BUNCE & SQUIRRELL

[2013] FamCA 939

FAMILY COURT OF AUSTRALIA

BUNCE & SQUIRRELL [2013] FamCA 939

FAMILY LAW– PROPERTY –INTERIM ORDERS – Where the wife sought orders for the sale of the former matrimonial home. Where the wife sought orders for the reimbursement of funds removed by the husband’s solicitor from a trust fund held by the husband’s solicitor on behalf of the parties – Where the wife sought an order for litigation funding pursuant to s 117 and/or s74 Family Law Act 1975 (Cth) –Where the wife sought injunctions restraining the husband from dealing with property.

Family Law Act 1975 (Cth)

Waugh and Waugh (2000) FLC 93-052

APPLICANT: Ms Bunce

RESPONDENT: Mr Squirrell

INTERVENOR:

INDEPENDENT CHILDREN’S LAWYER:

FILE NUMBER: DGC 175 of 2012

DATE DELIVERED:

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 15 November 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Smallwood

SOLICITOR FOR THE APPLICANT: Portelli & Co

COUNSEL FOR THE RESPONDENT: Mr Weil

SOLICITOR FOR THE RESPONDENT: GPZ Legal

Orders

1. That forthwith the husband and the wife do all such acts and things as may be required to transfer monies held upon trust for them by GPZ Legal into an interest bearing account in their joint names, such account to be held upon trust for them by their lawyers, GPZ Legal and F Family Lawyers on behalf of the parties until further order or agreement in writing by the parties.

2. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

3. That all extant interim applications be otherwise dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Bunce & Squirrell 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

FILE NUMBER: DGC 175 of 2012

Ms Bunce

Applicant

And

Mr Squirrell

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. Before me on 15 November 2013 in a Judicial Duty List was the Application in a Case filed on behalf of the wife on 25 September 2013.  That application sought orders for:-

   ·Sole use and occupation of the former matrimonial home;

   ·Sale of properties at B Street, C Town and D Street, Suburb E;

   ·That the husband’s solicitor re-pay into monies held on trust for the parties, sums paid to him on account of legal fees expended in relation to commercial proceedings;

   ·A litigation funding order in the sum of $30,000; and

   ·Injunctions.

2. The husband opposed that application.  Ultimately some of the issues were resolved on the day by consent and I made orders by consent disposing of many of the above identified issues.

3. The outstanding matters requiring determination relate to:-

   ·Whether there should be an order for sale of the C Town property;

   ·Whether the husband’s solicitor should reimburse monies paid to him on account of legal fees to the funds held upon trust for the parties;

   ·Injunctions; and

   ·Litigation funding order.

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

5. The matter was conducted on the papers.  Each party relied upon the material referred to below and their counsel’s oral submissions.  The onus of proof lies with the applicant, in this case the wife, and the standard of proof is the balance of probabilities.  However, given the nature of the hearing, contentious facts cannot be determined without the evidence being properly tested.  Accordingly, in determining the matter, I have relied upon only those facts which are agreed or not in issue.

MATERIAL RELIED UPON 

1. The wife relied upon the following material in support of her application:-

   ·Application in a Case filed 25 September 2013;

   ·Affidavit of the wife sworn 19 September 2013 and filed 25 September 2013;

   ·Affidavit of the wife sworn and filed 1 November 2013;

   ·Affidavit of Mr F sworn and filed 1 November 2013; and

   ·Affidavit of the wife sworn 14 November 2013 and filed 15 November 2013.

2. The husband relied upon the following material:-

   ·Affidavit of the husband sworn 14 November 2013 and filed 15 November 2013; and

   ·Affidavit of Mr G sworn 14 November 2013 and filed 15 November 2013.

ORDERS SOUGHT

1. The interim orders sought by the wife were as follows:-

   ·That each of the parties do all things required to enable the property at B Street, C Town be forthwith placed on the market for sale by public auction or on such terms and conditions as agreed between the parties and if no agreement within 21 days in accordance with the directions fixed by the President of the Real Estate Institute of Victoria.

   ·That the parties do all things and sign all documents required to jointly instruct estate agents for the sale of the C Town property and if the estate agent or the terms of sale are not agreed within 14 days each provide a list of two agents and request the President of the Real Estate Institute of Victoria to choose an agent to conduct the sale of the property to be sold on such terms as recommended by the agent if not agreed in writing by the parties.

   ·That each party be entitled to receive copies of all documents from the nominated agents and details of all negotiations for sale in respect of the sale of the property.

   ·That the husband and/or his solicitor Mr G immediately re-pay into trust monies previously received by the firm GPZ Legal on behalf of the husband and the wife the sum of $53,433.86.

