Daniels and Green (No 2)

[2016] FamCA 873

FAMILY COURT OF AUSTRALIA

DANIELS & GREEN (NO 2) [2016] FamCA 873

FAMILY LAW – PROPERTY – interim orders – where the wife seeks orders for interim property settlement – where the application is opposed by the husband – where consideration is given to the relevant legal principles – where an order is made for the sale of property – where all other interim applications are dismissed.

Family Law Act 1975 (Cth) Pt VIIIAA, s 79

Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466

Zschokke & Zschokke (1996) FLC 92-693

APPLICANT:

RESPONDENT:

Ms Daniels

Mr Green

FILE NUMBER: ADC 3227 of 2014

DATE DELIVERED: 14 October 2016

PLACE DELIVERED: 14 October 2016

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 10 October 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Crighton

SOLICITOR FOR THE APPLICANT: Websters Lawyers

COUNSEL FOR THE RESPONDENT: Ms Horvat

SOLICITOR FOR THE RESPONDENT: Budwal Lawyers

Orders

1. That the parties do all things necessary to forthwith place the property situate at D Street, Suburb C in the state of South Australia on the market for sale either by public auction or private treaty upon such terms and conditions as the parties may agree in conjunction with the advice given by the nominated real estate agent, but in the absence of agreement as may be ordered by this Honourable Court.

2. That upon the sale of the D Street property the proceeds of sale after the payment out of the mortgage to Bank SA and the costs of sale including agent’s commission, the balance remaining shall be deposited into an interest bearing account held in the name of both parties with such account to require the joint signature of the parties for withdrawals and both parties be restrained from distributing those monies without a signed written agreement or order of the Court.

3. That the parties will use their best endeavours to request that Bank SA remove any cross or collateral security or guarantee secured over the D Street property and that the husband will do all things necessary to remove any warrant for sale or charge placed on the said property by Mr E.

4. That upon the sale of the D Street property liberty is given to the wife to relist for hearing paragraph 8 (c) of her Application in a Case filed 22 August 2016.

5. That all other interim proceedings be 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 Daniels & Green (No 2) 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

FILE NUMBER: ADC 3227  of 2014

Ms Daniels

Applicant

And

Mr Green
Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. By Amended Initiating Application filed 29 July 2016 Ms Daniels (“the wife”) seeks orders for property settlement and parenting orders in respect of the child F born … 2006 (“the child”).

2. These reasons relate to the property settlement proceedings.  The wife seeks that the non-superannuation property pool be divided 40 per cent to the husband and 60 per cent to her, with the wife to retain the following properties as part of her settlement:-

   ·2 B Street, Suburb C, SA, …

   ·B Street, Suburb C, SA, …

   ·D Street, Suburb C, SA, … (“D Street property”)

   ·G Street, Suburb H, SA, …

3. By Amended Response to the Initiating Application filed 8 July 2016, Mr Green (“the husband”) seeks orders that would divide the property on effectively an equal basis, but with him retaining the following properties:-

   ·B Street, Suburb C

   ·The D Street property

   ·G Street, Suburb H

BACKGROUND

1. The wife was born in 1965 and the husband was born in 1967.  The parties were married in 1990 and separated in December 2012 with a divorce order being made on 7 September 2013.  The period of marriage is 23 years.

2. There is one child of the marriage namely the child F born in 2006.  the child is nearly 10 years of age and currently attends I School.

3. The wife has the current primary care of the child, with orders providing for the child to spend significant and substantial time with the husband.  It appears that the parties are in dispute as to the parenting arrangements.

4. Following separation, the wife initially took up residence in a room at the back of her business premises, but then in September 2014 moved into a property at 2 B Street, Suburb C.  The wife continues to reside in that property.  The husband resides in the property situate at B Street, Suburb C, namely the parties are effectively neighbours.

5. As at the commencement of the proceedings the wife derived a modest income from her business.

6. Over time the parties purchased the real estate that now forms the basis of their property.

7. The husband and his brother established the J Trust (“the trust”) in 2001.  That entity established a property portfolio and set up a business.

8. With the support of the trust, the wife established a business at Suburb K and upon its sale a further business was established.

