, I enjoy the ideas and creativity of marketing but I still want to be a lawyer. I do not want to be my firms client relationship manager (I don’t have one yet). I want to tease away at controversies and drill down on the factual basis of issues.

Marketing is accepted as essential now. Like ethical issues we all hope we can face the challenge when it arises. Like ethics the challenge changes face and shape.

We market our strengths but hopefully we share many. I often feel there is a me in here who would like to be a me out there and sometimes I get through and out and heard….and sometimes I am a bit lost as an individual in a work history, a profile and others view of me and process.

I like teasing out problems but the processes between me and that problem to solve can become frustrating though essential: disclosure and valuation use up so many resources. I wish getting through them was simpler. It is hard to remain the energetic problem solver of the marketing pitch during the same old same old of pure process moments.

Regards,

Kay Feeney

How Resiliency can determine your adverse life experience

I think that while resilience may be a disposition it is also a muscle that builds with use. Those I observe to cope with challenges of all sizes have had experiences of adversity in their past.

As a family lawyer I observe responses to adversity all the time. I recall reading a book about raising good men in which the author asked if a parent would want the first time choice and consequence to be a linked experience for their child as the first time the child put their foot on an accelerator. That thought stayed with me.

In a training session about assisting clients to make decisions we were encouraged to start with small choices: where did they want to sit, would they like the blind open or closed, tea or coffee. These were not trivial choices but part of building to match fitness to making bigger choices during negotiations.

It seems to me that an ability to deal with loss is developed by having successfully dealt with it before.

It is not easy then for the lawyer to build match fitness for loss in their interaction with a client but can we tune into how experienced with loss our clients are?

We know to think about the cycle of grief and we often talk to clients about where they might be in the cycle but can we tune into how much loss will be beyond the clients experience.

The end of the relationships we work within involve so many elements of loss: Of the dream, of the person, of intimacy, of status, of safety, housing, of the capacity to educate your children as you wish, of the opportunity to see your children every day.The range is breathtaking and humbling. Family lawyers observe such courage every day.

But can we do more to recognise when the client will go beyond a manageable threshold? We work with counsellors and psychologists. We refer our clients responsibly.

Clients are great teachers. I recall being at a mediation with a client. I was instructing brilliant counsel. We had a very mindful mediator. My client was a very competent human. The clients counsellor had been positive in describing our clients state of recovery from the shock of infidelity and separation.

Suddenly during the mediation the client began to say over and over almost as a moan…..too much loss. I had never forgotten that client. Counsel and mediator and I worried about the basic threshold of capacity. The matter did not resolve that day.

We were dealing with property and care of a child. Property did settle but care was much more difficult. I wonder if the lawyers, mindful of costs, should have realised the issues had such different loadings for the parties that they should have been mediated separately. The other party who had moved on of course didn’t need the process broken down in that way.

I have kept an eye on the idea of too much loss ever since. I once heard a motivational speaker talk about the tendency to catastrophize. To say in the face of adversity….it is a plane crash….when on a scale of one to ten it is not a ten it is really just a one.

Lawyers live with daily risk assessment. We may well go to catastrophe readily but then we check through process back to a capacity to make decisions. We don’t get stuck.

How can we help clients not get stuck? I try to encourage a future focus, to encourage a belief that the past is just that, behind you. I try to focus on resolution.

Unfortunately the task of taking instructions about contributions is about the past. It can take clients right back to the occasion of loss. Mind set matters though and again we have a chance to assist our clients to try not to be defined by their former partners view of them nor their own recollection.

We all have the conversation about recollection being coloured by perception with our clients.

I hope as my skills in defusing conflict grow my capacity to prepare clients for resolution by making decisions and displaying resilience grows too.

Regards,

Kay Feeney

Smile and go the extra mile

I suddenly think: I wish I had been a miser up till now! So clearly, I don’t think I have been and that for me that was not my first choice as to how to live my life so why does it pop up as that symbolic thought? It is about retaining my resources for my own use.

It is a message to self that I have not been sufficiently self-protective. It is my boundary marker for myself.

What triggered it? The client for whom I worked till 8.00 pm on a Friday night questioning the last invoice triggered it. The fact that I was so interested in solving their problem, I let myself down perhaps. That going the extra mile may not be recognised once my use has ended.

I do become interested in the problem to be solved. We all recognise that many clients can not appreciate a job really well done. I have to accept that I have to define my value. This case was interesting. I learnt a lot. I don’t regret my engagement but I will acknowledge my own reminder to self.

Kay Feeney

One person’s concern is another’s control

One person’s concern is another’s control. Offering to help can be colluding with denial or be disempowering.

These are all real ideas and real responses to actions.

It is no longer easy, to be sure of how an action will be received. It is no longer easy, to know what motivates an action.