   ·That the balance then held in the trust account of GPZ Legal on behalf of the parties be retained in an interest-bearing trust deposit by the firm of F Family Lawyers, solicitors for the wife on behalf of the parties until further order or agreement in writing by the parties.

   ·That by way of interim lump sum maintenance or security for costs or both, within 14 days the wife be permitted to draw down a sum to be applied to her legal and accounting fees in a sum of $30,000 from the monies held in the trust account of the firm GPZ Legal.

   ·That the husband be restrained by himself, his servants or agents from disposing of, dealing with (including leasing out), encumbering or diminishing the value of all personal or real property in which he has an equitable interest, save for the purposes of meeting his reasonable day-to-day living expenses.

SHORT HISTORY

1. The wife was born in 1953 and is aged 60 years.  She is employed in retail/sales on a part-time basis.  The wife resides at the former matrimonial home at B Street, C Town (“C Town”). 

2. The husband was born in 1951 and is aged 62 years.  He is engaged in full-time employment as a building, marketing and design consultant.

3. The husband and the wife commenced cohabitation in 1983 and were married on 25 October 1985.  Separation occurred in or about June 2011.  The parties have three adult children who live independently. 

4. Until approximately mid-March 2012 the husband operated a building business through a number of corporate entities.  Those entities were collectively known as “H Group”.  The husband was the sole shareholder and director of each of the companies that were members of that group, save for H Group Holdings Pty Ltd and ACN ….

5. In addition to the former matrimonial home at C Town, the parties own investment properties at Suburb E described by the wife as “the Penthouse” and “the Car Park”.  Included in the orders I have made by consent at the conclusion of this interim hearing are orders that the Penthouse and the Car Park be sold.

6. The parties had loans from the Commonwealth Bank in the order of $1.8 million secured over the titles to the Penthouse, the Car Park and C Town.  The parties fell behind in loan repayments and interest due in respect of those loans from the Commonwealth Bank.   As a consequence the Commonwealth Bank issued a writ in the Supreme Court of Victoria against both the husband and the wife seeking orders for the sale of the three properties.

7. The husband failed to file a notice of appearance or a defence in respect of those Supreme Court proceedings and the Commonwealth Bank entered judgment by default against the husband.  Following the entering of judgment, the husband made application to set that order aside.  The husband’s application was successful.

8. The parties agreed to refinance the loans with the Commonwealth Bank in order to avoid a “fire sale” of the three properties.  To that end, the husband and the wife borrowed the sum of $1.185 million from I Pty Ltd and a further $760,000 from J Pty Ltd (“the Loans”). 

9. Of the amounts borrowed by the husband and the wife, the wife alleges that the sum of $189,275.24 was set aside for the purpose of :-

   ·Carrying out maintenance and urgent repairs to the C Town property; and

   ·To have sufficient funds in hand to be able to meet interest payments in relation to the loans secured over the properties as and when they fall due.

10. The husband admits that those funds were to be applied towards interest payments and does not respond to the allegation with respect to its application to maintenance and repairs at C Town.

11. Settlement of the refinance occurred on 22 July 2013.  Upon settlement, the sum of $189,275.24 was paid to the husband’s solicitor, GPZ Legal (“the Trust Funds”) to be held by them upon trust for the parties. 

12. On 8 August 2013 the husband’s solicitor drew down from the Trust Funds the sum of $53,483.36 to meet legal costs incurred by the husband with GPZ Legal in respect of the commercial dispute.  The balance remaining after deduction of that sum was $133,308.26.  The wife alleges that sum was drawn down from the Trust Funds without her knowledge or consent.

13. The wife alleges at paragraph 17 of her affidavit sworn 19 September 2013 that it was agreed that the Trust Funds would remain in a trust account with the funds only to be disbursed upon written agreement by both parties’ lawyers.  The husband does not respond to that allegation and refers to and relies upon the affidavit of his solicitor, Mr G.  In his affidavit sworn 14 November 2013 Mr G does not respond to that specific allegation.  Indeed, at paragraph 10 of that affidavit Mr G deposes:-

    At no time did I agree with [Mr F] that a portion of the funds borrowed by the parties would be applied towards costs.  These costs were necessarily incurred when preserving assets belonging to the parties and enhancing the asset pool.   

14. At paragraph 14 of his affidavit Mr G deposes:-

    I was authorised by my client to withdraw the funds from our trust account and to apply them towards costs.

15. Significantly, Mr G is silent as to whether he had the authority of the wife (who was a joint borrower of the funds) to withdraw funds and apply them towards his costs. 

