Cai and Hsueh

[2017] FamCA 671

FAMILY COURT OF AUSTRALIA

CAI & HSUEH [2017] FamCA 671

FAMILY LAW – ENFORCEMENT OF ORDERS – Where parties entered into binding financial agreement – Where disagreement as to effect of the financial agreement – Where issue as to agreed funds owing to wife by the husband and payment of same – Where otherwise appropriate to make orders to give effect the parties’ common intention.

Family Law Act 1975 (Cth) s 90KA
Judiciary Act 1903 (Cth) s 32

Cai & Hsueh [2016] FamCA 1081

APPLICANT: Ms Cai

RESPONDENT: Mr Hsueh

INDEPENDENT CHILDREN’S LAWYER: Ms Reid

FILE NUMBER: PAC 6235 of 2015

DATE DELIVERED: 1 September 2017

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 19 July 2017

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Shepherd of Shepherds The Family Law Specialists

RESPONDENT – SELF-REPRESENTED LITIGANT: In person

SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: Ms Reid of JPM Legal

Orders

1. That the wife have a charge to the value of $97,500.00 over the husband’s share of the net proceeds of sale of the properties at H Street, Suburb I and Lots 1 and 2/J Street, Suburb K with such charge to be paid out on settlement of the sales.

2. That the parties do all necessary things and sign all necessary documents so as to procure that from the proceeds of sale of the properties at H Street, Suburb I and Lots 1 and 2/J Street, Suburb K, National Australia Bank (NAB) mortgage being NAB account Number …98 be paid out and be discharged.

3. That the parties do all necessary things and sign all necessary documents so as to procure upon sale of the properties at H Street, Suburb I and Lots 1 and 2/J Street, Suburb K a release of the said properties from NAB mortgage being account number …47 to the effect that the said mortgage (and the balance then outstanding) will remain secured over the wife’s property at B Street, Suburb C.

4. That, otherwise, the wife’s Application filed 13 March 2017 is dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

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

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 6235  of 2015

Ms Cai

Applicant

And

Mr Hsueh

Respondent

REASONS FOR JUDGMENT

1. On 13 March 2017 the applicant wife filed an application seeking orders arising from a binding financial agreement (BFA) dated 28 October 2006 entered into between herself and the husband.

2. In summary, the wife’s application sought orders as follows:

   (1)that the properties situated at H Street, Suburb I and Lots 1 and 2, 3 J Street, Suburb K be sold and to facilitate such sales:

   (a)the husband and wife agree as to the appointment of a real estate agent;

   (b)the husband and wife agree upon a conveyancer or solicitor to have carriage of the sale;

   (c)that an auction year be appointed as agreed, that the sale of the Suburb K properties by way of auction take place within three months from date of orders and the sale of the Suburb I property by auction take place within five months from the date of orders;

   (d)that the reserve price absent agreement between the parties be as proposed by the appointed estate agent;

   (e)that the husband and wife each pay one half of auction expenses;

   (f)that in the event that the properties are not sold at auction or within 14 days of the auction sale then the properties be resubmitted for further sale by public auction;

   (2)that upon completion of the property sales the proceeds of sale be applied in the following manner:

   (a)in payment of costs, commissions and expenses in relation to the sales and payment of any outstanding Council and water rates and other levies outstanding at the time of sale;

   (b)to discharge any debts affecting the Suburb I and Suburb K properties;

   (c)payment of 50 per cent of the balance to the wife;

   (d)in payment to the wife pursuant to clause 4.9 of the agreement and order 5 of 19 December 2016 the amount of $195,000.00;

   (e)the balance thereafter to be held in trust by the conveyancer/solicitor to pay the applicant wife’s tax liabilities pursuant to clause 6 of the agreement;

   (f)that within two weeks from the settlement of the sales of the real estate properties the parties appointed a registered tax agent to calculate Goods and Services Tax and Capital Gains Tax which is required to be reported to the Australian Taxation Office with Capital Gains Tax income attributable to the applicant wife to be the last item added to the applicant wife’s taxable income for the relevant financial year and that Goods and Services Tax payable be remitted to the Australian Taxation Office and that Capital Gains Tax payable by the wife be paid to her;

   (g)that any balance then remaining be paid to the husband;

   (h)that the balances of all joint bank accounts of the parties be divided equally between them.

3. A previous application in relation to the BFA was the subject of judgment and orders delivered on 19 December 2016: Cai & Hsueh [2016] FamCA 1081.

4. Section 90KA of the Family Law Act 1975 (Cth) provides for the Court to determine the question whether a financial agreement or a termination agreement is valid, enforceable or effective in the following terms:

   The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:

   a)subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and

   b)has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and

   c)in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.

5. Section 32 of the Judiciary Act 1903 (Cth) relevantly provides:

   The High Court in the exercise of its original jurisdiction in any cause or matter pending before it, whether originated in the High Court or removed into it from another Court, shall have power to grant, and shall grant, either absolutely or on such terms and conditions as are just, all such remedies whatsoever as any of the parties thereto are entitled to in respect of any legal or equitable claim properly brought forward by them respectively in the cause or matter; so that as far as possible all matters in controversy between the parties regarding the cause of action, or arising out of or connected with the cause of action, may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters may be avoided.

