Bush and Bush and Ors
[2008] FMCAfam 1167
•4 November 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BUSH & BUSH & ORS | [2008] FMCAfam 1167 |
| FAMILY LAW – Property – undefended – where lacking evidence regarding liabilities – liabilities to third party creditors – parties to file further evidence and put third party creditors on notice. |
| Family Law Act 1975, s.79 |
| Ascot Investments v Harper (1981) FLC 91-000 Biltoft & Biltoft (1995) FLC 92-614. Hickey Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 DCT v Kliman & Kliman (2002) FLC 92-113 Zdravkovic v Zdravkovic (1982) FLC 91-220 |
| Applicant: | MS BUSH |
| First Respondent: | MR BUSH |
| Second Respondent: | [A] PTY LTD |
| Third Respondent: | [I] PTY LTD |
| File Number: | SYC 7462 of 2007 |
| Judgment of: | Altobelli FM |
| Hearing date: | 28 August 2008 |
| Date of Last Submission: | 28 August 2008 |
| Delivered at: | Sydney |
| Delivered on: | 4 November 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Winfield |
| Solicitors for the Applicant: | Equity Lawyers |
| First Respondent: | No Appearance |
| Second Respondent: | No Appearance |
| Solicitors for the Third Respondent: | York Family Law |
ORDERS
Within 42 days the wife is to file and serve evidence about the extent of any current liability owed by either of the respondents to Citigroup Pty Ltd and Westpac Banking Corporation.
Within 42 days the wife is to notify Citigroup Pty Ltd and Westpac Banking Corporation of these proceedings and of the orders sought by her insofar as those orders potentially affect their position as creditors of the respondents, and to file and serve an affidavit of service within 49 days of these orders.
The matter be adjourned to 19 December 2008 at 9.30am for mention.
The wife have leave to provide to the creditors referred to above a copy of these orders and these reasons.
Parties have leave to restore on seven days notice.
IT IS NOTED that publication of this judgment under the pseudonym Bush & Bush & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 7462 of 2007
| MS BUSH |
Applicant
And
| MR BUSH |
First Respondent
| [A] PTY LTD |
Second Respondent
| [I] PTY LTD |
Third Respondent
REASONS FOR JUDGMENT
Introduction
The wife’s application for property orders against the first and second respondents was heard by me on an undefended basis on 28 August 2008. On that date I also granted leave to [I] Limited (“[I] Pty Ltd”), a significant creditor of the wife, to intervene in these proceedings. I dealt with the issues existing between the wife and [I] Pty Ltd by making notations to the effect that I would give to all parties seven days notice of my intention to deliver judgment in the property proceedings and would also stay final orders for 14 days after making to enable [I] Pty Ltd and the wife to consider the effect of my proposed orders on them. I heard all the wife’s evidence and reserved my judgment.
During my consideration of this matter, which included a detailed review of the evidence filed by the wife and by the husband during the period when he participated in the proceedings, an important issue came to my attention. The purpose of these reasons is to explain my concerns about the evidence and to thus give to the wife and to [I] Pty Ltd an opportunity to file further evidence if they so desire.
Background
In my final reasons for judgment I will provide the detailed background evidence that is necessary in order to understand this case. For present purposes suffice it to say that these are undefended property proceedings with a regrettably long and indeed sad history. The applicant wife alleges that the husband has failed to properly disclose his true financial affairs to the court. The orders made (including costs orders against him) do create a strong impression about non-disclosure. The wife seems to have been put to enormous cost and inconvenience in bringing the matter to this point. It seems as if the former matrimonial home has been sold by the mortgagee. For all practical purposes, all that is left are assets owned by various third party corporate entities, some of which are owned and controlled exclusively by the husband, and some of which are not so controlled but where he appears to have an interest.
