Chai & Hsu
[2023] FedCFamC2F 1376
•26 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Chai & Hsu [2023] FedCFamC2F 1376
File number(s): MLC 8903 of 2023 Judgment of: JUDGE J YOUNG Date of judgment: 26 October 2023 Catchwords: FAMILY LAW – PROPERTY – interim property – competing applications for sale of real property – parties have a considerable portfolio of real property - where parties have outstanding mortgage repayments and other liabilities – where moratorium on repayment of mortgages due to expire – parties do not have financial capacity to service mortgages or pay liabilities – orders made as sought by the wife. Legislation: Family Law Act 1975 (Cth) ss 75(2), 79, 80(1)(h) Cases cited: Gabel & Yardley [2008] FamCAFC 162
Felice & Felice (2011) FamCA 162
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-46
Division: Division 2 Family Law Number of paragraphs: 56 Date of hearing: 23 October 2023 Place: Melbourne Counsel for the Applicant: Mr Goddard Solicitor for the Applicant: Bowlen Dunstan And Associates Counsel for the Respondent: Mr Cash Solicitor for the Respondent: Linx & Associates ORDERS
MLC 8903 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS CHAI
Applicant
AND: MR HSU
Respondent
ORDER MADE BY:
JUDGE J YOUNG
DATE OF ORDER:
26 OCTOBER 2023
THE COURT ORDERS THAT:
1.The Husband and the Wife shall forthwith instruct the selling agent for the property situate at B Street, Suburb C (Suburb C Property) to accept the current offer for the purchase of the property for $1.6million and shall do all other acts and things necessary as soon as practicable to effect the sale of the Suburb C Property with the proceeds of sale to be applied as follows:
(a)Firstly, to pay the selling agents costs;
(b)Secondly, to discharge the mortgages against the following properties, in order of priority:
(i)D Street, Suburb E (the Suburb E Property);
(ii)F Street, Suburb G (Suburb G Property)
(iii)H Street, Suburb J (Suburb J Property)
(c)Thirdly, to pay any outstanding rates and any other outgoings owing in relation to the Suburb C Property;
(d)Fourthly, to pay any outstanding rates and any other outgoings owing in relation to the properties enumerated in order 1(b) hereof in order of priority;
(e)The balance then remaining, if any, be divided equally between the parties as part property settlement.
2.The Wife shall sell the property situate at K Street, Suburb L (Suburb L Property) on terms and conditions nominated by her providing that she authorise the selling agent to provide the Husband with any information as to the sale as reasonably requested by him.
3.The proceeds of sale of the Suburb L Property shall be applied as follows:
(a)Firstly, to pay the selling agent’s costs and commissions of the sale
(b)Secondly, to discharge the mortgage against the Suburb L property;
(c)Thirdly, to pay any outstanding rates and any other outgoings owing in relation to the Suburb L Property;
(d)Fourthly, the balance, if any, be divided equally between the parties as part property settlement.
4.Order 3 of the orders made 27 September 2023 be discharged.
5.M Company of N Street, Suburb O be appointed the single expert valuers and the parties do all acts and things necessary to obtain their valuation reports, at equal shared expense, of the following properties as soon as practicable:
(a)The Suburb L Property;
(b)The Suburb G Property;
(c)The Suburb J Property;
(d)The Suburb E Property; and
(e)The property situate at P Street, Town Q.
6.Order 4 of the orders made 27 September 2023 be varied to read as follows:
(a)Subject to the parties compliance with orders 1 and 2 hereof, the parties do all such acts and sign all such documents to appoint Mr S as Mediator, with such mediation to be conducted on or before 16 December 2023, with the costs of the Mediation to be borne at the joint expense of the parties.
7.All outstanding interim applications otherwise be dismissed.
8.All other Orders made on 27 September 2023 to remain in full force and effect.
9.Costs reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE J YOUNG:
INTRODUCTION
Before the Court are competing Applications of the parties for interim property orders.
