Erington and Erington (No 2)

[2016] FamCA 1104

FAMILY COURT OF AUSTRALIA

ERINGTON & ERINGTON (NO. 2) [2016] FamCA 1104

FAMILY LAW – INJUNCTIONS – Application by the husband for the removal of caveats lodged by the wife or on her behalf – where the husband seeks the removal of caveats over commercial properties so that the properties can be sold to a business associate – where the bank has issued a notice of demand and foreshadowed a mortgagee sale of the commercial properties – interim orders made requiring the wife to remove caveats lodged by her or on her behalf and restraining her from lodging further caveats over the property

Family Law Act 1975 (Cth)

APPLICANT: Mr Erington

RESPONDENT: Ms Erington

FILE NUMBER: MLC 9064 of 2015

DATE DELIVERED: 3 August 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 3 August 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Melilli

SOLICITOR FOR THE APPLICANT: Landers & Rogers

THE RESPONDENT: In person

Orders

1. That the wife by herself, her servants and agents (including but not limited to Solicitors Q Advisory) forthwith remove, at her expense, the caveat number AM… lodged by her or on her behalf, by Ms O and Ms P, Solicitors of Q Advisory.

2. That the wife, her servants and agents be thereafter restrained from lodging any further caveats on the title to any real property in which the husband personally or in his capacity as a director or shareholder of Erington Pty Ltd has a legal or beneficial interest.

3. That the husband’s costs fixed in the sum of $4,684.25 be reserved to the Trial Judge.

4. That paragraphs 1 to 5 inclusive of the husbands Application in a Case filed 16 June 2106 be dismissed.

5. That paragraphs 6 to 15 of the husband’s Amended Application in a Case filed 29 July 2016 be adjourned for hearing in the Senior Registrar’s List at 10.00am on 1 September 2016.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Erington & Erington (No.2) 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 9064  of 2015

Mr Erington

Applicant

And

Ms Erington

Respondent

REASONS FOR JUDGMENT

1. The matter of Erington comes before me today in a Judicial Duty List. 

2. The application before me is the husband’s Application in a Case filed on 16 June 2016.  That application is supported by the husband’s affidavit filed 16 June 2016 and an affidavit from his commercial lawyer, Mr R, filed 27 July 2016.  The husband seeks orders that the wife do all things to remove, at her expense, caveats lodged by her or on her behalf in respect of three commercial properties held by entities controlled by the parties at Suburb E, Suburb F and M Street Suburb E.  A further order is sought that the wife be restrained from lodging any further caveats over the titles to those properties or indeed on the title to any property in which the husband personally or in his capacity as a director or shareholder of Erington Pty Ltd has a legal or beneficial interest. 

3. That application is opposed by the wife.  Whilst she has not filed a Response to an Application in a Case, she has filed an affidavit, that affidavit being her affidavit filed 2 August 2016.  It is clear from reading that affidavit that the wife opposes the orders sought by the husband. 

4. This is the second occasion on which this matter has come before me. The matter was last before me on 14 April 2016, at which time orders were sought by the husband to facilitate the sale of the parties’ businesses. At that time, the position was that the ANZ Bank, the mortgagee, was threatening to foreclose on loan facilities and to appoint receivers to protect its interests. It was against that backdrop that the husband sought orders for the sale of the businesses. I made orders facilitating the sale of those businesses. What has transpired since those orders were made is that the bank has served upon the parties a notice of demand pursuant to s 76 of the Transfer of Land Act 1958 (Vic). That demand is dated 7 April 2016. The default amount claimed by the bank on the demand is $3,833,273. That demand foreshadows that the bank proposes, in the event of the continued default, to effect a mortgagee sale of the commercial properties at Suburb E, Suburb F and M Street.

5. The husband deposes in his affidavit that at the time that demand was served, the total amount of indebtedness by the parties or their entities to the ANZ Bank was in the order of $9.668 million.  I am today informed and it appears to be common ground between the parties, that the debt to the bank as at 29 July totalled $14,692,992.05, being a debt of $9,783,935 with respect to the facilities secured against the commercial properties and other debt totalling in around $4.9 million relating to business bailment facilities.

6. The position of the bank is that it has extended time and placed a moratorium upon its action to force the sale of the properties as a result of negotiations that have been entered into with a Mr I, who is a person who holds an interest in the businesses, he being the person who controls the entities to which the sale of the parties’ interest in the business was effected pursuant to my previous orders. 

7. It is evident from the material filed on behalf of the husband that negotiations have occurred between he, Mr I, and the bank, and that a deed of settlement has been entered into, that deed being dated 20 May 2016.  It is proposed pursuant to that deed that Mr I purchase the three properties the subject of the husband’s application.  The husband seeks a sale of those properties.  The bank supports the sale.  The issue that stands in the way of that sale proceeding is the caveats that have been lodged by or on behalf of the wife over those commercial properties.  Arguably, the wife does not have a caveatable interest in respect of those properties.  No submissions have been made directly in relation to that matter, but on the face of the material before me it would appear that the wife does not in fact have a caveatable interest in relation to the properties.