6. As can be seen, the scope of this Court’s power is wide-ranging as to the quelling of disputes arising from BFAs.

7. Orders made on 19 December 2016 were relevantly as follows:

   (1)A Declaration that [Ms Cai] (“the wife”) does not hold a 50 per cent interest in the real estate property at [B Street, Suburb C] in trust for [Mr Hsueh] (“the husband”).

   (2)A Declaration that the voluntary redundancy payment received by the wife in March 2012 is not a payment provided for in clause 1.1 (g) (ii) of the Financial Agreement between the parties dated 28 October 2006 being a payment by way of:

   “gifts, inheritances or lump sum compensation payments and damages awards for personal injury”.

   (3)…

   (4)…

   That by Consent:

   (5)That pursuant to clause 4.9(d) of the Financial Agreement between the parties dated 28 October 2006 the sum of $195,000.00 is payable by the husband to the wife.

8. The husband appealed those orders. On 7 August 2017 the Appeal was resolved by consent with the amount set out in (5) above varied to the sum of $97,500.00.

The wife’s application

1. The wife relied upon her affidavits filed 13 March 2017 and 13 July 2017.

2. The parties, who had lived separately and apart under the one roof in a jointly owned property at Suburb I, finally separated in February 2016 with the husband moving to a property owned by the wife at B Street, Suburb C.

3. The jointly owned property of the parties comprises:

   a)The property at H Street, Suburb I;

   b)The properties Lots 1 and 2 J Street, Suburb K comprising a duplex development.

4. The properties are subject to mortgage.

5. The BFA provides as to shared property. The relevant factual background as to same is considered in the previous judgment, Cai & Hsueh (supra):

   16.On 28 October 2006 the parties entered into the subject Financial Agreement.

   17.As at the date of the Financial Agreement the wife had the following assets:

   a)the Suburb C property having a value of about $370,000.00 subject to a  mortgage of about $350,000.00;

   b)superannuation entitlements of about $73,000.00;

   c)CBA term deposit offset account (9099) with a balance of $54,000.00; and

   d)CBA offset MISA account (6403) with a balance of about $152,000.00.

   18.In November 2006 the parties contracted to purchase a property at H Street, Suburb I in joint names. The purchase price of $643,000.00 was funded by way of mortgage borrowing of $472,150.00. The balance of purchase price was provided by the wife and the husband from their respective funds at that time.

   19.Subsequent to purchase the parties resided in that property.

   20.After the purchase the wife retained cash funds in her various accounts totalling about $83,000.00. She subsequently transferred funds totalling $83,790.00 by way of loan from her accounts to a joint mortgage offset MISA CBA account that was linked to the parties Suburb I property mortgage. The transfers were as follows:

   •8 December 2006  $  25,000.00

   •2 January 2007  $    4,590.00

   •5 January 2007  $  54,200.00

   These deposits from the wife’s funds are acknowledged by the husband.

   21.The wife continued to meet mortgage payments on the Suburb C property by way of funds withdrawn from the Suburb I CBA MISA offset account that she had advanced to that account by way of loan. The wife’s withdrawals from the CBA MISA offset account were paid into her Suburb C CBA mortgage until that facility was refinanced with a NAB mortgage in May 2011 of $340,395.00.

   22.Funds were transferred to the mortgage from the joint MISA account in the period from late 2006 to refinance the facility were in total $115,520.00.

   23.The NAB refinance by the wife in May 2011 was secured over the Suburb C property that remained in her sole name. Payments to this mortgage account were transferred from the parties’ joint NAB account (…37) each month in the sum of $2,252.59. Payments, until refinance in January 2014, were about $69,812.00. During this time rental payments received into the joint account were about $57,000.

   24.In January 2014 the wife again refinanced her Suburb C property with the CBA discharging the NAB mortgage and borrowing $325,000.00 by way of an interest only facility. Interest payments were debited to the parties’ joint NAB account (…37). The husband acknowledges that the wife’s rental income has met the interest payments on this loan.

   25….

   26.In November 2013 the parties jointly purchased at auction a further property at [3 J Street, Suburb K]. The property was purchased for $825,000.00. Settlement of the purchase was effected in January 2014 with the parties’ mortgage obligations over the [Suburb I] property and the wife’s mortgage obligation over her [Suburb C] property being refinanced at that time in the sum of $325,000.00 being an interest only facility for five years and thereafter principal and interest payments for a period of 25 years.

   27.At the time of purchase of the [Suburb K] property the parties borrowed a further sum of $90,000.00 by way of an interest only facility for five years and thereafter principal and interest payments for 25 years with the sole security for the borrowing being the wife’s property at [Suburb C]. These additional funds, it appears, were applied to a duplex development that the parties undertook on the [Suburb K] property after purchase.

6. The funds from the $90,000.00 borrowing were paid into an offset account and later applied to the cost of the duplex development.

