Foley and Hailes (No. 3)

[2014] FamCA 1164

FAMILY COURT OF AUSTRALIA

FOLEY & HAILES (NO. 3) [2014] FamCA 1164

FAMILY LAW – PROPERTY – INTERIM ORDERS – Where the wife sought orders for the sale of the former matrimonial home – In circumstances where both mortgage payments and council rates for the property are in arrears – Orders made for the sale of the property.

Family Law Act 1975 (Cth)

APPLICANT: Ms Foley

RESPONDENT: Mr Hailes

FILE NUMBER: MLC 1774 of 2014

DATE DELIVERED: 22 December 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 2 December 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr King

SOLICITOR FOR THE APPLICANT: Argent Law

COUNSEL FOR THE RESPONDENT: Mr Kanarev

SOLICITOR FOR THE RESPONDENT: Slater & Gordon

Orders

1. That forthwith the applicant and the respondent do all such acts and things as may be required to sell the property situate at B Street, C Town, Victoria 3…, being the property more particularly described in Volume …, Folio … (“B Street”), by public auction (“the sale”).

2. That the proceeds of the sale be applied as follows:-

   (a)First, the payment of selling expenses;

   (b)Second, in payment of outstanding rates, taxes and other outgoings;

   (c)Third, to discharge the mortgages secured over the title to B Street including but not limited to the Westpac mortgage loan accounts …58 and …84; and

   (d)Fourth, the balance then remaining be paid into an interest-bearing account in the name of the applicant and the respondent to be held upon trust for them by the lawyer for the applicant until further order of this Court or agreement in writing of the parties.

3. That the selling agent be as agreed between the parties and failing agreement by 19 December 2014 be that nominated by the President of the Real Estate Institute of Victoria or his nominee.

4. That the applicant and the respondent do all things necessary to appoint their lawyers to jointly act on behalf of the parties with respect to the sale.

5. That the reserve price of B Street be as agreed between the parties and failing agreement be as nominated by the selling agent.

6. That pending settlement of the sale the respondent do all acts and things necessary to keep B Street in good order and condition.

7. That no later than 14 days prior to settlement of the sale, the respondent vacate B Street.

8. That the parties do all things necessary and sign all documents to give effect to this order.

9. That there be liberty to apply with respect to the sale.

10. That the interim orders sought in the applicant’s Amended Initiating Application filed 22 July 2014 be dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Foley & Hailes (No. 3) 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 1774 of 2014

Ms Foley

Applicant

And

Mr Hailes

Respondent

REASONS FOR JUDGMENT

Introduction

1. These are my reasons for judgment with respect to orders made by me on 2 December, 2014 following a hearing in the Judicial Duty List.

2. On 22 July 2014 the wife filed an amended initiating application in which she sought inter alia, interim orders that the former matrimonial home at C Town be sold. The husband opposed that application.

3. The wife’s interim application was listed before Bennett J in a Judicial Duty List.  There was no appearance by the husband that day.  As a consequence, procedural orders were made for the matter to proceed on an undefended basis and the matter was otherwise adjourned for hearing before Bennett J on 26 August, 2014.

4. On 26 August 2014 the husband appeared at the hearing before Justice Bennett.  He informed the Court that he wished to participate in the proceedings and to that end sought the opportunity to file documents.  Bennett J adjourned the matter on the issue of the wife’s interim application for the sole use and occupation or alternatively a sale of the former matrimonial home to 3 October 2014 and made further orders extending the time for the filing of the husband’s response and financial statement and any accompanying affidavit upon which he wishes to rely on the adjourned date to 12.00 noon on Friday 12 September 2014.  Further orders were made for the wife to file and serve any affidavit material upon which she relies in reply to the husband’s response by not later than 12.00 noon on Friday 26 September 2014.

5. The husband did file material in response to the wife’s amended initiating application in compliance with Bennett J’s orders of 26 August 2014.  In his Response to Initiating Application filed 12 September 2014 the husband sought that:-

   ·the wife’s amended initiating application be summarily dismissed.

   ·the applicant do all acts and sign all documents as are necessary to transfer to the respondent, at the respondent’s expense, all of the Applicant’s right to title and interest in the former matrimonial home.

   ·the respondent indemnify the applicant against all claims, demands, proceedings and judgments in respect of liability pursuant to the Westpac mortgage (…6P) and all other rates, taxes and other outgoings with respect to the property whatsoever nature and kind.

6. The interim application did not proceed in the judicial duty list on 3 October 2014 and was adjourned for hearing in the judicial duty list before me on 2 December 2014.

