Fevga and Caprini

[2012] FamCA 272

FAMILY COURT OF AUSTRALIA

FEVGA & CAPRINI [2012] FamCA 272

FAMILY LAW – INJUNCTIONS - Interlocutory injunction relating to the occupation of a vacant property where the mortgagee is pressing.  Breakdown of a de facto relationship and the power of the Court to make interlocutory injunctions relating to properties which include a disputed ownership by a third party as to part.  Question of determining the matter on the balance of convenience.

Family Law Act 1975 (Cth)

ABC v Lennah Game Meats Pty Ltd [2001] HCA 63; (2008) CLR 199
Fego v Northern Territory [1998] HCA 58;  195 CLR 96
Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4^th edit, Chapter 21

APPLICANT: Mr Fevga

RESPONDENT: Ms R Caprini

FILE NUMBER: MLC 7326 of 2011

DATE DELIVERED: 1 May 2012

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 23 April 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Dr Ingleby

SOLICITOR FOR THE APPLICANT: McKean Park

COUNSEL FOR THE RESPONDENT: Mr Salamanca

SOLICITOR FOR THE RESPONDENT: Beswick Foulkes

SOLICITOR FOR THE PROPOSED INTERVENOR: Mr Merlo, Melbourne Legal Chambers

Orders

1. That Ms Y Caprini be added as a party to the proceedings.

2. That Ms Y Caprini file a response to the initiating application filed 16 August 2011 by 4.00pm on 31 May 2012.

3. That the applicant Ms R Caprini file an amended initiating application setting out with precision the orders she is now seeking by 4.00pm on 18 May 2012.

4. That until further order, Mr Fevga have exclusive occupancy of the property at … O Street, Suburb E on condition that whilst he is in occupation, he pay all outstanding payments under the mortgage encumbering the property to the Commonwealth Bank of Australia and continue to make payments under such mortgage as they fall due, together with all outgoings of and with respect to the property, as and when they fall due.

5. That the application in a case filed 14 March 2012 is otherwise dismissed save as to paragraph 3 which is struck out with a right of reinstatement upon application.

6. That the responses to the application in a case filed 19 April 2012 and 20 April 2012 be otherwise dismissed.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Fevga & Caprini 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 7326  of 2011

Mr Fevga

Applicant

And

Ms R Caprini

Respondent

REASONS FOR JUDGMENT

1. By application filed 16 August 2011, Ms R Caprini sought a declaration that this Court had jurisdiction to make an order relating to the division of property arising out of the breakdown of her de facto relationship with Mr Fevga.  That declaration is now unnecessary because Mr Fevga concedes the Court has jurisdiction.

2. In her application, Ms R Caprini sought orders that a real property at O Street, Suburb E (“O Street’) be sold and the proceeds be divided.  In so doing, Ms R Caprini also acknowledged that her mother (the third party) had a 40 per cent interest in O Street.

3. In his response filed 20 December 2011, Mr Fevga sought undefined orders but in any event, did not mention O Street. 

4. The application before me was filed by Mr Fevga (“the applicant”) on 14 March 2012. He sought a number of orders but the only relevant ones for determination were that the third party be joined as a party to the proceedings pursuant to Rule 6.03 of the Family Law rules 2004 and that he have liberty to occupy O Street pending the determination of the proceedings providing that he be responsible for all repayments of the mortgage and outgoings.

5. There was no dispute that the third party needed to be joined.  She filed a response to the applicant’s application and appeared by her solicitor.

6. Ms R Caprini (“the respondent”) and also the third party sought orders that O Street be tenanted through a commercial agent and that the rent be used to pay the mortgage.  They further sought that 40 per cent of the rental be paid to the third party as a result of her ownership. 

7. The issue was primarily who should occupy O Street pending the ultimate determination of the substantive property proceedings. 

8. The applicant who was represented by Dr Ingleby of counsel, relied upon an affidavit in which he said he and the respondent separated in November 2010 but he did not vacate O Street until February 2011.  He said he did so in the expectation that he was to receive a settlement from its expected sale.  Since February 2011, O Street has been vacant.  The property was not sold and there was a breakdown of settlement discussions with the respondent.  He said he paid all of the mortgage payments until December 2011.  No-one has paid the mortgage payments since.

9. In early February 2012, the respondent requested the property be tenanted.  The applicant responded proposing that he would occupy it and pay the entirety of the mortgage repayments.  The respondent refused his request.

10. As part of the substantive proceedings the applicant alleged that representations were made to him that if he put money into the development of O Street at a time when he had intended to put his money into another property, O Street would be made his and that of the respondent.  That is not how the legal title was later shown.  Attached to his affidavit was a statement of claim which lacks particularity and I understand is intended to mean that the applicant alleges that he and the respondent own the whole property not just 60 per cent.

11. To undertake the development or construction on O Street, a joint borrowing by the applicant and the respondent occurred.  That is the mortgage which currently encumbers O Street.  It transpires that the mortgage is guaranteed by the third party.

