Falkner and Stokes

[2017] FamCA 298

FAMILY COURT OF AUSTRALIA

FALKNER & STOKES [2017] FamCA 298

FAMILY LAW – PRACTICE AND PROCEDURE – Injunctive relief to preserve property – not a valuation exercise – wife to elect to take named property at equivalent of genuine offer to purchase as part of her entitlement to final alteration of property interests – costs – costs reserved

APPLICANT: Mr Falkner

RESPONDENT: Ms Stokes

FILE NUMBER: MLC 8267 of 2015

DATE DELIVERED: 23 February 2017

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Bennett J

HEARING DATE: 23 February 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Dickson QC

SOLICITOR FOR THE APPLICANT: Lander & Rogers

COUNSEL FOR THE RESPONDENT: Mr Strum QC with Ms Renwick

SOLICITOR FOR THE RESPONDENT: Taussig Cherrie Fildes

Orders

IT IS ORDERED:

1.That within 14 days the wife elect to retain or not to retain the B Town Property on a final basis at a value described in the Contract of Sale drawn between C Pty Ltd ACN … and D Pty Ltd ACN … and, in the event that the wife does not so elect in writing and communicate such election to the solicitors for the husband within the 14 days specified, the wife do all acts and things necessary to join with the respondent in the sale of the property pursuant to the contract of sale.

2.Otherwise the husband’s application in a case filed on 10 February 2017 and the wife’s response thereto be dismissed NOTING THAT there has been no hearing on the merits of paragraph 4 of the husband’s application.

3.The costs of both parties of and incidental to this day be reserved.

AND IT IS NOTED that this Order does not authorise any other contract of sale and if the sale described above falls through the order above is irrelevant.
AND IT IS FURTHER NOTED that this matter is otherwise set down for final hearing before me on 7 August 2017 at 10.00 am.

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 Falkner & Stokes 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 MELBOURNE

FILE NUMBER: MLC 8267 of 2015

Mr Falkner

Applicant

And

Ms Stokes

Respondent

REASONS FOR JUDGMENT

1. This matter comes before me as an urgent interlocutory application. The final hearing is listed before me in August 2017. I am sitting in Adelaide in a part heard defended matter and the parties and their practitioners are in Melbourne. The hearing was conducted by video link with which we experienced one lengthy interruption. Due to pressure of time, I pronounced orders at the conclusion of the proceedings and said that I would deliver an expanded version of my reasons subsequently. These are those reasons.

2. At the hearing, the husband relied on his affidavit sworn on 8 February 2017 [20] and the wife relied on her affidavit sworn 21 February 2017. Neither party sought to cross examine the other. There were no objections to admissibility of material. These are interim financial proceedings and, as such, s 75 of the Evidence Act 1995 makes the hearsay rule inapplicable if the party that adduces hearsay evidence also adduces evidence of its source.  

3. The matter proceeded on submissions. The oral submissions of senior and junior counsel for the wife were augmented by written submissions dated 23 February 2017[1].

   [1] Exhibit “W1”

4. By an application in a case filed 10 February 2017 the husband seeks that the wife elect to retain or not retain a commercial property as a fixed component of her entitlement to an alteration of property interests between them at value of $6,600,000 and, if the wife elects not to take the commercial property at that price, she cooperate with the husband on an immediate sale of the property to D Pty Ltd (“the purchaser”) for $6,600,000. Alternatively, the husband would accept the wife’s concession or undertaking that, on a final alteration of property interests, she will make an adjustment in his favour for the difference between the sum of $6,600,000 and any lesser subsequent valuation of the commercial property for the purpose of the proceedings.  The wife is not agreeable to either and, by her response to an application in a case filed 21 February 2017, she seeks that the husband’s interim application be dismissed. Each seeks costs against the other, the husband on an indemnity basis.

5. The relevant power, as identified by senior counsel for the husband, is the injunctive power under s 114 of the Family Law Act 1975 (“the Act”) the exercise of which is sought “to preserve and maintain and maximise” the property of the parties. In particular the opportunity to sell the B Town Property at a price of $6.6 million before the prospective purchaser withdraws the offer. S 114(1)(e) of the Act relates to property of the parties to the marriage. The B Town Property is owned by a trust controlled by the parties and not directly by the husband and the wife. I do not understand the wife to take the point that s 114(1)(e) does not apply. If she did so, there is also power under s 114(3) of the Act.