7. The matter was conducted on the papers.  Each party relied upon the material referred to below and their counsel’s oral submissions.  The onus of proof lies with the applicant, in this case the wife, and the standard of proof is the balance of probabilities.  However, given the nature of the hearing, contentious facts cannot be determined without the evidence being properly tested.  Accordingly, in determining the matter, I have relied upon only those facts which are agreed or not in issue.

MATERIAL RELIED UPON 

1. The wife relied upon the following material in support of her application:-

   ·Amended initiating application filed 22 July 2014;

   ·Her affidavit filed 22 July, 2014;

   ·Her affidavit filed 13 November, 2014;

   ·Her affidavit filed 2 December 2014; and

   ·Her financial statement filed 3 March, 2014.

2. The husband relied upon the following material:-

   ·response to initiating application filed 12 September, 2014;

   ·his affidavit filed 12 September, 2014; and

   ·his financial statement filed 12 September, 2014.

Background

1. The applicant wife is Ms Foley aged 27 years. The wife describes her occupation as that of “[a role in the entertainment industry]”; she deposes to additionally having spent some time employed in a sports industry role. That she worked in a sports industry role is disputed by the husband.

2. The respondent husband is Mr Hailes.  He is aged 44 and until 2011, was self-employed in the construction industry. At the time of the hearing before me, the husband was unemployed and had been so for the previous 12 months.

3. The parties met at the wife’s place of employment and married, the wife says, some five to seven days later in July 2010. That the parties were ever married is disputed by the husband. He deposes that the parties underwent a religious Muslim ceremony in July 2010, a week after they met, but that they did not obtain or apply for a marriage certificate. For the purposes of the hearing before me, nothing turns on that fact of whether the parties are or are not validly married. The parties separated in November 2013.

4. The former matrimonial home at C Town in Victoria is the site of a training business from which the wife taught for some time.

Evidence

1. It is the wife’s case that the mortgage on the C Town property is in arrears, that the mortgage liability is increasing and that this is adversely affecting the credit rating of both parties.

2. The parties purchased the C Town property jointly in November 2011 for the sum of $1.7 million.  In order to facilitate the purchase the parties borrowed approximately $1.3 million from Westpac Bank which is secured against the title to the C Town property by way of first registered mortgage (“the mortgage”).

3. The wife alleges that she owned a property in Suburb A at the commencement of the parties’ relationship.  She deposes that that property was sold in December 2010 and the net proceeds of sale, being the sum of $130,000 were paid to an associate of the husband. 

4. The husband alleges that prior to the commencement of their relationship he sold his interest in a property at Suburb H and received net proceeds of $500,000 from that sale.  The wife does not admit that allegation.

5. The husband is critical of the wife’s conduct during the marriage and alleges that she was addicted to prescription and non-prescription drugs and alcohol and that money he had given to her to pay debts (including the council rates) was used by her to service her drug habit.  Whilst the wife admits that the parties took illicit substances during the relationship she denies the allegation with respect to money alleged to have been given to her by the husband.

6. The evidence of each of the parties is untested.  Accordingly, I am not in a position to make findings with respect to those matters.

7. In her affidavit filed 22 July 2014 the wife deposes that the husband has lived at C Town since separation.  At paragraph 39 of that affidavit the wife deposes that the parties are in default under the mortgage.  At paragraph 41, the wife deposes that she received a Notice of Default from the Westpac Group on 11 Jun, 2014.  A copy of that notice is annexure CF-4 to that affidavit.  At that time the arrears under the mortgage was in excess of $18,000.

8. The husband responded to the wife’s affidavit by affidavit filed 12 September 2014.  With respect to the wife’s allegations regarding the parties’ default under the mortgage, at paragraph 36 of that affidavit he responds as follows:-

   I received one default notice from Westpac bank dated 11 June 2014.  At that time I was struggling to pay the mortgage as I was not working … At this time I was about $16,000 in arrears in the mortgage repayments.  I contacted Westpac bank and they added this amount to the mortgage and also fixed the loan on an interest only basis.  In any event, once ….I started to receive some rent monies I made a lump sum payment of $6,500 to cover the mortgage arrears.  I am receiving regular rent now and therefore the Westpac loan is up to date.

9. At the hearing before Thornton J on 3 October 2014 there was a notation to the orders made that day which provides:-

   A.The husband asserts that the mortgage payments on the former matrimonial home are substantially up to date.

10. At the commencement of the hearing it was submitted on behalf of the wife that notwithstanding the husband’s sworn evidence (as contained in his September affidavit) and the assertion of the husband as set out in the October 2014 orders, the mortgage continues to be in arrears.  Accordingly, the wife sought orders for the sale of the C Town property.

11. During the luncheon adjournment the wife attended Westpac Bank to obtain current balances with respect to the Westpac loans.  Following lunch the wife sought leave to file an affidavit with respect to the current loan balances. Counsel for the husband did not object to the filing of that affidavit and accordingly I granted leave to the wife to file that document.