9. That business has now been sold.

10. The wife is not currently in paid employment.  The husband continues to operate his business and to manage the property portfolio both within the trust and as between the parties.

11. The financial position of the parties is made more complex by the liabilities of the trust being the subject of cross security over the real property both within the trust and held variously by the parties.  Each of the parties have also given guarantees in favour of Bank SA.

HISTORY OF CURRENT PROCEEDINGS

1. On 14 April 2016 Dawe J heard and determined interim proceedings that had been filed in the proceedings and were the subject of transfer to the Family Court of Australia from the Federal Circuit Court.

2. Her Honour’s judgment of 14 April 2016 concerns Applications in a Case filed by the wife on 26 February 2016 and 15 March 2016.  The focus of the March application seeks urgent orders that the husband discharge a mortgage over the property at B Street, Suburb C, that he remove a caveat over the property and that he then enter into negotiations with Bank SA to seek a loan secured over the property to enable the wife to utilise those funds for her own purposes, but in particular to set up a business that she hoped would be financially viable.  The application did not find favour with her Honour who considered that whilst the wife was in a difficult financial position, she was not prepared to make orders which would see the total indebtedness of the parties increase.

3. The parties are in high conflict.  It would be difficult to envisage the husband and wife being able to cooperate sufficiently to satisfy a bank that a loan should be approved in favour of the wife.  There was no business plan presented to her Honour, nor was there any assessment as to the lump sum that the wife would seek.  It would seem problematic in the absence of evidence that establishes that a bank may be receptive to the wife’s proposal to consider that approval would be given where the parties relationship is acrimonious, the wife’s ability to generate income in the absence of a business plan seemingly problematic and against the background of the husband being unlikely to provide support for the wife’s proposed venture.

4. Her Honour dismissed the Applications in a Case together with the responses of the husband and ordered that the parties should bear their own costs. 

5. The husband filed an Application in a Case on 17 May 2016 which sought orders generally in respect of the property of the parties, but in particular sought orders in respect of the property at D Street, Suburb C such that order 4 of orders made by Judge Kelly on 14 January 2016 be discharged and that the husband be the “sole agent and trustee for both parties over the property” and that he be responsible for collecting the rental income and meeting the outgoings including the mortgage in respect of the property.  That application was supported by an affidavit.

6. The short summary is contained in paragraph 23 of the affidavit filed 17 May 2016 in the following terms:-

   It has now come to my attention that [Ms Daniels] has not made the mortgage repayments in respect of the [D Street] property since 1 December 2015 despite collecting the rental income for that property.  Exhibited hereto and marked “AG-5” is a copy of the BankSA letter dated 10 May 2016.

7. The wife admits that because of her precarious financial position she has not been able to support the mortgage and the outgoings and to the extent that the property was tenanted until the end of July 2016, the wife admits that she retained the rental income for her own purposes but was not able to pay the mortgage and the outgoings pursuant to the order.  It is common ground that the mortgage is in arrears in the sum of $7,000 and that Bank SA have indicated their intention to foreclose on the property if the mortgage arrears are not discharged.

8. By Response filed 29 July 2016 the wife opposed the orders sought by the husband, but sought a range of orders including orders that the husband facilitate the payment of a lump sum amount namely $42,735 to the wife from the Trust and that the wife be permitted to place a second registered mortgage on the property at B Street, Suburb C.

9. The proceedings were initially heard by me on 3 August 2016 and argument was adjourned to 16 September 2016.  On that date orders were made that order 3 of the Application in a Case filed 17 May 2016 and an Application in a Case filed 22 August 2016 be adjourned for further hearing to 10 October 2016.  The Application in a Case filed 29 July 2016 was abandoned.

APPLICATION IN A CASE FILED 22 AUGUST 2016

Joinder of J Trust

1. The wife seeks an order that the trust be re-joined to the proceedings.  In the early stages of this matter the trust was a party to the proceedings.  By affidavit filed 24 September 2015 a valuation report in respect of a business valuation of the husband’s business and the trust generally was filed.  Thereafter the trust has not had any involvement.  It is reasonable to assume that there was sufficient property as between the parties to enable a property settlement to occur taking into account the value of the husband’s interest in the trust.