16. I am satisfied on the basis of the evidence of the husband and his lawyer that the wife’s authority was not obtained prior to the withdrawal of funds to pay Mr G’s costs.  I am also satisfied that in the absence of a denial of the specific allegation of the wife as to the requirement that the funds only be disbursed upon the prior written agreement of both parties, that it is likely there was an agreement between the parties’ respective legal practitioners to that effect.  Even were there no such agreement between the practitioners, in circumstances where a legal practitioner is holding moneys upon trust for both parties, good practice would suggest that such consent should first be obtained before a disbursement of funds.

17. The wife deposes that in order to service the interest payments on the Loans, the sum of $43,762.50 must be paid each quarter.  Further, the wife alleges that up to $55,000 will be required in order to prepare the C Town property for sale.  Accordingly, she is critical of the husband for authorising the payment to his lawyers from the Trust Funds.  It is in those circumstances that she seeks the repayment of the monies drawn down by Mr G to the Trust Funds.

18. Further, when the first quarterly instalment of interest on the Loans was due on 22 October 2013 that sum was not paid.  The wife deposes at paragraph 5 of her affidavit sworn 1 November 2013 that on 31 October 2013 she received a letter of demand from the mortgagee informing her that the interest had not been paid on 22 October 2013 and that the sum of $14,485.00 was now due.  In his affidavit sworn 14 November 2013 the husband admits at paragraph 10 that he forgot to make the payment or to instruct his solicitor to make the payment on his behalf.  It is surprising that such an oversight occurred given the agreed principal purpose of the Trust Funds was to service the interest on the Loans.  As a consequence of the parties’ failure to pay interest in accordance with the terms of the loan, the parties incurred interest and penalties of approximately $5,597.50.

SALE OF C TOWN

1. On the day of the hearing I made orders by consent for the sale of the Penthouse and the Car Park.  The wife also seeks an order for the sale of C Town.

2. It was submitted on behalf of the wife that the sale of C Town was necessary to relieve the parties from their substantial liabilities.  It was submitted that the parties currently have loans of approximately $1.8 million secured over the titles to the Penthouse, the Car Park and C Town.  As detailed above, the parties have refinanced in order to avoid a mortgagee’s sale by the Commonwealth Bank.  From the funds borrowed under the refinance arrangements, the parties have allocated part of the Trust Funds to service the interest on the Loans.  The Trust Funds will be exhausted within 12 months.

3. The husband opposes the order for sale with respect to C Town.  Whilst the husband does not state with precision the final orders sought by him in his Response to Initiating Application filed 22 June 2012, counsel for the husband submitted that his client may wish to retain C Town as part of his final property settlement.

4. At this stage the extent of the parties’ property interests is uncertain.  Many of the entities related to the husband’s business are in liquidation and there are pending proceedings involving those entities in the Supreme Court of Victoria.  It was submitted on behalf of both parties that until those proceedings are concluded, the parties will not be in a position to assess the value of their property interests.   

5. It was common ground between the parties that they hope to sell the Penthouse and the Car Park for $2 million. Were a sale achieved at that figure, the parties’ outstanding mortgage liabilities would be extinguished leaving C Town unencumbered.  The C Town property is valued at well in excess of $1.5 million.

6. Further, it was common ground that significant repairs need to be undertaken at C Town before it can be listed for sale.  It was the wife’s case that part of the Trust Funds should be applied towards those repairs.

7. Counsel for the wife did not identify the source of power upon which she relied in support of the application for sale. Section 114 of the Family Law Act 1975 (Cth) (“the Act”) provides an injunctive power which enables the Court to make such orders as it considers proper for the protection of property. Both the wife’s affidavits and the submissions of her counsel were directed towards the need to protect the property from creditors.

8. Having regard to the above matters, I do not consider that it would be proper to exercise the injunctive powers pursuant to s 114 at this time. I am satisfied that it would be premature to make an order for the sale of C Town in circumstances where:-

   (a)   it is conceded by the wife that the proceeds of sale of the Penthouse and the Car Park may discharge the whole of the mortgage liability secured over C Town;

   (b)  significant repairs are required at C Town before it can be listed for sale; and

   (c)  the husband may seek to retain that property as part of his final property settlement.

THE TRUST FUND

1. The wife seeks orders that the husband’s solicitor reimburse the Trust Funds with monies drawn by his firm on account of legal costs in relation to the commercial proceedings.  Further, she seeks orders that the Trust Funds be retained by her solicitors in an interest bearing account.

2. The history of the husband’s solicitor’s management of the Trust Funds is detailed above.

3. As detailed above, I am satisfied that the husband’s solicitor drew down payment for the husband’s outstanding legal costs without the wife’s prior knowledge or consent.

4. The wife is also critical of the quantum of costs drawn down and seeks a repayment by the solicitor of that sum. Ostensibly that is an application pursuant to s 106B of the Act. I am unable to make findings with respect to those issues. Ultimately it is a matter for the trial judge to determine whether the quantum of costs paid is capable of challenge and further whether such costs as are payable should be met by the husband alone or the parties jointly.