The applicant wife seeks orders for the sale of the property at B Street, Suburb C (Suburb C Property) and the property at K Street, Suburb L (Suburb L Property). The wife seeks further orders that the net proceeds of sale of the Suburb C Property be applied to the discharge of mortgages over properties at D Street, Suburb E (Suburb E Property), F Street, Suburb G (Suburb G Property) and H Street, Suburb J (Suburb J Property) (collectively, Other Properties), to outstanding rates and outgoings for the Suburb C Property and Other Properties, with any surplus to be divided equally as part property settlement. She seeks further orders that the net proceeds of sale of the Suburb L Property be applied to discharge of the mortgage over that property, to outstanding rates and outgoings for that property and with any surplus to be divided equally as part property settlement.
The respondent husband seeks orders that the Suburb L Property and the Suburb G Property be listed for sale by public auction, with the proceeds to be applied firstly to the selling costs and secondly to the discharge of the mortgages over those properties and with any surplus to be divided equally as part property settlement.
The wife contends that the orders she seeks are necessary as the Suburb C Property has been listed on the market for some time, a formal offer to purchase the property has been received, and that the husband has not engaged in correspondence regarding the sale of the property. She further contends that the parties do not have the financial capacity to service the mortgages over the Other Properties, and that the sale of the Suburb C Property is needed to reduce outstanding mortgage debts and other property costs.
The husband contends that the orders he seeks are necessary as the sale of the Suburb G Property and Suburb L Property will allow the parties to keep the Suburb C Property, thus allowing the property pool to be preserved and maximised in value.
For reasons which I set out below, I make the orders sought by the wife.
BACKGROUND AND PROPERTY POOL
The wife is 45 years old and is self-employed as an allied health worker .
The husband is 45 years old and employed as a professional.
The parties commenced cohabitation in or around mid-2010 and were married in 2010.
There are two children of the relationship, X aged 10 and Y aged six. The children currently live with the wife and spend time with the husband two to three times a week for dinner under an informal agreement.
X has been diagnosed with Autism Spectrum Disorder and Y has developmental delay. The children therefore have special needs.
The husband pays child support as assessed in the amount of $30.00 per week.
The wife alleges family violence by the husband.
The parties separated on 28 November 2021.
The parties have, both jointly and individually, a considerable portfolio of real property. At hearing, a table of the real property assets and liabilities of the parties was prepared by the applicant and agreed to by the respondent for the purpose of the interim hearing as follows:
Description
Ownership
Agreed value
Mortgage over property
Assets
1
H Street, Suburb J
Husband
$490,000
$317,000
2
F Street, Suburb G
Wife
$1,150,000
$540,000
3
K Street, Suburb L
Wife
$700,000
$610,000
4
D Street, Suburb E
Joint names
$2,600,000
$680,000
5
P Street, Town Q
R Pty Ltd as Trustee for the T Family Trust
$570,000
Unencumbered
6
B Street, Suburb C
R Pty Ltd as Trustee for the T Family Trust
$1,600,000
Unencumbered
The wife and children reside in the property in the Suburb E Property.
The husband resides in the property in Suburb J Property.
It is uncontested that the parties are the directors of the R Pty Ltd (the corporate trustee of the T Family Trust). As set out above, R Pty Ltd is the owner of the Suburb C Property and the Town Q Property. It is also uncontested that the parties each hold 50 shares of the 100 shares issued in R Pty Ltd.
The Suburb G Property is currently tenanted.
Mortgages on the properties therefore total in excess of $2,000,000. Relevantly, the Suburb C Property is unencumbered.
In his financial statement, the husband deposes to an income of $750 per week and expenses of $1300 per week. In her financial statement the wife deposes to an income of $1404 per week and expenses of $4717 per week. It is uncontested that the husband does not contribute to any of the mortgage repayments on any of the properties, including the Suburb J Property in which he lives.