2. The wife did not seek any orders in respect of the trust and accordingly there was no advantage to be gained by the trust being joined.

Lump Sum Spouse Maintenance

1. The wife has made a previous application for spousal maintenance.  It was dismissed.  No further application has been made save and except in the current Application in a Case which seeks urgent spousal maintenance in the lump sum of $42,735.14 payable within seven days by the husband and the trust.

2. It is difficult to understand the basis of the order sought and I formed the early view that whatever was the wife’s intention, it was unlikely that such an order could be made.  The wife’s financial position could not be said to be qualitatively different from that as heard and determined by Judge Kelly in terms of her failed application for spousal maintenance.  The husband’s financial position similarly does not have appeared to have altered.

3. What is at the heart of the wife’s application arises from the provision of the financial statements for the trust which indicates that she has a credit loan account balance of $42,735.  The wife has made a request from the trust for those monies with such demand being refused on the basis that the trust has no capacity from its ready resources to meet such a claim.

4. It may be the case that the wife seeks that the trust be re-joined to seek orders relating to her purported credit loan account entitlement.

5. Whilst the details in the affidavit may be of assistance in terms of the wife’s current financial position, I do not consider that as presently formulated the Court could make any order requiring the husband and the trust to pay to the wife her credit loan account balance.  The wife could of course take action by way of civil remedy but that is not how the matter proceeds in this Court.

B Street, Suburb C

1. The wife again seeks an order which would allow her to place a second registered mortgage against this property for the purpose of borrowing a sum of money to assist in her personal expenses but also to progress her intention to set up another business.

2. I consider that the wife’s application in this regard is no different to that which was heard and determined by Dawe J on 14 April 2016.  There is little or no further information available to the Court and without an indication from the bank that they would consider the wife’s application favourably, I consider the exercise to be barren of hope in circumstances where it is opposed by the husband.

3. No order can or should be made in relation to this aspect of the wife’s application.

D Street, Suburb C

1. The wife seeks an order that the parties do all things necessary to place the D Street property on the market for sale and from the net proceeds she receive $80,000 by way of interim property settlement with the balance to be deposited into an interest bearing account held in the name of the parties and pending further order of the Court.

2. It is this property that is the subject of order 3 of the husband’s Application in a Case filed 17 May 2016.

3. The wife acknowledges that she does not have the means to pay her expenses and those of her daughter together with the mortgage and outgoings on D Street.

4. The property was tenanted until the end of July but has remained untenanted save for a late admission by the wife that of recent date she has privately tenanted the property (as opposed to a tenancy arranged through the appointed agent) for a modest rental sum of $150 per week.  Whilst not stated, it is a reasonable inference that the wife has retained the rental income without deduction for any outgoings or mortgage payments.

5. She frankly admits that she does not have the ability to pay the arrears of the mortgage and confirms that she is aware of a default notice from Bank SA as to outstanding arrears.

6. The D Street property is not without complications.  It is one of the properties that guarantee loans made in favour of the trust.  Furthermore, arising from unrelated litigation the husband and his brother are liable to pay the sum of $160,000 to Mr E.  The judgment sum has resulted in Mr E lodging a warrant for sale or a charge over various properties including D Street.

7. The husband belatedly admits that as far as he is concerned the judgment debt has been paid in full and can offer no explanation nor indicate the action that has been taken to require Mr E to remove the charge and warrant for sale.

8. There is no evidence available that would assist in understand the attitude of Bank SA to removing their cross security (as opposed to the underlying mortgage secured over the property).

9. The issue is raised in an order sought by the wife that the husband and the trust do all things necessary to remove D Street as security for the family trust loans and guarantees and that the wife be removed as a guarantor for the trust loans, with the further implication that if that cannot be achieved then Bank SA should be ordered to transfer their security to other properties pursuant to Part VIIIAA of the Family Law Act 1975 (Cth) (“the Act”).

10. Whilst there has been some initial discussion with the bank, there is no evidence that assists the Court in understanding the bank’s attitude and in any event I am not satisfied that sufficient or proper notice has been given to the bank not just of the application (service has been effected on the bank), but as to effect and consequences of the order that is being sought.