6. The husband is 67 years old, the wife is 57 years old. Both parties are self-employed, the husband is professionally trained and the wife is a consultant. Both are in good health. The parties separated in March 2012 after a relationship of 22 years. There are three children of the marriage. A daughter who is 22 years old and sons who are 21 and 18 years respectively.

7. The husband commenced property proceedings by an application filed on 12 September 2015. The wife’s response was filed on 2 December 2015. The husband sought a division of property in the proportions of 62.5 per cent to himself and 37.5 per cent to the wife[2]. The wife sought to retain 55 per cent of all property[3]. Neither specified the precise financial orders which would implement the proportional division for which each applied and, in particular, neither specified what was to become of the property at E Street, B Town in New South Wales (“the B Town Property”). The B Town Property is the commercial property which is the subject of this interim application.

   [2] By an amended application initiating proceedings filed 9 December 2016 the husband seeks a division of property as 57.5 per cent in his favour and 42.5 per cent to the wife.

   [3] The wife filed an amended response on 13 January 2017.

8. The following are non-contentious facts:-

   a)The property of the parties or either of them, including property of related corporate entities, approximates $15-$20 million.

   b)The B Town Property is owned by the parties through C Pty Ltd (A.C.N. …) as trustee for the Falkner Investment Trust but nothing turns on that for the purpose of this interim application.

   c)The B Town Property was valued by F Valuers on 12 February 2016 at $5.6 million. This was solely at the behest of the husband, it was not a joint valuation.

   d)The requirement for the parties to attend a conciliation conference was dispensed with on 24 November 2015. The parties have since had two mediations with the Hon Mr P Young QC. The last mediation was on 21 December 2016.

   e)On 4 August 2016, the proceedings were listed for final hearing on 6 February 2017. Ultimately that trial date was vacated because of the unforeseen unavailability of a single expert witness, that is, not through the fault of the parties. Paragraph 7 of the Order provided for the parties to choose an appropriately qualified person to value the B Town Property and other properties and, inferentially, to have the valuations conducted.

   f)In September 2016 the wife was informed by the husband that he had received an offer to purchase the B Town Property for $6.9 million. The offer was made by G Pty Ltd.

   g)On 21 September 2016 the solicitors for the wife acknowledged that the B Town Property did not have to be valued because it was to be sold.

   h)On 18 September 2016 Mr H of I Group was appointed as the single expert witness to value the balance of the properties, Property K and Property L.

   i)On 6 December 2016, G Pty Ltd withdrew from the purchase of the B Town Property and its deposit of $68,000 was refunded.

   j)On 22 December 2016 the husband’s solicitors communicated that they had received an offer for the B Town Property from the purchasers at $6.6 million. On 23 December 2016 the wife’s solicitors communicated the wife’s consent to the unconditional sale of the B Town Property. However, within a very short space of time, the wife solicitors sought to qualify the wife’s consent with a condition that she be permitted to retain Property K, as part of her final entitlement to an alteration of property interests. The husband did not agree to the wife retaining Property K whereupon the wife withdrew her consent to the sale of the B Town Property to D.

   k)On 12 January 2017 the wife’s solicitors wrote to the husband’s solicitors stating, inter alia, “Unless the matter resolves by consent, or your client states in open correspondence that he agrees that she retain Property K, Ms [Stokes] will seek at trial that she retain B Town.”

   l)On 13 January 2017 the wife filed an amended response to initiating application in which, relevantly, the wife seeks:-

   4.On or before the Date, the husband and wife each do all such acts, and sign all such documents, as are required to cause FIT to sell [B Town] to an entity to be nominated by the wife at market value (as determined by this Honourable Court).

   5.In the alternative to order 4, or before the Date the husband and wife each do all such acts, and sign all such documents, as are required to cause FIT to sell [Property K] and [Property L] to an entity to be nominated by the wife at market value (as valued by Mr [H] of [I Group]).

   m)On 31 January 2017, D signed an unconditional offer to purchase the B Town Property for $6.6 million.

   n)On 1 February 2017 the wife’s solicitors wrote to the husband’s solicitors stating, inter alia, “Ms [Stokes] confirms that she seeks to retain the [B Town Property], and therefore does not consent to it being sold.”

   o)The purchaser, D Pty Ltd, is the existing tenant/lessee of the B Town Property.

   p)It is conceded that the offer by the purchaser, at $6.6 million is a genuine offer which is capable of acceptance.

   q)It is also conceded that whatever may be the wife’s entitlement on a final alteration of property interests, her entitlement will be enough for her to be able to retain the B Town Property if she wishes to do so.