At the hearing the wife asserted that the pool of assets and liabilities comprised the following:
PROPERTY
| Proceeds Property M | Jt | NK | NK |
| NAB [0] | W | $ 245.06 | |
| Household contents | W | $ 2,000.00 | |
| Household contents | H | NK | |
| Property R | H | $350,000.00 | |
| [A] Pty Ltd | H | $200,000.00 | |
| [A] Pty Ltd motor vehicles | Co | $ 26,582.95 | |
| [S] Pty Ltd | H | $ 36,000.00 | |
| Air Conditioning Hospital | H | NK | |
| Costs orders against Husband | W | $ 30,000.00E |
LIABILITIES
| Mortgage on Property R | Co | $220,000.00E |
| American Express | W | $ 300.00 |
| CBA Mastercard | W | $ 3,827.00 |
| Costs orders in favour of Wife | H | $ 30,000.00 |
| [I] Pty Ltd litigation lending | $141,427.00 |
FINANCIAL RESOURCES
| [X] Superannuation | W | $ 1,500.00 |
| Husband’s superannuation | H | NK |
I note that there is evidence of a single joint expert that goes a long way towards enabling me to make findings about the values of the major items of property referred to above. My concerns, however, relate to whether and/or to what extent evidence about all liabilities has been presented to the court.
The orders sought by the wife at hearing are as follows:
6. The First Respondent forthwith vacate the property situate at and known as Property R and he thereafter remain away there from and grant to the Applicant Wife the quiet use and enjoyment thereof.
7. [A] Pty Limited (ACN [1]) be joined as a party to these proceedings.
8. The Second Respondent [A] Pty Ltd forthwith transfer to the First Respondent the property situate at and known as Property R, for transfer to the Wife, this being deemed an appropriate sum to satisfy in part the outstanding matters between the parties to these proceedings and:
8.1 The Court note that [A] Pty Ltd is a party to these proceedings;
8.2 This order is binding on all parties including the Second Respondent.
9. Simultaneously with his receipt of transfer of the Property R property from the Second Respondent, the First Respondent transfer to the Applicant Wife the whole of his right, title and interest in the Property R property subject to the existing mortgage.
10. In the alternative to Orders 8 and 9 as sought herein, the First respondent pay to the Applicant Wife the sum of $110,000.00 within 28 days of these Orders and the said sum be charged against the Property R property and the Applicant Wife be permitted to lodge a caveat on the title of the Property R property, to be withdrawn at such time by the Applicant Wife upon payment of the said sum from the First Respondent.
11. Pursuant to section 117 of the Child Support (Assessment) Act 1987, there be a departure from the administrative assessment of child support payable from the First Respondent to the Applicant Wife for the children [Y] born in 2000 and [Z] born in 2002 as follows:
11.1 For the period 26 September 2007 top 16 November 2020 the annual rate of child support be set at $26,000.00 and subject to 11.2 below, this amount to be apportioned equally between the children;
11.2 The annual rate of child support be increased each year in accordance with variation in the Consumer Price Index.
12. The First respondent forthwith do all acts and things and sign all such documents as are necessary so as to:
12.1 cause the Second Respondent to transfer to the Applicant Wife all its right, title and interest in the Holden Commodore motor vehicle registration number [Y] and any other motor vehicles either owned or leased by the Companies; and
12.2 cause the Companies to assign to the Applicant Wife all policies of insurance in respect of those motor vehicles.
13. The Applicant Wife retain the furniture, furnishings and personal belongings in her possession.
14. The First Respondent pay the Applicant Wife the sum of $800.00 per week by way of spousal maintenance.
15. In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these orders, the Registrar or Deputy Registrar of the Federal Magistrates Court of Australia at Sydney be appointed pursuant to section 106A of the Family Law Act to execute the said deed or instrument in the name of that party and do all acts and things necessary to give validity and operation to the Deed or instrument.
16. Within 28 days of the orders, the First Respondent pay to the Applicant Wife a sum of $40,000.00 from bank accounts held by the First Respondent and/or under his control.
The orders sought clearly have an impact on [A] Pty Ltd (“the company”), the second respondent, and the evidence leads me to conclude that for all practical purposes the husband controls this company as sole director and sole shareholder. I am more than satisfied that both the husband personally, and the company are on notice of the proceedings and have been duly served with all relevant documents. The property at Property R is owned by the company. It is the impact of these orders on the company’s creditors that causes me concern, and I have no evidence to indicate that those creditors have been notified of these proceedings and of the orders sought.
