Allan and Allan

[2016] FamCA 394

FAMILY COURT OF AUSTRALIA

ALLAN & ALLAN [2016] FamCA 394

FAMILY LAW – PROPERTY – INTERIM ORDERS – Application by the husband for sale of real property and refinancing of a mortgage liability – where the husband seeks orders to alleviate his alleged financial difficulties – where there is no evidence to support the husband’s alleged financial difficulties – where the wife seeks to retain the real property sought to be sold by the husband as part of the final property settlement – where the orders proposed by the husband would result in him controlling assets representing a significant proportion of the pool of assets – application refused

Family Law Act 1975 (Cth)

Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; (2011) FLC 93-446

APPLICANT: Ms Allan

RESPONDENT: Mr Allan

FILE NUMBER: MLC 603 of 2015

DATE DELIVERED: 24 May 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 4 May 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr J Williams

SOLICITOR FOR THE APPLICANT: Pearsons

THE RESPONDENT: In person

Orders

1. That all extant interim applications be otherwise dismissed.

2. That all extant applications for final orders be placed in the list of cases awaiting allocation to a judicial docket with priority as and from 10 February 2016.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Allan & Allan has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 603  of 2015

Ms Allan

Applicant

And

Mr Allan

Respondent

REASONS FOR JUDGMENT

Introduction

1. Pursuant to orders of Registrar Moser made 11 March 2016 these proceedings were listed for hearing before me in the Judicial Duty List on 4 May 2016.

2. There were a number of interim applications before the Court that day.  However the only issues sought to be pressed before me was the interim application of the husband in his Amended Response to Initiating Application filed 20 April 2016.  That application sought interim orders that:-

   ·The property at 1 B Street, Suburb C (“the Suburb C property”) be sold and that the net proceeds of sale be paid to the parties by way of partial property settlement, the first $800,000 to the husband and the balance in such proportions as the Court determines;

   ·The wife withdraw caveats lodged by her in respect of properties held at Suburb D to enable the husband to re-finance the existing mortgage liabilities secured over the title to that property;

   ·The amounts provided to the husband pursuant to the re-financing of the liabilities secured over Suburb D be retained by him as a partial property settlement;

   ·The costs of the new loan facility secured over Suburb D be met by the wife.

3. The wife opposed those orders. 

4. These are my Reasons for Judgment with respect to that application.

The Parties

1. The wife is the applicant in the proceedings.  She is aged 42 years.  She is self-employed as a health care professional.  Her income from that employment is approximately $30,000 per annum.

2. The husband is the respondent in the proceedings.  He is aged 41 years and is currently unemployed.  Previously he has been engaged in various business interests.

3. The parties married in 2001 and separated in January 2015.  There are two children of the marriage, E, aged 10 years and F aged 10 years.  The children live with the wife and spend time with the husband pursuant to interim orders.

Material Relied Upon by the Parties

1. In support of his application, the husband relied upon the following documents:-

   ·Amended Response to Initiating Application filed 20 April 2016 (paragraphs 8, 11, 12, 13 and 14 of the interim orders sought);

   ·Affidavit of the husband filed 3 May 2016;

   ·Affidavit of the husband filed 20 April 2016;

   ·Affidavit of the husband filed 22 January 2016; and

   ·Affidavit of the husband filed 26 March 2015.

2. The wife relied upon her Affidavit filed 28 April 2016.  In addition during the course of submissions on her behalf, counsel for the wife tendered a letter from Property Shares to G Pty Ltd dated 18 March 2015 (Exhibit W-1).

Orders Sought

1. The husband sought orders in the terms of paragraphs 8, 11, 12, 13 and 14 of his Amended Response to Initiating Application filed 20 April 2016.  During the course of submissions made by him he confirmed that paragraphs 2, 6 and 7 of that application for interim orders should be dismissed.  Order 1 of that application sought an order that the wife’s application be dismissed.  The wife conceded that all interim applications should be dismissed. 

2. The wife opposed the orders sought by the husband.

The Hearing

1. The hearing was conducted on the papers.  Each party relied upon the material referred to above and the submissions made.

2. The wife was represented by counsel.  The husband was self-represented, although he has had a solicitor representing him throughout the proceedings and indeed that solicitor has only recently filed a Notice of Ceasing to Act on 19 May 2016. 

3. At the commencement of the hearing the husband confirmed that he was unable to afford to continue to retain lawyers to represent him and that he would be representing himself during the proceedings.  Prior to commencing the hearing, I informed the husband of the availability of a duty lawyer to provide him with advice as to the conduct of the hearing.  The husband declined the opportunity to attend upon that duty lawyer for advice or assistance. 

4. Further, prior to the commencement of the hearing I informed the husband as to the manner in which the hearing would be conducted, that he would be required to make submissions in respect to the orders sought by him and direct me to the parts of the evidence relied upon by him in support of his application.  I also informed him that he would have an opportunity to reply to the submissions made on behalf of the wife.  The husband confirmed that he understood the manner in which the hearing was to be conducted.