It is uncontested that the parties are unable to meet the required mortgage repayments on the properties. Post separation the wife paid the mortgages and outgoings on the properties from existing funds and from the proceeds of the sale of another property. However, those funds have been exhausted and no mortgage repayments have been made on the properties since in or about late 2022. The lender, U Bank, has agreed to a pause on repayments on the mortgages by way of temporary financial assistance, the extension to which will end in late 2023. Whilst the husband’s evidence is that he is seeking to extend the period of the moratorium, there is no evidence before the Court that this has been agreed to by U Bank, nor that U Bank would be willing to consider any further period of non-payment.
It is also uncontested that the parties owe outstanding rates and land tax payments. The wife deposes that these outstanding payments currently amount to approximately $40,000.
ORDERS SOUGHT
The orders sought by the parties in their filed material were amended several times at hearing in an effort to resolve this matter.
Ultimately, the orders sought by the wife are as follows:
1.The Husband and the Wife shall forthwith instruct the selling agent for the property situate at [B Street, Suburb C] to accept the current offer for the purchase of the property for $1.6million and shall do all other acts and things necessary as soon as practicable to effect the sale of the property with the proceeds to be applied as follows:
a. Firstly to pay the selling agents costs;
b.Secondly to repay the [U Bank] in respect of loans secured by mortgage against he following properties in order of priority:
i. [D Street, Suburb E];
ii. [F Street, Suburb G;
iii.[H Street, Suburb J]
c.Thirdly to pay any outstanding rates and any other outgoings owing in relation to the [B Street, Suburb C] Property;
d.Fourthly to pay any outstanding rates and any other outgoings owing in relation to the properties enumerated in order 2(b) hereof in order of priority;
e.The balance then remaining, if any be divided equally as between the parties.
2.The Wife shall sell the property situate at [K Street, Suburb L] on terms and conditions nominated by her providing that she authorise the selling agent to provide the Husband with any information as to the sale as reasonably requested by him.
3. The proceeds of sale of the [Suburb L] property shall be applied as follows:
a. Firstly to pay the selling agent’s costs and commissions of the sale
b.Secondly to repay the [U Bank] monies owed to it secured by the mortgage against the [Suburb L] property;
c.Thirdly to pay any outstanding rates and any other outgoings secured against the [Suburb L] Property);
d.Fourthly the balance, if any, be divided equally between the parties as part property settlement.
4. Order 3 of the orders made 27 September 2023 be discharged.
5.[M Company] of [N Street, Suburb O] be appointed the single expert valuers and the parties do all acts and things necessary to obtain their valuation reports at equal shared expense of the following properties as soon as practicable:
a. The [Suburb C] Property
b. The [Suburb L] Property
c. The [Suburb G] Property
d. The [Suburb J] Property
e. The [Suburb E] Property
f. The property situate at [Town Q]
6. All outstanding interim applications otherwise be dismissed.
7. The parties’ costs of today be reserved.
Ultimately, the orders sought by the husband are as follows:
1.The parties do all acts and things necessary to sell forwith by public auction, the property situate at [Suburb L] and for these purposes:
a)the wife providing the Husband with three (“3”) real estate agents to conduct the sale and the husband nominating one (“1”), with the reserve price to be determined by the valuations in order 3 herein;
b) Upon sale the proceeds be applied:
i. Firstly to the costs and commissions of the selling agent;
ii. Secondly, to discharge the mortgage in favour of [U Bank];
iii.Any net proceeds thereafter be divided equally between the parties as part-property settlement.
2.The parties do all acts and things necessary to sell forwith by public auction, the property situate at [Suburb G] and for these purposes:
c)the wife providing the Husband with three (“3”) real estate agents to conduct the sale and the husband nominating one (“1”), with the reserve price to be determined by the valuations in order 3 herein;
d) Upon sale the proceeds be applied:
i. Firstly to the costs and commissions of the selling agent;
ii. Secondly, to discharge the mortgage in favour of [U Bank];
iii.Any net proceeds thereafter be divided equally between the parties as part-property settlement.