7. In April 2015 the parties refinanced the two CBA Suburb C loans with the NAB. There was no additional borrowing. Although the wife is the owner of the Suburb C property, the two loans were negotiated in the joint names of the parties and the lender took all of the parties’ properties, Suburb C, Suburb I and Suburb K, as security.

8. The wife, it appears, now complains that agreement cannot be reached on the mechanism for sale of the parties’ “shared property” as provided for in the BFA.

The husband’s response

1. The husband relied on his affidavit filed 27 March 2017. He, otherwise, seeks that the wife’s application be dismissed.

2. The husband correctly asserts that he is still a joint borrower with the wife in relation to the mortgages secured over her Suburb C property.

The BFA: (Annexure “A” to the Wife’s affidavit 13 March 2017)

1. The BFA as to shared property relevantly, in summary, provides:

   a)That shared property will be divided equally (Cl 4.10);

   b)In default of agreement as to division of shared property (Cl 4.11), the parties will endeavour to reach agreement as to sale and in default of agreement as to:

   i)agreement as to value for a valuer to be appointed;

   ii)agreement as to the quantum of debt “secured against the property” to be identified by up to date statements from the financial institution;

   iii)agreement as to the “best available means” for sale for a legal practitioner sale appointed by the President of the Law Society of NSW to act on the sale, determine the method of sale, timing of the sale and “appropriate documentation” for sale and the proceeds of sale to be paid equally.  

2. A solicitor has been duly appointed.

3. The agreement also provides for any liability for “stamp duty and tax (including Capital Gains Tax and Goods and Services Tax)” to be paid by the husband. The nature of any such liability will not be known until after sale and the lodgement of the relevant financial year tax return by the wife and the issue of any assessment relating to any assessable Capital Gains Tax or Goods and Services Tax liability, if any.

4. The reference in the BFA to “quantum” of debt seems an acknowledgment that there may be more significant borrowings secured by the properties (such as the Suburb C property) that would not be required to be discharged on sale. 

5. The husband in submissions concedes that of the two loans secured against the Suburb C property “only the $90,000.00 is secured for the Suburb K (property)”. His complaint seems to be that after sale of the shared properties he will still be a joint borrower in relation to the primary loan secured over Suburb C although the wife is the sole registered proprietor.

6. It may be that after completion of the sales (and payout of the $90,000.00 loan) he may make application to the NAB to be released from his liability under the remaining contract for loan.

The application

1. The wife’s application somewhat curiously seeks orders as to implementation of the sales of the “shared properties”.

2. Yet, absent agreement, the conduct of same will vest in the duly appointed solicitor. It is to be inferred that the solicitor will be obliged to pay selling agents commission and charges in the usual way and that contract adjustments will see the payment of any outstanding rates and charges.

3. The “quantum of debt secured” will be ascertained and paid out as discussed above with the net proceeds of sale then to be divided equally.

4. For the sake of clarity, it is clear that the parties intend that the “secured debt” for the purposes of Cl 4.11 of the BFA is to include the $90,000.00 facility secured over Suburb C but not the primary loan secured over that property that relates solely, on the wife’s evidence, to the wife’s acquisition of same. It is appropriate that there be a declaration to give effect to the parties’ intentions.

5. The Order of the Full Court provides for a payment of $97,500.00 from the husband to the wife as a consequence of the parties’ adjustment of “separate property” under Cl 4.9(d) of the BFA.

6. Nowhere is it provided that it is a charge on the husband’s share of the proceeds of sale. The wife may enforce that liability as she sees fit. The husband was, prior to the Full Court determination, agreeable to $195,000.00 being set aside from the sale of the shared properties pending determination of his liability on appeal. The liability of the husband only crystallised on resolution of the appeal by consent on 7 August 2017. There is no evidence that he will not pay save for the wife’s inherent suspicion. However, the issue has been raging between the parties for some time. It is now resolved. By reason of his prior willingness to set funds aside from the sales, it is proper that the funds be paid to the wife on settlement of the sales of the shared property.

7. Thus, to avoid further application, it is appropriate that the wife have a charge over the husband’s half share of the proceeds of sale of the shared properties to secure payment. An order will be made accordingly.

8. Otherwise, liabilities as to “stamp duty and tax (including Capital Gains Tax and Goods and Services Tax)” will not be ascertained until after completion of the sales and as to Capital Gains Tax the later filing of personal income tax returns by the wife. The BFA does not provide for any reservation of funds from the proceeds of sale.

9. The wife will be able to enforce her indemnity as she sees fit if and when her liability, if any, is ascertained in a certain sum.  That sum will depend on the totality of wife’s other income for the whole of the relevant taxation year in which the sales occur. It is not appropriate that an order as sought by the wife be made.

10. The wife, otherwise, seeks an order for the joint bank accounts of the parties to “be divided equally”.  The BFA makes provision for such a division: Cl 4.10. There is no evidence of any requirement for specific enforcement orders. Indeed, there is no evidence as to what bank accounts are referred to. It is not appropriate that there be any order as sought by the wife.

11. Orders will be made as discussed above.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 1 September 2017.

Associate: 

Date:  1 September 2017