11. The husband resists the wife’s order and is keen to retain the D Street property as part of his property portfolio.

12. In compliance with my earlier order, the husband and the wife have set out what they consider comprises the pool of assets available for division and the details of the orders that each of them seek.

13. As stated, the wife would wish to retain the properties other than D Street, whereas the husband is only prepared for the wife to retain the property in which he currently resides namely, 2 B Street, Suburb C.

14. The pool has not yet been settled and there remains uncertainty in respect of the current value of the husband’s interest in the trust.  Nonetheless, it is likely that the property pool has a net value of between $1 million and $1.2 million.

15. At present the wife does not have control of any of the property and she is effectively without funds.

16. The husband’s position appears to be more certain.  He continues to operate the trust and he derives an income therefrom.  He manages the property of the parties other than the property in which the wife resides.  He acknowledges that he is not in a position to pay spousal maintenance and is only able to continue and avoid financial hardship by the generosity and assistance of his brother and members of his family who have provided funds to enable him to pay his legal fees as and when they fall due.

17. The wife does not have that advantage.

18. The husband is not able from his own resources to fund the outgoings in respect of the D Street property and upon the acknowledgement by his counsel that he would only be able to retain the property by utilising borrowed funds, the issue is raised that any monies borrowed would likely be considered as a further liability in respect of the property pool thereby diminishing the overall value of the parties interests.

19. Notwithstanding that the husband seeks an order that he should transfer his interest in 2 B Street, Suburb C to the wife, that is not a proposal either sought by the wife at this stage or proposed by the husband.

20. Accordingly the wife’s focus is upon D Street as being a property that has equity, is not encumbered by a tenancy, is beyond the financial ability of the parties to fund without recourse to borrowings and hopefully can be the subject of negotiation with the bank for release from the cross security and guarantees currently imposed.

Lump Sum

1. The wife seeks the sum of $42,735.14.  Initially it is sought by way of spousal maintenance, but I am satisfied that the spousal maintenance power should not be invoked in respect of the wife’s application.

2. In any event the lump sum sought has been determined not by any reference to the wife’s needs, but by reference to her credit loan entitlement in the trust.  That is, the lump sum amount is disconnected from the wife’s needs.

3. I am however satisfied that the wife’s financial circumstances are parlous. 

4. Whilst not necessary focussing on any defined lump sum order, I accept that she is dependent on a Centrelink benefit of $270 per fortnight for support.  She receives no child support and she has considerable expenses both for herself but also for the parties daughter’s school fees and extra-curricular activities as set out in paragraph 12 of her affidavit.

5. The wife has health issues and there is a modest ongoing cost for medication.

6. There is no detail in respect of the likely future litigation costs for the wife, but as set out in her Amended Financial Statement filed 29 July 2016, the following liabilities are specified:-

Loan for repayment of tax	$19,179
SA Government fines	$  5,700
Workcover liability	$  2,200
Legal fees to Ms L	$42,000
Debt to Mr M for accounting fees	$  8,000
Centrelink debt	$10,000
I School	$  3,500

1. The wife has incurred additional legal fees since 29 July 2016 and it is reasonable to assume, not dissimilar to the husband, that further litigation costs will be incurred.

1. It is not that the husband disputes the wife’s obligations or that she is entitled to a substantial share of their property (on his case about 50 per cent and between $500,000 and $600,000), but that he has no present ability to provide any interim settlement to the wife and would prefer that the Court hear and determine the property settlement in one hearing rather than across multiple hearings.

2. In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 the Full Court said at [79]:

   The need for a party to proceedings under the Act to seek an order for the provision of funds to enable the payment of his or her legal costs of participating in the proceedings has been recognised for many years. It is a reflection of an important matter that distinguishes litigation under the Act from civil litigation between parties who are not parties to a marriage, namely that “very often the wealth of the parties is controlled by one rather than both of them”: BlueseasInvestments Pty Ltd v Mitchell (1999) FLC 92-856 at 86,128 per Full Court (Nicholson CJ, Lindenmayer and O’Ryan JJ).