3.The Wife’s application to sell the property situate at [Suburb C] and the husband’s application to sell [Suburb G] property be adjourned to ______in Division ___ on ___ and for these purposes:
a.The wife shall file an application in a case and any supporting affidavits by 4:00 PM Thursday 26 October 2023;
b.The Husband shall file a response to the application and any supporting affidavits by 4:00 PM 30 October 2023;
c.Each of the parties file a case outline 2 days prior to the interim defended hearing date;
4.Order 3 of the orders made 27 September 2023 be varied to substitute the name of the single expert valuer from [V Pty Ltd] of Level [W Street, Suburb Z] to [M Company].
5. The parties’ costs of today be reserved.
ISSUES IN DISPUTE
The issues in dispute are which of the parties’ properties is to be sold to relieve the parties’ financial hardship and the terms upon which that sale is to occur.
MATERIAL RELIED ON
The wife relied on the following material:
(1)Initiating Application filed 7 August 2023;
(2)Affidavit of the wife filed 13 October 2023;
(3)Financial Statement of the wife filed 7 August 2023; and
(4)Outline of case filed 18 October 2023.
The husband relied on the following material:
(1)Response filed 26 September 2023;
(2)Affidavit of husband filed 11 October 2023;
(3)Financial Statement of husband filed 26 September 2023.
(4)Outline of case filed 20 October 2023;
SALE OF THE PARTIES’ PROPERTIES
Sale of the Suburb L Property
It is uncontested that the parties have agreed that the Suburb L Property will be sold. At issue are the terms upon which that sale is to occur. The husband seeks that the Suburb L Property be valued, the wife then nominate three selling agents and the husband then nominate the agent to be engaged. The wife seeks to seek to sell the Suburb L Property on terms and conditions nominated by her and for the husband to be provided with information regarding the sale.
On 4 October 2023 legal representatives for the husband wrote to the legal representatives for the wife in relation to the sale of the Suburb L Property. That correspondence relatively provides as follows:
Given the mutual agreement of the parties regarding the sale of [Suburb L], in accordance with paragraph 5 of the order dated 27 September 2023, the property can be sold.
Since the property is solely registered under your client’s name and your client has already initiated contact with [AA Company], we strongly recommend that your client promptly engage with [AA Company] to coordinate the auction campaign. Please copy our client in any future correspondence with [AA Company].
On the material before the Court, the sale of the Suburb L Property will release equity of approximately $90,000 following discharge of the mortgage, not taking into account costs associated with the sale. In addition, the process provided by the husband will involve an extended period of time.
Sale of the Suburb G Property
The husband proposes that the same process as sought for the sale of the Suburb L Property be undertaken for the sale of the Suburb G Property. The Suburb G Property is currently tenanted and sale would therefore require the tenant to first be given notice and vacate the premises.
On the material before the Court, the sale of the Suburb G property will release equity of approximately $610,000 following discharge of the mortgage, not taking into account costs associated with the sale. In addition, as for the Suburb L Property, the process proposed by the husband will involve an extended period of time.
Sale of the Suburb C Property
The wife’s evidence is that in mid-2023 the parties agreed to the sale of the Suburb C Property. The wife’s evidence is that in mid-2023 she engaged an agent to sell the property and that in late 2023 a formal offer to purchase for the sum of 1,600,000 was made (Offer). On the evidence before the Court in late 2023 the selling agent provided written advice to the wife that the Offer is “extremely strong and competitive” and that there are no further offers near this level nor any further interest in the Suburb C Property. This advice was provided to legal representatives for the husband on 5 October 2023. The wife wishes to accept the Offer.
The husband says that the Suburb C Property ought not be sold to preserve the property pool and that its value is $1,800,000 (being an amount in excess of the Offer).
