Curtain and Curtain

[2014] FamCA 566

FAMILY COURT OF AUSTRALIA

CURTAIN & CURTAIN [2014] FamCA 566

FAMILY LAW – PROPERTY – Interim distribution – where the husband seeks to draw down on the mortgage secured over the former matrimonial home – where the wife seeks orders for the sale of property that the husband wants to retain – where the husband is experiencing considerable financial uncertainty – consideration of whether it is appropriate to exercise discretion – where an order for interim distribution to the husband may impact the wife’s ability to retain the former matrimonial home – husband’s application and wife’s response dismissed.

Family Law Act 1975 (Cth)

Gabel & Yardley (2008) FLC 93-386

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466
Wenz & Archer (2008) 40 Fam LR 212

APPLICANT: Mr Curtain

RESPONDENT: Ms Curtain

FILE NUMBER: MLC 8179 of 2013

DATE DELIVERED: 5 March 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Macmillan J

HEARING DATE: 5 March 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Mellas

SOLICITOR FOR THE APPLICANT: PCL Lawyers

COUNSEL FOR THE RESPONDENT: Mr Lennon

SOLICITOR FOR THE RESPONDENT: Lennon Mazzeo

Orders

IT IS ORDERED THAT

1. The husband’s application in a case filed 19 February 2014 and the wife’s response to an application in a case filed 5 March 2014 be otherwise dismissed, save and except for any application for costs.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Curtain & Curtain 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 MELBOURNE

FILE NUMBER: MLC 8179 of 2013

Mr Curtain

Applicant

And

Ms Curtain

Respondent

REASONS FOR JUDGMENT

1. The husband in his application in a case filed 19 February 2014 seeks orders by way of partial property settlement that he and the wife be required to do all acts and things necessary to enable them to draw down the sum of $140,000 against the mortgage secured over the real property at B Street, Suburb C to be used by the husband as follows:

   (a)$25,000 to be placed in the operating account of D Pty Ltd;

   (b)$25,000 to be placed in the husband’s personal account;

   (c)$10,000 to be placed in the joint account of the husband and the wife;  and

   (d)$80,000 to be placed in PCL Lawyers’ trust account on account of the husband’s legal costs.

2. The wife in her response to the husband’s application in a case filed by leave this day opposes the husband’s application and seeks orders for the sale of the properties at E Street, Suburb F, and G Street, Suburb F, and the husband’s boat. 

3. The husband opposes the sale of either property or the boat. 

PARTIAL PROPERTY SETTLEMENT

1. This Court has the power pursuant to s 80(1)(h) of the Family Law Act1975 (Cth) (‘the Act’) to make orders pursuant to s 79 of the Act for partial property settlement.

2. Although as stated by the Full Court in Gabel & Yardley (2008) FLC 93-386 there is only one exercise of power pursuant to s 79, that power may ‘be exercised by a succession of orders until the power … is exhausted.’ In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466(‘Strahan’) the Full Court, whilst acknowledging that it was preferable that there be one final hearing in s 79 of proceedings, considered the circumstances in which the court might exercise its power to make orders for partial property settlement. The Full Court said at paragraph 132 as follows:

   … in our view, when considering whether to exercise the power under s 79 and s 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.

3. The Full Court in Strahan also agreed with the submissions of senior counsel for the wife in that case in relation to the decision of Riethmuller FM, as he then was, in Wenz & Archer (2008) 40 Fam LR 212 (‘Wenz’), that ‘[i]t cannot be the case that a party who has an irresistible claim to a substantial share of the property of the parties should be held out of that property while the matter is litigated.’

4. The Full Court in Strahan went on to say at paragraph 137 as follows:

   Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that … the applicant … will be likely 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”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer.  As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought … then that should be the end of the matter”.  In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

BACKGROUND

1. The husband relied upon his affidavit filed 19 February 2014 and the wife relied upon her affidavit filed this day.  Their evidence was not tested and the matter otherwise proceeded by way of submissions by counsel for the husband and the wife’s solicitor.  In those circumstances, I cannot make findings of fact and insofar as there are factual disputes between the parties’ respective evidence. 

2. The husband and wife commenced cohabitation in September 1995 and married in 1996.  They separated in September 2012 when the husband left the former matrimonial home in Suburb C. 