Conduct is closely scrutinised. A single act or statements made can be seized on social Media. Some attitudes are not acceptable, even if they are well intended.

QCAT in the Guardianship jurisdiction is called upon to consider conduct all the time.

The obligations of an attorney pursuant to the Powers of Attorney Act 1998 (Qld) are enormous, and I suspect unknown to many who act in the role.

These obligations are set out below from schedule 1 of the Power of Attorney Act 1998 (Qld).

Part 1 – General principles

1. Presumption of capacity

An adult is presumed to have capacity for a matter.

2. Same human rights

The right of all adults to the same basic human rights regardless of a particular adult’s capacity must be recognized and taken into account. The importance of empowering an adult to exercise the adult’s basic human rights must also be recognised and taken into account

3. Individual value

An adult’s right to respect for his or her human worth and dignity as an individual must be recognised and taken into account.

4. Valued role as member of society

An adult’s right to be a valued member of society must be recognised and taken into account.

Accordingly, the importance of encouraging and supporting an adult to perform social roles valued in society must be taken into account.

5. Participation in community life

The importance of encouraging and supporting an adult to live a life in the general community, and to take part in activities enjoyed by the general community, must be taken into account.

6. Encouragement of self-reliance

The importance of encouraging and supporting an adult to achieve the adult’s maximum physical, social, emotional and intellectual potential, and to become as self-reliant as practicable, must be taken into account.

7. Maximum participation, minimal limitations and substituted judgment

“¢ An adult’s right to participate, to the greatest extent practicable, in decisions affecting the adult’s life, including the development of policies, programs and services for people with impaired capacity for a matter, must be recognised and taken into account.

“¢ Also, the importance of preserving, to the greatest extent practicable, an adult’s right to make his or her own decisions must be taken into account.

“¢ So, for example””

1. the adult must be given any necessary support, and access to information, to enable the adult to participate in decisions affecting the adult’s life; and

2. to the greatest extent practicable, for exercising power for a matter for the adult, the adult’s views and wishes are to be sought and taken into account; and

3. a person or other entity in performing a function or exercising a power under this Act must do so in the way least restrictive of the adult’s rights.

“¢ Also, the principle of substituted judgment must be used so that if, from the adult’s previous actions, it is reasonably practicable to work out what the adult’s views and wishes would be, a person or other entity in performing a function or exercising a power under

take into account what the person or other entity considers would be the adult’s views wishes.

“¢ However, a person or other entity in performing a function or exercising a power under this Act, or an enduring document, must do so in a way consistent with the adult’s proper care and protection.

“¢ Views and wishes may be expressed orally, in writing or in another way, including, for example, by conduct.

8. Maintenance of existing supportive relationships

The importance of maintaining an adult’s existing supportive relationships must be taken into account.

9. Maintenance of environment and values

“¢ The importance of maintaining an adult’s cultural and linguistic environment, and set of values (including any religious beliefs), must be taken into account.

“¢ For an adult who is a member of an Aboriginal community or a Torres Strait Islander, this means the importance of maintaining the adult’s Aboriginal or Torres Strait Islander cultural and linguistic environment, and set of values (including Aboriginal tradition or Island custom), must be taken into account.

Note””

Aboriginal tradition means the body of traditions, observances, customs and beliefs of Aboriginal people generally or of a particular community or group of Aboriginal people, and includes any such traditions, observances, customs and beliefs relating to particular persons, areas, objects or relationships””see the Acts Interpretation Act 1954, schedule 1. Island custom, known in the Torres Strait as Ailan Kastom, means the body of customs, traditions, observances and beliefs of Torres Strait Islanders generally or of a particular community or group of Torres Strait Islanders, and includes any such customs, traditions, observances and beliefs relating to particular persons, areas, objects or relationships””see the Acts Interpretation Act 1954, schedule 1.

10. Appropriate to circumstances

Power for a matter should be exercised by an attorney for an adult in a way that is appropriate to the adult’s characteristics and needs.

11. Confidentiality

An adult’s right to confidentiality of information about the adult must be recognised and taken into account.

Given that most attorneys are family members it might come as a surprise that this is not the time to be a loving despot but that the work of the attorney is really all about the adult they are making decision in substitution for.

After the loss of capacity, an adult’s right to waive the right to privacy cannot be a substituted decision. They must recognise the adult’s right to confidentiality and pursuant to section 74A of the Powers of Attorney Act 1998; they are prohibited from using confidential information other than in instances allowed for in section 74 of the Powers of Attorney Act 1998. A breach of section 74A carries a maximum penalty of 200 penalty units or in dollar terms, $24,380.

As an attorney is acting in an environment where the language and actions around assisting, stepping in, empowering and disempowering are all complex and agitated, it is important that attorneys tread carefully.