   r)On 14 February 2017 the husband’s solicitors wrote to the wife’s solicitors inviting the wife to jointly instruct Mr H (valuer) to comment as a matter of urgency and prior to this hearing on D’s offer and the early valuation by F. On 17 February 2017 the wife’s solicitors responded, inter alia, that “In accordance with order 7 of the Orders made on 4 August 2017 (sic) Ms [Stokes] requires that [B Town] be valued by the single expert, Mr [H].” Further, the valuer could be referred to D’s offer but not to the earlier valuation by F.

   s)On 17 February 2017 an opportunity arose wherein Mr H was part way to B Town and could inspect the B Town Property that day. The solicitors for the husband asked the solicitors for the wife if they were agreeable to Mr H inspecting the property, providing a short form opinion with a full valuation to follow. The wife’s then solicitor, Mr M, said that he was unable to get instructions from the wife and that he was not prepared to agree to the inspection. It is not clear to me why instructions had to be sought from the wife for the inspection to take place given that only three days earlier the wife’s solicitor had stated that the wife “required” a valuation by Mr H. Likewise, the statement by the wife that her solicitor “stated that he was not prepared to commit me to the immediate engagement of Mr [H] without my express instructions”[4] is puzzling.

   [4] Affidavit of [Ms Stokes] sworn 21 February 2017 [40.3]

9. The husband does not seek to prevent the wife from retaining the B Town Property but, if she does so, he seeks that she make the declaration now and that it be for a value of $6.6 million. Mr Dickson QC, for the husband was clear that:-

   a)The wife does not have to complete the acquisition now so there would be no immediate financial or administrative consequences for her now or until after the final determination of the financial proceedings.

   b)If the wife elects to take the B Town Property and the property is subsequently found at trial or considered to have a value in excess of $6.6 million, the husband will not seek an adjustment for that increase. Likewise, if the property goes down in value he still wants it to be taken at the $6.6 million which would have been the proceeds of sale to D.

10. There is a dispute about whether the wife or those whom she instructs sighted the information provided by the husband to F in 2016. The wife deposes[5] that she does not know what instructions were provided by the husband to F. In oral submission, senior counsel for the husband states that the wife was copied into the instructions to F and references the relevant correspondence. Senior counsel for the wife did not seek to refute that statement in his subsequent oral submissions. Details around the F valuation are somewhat of a distraction. The above history establishes that the wife was content for the B Town Property to be sold at $6.6 Million as at 23 December 2016. To the extent that the wife augmented her position within a few minutes, that was to make her retention of two other properties as a precondition, there is nothing to indicate that she wished to investigate whether the $6.6 million offer was commercially unsound.

    [5] Affidavit of [Ms Stokes] sworn 21 February 2017 [8,2]

11. I asked, but was not told, whether commission would be payable on a failed sale to D but I am assuming that it would so there is no saving of commission by virtue of the wife retaining the property,

12. The gravamen of the wife’s opposition to the husband’s application, as articulated by Mr Strum QC, seems to be that the wife wants to preserve the valuation of the B Town Property as an issue at trial to be decided on expert evidence. It was submitted that, at trial, the wife should be entitled to argue that the B Town Property was not now, nor is then, worth $6.6 million dollars because:-

    a)She is not agreeable to a sale and therefore there is no willing but not anxious seller;

    b)D’s offer was/is not that of “a willing but not anxious buyer acting at arm’s length.” That is, if expert valuation evidence was accepted at trial which put the current market value of the B Town Property at less than $6.6 million, the fact that D was prepared to pay $6.6 million is indicative of it being an overly anxious buyer. 

13. Mr Strum seeks to make hay on the basis that the test in Spencer v the Commonwealth of Australia does not contemplate an eager but genuine purchaser who may withdraw its offer at any time. The consequences of accepting the wife’s contention is that the valuation issue would be decided at trial with perhaps little regard to the tenant’s admittedly genuine offer of $6.6 million or at least with the potential for the import of it to be much diluted.  I do not consider this to be determinative of the current application but it does illustrate why it is important to identify this application as one concerned with the preservation of property rather than, as Mr Strum seems to regard it, as a premature exercise in the valuation of one of many assets. The property which is to be preserved is the difference between the offer of $6.6 million and the valuation of the B Town Property at a lower figure.