3. There are four children of their marriage: J aged 14; K aged 11; L aged nine; and M aged six.  All four children live with the wife and the husband deposes that he spends five nights a fortnight with M or as may be otherwise agreed with the wife but that although there are orders in place for him to spend time with the other children they currently spend little time with him. 

4. The husband is 40 years of age and is a qualified electrician operating his own electrical contracting business.  That business is an air-conditioning business.  The husband deposes to having an income of $2,096 per week, which includes the $332 and $364 he receives in rental income from the investment properties in his name.  The husband has a new partner who earns approximately $2,500 per week. 

5. The wife is 41 years of age.  The wife is a qualified primary school teacher and works as an emergency teacher.  The husband in his affidavit deposes to the wife having disclosed in her financial statement weekly income of $800 per week. 

6. At paragraph 24 of his affidavit the husband deposes that he pays approximately $600 per week to the wife so that she can meet expenses for herself and the children.  He deposed that the children’s expenses included school fees (of approximately $263 per week), the children’s sports, dancing and music (approximately $77 per week), dental expenses for J (approximately $57 per week), phone, Internet and Foxtel (approximately $115 per week), house, car and health insurances (approximately $103 per week). 

7. He further deposed that he is unable to continue to pay the wife the sum of $300 he had previously paid her.  The parties agreed that the husband stopped paying the $300 per week either late last year or early this year.  It is also submitted on behalf of the wife that the figure of $800 per week she disclosed in her financial statement included the sum of $300 which the husband no longer pays. 

8. Although there appeared to be a substantial difference between the evidence of the husband and the wife as to the parties’ assets and liabilities, after some clarification it was submitted by counsel for the husband that I could deal with the matter on the basis of the wife’s evidence as to the assets and liabilities, subject to the inclusion of the value of the motor vehicle and the husband’s motorbike. 

9. The assets and liabilities, as best as I can ascertain, for the purposes of this application are as follows:

   ·   B Street, valued at $900,000;

   ·   E Street, valued at 335,000; 

   ·   G Street, valued at $420,000; 

   ·   the boat, valued at $25,000;  

   ·   Motor vehicle, valued at $25,000; 

   ·   Motorcycle, $4,000; 

   making a total of $1,709,000. 

10. The liabilities are:

    ·   the B Street mortgage of $44,000; 

    ·   the E Street mortgage of$400,000; 

    ·   the G Street mortgage, $270,000; 

    ·   a Westpac credit card of $8,000;  and

    ·   the wife has included legal fees of $30,000 for each of the parties;

    making total liabilities of $782,000 and net assets of $927,000. 

11. The husband’s evidence was that the two Suburb F properties were valued at approximately $400,000 each however there was no evidence before me as to value and he ultimately accepted the values attributed to them by the wife for the purposes of the hearing this day. 

12. The husband says in support of his application as follows: 

    ·   that he is currently experiencing inconsistent trading and that his work can go from busy to non-existent over the course of the month and that many of his customers are slow to pay their accounts. The husband set out in some detail what he said were outstanding accounts including the dates upon which payment was due, some of which are many months overdue; 

    ·   that he does not have the cash flow to pay either his business or personal expenses; 

    ·   that during the marriage he and the wife borrowed against the family home to maintain the business cash flow; 

    ·   that he had depleted the reserves of available cash in the business meeting payments for the wife and the children since separation; 

    ·   that some of the pressure on his business is a result of legal fees that he has paid to date, and that he currently has outstanding legal fees of $13,000; 

    ·   that he estimates that he will require at least a further $80,000 to cover his presently outstanding and future legal fees, not including the $13,000 that he currently owes;  

    ·   that he currently receives rental income from the investment properties of $696 per week but that the expenses he incurs at $881 per week, leaving a shortfall of $185 per week; 

    ·   that he has since separation paid all the expenses for those investment properties using, he says, mostly funds from the business; 

    ·   that he and the wife have used the equity in the former matrimonial home to meet the expenses of the investment properties from time to time; 

    ·   that he is not able to continue to meet the expenses or shortfall in relation to those investment properties and proposes that the shortfall be met from funds drawn down against the equity in the former matrimonial home pending property settlement; 

    ·   that it is not a good alternative to sell either or both of the investment properties as, in particular, if the G Street property is sold it will crystallise a debt as they owe more on the unit than it is worth and that as a result of any sale they will incur selling costs and agent fees; 

    ·   that he wishes to retain the investment properties by way of final property settlement; 

    ·   that the former matrimonial home has a net equity of approximately $856,000; 

    ·   that the former matrimonial home is collateralised with the G Street property; 

    ·   that he will meet the interest payments on the $140,000 he seeks by way of partial property settlement; and

    ·   that there is no risk that there would be insufficient funds to satisfy any final property orders that this Court is likely to make. 