5. Given the nature of the hearing, contentious facts cannot be determined without evidence being properly tested.  Accordingly, in determining the matter I have relied upon those facts which are agreed or not in issue. 

Legal Principles

1. The Court has power to make interim property orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). In  Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; (2011) FLC 93-446 (“Strahan”) it was recognised by the Full Court that there may be circumstances which justify the exercise of the power pursuant to ss 79 and 80(1)(h) of the Act prior to the final hearing. Boland and O’Ryan JJ note at paragraph 118 of their judgment that the approach to be taken to the hearing of an application for an interim property order is as follows:-

   … There are two stages to the hearing of such an application where the power is to be exercised pursuant to s 80(1)(h) of the Act. This is recognised by the fact that although the power under s 79 should ordinarily be exercised on a once only basis, “circumstances may arise before there can be a final hearing” where the power is exercised. Thus the first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.

2. The circumstances in which the Court might exercise its power to make orders for partial property settlement was considered by the Full Court in Strahan at paragraph 132; whilst acknowledging that it is preferable that there be one final hearing in s 79 proceedings the Court concluded:-

   … in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

Discussion

1. The husband seeks a sale of the Suburb C property and the ability to re-finance the mortgage on the Suburb D property due to his “dire” financial situation.  Put simply, it was submitted by him that he has no access to funds and no means to retain lawyers to act on his behalf in the proceedings without release of funds for that purpose.

2. His evidence, as set out in his Affidavit filed 20 April 2016 is that he is able to secure an extension of the loan facilities over the Suburb D property to enable him to access approximately $400,000.  To enable him to access that re-financing option, he requires the wife to remove the caveats lodged over the Suburb D property.  He proposes that the wife meet the cost of that refinancing.

3. Based upon the husband’s material, the parties’ assets, liabilities and financial resources (rounding up or down) are summarised as follows:-

   Assets

   ·       2 B Street, Suburb C  E$  770,000

   ·       3 B Street, Suburb C  E$  770,000

   ·       1 B Street, Suburb C  E$  710,000

   ·       H Street, Suburb D  E$2,120,000

   ·       Motor vehicle 1   $    35,000

   ·       Motor vehicle 2   $     8,000

   ·       National Australia Bank  E$    28,000

   ·       ANZ Term Deposit   $    20,000

   ·       Husband’s bank accounts   $    14,000

   ·       Husbands’ trading stock   $    42,000

   ·       Furniture and chattels  E$    30,000

   ·       Wife’s physiotherapy business  Not known

   Total  E$4,547,000  

   Liabilities

   ·       Line of credit secured over 3 and 2 B Street,

   Suburb C   $  900,000

   ·       Mortgage over H Street, Suburb D   $  980,000

   ·       Loans from husband’s family  `          E$    87,000

   ·       Husband’s credit card debts  E$    12,000

   ·       Costs of subdivision of Suburb D   E$    25,000

   Total  E$2,004,000

   Superannuation

   ·       HESTA Superannuation (Wife)   $  120,000

4. The parties’ principal assets are the properties at Suburb C and Suburb D.  Those properties have been valued by a single expert valuer.  The parties’ net assets, excluding superannuation, based on those valuations is approximately $2,543,000 of which sum the husband seeks interim orders the effect of which will provide him with a partial property settlement of no less than $1.2 million, being $800,000 from the proceeds of sale of the B Street property and $400,000 upon the re-finance of the Suburb D liabilities.  In percentage terms, the husband seeks payments valued at approximately 47 per cent of the identified pool of assets. 

5. As to the husband’s proposal that the property at B Street be sold, the wife’s primary basis for opposing that application is that she seeks to retain that property as part of her final property settlement. 

6. Paragraph 5 of her Amended Initiating Application filed 17 March 2015 seeks an order that the wife retain the properties situate at and known as 2, 1 and 3 B Street, Suburb C.  The wife currently resides at 2 B Street Suburb C.  The property sought to be sold by the husband is a neighbouring property and is currently tenanted.  The wife’s evidence is that the rental income received from the properties at 3 B Street and 2 B Street are applied by her to the mortgage liability secured over the titles to 3 and 2 B Street.  The surplus rental income received is applied by the wife towards the rates, maintenance and other expenses associated with the properties.  Were the property at 1 B Street (which is unencumbered) to be sold, the wife would not be able to continue to meet the mortgage liabilities secured over the titles to the properties at 3 and 2 B Street.  Hence, a sale of 1 B Street would jeopardise her ability to remain at 2 B Street with the children of the marriage.

7. Having regard to the assessment of the parties’ single expert valuer, their equity in the B Street properties is approximately $1,350,000, which is approximately 53 per cent of the parties’ property interests.  Hence, it was submitted on behalf of the wife that her proposal that she retain the property is realistic, particularly having regard to her contributions during the marriage and the fact that she has the primary care for the two children of the marriage in circumstances where the husband is currently not working and paying no child support.  I accept that submission.