On 15 September 2023, legal representatives for the husband informed legal representatives for the wife the husband would not accept the Offer until “there is a clear accounting of how the sale proceeds from the property located at [BB Street, Suburb CC] were utilised. We have reason to believe that your client all relevant financial information, possibly withholding details about the use of these funds.”
On 27 September 2023, orders were made by this Court for the appointment of V Pty Ltd to undertake valuations of the parties’ real property, in the absence of agreement as to valuations, within 28 days.
In late 2023, noting that the husband says that the true value of the Suburb C Property is $1,800,000, legal representatives for the wife wrote to the husband’s legal representatives seeking the husband’s consent to have the appointed valuer undertake a valuation of the Suburb C Property in time for the interim hearing listed on 23 October 2023. On the same day, legal representatives for the wife received an email from the husband’s legal practitioner to the effect that the husband did not agree to the expedited valuation of the Suburb C Property and suggesting that if the wife considered this would be of utility prior to the interim hearing an adjournment of that hearing ought be sought.
LEGAL PRINCIPLES
Section 79 of the Family Law Act 1975 (Cth) (Act) confers on the Court a power to make orders for property settlement. While there is only a single exercise of power under s 79, the Court may exercise the power through “a succession of orders until the power ... is exhausted” or until a final order dealing with all the known property of the parties is made.[1]
[1] Gabel & Yardley [2008] FamCAFC 162.
Section 80(1)(h) of the Act confers on the Court a power to “make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order”. Together, ss 79 and 80(1)(h) confer on the Court a power to make orders for interim property settlement.
The Full Court decision of Strahan & Strahan (Interim Property Orders)[2] is the leading authority on the test to be applied when considering an interim property settlement application. The Full Court stated that there are two stages to consider when hearing an application for interim property settlement.
[2] Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466.
The first stage is what was said to be “the procedural step”. Their Honours Justice Boland and Justice O’Ryan held at para [132]:
In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and 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.
The second stage of the process for considering interim property applications is the “substantive step”. With respect to the second stage of the process, their Honours said at [135]:
In relation to the second matter, as the jurisdiction under s 79 of the Act is being exercised the provision of that section must be considered and applied but with limitations given that it is not the final hearing. There is also no requirement of compelling circumstances in relation to the substantive step.
Given that a party is effectively seeking access to their own funds, it is unnecessary for there to be “any detailed inquiry as to the purpose for which funds are to be used”.[3]
[3] Felice & Felice (2011) FamCA 162 at [12].
Following on from discussion about the two-stage approach, the plurality of the Full Court in Felice at para [137] considered “the adjustment issue” or “claw back issue”, which is whether:
it seems likely to the Court that…the applicant…will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made.
In exercising the power under s 79 of the Act, it is important for the Court to ensure that it is just and equitable to make the order sought in circumstances where the power will not be exhausted by an interim order.[4]
[4] Ibid at [136].
The Full Court decision Gabel v Yardley confirmed that:[5]
the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal.
[5] Gabel & Yardley [2008] FamCAFC 162 at [72].
In summary, the tests to be applied are:
(a)whether the power under ss 79 and 80(1)(h) of the Act should be exercised;
(b)if so, then an assessment of the factors contained in s 79 of the Act is to occur; and
(c)an assessment as to whether any interim amount in this matter is able to be ‘clawed back’ at a final hearing stage.
CONSIDERATION
The evidence before the Court is that neither party has the financial capacity to service the mortgages over the properties or to pay the outstanding rates and liabilities of the properties.
On the evidence before the Court, as set out above, I am satisfied that there is a need for property to be sold to meet the parties’ liabilities and to preserve, in so far as is possible, the property pool. Accordingly, I am satisfied that it is appropriate to exercise the jurisdiction to make an interim property order. There is a not insubstantial property pool of somewhere between approximately $5,000,000 and $7,000,000 (after liabilities) and I am satisfied that any order as sought by either party will be able to be accounted for in the final property settlement.