8. The evidence of the husband’s commercial lawyer sets out clearly the history of the negotiations and the background to the deed of settlement that has been entered into by the husband and Mr I.  Mr I deposes, at paragraph 14 of his affidavit, as to the potential consequences for the parties if that proposed sale does not proceed.  He deposes as follows:-

   If this Honourable Court does not order that the caveat lodged by the Wife be removed and the moratorium period expires, I expect that ANZ will act promptly to enforce its rights to effect mortgagees sales of the commercial real properties.  As detailed in my letter annexed hereto as PJ-2, the costs associated with a mortgagee sale will be substantial, based on my experience of other sales in these circumstances.  The price may also be less than that agreed in the current contracts of sale.  Based on my experience, I would expect the caveat lodged by the Wife to be the subject of a further Application lodged by ANZ, seeking its removal. 

9. It is evident from the affidavit that there are likely significant financial consequences if the sale does not proceed.  There is no evidence put by the wife to contradict that of Mr R.  Accordingly, I accept his evidence as to those potential consequences.

10. The wife, in her affidavit, raises the issue as to her concerns as to the proposed sale not being an arm’s length transaction.  She raises concerns that Mr I is an associate of the husband and that the sale is being effected at a discounted price.  She complains that the properties have not been valued and should have been valued.  In support of that position, she relies upon the orders that were previously made by consent in December 2015 which required that valuations be undertaken.  She seeks the opportunity now to have the properties valued. 

11. The difficulty with that position, as is put on behalf of the husband, is that largely events have overtaken those orders.  The evidence before me is that the parties for a period of more than 12 months have been in ongoing negotiations with the bank.  As I noted in my earlier judgment with respect to the sale of the businesses, there was little dispute at that time that the businesses had been performing badly for a period of at least 12 months.  There was common ground that the business had been in default in respect of its obligations to the ANZ Bank, and that that had been the case since about February 2015, and further, I noted there that the parties had been in negotiations with the ANZ Bank since early 2015 to attempt to resolve the issues around the default under those obligations.

12. The parties have been on notice as to the potential actions of the bank to enforce its rights since May 2015.  The bank has extended a number of indulgences to the parties to try to rectify their position under those loans.  The wife may well feel aggrieved that these properties have never been valued.  However, it was open to her at any time after the orders were made in December 2015 to enforce her rights with respect to valuation.  Until recently she has been represented.  She has been represented in these proceedings by experienced lawyers and experienced counsel in this jurisdiction, including senior counsel.  At this point in time, her complaints as to the failure to value are simply complaints made too late in the circumstances the parties now find themselves in.

13. The orders sought by the husband are effectively orders sought pursuant to s 114 of the Family Law Act1975 (Cth) (“the Act”). The court has wide powers to grant injunctions pending the determination of proceedings. Section 114 of the Act enables the court to make orders as it considers proper for the protection of property. The orders that I am asked to make today are orders for the protection of property. It is protection of property in the sense that it will enable the orderly sale of the properties to be completed so as to minimise the parties’ liabilities under the facilities to the ANZ Bank.

14. I am also asked to make orders requiring the wife’s former solicitor to remove the caveat. Those are orders sought pursuant to s 90AF of the Act. It is clear from exhibit H1 that the application made in respect of the wife’s former lawyers has been served upon Q Advisory. They were first given notice of the application by letter dated 17 June 2016. Subsequent to that correspondence, they were served with the affidavit of Mr R by email dated 27 July 2016. Further, on 1 August 2016, the husband’s solicitors caused Q Advisory to be served with the Amended Application in a Case and affidavit relied upon by the husband. That letter also confirmed that the application would be sought to be proceeded with today. The letter informed Q Advisory as to counsel to be briefed on behalf of the husband. It also noted that “if you seek to be heard in relation to our client’s application, or if you now hold instructions to act for the wife please advise us of counsel briefed by your firm or your client”.

15. There has been no appearance on behalf of Q Advisory today. Section 90AF of the Act provides that the court may make an order or injunction under s 114 binding a third party. Section 90AF(2) provides that the court may, in proceedings under s 114, make any order or grant any injunction that directs a third party to do a thing in relation to the property of a party to the marriage, or alters the rights, liabilities or property interests of a third party in relation to the marriage.

16. The order that I am asked to make today is an order directing that that firm of solicitors cause the withdrawal of a caveat lodged by them on behalf of the wife. Section 90AF(3) of the Act provides that the court may only make an order or grant an injunction under subsection (1) or (2) if the making of the order or the granting of the injunction is reasonably necessary or reasonably appropriate and adapted to effect a division of property between the parties to the marriage and if the order or injunction concerns a debt of a party to the marriage it is not foreseeable at the time that the order is made or the injunction granted that to make the order or grant the injunction would result in a debt not being paid in full.

17. I need to be satisfied that the third party has been accorded procedural fairness in relation to the making of the order or the injunction. I need to be satisfied that in all the circumstances it is proper to make the order or grant the injunction. I need to be satisfied that it is just or convenient to grant the injunction. I am also required to take into account the matters set out in s 90AF(4).

18. Having regard to the chronology which I have outlined earlier in these reasons I am satisfied that it is necessary to make the order as sought.  To do otherwise would be to invite a mortgagee sale of the subject properties; that can only be contrary to the parties’ interests.  It would likely further diminish the pool of assets available to them were the situation allowed to continue and the bank were to enter into a mortgagee sale of the property.

19. I am also satisfied, having regard to the provisions of s 90AF, that, firstly, procedural fairness has been afforded to Q Advisory, and, further, that it is proper and just and convenient that orders be made in those terms. I note Q Advisory had not sought to be heard in relation to these matters.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 3 August 2016.

Associate: 

Date:  3 August 2016