14. The wife’s case was articulated by Mr Strum as if the wife will actually retain the B Town Property as part of her entitlement on a final determination of property interests. However, that is not quite how the wife’s recently filed amended response reads. The wife seeks ownership of the B Town Property as one outcome. However, if the wife does not retain the B Town Property, she seeks to retain two other commercial properties one of which is the Property K. Accordingly, the wife falls short of making a firm commitment to take the B Town Property at all. The husband does not seek to retain the B Town Property so it may well still have to be sold to implement a final alteration of property interests. The husband’s concern is that, if this occurs, the parties will not achieve an offer as high as $6.6 million.

15. I do not agree with Mr Strum’s characterisation of the husband’s application as one in which the husband seeks to have the court make a determination as to valuation of a real property prematurely or prior to the final decision which, he submits, is impermissible.

16. Many of Mr Strum’s written submissions contain accurate statements, legal principle and some examples but they are not, in my view, necessarily apposite to the facts of this case. I will turn briefly to the balance of Mr Strum’s written submissions.

17. I have no difficulty with the statement that sale of property prior to the final hearing should be approached with caution and ordered for various reasons including the purpose of preserving assets (Bearup v Bearup (1993) 114 FLR 214). This case is about preserving the opportunity to sell one of the divisible assets at what appears to be a good price noting that it has not been submitted on behalf of the wife that the B Town Property is worth more than the offer. I am satisfied that the wife has had the wherewithal to have the B Town Property valued either in cooperation with the husband by the single expert witness previously agreed to or by a valuer appointed by her and colloquially referred to as a “shadow” expert.

18. I do not accept Mr Strum’s submission [26] that the court is necessarily ascribing a value to the B Town Property “based solely on an offer to purchase.” The wife offers no valuation evidence in opposition to the husband’s application and does not question the genuine nature of the offer. However, I state again, this interim dispute is not about valuation but about the preservation of assets.

19. Mr Strum’s written submission states [25] “…a forced sale of the [B Town] Property in circumstances where the wife wishes to and can retain that property as part of her overall property settlement, would defeat her substantive claim and be a final order and not an interim order, incapable of reversal at trial”. The submission is misconceived. The sale is not forced. The wife can elect to take the B Town Property if she wishes and, as previously stated, the husband proposes that the actual transfer take effect with the implementation of the final order.  It appears to me that the “substantive claim” to which Mr Strum refers is the wife’s opportunity to argue at the final hearing that the B Town Property is not then, or now, worth $6.6 million and that it should be available to her for a lesser value with no prejudice of the husband.

20. This is a case about preserving the property of the parties. It is self-evident that, if the B Town Property realises a purchase price of $6.6 million now the assets divisible between the parties will be calculable having regard to that amount less, presumably, commissions and costs of sale. However, if the wife successfully blocks the sale and by the time of the trial D is no longer offering $6.6 million and the valuation is, for the sake of argument, found to be $5.6 million, the property divisible between the parties will be diminished.

1. I will grant the relief similar to that sought by the husband.

2. The wife is neither uninformed nor in the dark. The wife has had from 23 December 2016 to consider what the B Town Property is worth, I note that a sale was first contemplated in September 2016 at which time the wife’s solicitors conceded that a valuation was, therefore, not necessary. However, if for whatever reason the wife has not done anything to date to satisfy herself of whether the B Town Property is worth $6.6 million to her, she must be given a proper opportunity to decide.

3. Mr Dickson submits seven days will suffice and thereafter the wife should allow the sale to D to proceed unless she makes an election to retain the property herself. I consider that to be too short.  Fourteen days is fair and I will order accordingly.

4. I am satisfied that this injunctive relief sought by the husband and granted by me is proper. The wife will not be deprived of the B Town Property providing she matches the genuine offer from D because she can stop the sale by electing to receive it at that price. If the wife makes the election, she has nothing to complain about and the husband is protected. If the wife does not elect to take the property, she still shares in the proceeds of sale of the B Town Property at the price of $6.6 million.

5. For the wife to block the sale to D for the genuine offer of $6.6 million and then, as presaged by Mr Strum [45], seek to argue at trial that she should receive the B Town Property for a less than $6.6 million, looks like the wife is endeavouring to get the B Town Property for less than it is worth at the expense of the husband. That would not be proper or just outcome.

6. There are cross applications for costs. I consider that justice between the parties, vis a vis costs, will be best achieved at the final hearing and with the benefit of hindsight. Accordingly, I will reserve the question of costs to the final hearing.

I certify that the preceding twenty six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bennett delivered on 23 February 2017 and settled on 11 May 2017.

Associate: 

Date:  11 May 2017