12. It is clear on the uncontested evidence that the property has remained vacant now for over a year and the mortgage remains unpaid and demands are being made by the mortgagee.

13. The respondent who was represented by Mr Salamanca of counsel relied upon an affidavit as well.  She referred to the breakdown of discussions and the failure of a conciliation conference to resolve the matter.  She complained that there were significant arrears owing to the mortgagee and she and the third party wanted to rent out the property. 

14. The respondent said that with the assistance of her father, O Street which had been in the family’s property for many years was meticulously refurbished and reinstated to its original condition.  That however appears to have been with the assistance of a significant sum of money put into it by the applicant and money borrowed from the mortgagee as a result of the joint borrowing.

15. The respondent complained that the applicant had used the premises as a place of accommodation for his clients and ran his business from there.  She said he was often away and left the premises in the possession of “transient client and other persons” (sic) who did not look after it and caused significant damage.  She referred to his other uses of it.

16. This hearing was determined on the papers and as such, I was not in a position to make any finding as to fact.  To the extent that the allegations to which the respondent referred were made, the applicant denied them.  I am not in the position to make any finding about whether the applicant acted as asserted and in my view, it does not affect the determination I propose to make. 

17. The respondent went on to say that she had made inquiries of an agent about what money could be achieved and although no objection was taken to the hearsay nature of the evidence, counsel for the applicant pointed to the fact that whilst the agent gave an indication as to what was the “mid-point” of the potential rent value of the property, no tenant had been proffered.  In my view Dr Ingleby was right.  Giving an indication as to the value of the rental potential is not evidence that assists the respondent.  As I pointed out in discussion, there are further problems associated with the impact of the rent on taxation issues and outgoings.  I am therefore unaware of what the real effect of putting a tenant into the property would be even if one was available. 

18. On 7 March 2012, the Commonwealth Bank as mortgagee served notice to pay.  It was the respondent’s position then that she could not rent out the property without the applicant’s consent and as a consequence, the “stand-off” continued until these proceedings. 

19. The third party represented by her solicitor Mr Merlo, relied upon an affidavit not only to join the proceedings but to seek orders as well.  She set out the background of the ownership of the land and in particular her attachment to it.  It has to be acknowledged however that as late as August 2011, the respondent was seeking for the property to be sold.  Little weight must therefore be given to this late development of attachment.

20. The third party also said that the respondent had no capacity to make the payments and therefore she required the applicant to do so failing which there would be a mortgagee’s sale.  I note however that despite the fact that she is a guarantor, nothing was done by her about making the payments for the many months that have passed.

21. The third party then set out a series of objections to the applicant having possession including that he would not keep it in a good and proper state of repair, that he was absent for frequent and lengthy periods of time and had left adolescent children alone and unsupervised when he was away.  These children apparently had parties and a number of people also stayed at the property when he vacated.  None of this evidence was time-dated and curiously, no steps had been taken even after the proceedings were commenced in this Court until now by the third party to rectify her concerns.  She went on to say that the applicant had not done even the most basic of maintenance and she and her husband had had to pay for contractors to clean up and repair the property when he vacated.  She complained also that the applicant had not contributed during his occupation to the payment of utilities and outgoings.

22. The applicant acknowledged that this was an interlocutory application and as such all of those matters about which both the respondent and the third party complained could be adjusted at trial.

23. Each member of counsel said that the basis upon which the determination was to be made was that this was an asset protection type of order.  In reality, it was in the nature of an interlocutory injunction. 

24. Section 114(2A) of the Family Law Act 1975 (Cth) (“the Act”) provides that in a de facto financial cause (and this is such a case) the Court may make such order or grant such injunction as it considers proper with respect to the use or occupancy of a specified residence of the parties to the relationship.  To the extent that this property is no longer (and it has not been for a long while) the residence of either of the parties to the relationship, the provisions then extend to property generally.  That legislative provision cannot apply to the third party who seeks orders of an injunctive nature in her own right nor can it apply to the applicant who seeks orders against the third party in his own right.

25. Section 90TA extends the reach of Part VIIIAA concerning injunctions against third parties to cases involving de facto financial causes.  That provides that if there are extant proceedings relating to an injunction within the de facto financial cause, the powers in s 90SS may be used to grant “any other” injunction which the Court thinks necessary to do justice.  That includes orders against a third party from doing “a thing in relation to” the property of a party to the de facto relationship.  The injunction can only be granted if it is necessary (see s 90TA(3)(c)) but for the sake of clarity, the section provides that the power in s 90SS is not limited by what is set out in the amended s 90AF(1) and (2).  The Court is obliged to consider a number of matters before affecting the rights of the third party (see s 90AF(4)) but it was not suggested by any party that any of those provisions applied to prevent the order being made.