13. It is the wife’s case that it is not in the interests of justice that an order be made.  The wife disputes that the husband is likely to receive by way of property settlement a sum sufficient to cover the partial property settlement he now seeks together with the other property he proposes to retain.  It is her case that it may not be possible to make the necessary adjustment of the matter at a final hearing which would enable her to retain the former matrimonial home by way of settlement.  Based upon what she says are her contributions and the significant s 75(2) factors in her favour, including her ongoing responsibility for the children and the husband’s substantially greater income earning capacity, it is the wife’s case that she is entitled to somewhere between 70 and 80 per cent of the value of their combined interests in property. 

14. Doing the best I can on the figures available to me, on that basis, the husband would be entitled to property to the value of somewhere between $185,000 and $278,000.  It is his case that he wishes to retain the two investment properties, which have an approximate equity of $85,000, the boat which is valued at $25,000, and his motorbike which is valued at $4,000, a total of $114,000.  If the $140,000 he seeks by way of partial property settlement is added to this figure, it amounts to a total of approximately 27.5 per cent of the net value of the property available for division. 

15. It is submitted by the husband that an adjustment can be made, if necessary, at the final hearing.  There are a number of difficulties with that proposition in this case. Firstly, it is the husband’s case that he will meet the additional interest costs arising from the draw down on the mortgage however this is in circumstances where he says he presently cannot meet the shortfall on the investment properties and in circumstances where he says the business is trading inconsistently.  I note here that, as submitted by the solicitor for the wife, this is at a time of year one might expect to be a busy time for a business of this kind. 

16. As to the evidence before me in relation to how the business is trading, moneys that have been taken from the business for both personal expenditure and legal expenses is limited to assertions made by the husband in circumstances where that evidence has not been tested.  I cannot be satisfied on the evidence before me that the husband can meet repayments on the $140,000 or any additional repayments at all.  It is the wife’s case that if for whatever reason the husband could not meet the additional interest payments or, for that matter, the shortfall on the investment properties, particularly in circumstances where the former matrimonial home is collateral for the mortgage over the G Street property, that the former matrimonial home itself might be at risk. 

17. Arguably, if the husband were to be permitted to drawn down the $140,000 he now seeks and is then unable to meet the repayments, even if the Court were to order that the investment properties be sold to either repay the whole or part of that advance of $140,000 or to draw back any amount paid to the husband in excess of his ultimate entitlement, both the husband and wife appear to agree that after payment of the costs of those sales and, according to the husband, payment of capital gains tax, there may be little if any proceeds of sale to satisfy the additional borrowing. 

18. I have also had regard to the fact that the husband, at a time when he says that he is trading inconsistently and is unable to meet his ongoing business and personal commitments, has used funds that might otherwise have been applied to meet those expenses to instead meet his legal fees.  It is his case that $90,000 be paid to his solicitors on account of legal fees.  Those are fees calculated on the basis of the matter proceeding to a final hearing.  Even though it is ultimately a matter for the husband how he applies any moneys he receives by way of property settlement, whether partial property settlement or final orders, I am satisfied that this is a matter I can properly take into account in determining whether it is appropriate to exercise my discretion in favour of making an order for partial property settlement. 

19. Although I am not in any way determining what the husband and wife are entitled to by way of final property settlement, I am not satisfied in circumstances where the husband on his own evidence is experiencing considerable financial uncertainty and says that he presently cannot meet the shortfall in relation to the investment properties but wishes to retain those properties as part of his property settlement, and where any orders I might make could put at risk the wife’s ability to retain the former matrimonial home, that it would be appropriate to exercise the power in s 79 to make the order for partial property settlement sought by the husband. Nor am I satisfied that it would be possible to make any adjustment that might be necessary to take account of any payment to the husband by way of part property settlement, not only defeating the wife’s claim but also precluding the possibility of her retaining the former matrimonial home.

20. In all the circumstances, I propose to dismiss the husband’s application.  However, in circumstances where the husband says he wishes to retain the two investment properties and the boat, I also do not propose to accede to the wife’s application for their sale.  

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 5 March 2014.

Associate: 

Date:  25 July 2014