3. Following the decision of Zschokke & Zschokke (1996) FLC 92-693 the heads of power the permit the making of an interim order are summarised as follows:

   (i)a maintenance order (either periodic or lump sum) under ss 72 and 74;

   (ii)an order under s 79 as allowed pursuant to s 80(1)(h); and

   (iii)a costs order under s 117.

4. In Zschokke (supra) the Full Court said at 83,217:

   If the order is to be made under s 117(2) then, in our view, the matters contained in s 117(2A) must be addressed, and this would seem to have been recognised, if not expressly at least by implication, by the Full Court in Poletti. In saying this we acknowledge that a number of the paragraphs in the sub-section (notably paragraphs (d) failure by one party to comply with court orders; (e) total lack of success by one party in the proceedings; and (f) existence and terms of an offer for settlement) may not have relevance in an application for an order of the type in question. We also acknowledge that it may well be necessary in such an application for the Court to have regard to a range of relevant matters other than those specified in the sub-section, as is permitted by paragraph (g).

5. An order made by way of partial property settlement is an exercise of power pursuant to the provisions of s 79 but given that it is an interim hearing, the exercise is necessarily confined to the evidence reasonably presented to the Court.  It is well understood that whilst the circumstances are not required to be compelling before an award can be made, regard must be had to the general principle that the Court and parties are better served by one hearing under s 79 than multiple hearings.

6. Accordingly what is required is the determination that it is appropriate and proper to exercise the power taking in to account the following:-

   ·That any order made under s 79 must be just and equitable and provide some underlying consideration of the matters expressed in s 79(4);

   ·That the application is a proper reflection of the disparity between the parties in respect of their relative financial strengths and an incapacity on the part of applicant to meet his/her own legal costs;

   ·The financial circumstances of the parties;

   ·The extent of the property settlement likely to be received by the applicant and whether it will be sufficient to cover the interim lump sum sought.

7. I consider it reasonable that the wife be entitled to an interim settlement of property but at this stage whilst she seeks $80,000 by way of lump sum payment, there is some uncertainty as to whether the net proceeds of sale of D Street would enable such a sum to be paid.

8. The proceedings are in the trial list awaiting a trial date, but on present indications not earlier June 2017.

9. In the absence of any proposal by the husband or any agreement by the parties for an interim distribution of property, it seems that the orders the wife seeks could only be given effect consequent upon the sale of D Street.

10. Notwithstanding it is the husband’s preference to retain this property, in circumstances where to do so will only exacerbate the financial position of the parties and in particular with the present indication of the bank of their intention to foreclose on the property if the arrears are not discharged, it is appropriate to make the order as sought by the wife for the sale of the property at D Street, Suburb C.

11. Until there is a better understanding of the attitude of Bank SA and the ready removal by Mr E of his charge over the property, the extent to which the net proceeds are available to support the order sought by the wife is uncertain.

12. Accordingly, whilst I consider that the sum of $80,000 as sought by the wife is not unreasonable, a final determination should await any negotiations with the bank consequent upon the sale of the property.

Discovery

1. The wife abandons the orders that she seeks in respect of orders 10, 11 and 12 of the application.

Costs and Outgoings for Properties

1. The orders sought by the wife are unnecessary.  The husband pays the outgoings in respect of B Street, Suburb C and there is no need for an order in respect of the joint payment of the mortgage in respect of the D Street property given the order that is proposed for its sale.

2. Whilst unnecessary, there is no opposition by the husband to an order requiring him to maintain the property at B Street, Suburb C in reasonable repair, cleanliness and condition.

3. The wife also seeks that the husband reimburse her for the rates, taxes and levies paid in respect of B Street, Suburb C.  The payment by the wife is now a matter of significant history as has been the subject of judicial comment over the period of the litigation, I do not propose to make an order that would be based upon an effective audit of the financial arrangements between the parties.  The contribution by the wife may well be a factor that is brought to account during the proceedings but it would not be appropriate for it to be dealt with on a piecemeal basis.

CONCLUSION

1. I make orders as appear at the commencement of these reasons.

I certify that the preceding seventy seven (77) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 14 October 2016.

Associate: 

Date:  14 October 2016