5. The order sought by the wife as to the future management of the Trust Funds is an order for the protection of property pursuant to s 114.

6. Having regard to the history of the management of the Trust Funds, both in terms of the failure of the husband to give the wife prior notice as to how the Trust Funds were to be applied and also in terms of the failure to meet agreed interest payments as and when they fall due, I am satisfied that it is appropriate for orders to be made as to the future control and management of the Trust Funds.

7. Accordingly, I will make orders that the Trust Funds be invested in an interest bearing account in the names of the husband and the wife, to be held upon trust for them by the solicitors for both the husband and the wife.

LUMP SUM MAINTENANCE/SECURITY FOR COSTS

1. The wife seeks a payment from the husband in the sum of $30,000 by way of litigation funding order. She relies upon s 117 and/or s 74 of the Act as the source of power for making that order. The husband opposes that application.

2. At the commencement of the hearing, it was conceded by the wife’s counsel that in circumstances where there are significant financial pressures on the parties in terms of their ability to service interest payable under the Loans and to meet the costs of necessary repairs to C Town, the payment of such amount to the wife at this time was “not a priority”.

3. At this stage it would appear premature to contemplate the making of such an order.  Due to the ongoing commercial disputes related to the husband’s business, the future conduct of these proceedings is uncertain. 

4. There is no current evidence as to the parties’ financial circumstances.  Neither party is able to provide a current estimate as to the value of their interests in property and superannuation, nor have they recently filed a Financial Statement.  The wife’s Financial Statement was sworn 20 January 2012 and in that document she then estimated the value of her assets to be $3,955,000 and her liabilities to be $618,000.  The husband’s Financial Statement was sworn on 20 June 2012.  In that document he estimated his assets to be valued at $3,178,575 and his liabilities to be $16,190,000.  Similarly, neither party has provided current evidence as to their income and expenses.

5. No submissions were made by counsel for the wife in support of either a costs application or lump sum maintenance.  Save for the affidavit of Mr F, the wife led no evidence in support of those applications.  It follows in those circumstances that I could not be satisfied that it is appropriate to make orders with respect to costs or lump sum maintenance. 

6. There is no current evidence as to the parties’ current financial circumstances. Therefore, I am not in a position to assess the merits of the wife’s application either pursuant to s 117 or s 74 of the Act. Accordingly, that application must fail.

PROPERTY INJUNCTIONS

1. At paragraph 11 of her application the wife sought property injunctions restraining the husband from dealing with his real property, entities, the Trust Funds and monies standing to his credit in any bank or financial institution.  It was conceded by counsel for the wife at the commencement of her submissions that that application, as drawn, was too wide and that the husband should have the ability to access his accounts to meet his day-to-day living expenses.

2. In support of the application the wife relies upon the manner in which the husband has dealt with the Trust Funds, as detailed above.

3. Again, the wife relies upon s 114 of the Act which provides an injunctive power enabling the Court to make orders for the protection of property.

4. The orders sought by the wife are wide and far-reaching.  Whilst there is evidence as to the husband’s dealings with the Trust Funds, the wife does not allege any other behaviour of the husband that would justify the making of such far-reaching orders.  The orders I will make as to the future control of the Trust Funds will address the wife’s concerns with respect to that interest.

5. The Full Court considered the circumstances where such orders should be made in the decision of Waugh and Waugh (2000) FLC 93-052. There, the Full Court held that in order to impose an injunction on a party, the court must be satisfied that such injunction was necessary and that the risk of disposal of property in order to defeat a judgment is evident.

6. In this matter there is no evidence before the Court of such intent on the part of the husband.  Further, it is evident from the material before the Court that:-

   (a)The wife is a joint owner of the C Town property; and

   (b)Orders have been made by consent ensuring that the wife is:-

   oinformed of the progress of the Supreme Court litigation; and

   oinvolved in the sale process for the Penthouse and the Car Park.

7. I will make orders ensuring that the Trust Funds are controlled jointly by the parties’ solicitors.

8. Having regard to the above circumstances, I am satisfied that the orders sought by the wife are not necessary.

9. Accordingly, the orders that I will make are as follows:-

THE ORDERS

1. That forthwith the husband and the wife do all such acts and things as may be required to transfer monies held upon trust for them by GPZ Legal into an interest bearing account in their joint names, such account to be held upon trust for them by their lawyers, GPZ Legal and F Family Lawyers on behalf of the parties until further order or agreement in writing by the parties.

2. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

3. That all extant interim applications be otherwise dismissed.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 3 December 2013

Associate: 

Date:  3 December 2013