8. In circumstances where a party seeks to retain the property sought to be sold and there is a reasonable prospect of orders being made in those terms at the conclusion of the proceedings, in my view it would be premature to exercise the power under s 79 prior to the final hearing. To do otherwise would be to defeat the wife’s claim to retain that property. In my view, at an interim hearing, where the evidence of the parties is unable to be tested, it would be inappropriate to exercise the power under s 79 in those circumstances. Accordingly, I will dismiss that part of the husband’s application.

9. The wife also opposes the husband’s proposal that he be permitted to re-finance the mortgage liability secured over the Suburb D property.  The Suburb D property has been valued at approximately $2,120,000 and has a current mortgage liability of approximately $980,000.  Hence, the equity in that property is currently approximately $1,140,000. 

10. The wife was critical of the husband’s re-financing proposal and relied upon Exhibit W-1, the letter from Property Shares (being the proposed financier) to G Pty Ltd (the entity through which the parties hold their interest in the Suburb D property) dated 18 March 2015 in support of that position.  In particular, the wife pointed to what she submitted was a lack of commerciality with respect to the proposed re-finance, noting that the proposed terms of offer in that letter include:-

    ·a loan of up to $620,000 (having regard to the proposed facility limit of $1.6 million or 80 per cent of the value of the property);

    ·an interest rate of nine per cent per annum;

    ·an establishment fee of one per cent of the loan amount;

    ·the requirement of a guarantor for the loan; and

    ·written confirmation that the caveator on title (being the wife) provide a letter confirming she has no financial interest or entitlement in the Suburb D property.   

11. Having regard to the contents of Exhibit W-1 the wife’s concerns as to the proposed re-finance are well founded.  The terms and conditions proposed are onerous.  Notwithstanding the husband’s application before me that he be permitted to refinance to obtain a further $400,000 that correspondence contemplates a loan of $620,000.  In my view his application for permission to re-finance must fail in circumstances where the husband has placed no evidence before the Court as to:-

    ·his current employment or efforts to secure employment;

    ·his ability to service the proposed debt; or

    ·any current offer of finance and the terms of such offer.

12. Currently, the parties’ loan liabilities are being serviced by income earned on the properties securing the loans.  There is no pressure on the parties from lenders to sell the properties.   

13. It was submitted on behalf of the wife that the husband has provided no evidence of any financial pressure upon him to justify a sale of that property or a need to refinance.  In support of that submission reliance was placed upon paragraphs 3 and 4 of the husband’s Affidavit filed 22 January 2016.  In that Affidavit the husband deposes that his income from the Suburb D properties is $84,240 per annum and that the mortgage liability with respect to that property is approximately $67,600 per annum, leaving a surplus of approximately $16,500.  Hence, having regard to that evidence there would appear to be no basis for orders as sought by the husband at this time.

14. That view is bolstered having regard to the fact that the husband has sold approximately half of his jewellery stock and received $25,000 from that sale.  He continues to retain the balance of his stock valued at approximately $25,000.

15. Having regard to all of the above matters, I am satisfied that it would be premature to make orders facilitating a re-financing by the husband of the loan on Suburb D at this time, particularly given the uncertainty as to:-

    ·the amount to be borrowed by him;

    ·the terms of any proposed loan; and

    ·his ability to service the payments of the loan.

16. Further, I am satisfied that the provision of the additional finance may jeopardise the wife’s entitlement to a property settlement.  Currently, the husband retains control of the Suburb D property which based on his table of assets and liabilities represents approximately 45 per cent of the parties’ net assets.  The orders sought by him would see the payment to him of $1.2 million and an increase in the liabilities secured over Suburb D by $400,000.  He would control assets valued at approximately $1,940,000 or 76 per cent of the available pool of assets. 

17. In circumstances where I have limited evidence before me as to the parties’ contributions, where there are real issues between them as to the matters to be considered pursuant to s 75(2) of the Act and where that evidence is not able to be tested, I am satisfied that it would be premature to make orders as sought by the husband at this time.

18. It was submitted on behalf of the wife that the only orders I should make are to dismiss all interim applications and to otherwise place the final applications into the list of case awaiting allocation to a judicial docket.  I accept that submission.  The matter has had a number of interim hearing dates, first in the Federal Circuit Court and now in this Court.  Whilst the interim applications remain on foot, the determination of the parties’ competing applications for final orders is delayed; the best outcome from both parties’ perspective would see the conclusion of the interim matters to enable the matter to progress to a trial and final orders.

19. Accordingly, the orders I make are as follows:-

    1.That all extant interim applications be otherwise dismissed.

    2.That all extant applications for final orders be placed in the list of cases awaiting allocation to a judicial docket with priority as and from 10 February 2016.

I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 24 May 2016.

Associate:  Alison Power

Date:  24 May 2016