Relevant matters going to the parties’ contributions and s 75(2) factors are set out above. In this regard I note that this is an 11 year marriage. On the evidence currently before the Court, each of the parties have over the years made many different contributions, as income earner, homemaker, conservator of assets and parent. I note that the wife has care of the children from the marriage, both of whom have special needs and that the husband spends time with the children for dinner only a few times a week. I note that although the husband pays only a small sum in child support, it is as assessed. I note that the wife alleges family violence.
In circumstances where:
(1)the parties cannot meet the mortgage repayments and other liabilities associated with the properties;
(2)the mortgage liabilities are significant in isolation and are even more so given the asserted incomes of the parties;
(3)the moratorium on the cessation of mortgage repayments ceases in late 2023 and there is therefore some significant urgency to effecting sale of some property to alleviate the parties’ financial hardship. Further, even if U Bank agreed to extend the moratorium on mortgage repayments for a further period, whilst this might provide immediate financial relief, it ultimately only continues to increase the parties’ liabilities and further diminish the property pool which will be available for distribution at final hearing;
(4)the husband’s proposal is time consuming and will result in an increased risk of U Bank foreclosing. This in turn carries the risk of a reduction in the prices able to be obtained for the properties if they are sold by way of mortgagee auctions, thereby diminishing rather than preserving the property pool;
(5)the sale of the Suburb C Property is well progressed and there is advice that the Offer is strong;
(6)the husband has previously agreed to both the sale of the Suburb C Property and the Suburb L Property and in the manner in which the wife now seeks the court order;
(7)the husband asserts that the value of the Suburb C Property exceeds the Offer but would not agree to the expediated valuation of that property. Indeed, the base for the husband’s opposition to the wife’s proposal seems to shift and on the material currently before the Court may, perhaps, be seen to be driven by factors other than a desire to maximise and preserve the property pool;
(8)the husband’s proposal will result in the retention of the Suburb C Property, the Suburb E Property and the Suburb J Property. The Town Q Property will also be retained (noting that there is no suggestion by either party that the Town Q Property be sold and also noting that this property is unencumbered). However, under the husband’s proposal the Suburb E Property and the Suburb J Property will remain encumbered, with the parties having little (if any) capacity to meet the ongoing mortgage and other liabilities associated with those properties. Indeed, Counsel for the husband conceded at the hearing that this is the effect of the husband’s proposal;
(9)the Suburb C Property is unencumbered and therefore under the wife’s proposal the entire net proceeds of the sale will be available to be applied to the parties liabilities. Under the wife’s proposal, on the material currently before the Court, it appears that sale of the Suburb C Property and the Suburb L Property would likely allow the mortgages on the Suburb E Property, the Suburb G Property and the Suburb J Property to be discharged and for those properties to be retained by the parties unencumbered. It is of note that the Suburb E Property is the most valuable real property asset in the pool and is retained unencumbered under the wife’s proposal. Further, the wife and children reside at the Suburb E Property, which is the former matrimonial home, and the husband resides at the Suburb J Property. The Town Q Property is to be retained and is also unencumbered. Accordingly, under the wife’s proposal all the properties to be retained by the parties would likely be unencumbered. This is of considerable significance given the parties’ asserted limited incomes and therefore limited capacity to service any mortgage. Additionally, as the Suburb G Property is leased, it would also provide rental income for the use of the parties,
I consider the wife’s proposal to best preserve the parties assets and property pool.
I am therefore satisfied that:
· the Suburb C Property should be sold and the proceeds applied as sought by the wife;
· the Suburb L Property should be sold as proposed by the wife and the proceeds applied as sought by the wife.
I am further satisfied that an interim property order as sought by the wife, pursuant to ss 79 and s 80(1)(h) of the Act, is just and equitable.
Accordingly, I make the orders set out at the commencement of these reasons.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge J Young. Associate:
Dated: 26 October 2023
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