26. The legislative provisions therefore empower the Court to make an injunction in favour of a party to the de facto relationship against the third party.  Once the third party becomes a party to the proceedings (as has now occurred), the powers of the Court are extended to enable applications to be made by them for injunctive orders (see ss 90SS(1)(k) and 90TA(3)(c)).

27. A statutory injunction such as those just referred to extends the reach and power of the traditional common law injunctions (see the discussion in Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4^th edit, Chapter 21 and specifically 21-535).

28. The combined effect of the wide power and the extraordinary discretionary exercise indicated by such legislative phrases as “it considers proper”, “necessary to make to do justice” and “necessary to grant the injunction to do justice” means the Court is largely unguided about what is an appropriate circumstance in which to make orders that deny owners their legal rights.

29. Specifically in relation to interlocutory injunctions, the purpose has traditionally been to keep matters unaltered or without a prospect of a change to rights until they can be properly determined at trial; that is, to preserve the subject of the dispute.  In addition, it has traditionally been the position that the foundation for interlocutory relief is in showing the existence that a substantive right is the matter in dispute that must be protected (see ABC v Lennah Game Meats Pty Ltd [2001] HCA 63; (2008) CLR 199).

30. Here, the three parties assert a right to occupation and control by virtue of at least their legal ownership of the property.  The applicant asserts an equitable ownership to the exclusion of the third party but at least for the interlocutory hearing, the legal right of that third party is apparent from the title.

31. Once the existence of a genuine dispute about legal or equitable rights is apparent, the discretion should be exercised on the balance of convenience presuming that any financial or other injustice can be rectified at trial.  That discretion must factor in whether (at least in the case of the third party) adequate compensation can be later awarded if the injunction is granted on an interlocutory basis.

32. This case requires consideration of the effect of such an order on the parties and that includes consideration of questions of irreparable harm or special damage if granted or not granted.  It includes questions of general hardship.  (See Fego v Northern Territory [1998] HCA 58; 195 CLR 96 at Note 121).

33. Consideration must be given to how any advantage could be rectified at trial.  Importantly, the balance of convenience must not lead to injustice.

34. The applicant’s position is that he will occupy the property and pay all of the mortgage commitments.  Leaving aside her scepticism, the third party’s position is that she will miss out on a potential rent entitlement.  However, that rental entitlement has never before been pursued.  It could be rectified at trial if the third party was successful in denying the applicant’s claim in equity that he and the respondent are the owners of the property.  The applicant claims a greater entitlement than the third party and has paid a significant amount in mortgage payments even though he was not in occupation.  That must be seen as his responsibility anyway because he was a genuine borrower under the mortgage but it may be a contribution argument at trial. 

35. The respondent’s position was that she wanted the property tenanted because of her concern about losing it to the mortgagee in circumstances where she wanted to retain it and buy out the applicant.  That was not her position on the original application which remains unaltered despite her claim now to the contrary.  A conditional order in favour of the applicant solves her problem.  The respondent and the third party both assert an attachment to the land but that too flies in the face of the nature of the claim and what steps had been taken to date.

36. The respondent’s claim now in seeking to retain the property, has to also be viewed in the context of her request that the applicant pay the mortgage and the third party’s assertion that the respondent could not make the payment because of her impecuniosity. 

37. The property has remained vacant for a long time so that any hardship to the respondent must now be seen as modest.  To the extent there is a financial disadvantage by being excluded from O Street now, provided the mortgage is paid, any issue can be rectified at trial.

38. The third party’s position, in addition to that just mentioned is that the applicant allowed the property to deteriorate requiring expense and effort on her part.  That too is a matter that can be rectified at trial.

39. The respondent’s position supported by the third party was that between them, she and the third party had 70 per cent of the legal entitlement to the property.  That argument has no logical support in law.  The applicant and the respondent are joint tenants according to the title and as such have an undefined entitlement until the tenancy is severed.  No party argued that it had been severed even though their individual and collective conduct may have had that effect.

40. When all of those factors are balanced, convenience favours the applicant.  Any disadvantage to the respondent and the third party can be subsequently rectified.

41. To the extent that the injunction should attract conditions, it must be said that the applicant has offered to bring up to date, pay and keep up to date, the mortgage commitment together with all outgoings on the property pending trial.  There is no disadvantage to him in that order because apart from offering it, he is entitled to argue a contribution at trial in the same way that the respondent and the third party can argue that he has had occupation.  Should the applicant obtain some financial advantage for himself by allowing others to live in the property which was the concern of the third party, that too can be rectified at trial as can any issue associated with damage that might reduce the value of O Street.

42. Interlocutory injunctions are intended as a holding position pending trial but that too can be altered pending the trial should either the circumstances change or the conditions of orders not be met.

43. Accordingly, it is proper and just in this case to grant the application of the applicant and to dismiss the response of both the respondent and the third party save for the orders to which I have earlier referred.

I certify that the preceding Forty Three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 1 May 2012.

Associate: 

Date:  1 May 2012