Applicable Law
It is self-evident that before a court can exercise its discretion under s.79 it must first determine the value of the property of the parties, which means considering assets and liabilities: Hickey Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143, DCT v Kliman & Kliman (2002) FLC 92-113. Until the enactment of Part VIIIAA of the Act in 2003 the position of creditors in part depended on whether they were secured or unsecured. Irrespective of this, the position of creditors has always been recognised and the court has either protected or over-ridden their rights depending on the facts of the case e.g. Ascot Investments v Harper (1981) FLC 91-000; Biltoft & Biltoft (1995) FLC 92-614. Even if a creditor has not intervened in proceedings, the court still has power to order that its debt be discharged: Zdravkovic v Zdravkovic (1982) FLC 91-220. Central to all of this is the principle that the court must have evidence of debts and that creditors must be given notice of orders that might have an adverse impact on their interests as creditors.
The wife asserts that the only relevant third party liability is the mortgage serviced over the Property R property. She asserts that the liability serviced by this mortgage is about $220,000.00. Without the equity in this property the wife has very poor prospects of actually realising any tangible outcome from the orders she seeks. The court needs evidence of the precise liability secured over the Property R property. If, for example, there is no equity in the Property R property, some of the orders proposed by her are futile, and it could not be “just and equitable” to make the orders sought: s.79(2). Even in her alternate order (Order 10) she seeks a charge over the Property R property to secure the order for the cash payment she requests. The court would be reluctant to grant such a charge if there is no equity in the said property.
The concerns I have go further than just ascertaining the precise extent of the relevant liabilities. The mortgagee over Property R (Citigroup Pty Ltd) will need to be given notice of these proceedings and of the orders sought. Even if there is equity in the property, the orders sought by the wife have a potentially significant impact on the mortgagee. Even if it could be said that their security is unaffected by a change in ownership of their security property, their existing contractual arrangement is dramatically reconfigured in that the wife is substituted as mortgagor/borrower (on one possible scenario) or the existing mortgagor/borrower loses occupation of the security property (on another possible scenario). Either event would almost inevitably trigger a default of the bank’s financial and legal agreement with the respondents in this case. In my opinion, that is a significant enough impact to require that they be notified of these proceedings and of the orders sought.
Moreover, Westpac Banking Corporation, which holds two fixed and floating charges over the assets of the company, will also need to be notified for the same reasons as set out above. The evidence indicates that ASIC charge numbers [4] and [5] were created on 7 February 2007 and 9 February 2007 respectively, and have not yet been discharged. The existence of these securities probably indicate liabilities owed to a creditor which might also be affected by the orders sought by the wife, e.g. orders 12 and 16.
Finally, the evidence indicates that the Commodore motor vehicle referred to in proposed order 12 which is owned by the company is the subject of a Commercial Hire Purchase Agreement which names Westpac Banking Corporation as owner of the said vehicle. On this basis also, Westpac needs to given notice of the proceedings and of the orders sought.
Giving notice to these creditors gives them the opportunity to intervene if they so desire. Of course they might choose not to, and that is a matter that the court will take into account in deciding whether to make the orders or not. But even if the orders are made in favour of the applicant, she must understand that the orders only bind the parties to these proceedings. Thus if certain creditors are not joined (e.g. pursuant to Part VIIIAA), they are free to act as they please, indifferent to the court’s order if they so desire. The creditors legal obligations are towards the respondents in this case, and not to the applicant.
The wife has her own creditor to deal with – [I] Pty Ltd. It has sought an order that it be paid the amount owed to it prior to the wife receiving any entitlement or payment pursuant to these orders. That is a matter to be dealt with at another time provided, of course, the wife does in fact receive anything pursuant to any order the court makes.
Conclusion
Accordingly I will give the wife the an opportunity to provide further evidence about:
a)The extent of the liabilities owed by either of the respondents to Citigroup Pty Ltd and Westpac Banking Corporation, such evidence to be filed and served within 42 days; and
b)Notification to the said creditors of these proceedings and of the orders sought insofar as it potentially affects their position as creditors, such evidence to be filed and served within 49 days; and
c)I will adjourn this matter before me on 19 December 2008 to give any of these creditors the opportunity to be heard, and to hear such further submissions from the Applicant as she considers appropriate. I will authorise the wife to provide any creditor with a copy of these reasons and orders in the same manner as they were previously served with documents in these proceedings. I will grant leave to restore before me on seven days notice.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate:
Date: