Coleman and Norwood

[2013] FamCA 580

FAMILY COURT OF AUSTRALIA

COLEMAN & NORWOOD [2013] FamCA 580

FAMILY LAW – PROPERTY SETTLEMENT – Interim Orders – Family Trusts – Sale of real property held in Husband’s name as trustee –Whether trustee for sale ought to be appointed – Application of the proceeds of the sale of property – Where the Wife seeks an injunction preventing the Husband from incurring further liabilities against the trust property.

APPLICANT: Ms Coleman

RESPONDENT: Mr Norwood

FILE NUMBER: BRC 1271 of 2012

DATE DELIVERED: 9 August 2013

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Hogan J

HEARING DATE: 2 May 2013

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Turnbull
Family Law Group Solicitors

SOLICITOR FOR THE RESPONDENT: Ms Cullen of Counsel
Carvosso & Winship Buderim Solicitors

Orders

UPON THE UNDERTAKING of the Husband dated 30 April 2013 not to sell the properties for less than the individual allotment values as ascribed by T Valuers and

AND UPON THE FURTHER UNDERTAKING of the Husband dated 2 May 2013 to provide to the Wife copies of contracts for sale immediately after signing and to provide general basic information as to sales/lease values not including the buyer’s name or contact information as to offers and negotiations prior to lease and/or sale

IT IS ORDERED UNTIL FURTHER ORDER

1. That the Husband in his capacity as Director of the N Pty Ltd as Trustee for the N Property Trust is hereby restrained from selling, disposing, transferring, assigning or otherwise dealing with the properties described as Lots 3, 6, 8, 9, 10, 11, 13, 14, 15, 16, 18 and 19 on Survey plan … County of …, Parish of … (“the properties”) unless there is first compliance with the paragraphs (2) to (6):

2. That prior to the proposed sale of each individual lot, the Husband shall (in writing):

   (a)provide to the Wife any proposed marketing plan for any proposed auction;

   (b)not less than 14 days prior to any auction provide the Wife with:

   (i)     a copy of the document appointing the auctioneer/agent;

   (ii)    a copy of the auctioneer’s/agent’s proposed fee schedule (including particulars of the proposed commission);

   (iii)     the particulars of any (written) offer made, within 24 hours of such offer being made with not less than the particulars of the proposed purchase price, the person is making the offer, the terms of the offer (including any special conditions that might apply) and the proposed settlement date.

3. That the Husband shall:

   (a)market the properties, save for lot 12, at not less than the following individual sale values as set at in Schedule ‘A’ to this Order;

   (b)set a reserve price at not less than that shown in Schedule ‘A’ for each Lot;

   (c)enter into contract(s) for sale of the Lots at or above the amounts set out in Schedule ‘A’ to this Order;

   (d)not less than 3 business days prior to execution by the Husband or any contract of sale first provide the Wife with a copy of the proposed contract.

4. That upon execution of a contract for sale the Husband provide to the Wife a copy of the signed contract within 2 business days.

5. The Husband notify the Wife within 2 (two) business days of any contract for sale being unconditional for finance.

6. That forthwith upon a date being set for settlement (and not less than 24 hours prior to settlement) the Husband provide to the Wife a copy of the proposed settlement schedule and cheque details.

7. That the proceeds of sale be applied as follows:

   (a)subject to the Wife receiving copies of invoices/fees, to the payment of real estate agents costs and commission of the sale (including auctioneers fees); and then

   (b)any balance to the National Australia Bank for use in discharge of the liabilities of the Trust.

8. That to enable communication between the Husband and Wife for the purpose of this order (and to the extent necessary to give this order effect) the Wife is discharged from any prior undertaking not to contact the Husband.

   (a)the Husband and Wife shall communicate directly with each other by email;

   (b)each of the parties is at liberty to obtain a specific email address for this purpose;

   (c)the Wife shall, immediately upon reading by her of any email, send a reply email confirming receipt; and

   (d)that the email communications by both parties be civil, respectful and strictly confined to the matters otherwise set out in this order.

9. That the Husband be restrained in his capacity as Director of N Pty Ltd as Trustee for the N Property Trust from withdrawing any further funds or otherwise applying any further funds of the Trust on account of his legal costs in these proceedings save that the Husband is entitled to the further sum of $35,000.00 on account of those costs.

10. That the Husband be restrained in his capacity as director of N Pty Ltd as Trustee for the N Property Trust is restrained from borrowing, extending current borrowings, applying for further borrowings (secured or unsecured) or otherwise increasing the Principal of the liabilities of the Trust above the sum of $2.9 million.

11. That each party’s costs of and incidental to this application are reserved.

12. All outstanding Interim Property Applications are otherwise dismissed.

SCHEDULE ‘A’

Lot No. on Survey Plan …, County of …, Parish of …	Minimum Sale Price (ex GST)
Lot 3	$300,000.00
Lot 6	$310,000.00
Lot 8	$410,000.00
Lot 9	$180,000.00
Lot 10	$300,000.00
Lot 11	$300,000.00
Lot 13	$220,000.00
Lot 14	$300,000.00
Lot 15	$590,000.00
Lot 16	$420,000.00
Lot 18	$370,000.00
Lot 19	$330,000.00
Total Minimum Sale Price	$4,030,000.00

IT IS NOTED that publication of this judgment by this Court under the pseudonym Coleman & Norwood 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 BRISBANE

FILE NUMBER: BRC 1271 of 2012

Ms Coleman

Applicant

And

Mr Norwood

Respondent

REASONS FOR JUDGMENT

1. The Wife seeks orders and directions in relation to the sale of real property owned by the N Property Trust (“the Trust”) and described collectively as “E Industrial Park”. She seeks the appointment of a Trustee for Sale to undertake the sale of “E Industrial Park” which comprises thirteen Lots.

2. The parties do not dispute that the properties are to be sold.

3. The Wife’s concern lies in the Husband making decisions in relation to their sale which she fears will result in the proceeds of such sales being less than the values arrived at in the Single Expert report.  She contends that, should the Husband sell the properties for prices less than the valuations determined by the Single Expert, there will be a potential loss of up to $890,000.00, which equates to 70 per cent of the property pool.  As I understand it, if this occurred, there would be no property available for distribution between the parties. Her further concern is that, without a Trustee for Sale, the Husband will, to her detriment, retain control of the disposition of the Lots.

4. Previously, the Husband has sold Lots for prices above the valuation amounts.[1] In addition, he gave an Undertaking not to sell the properties for less than the ‘individual allotment values as ascribed by T Valuers, and to provide copies of the contracts for sale to the Wife ‘immediately after signing’.[2]

   [1] Affidavit of the Husband filed 30 April 2013.

   [2] Affidavit of the Husband filed 30 April 2013, para 36; Exhibit ‘B’, p1.

5. As I understand it, the Husband was the party primarily responsibility for the operation of the property development activities undertaken by the parties during their relationship. 

6. I have considered the submission made on behalf of the Wife in support of the appointment of a Trustee for Sale.  I am not persuaded to make such an order because of the costs associated with this, the potential delay it may cause in the sale of the Lots and subsequent extinguishment of debt, and the fact that previous sales of real property undertaken by the Husband have occurred, on all but one occasion, for prices greater that the values established by the Single Expert Report.

7. I consider that the balance of convenience favours orders which enable the Husband to continue to undertake these activities whilst ensuring that the Wife is kept informed of them and is able to participate in the disposition of the Lots. In this way a balance is struck between the protection sought by the Wife and the expediency sought by the Husband. It is appropriate that no Lot be sold for a price less than the value determined by the Single Expert without the Wife’s consent in writing.

8. It was asserted that the parties have been unable to communicate effectively in relation to the sale of the Lots.  Further, it was asserted that the Husband has failed to communicate with the Wife in relation to any of the previous sales.  Counsel for the Husband stated that, while the Husband was agreeable to communicating to the Wife, negotiations for the sale occurred in circumstances in which it was not practicable or realistically possible for there to be instantaneous communication passing to the Wife about the same.

9. I consider that orders like those handed to me at the hearing meet the necessary balance between ensuring that the Wife is kept informed about the details of any proposed sale of Lots and the practical reality of enabling sales of the same to be negotiated in the market place.

10. The Husband sought that any communication between the parties occur via their respective legal representatives. Whist it may be that communication between the parties has not been ‘ideal’ in the sense that the Husband asserts that he receives too much correspondence from the Wife and the Wife asserts that she does not receive enough correspondence from the Husband, I do not consider that such difficulties warrant the imposition of a restriction on the communication between the parties in relation to the sale of the Lots and matters associated with their property settlement proceedings.

11. I am not persuaded that the balance of convenience favours the imposition of an injunction restraining the parties from communicating about the sale of Lots (a matter which may necessitate communication on a more rapid basis than may be possible if required to proceed via legal representatives) or associated property settlement matters other than via their legal representatives. Rather, it is, I consider, appropriate that communication be in writing via post or email, and the content of such communication be solely related to the property settlement, including, inter alia, the sale of the Lots.

12. The Husband seeks that the remaining proceeds of any sale of the Lots be applied to a National Australia Bank account so as to enable the discharge of liabilities. The Wife asserts that any balance remaining after the sale of Lots the remaining proceeds to be applied to the mortgage account, also held by the National Australia Bank. It is clear that whatever funds are obtained will be needed to reduce the liability of the parties.

13. The Wife seeks to restrain the Husband, in his position as trustee for the Trust, from increasing the Trust’s liabilities without her written consent. It was submitted on her behalf[3] that the Trust is worth $3.43 million and has, according to the Husband, liabilities in the amount of $2.9 million dollars, leaving approximately $530,000.00 of equity in the Trust. In addition, reliance was placed on the Husband’s evidence that the estimated costs associated with the sale of Trust property are in an amount of $350,000.00, which, if realised, would leave equity of about $180,000.00. In addition, the mortgage registered over the former matrimonial home is in an amount of approximately $200,000.00 more than the amount at which that property has been valued such that, if this scenario is a reality, there will be no property of the parties available for distribution between them.

    [3] Husband’s Affidavit filed 07/12/12, Annexure ‘TN-2’.

14. It is against this background that submissions were made effectively stating that, in order to ensure the preservation of the property of the parties prior to trial, no further borrowings should be permitted and the Husband should be restrained from applying any funds toward the payment of his legal fees.

15. The solicitor for the Husband stated that such an order would potentially have a ‘negative’ impact on the pool, and proposed that it would be more appropriate to allow the Husband to increase the borrowings up to a limit of $3 million.

16. I accept that the Husband did not adduce any evidence of any need for the further potential borrowings as sought on his behalf by his solicitor. While his solicitor stated the extra $100,000.00 should be available should the circumstances arise over the course of the running of the business, I note that the Husband deposes to having worked to ensure there are tenants in the properties[4] and that there is no intention to borrow further funds in the future.[5]

    [4] Husband’s Affidavit filed 07/12/12, paragraph 24.

    [5] Husband’s Affidavit filed 07/12/12, paragraph 31.

17. Whilst it was submitted, by way of an example of the reason why the Husband may require access to additional borrowings, that there may be fit-out costs for new tenants, I understood the Husband’s evidence to be that, as at the date of hearing, all Lots were currently tenanted.

18. It is clear that significant liabilities already exist with the associated risk that there may, after the extinguishment of the same, be little, if any, property available for adjustment between the parties. For this reason, I am not persuaded, on the evidence before me, that it is just and equitable that the Husband be permitted to increase the liabilities of the Trust without the Wife’s written consent or to apply funds from the same toward the payment of his legal costs other than as agreed between the parties. I consider that the limit of the liability should remain at that which existed at the time of the hearing.

19. The Wife sought an order directing the Husband to amend the General Ledger of the Trust so as to ensure that amounts received by her, for example, by way of payments of child support, were not recorded as distributions to her but rather to the Husband from which he then paid such liability. Due to the imminent trial of the matter I am not persuaded to make the order sought in relation to the amendment of the entries in the General Ledger account.  It is more convenient that this matter is determined following a full consideration of all of the evidence.

Costs

1. Both parties agreed that the costs of and incidental to this application be reserved to the Trial Judge and I propose to Order accordingly.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 9 August 2013.

Associate:     

Date:              9 August 2013