12. Bank statements annexed to the wife’s affidavit filed 2 December 2014 disclose that the C Town property secures two loans in the names of both the wife and the husband. The current loan balances are $1,025.454.22 on account …92 and $353,050.23 on account …84.  Both the loans are in arrears.  The first loan is in arrears in the amount of $15,255.97 and the second is in arrears in the amount of $58.29.

13. The wife made additional enquiries of the J Council to determine what amounts are owed in respect of the rates on the C Town property.  The wife was issued with a Rate Statement which she annexed to her affidavit filed that day. That statement shows the rates on the former matrimonial property to be in arrears in the amount of $28,353.20.

14. The husband did not dispute the evidence of the wife that the Westpac loans and the Council rates are in arrears.

15. It was submitted on behalf of the wife that notwithstanding the evidence of the husband and the notation to the October 2014 orders, the Westpac loans have been in arrears for many months.  The husband did not challenge that submission.  The wife seeks an order for sale of C Town to avoid a mortgagee sale of that property and the potential damage that the continuing default under the mortgage may have upon her credit rating.

16. The husband opposed the sale.   He seeks final orders for a transfer of the C Town property from the wife.

17. It was submitted on behalf of the husband that he proposed to return to work in the construction industry and that upon his return to work and receipt of income therefrom, the arrears under the mortgage would be discharged by 31 December 2014. That submission was made on behalf of the husband in circumstances where he deposes at paragraph 63 of his affidavit filed 12 September, 2014 as follows:-

    About 7 years ago I had back surgery.  I had three prolapsed discs which paralysed me from the waist down.  I still suffer from back pain and I cannot do the manual labour as I used to.  I am therefore relying on the [rental] income I generate from the [C Town] property to live.

18. In light of the husband’s sworn evidence I am satisfied there is no basis for the submission made on behalf of the husband as to his newly formed intention to return to work.  The reality is that the husband has not worked for a significant period and has a debilitating back injury which has prevented him from working for some years. 

19. The husband has been in arrears under the mortgage since May 2014 and payments with respect to Council rates have also been in arrears since the parties’ separation. 

20. The husband has been on notice as to the wife’s application to sell the property since 22 July 2014.  That application has been before the Court on 6 August 2014, 26 August 2014 and 3 October 2014.  Having regard to the history of the application I am satisfied that the husband has had ample opportunity to bring payments under the mortgage and Council rates up to date; he has failed to do so.

21. The husband’s only source of income is rent received from the training business operated at the C Town property.  He deposes that the rent received by him is applied towards his living expenses and the mortgage.  The husband discloses in Part D of his Financial Statement that he receives rent of $1,750 per week.  At Part G of his Financial Statement he discloses that the mortgage liability to Westpac Bank is $1,750 per week.  On the basis of that evidence I am satisfied that the rental received by the husband is insufficient to service the parties’ mortgage liability, rates and outgoings on the property and provide for the husband’s living expenses.

22. The wife’s Financial Statement filed 3 March 2014 discloses that she has an income of $800 per week and that her expenses (including rent of $450 per week) total $760 per week.  On the basis of that evidence, I am satisfied that the wife is not in a position to contribute to the mortgage.

LEGAL PRINCIPLES

1. The Court has wide powers to grant injunctions pending the determination of the proceedings. Section 114 of the Family Law Act 1975 (Cth) (“the Act”) enables the Court to make such orders as it considers proper for the protection of property.

2. The Court also has powers to make interim property orders pursuant to s 79 of the Act. In Strahan & Strahan(Interim property orders) (2011) FLC 93-446 (“Strahan”) it was recognised by the Full Court that there may be circumstances which justify the exercise of the power pursuant to ss 79 and 80(1)(h) prior to the final hearing. Boland and O’Ryan JJ note at paragraph 118 of their judgment that the approach to be taken to the hearing of an application for an interim property settlement order is as follows:-

   There are two stages to the hearing of such an application where the power is to be exercised pursuant to s 80(1)(h) of the Act. This is recognised by the fact that although the power under s 79 should ordinarily be exercised on a once-only basis, “circumstances may arise before there can be a final hearing” where the power is exercised. Thus the first step is to resolve whether to exercise the power before a final hearing and if it is resolved to do so then the second step involves the exercise of that power.

3. At paragraph 132 the Full Court, whilst acknowledging that it is preferable that there be one final hearing in s 79 proceedings, considered the circumstances in which the Court might exercise its power to make orders for partial property settlement and concluded:-

   …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.

4. The principal asset of the parties is the C Town property, which as noted above, was acquired by them during the marriage.  That property is said to be valued at in excess of $1.7 million although there is no admissible evidence as to its value.  The parties’ mortgage liability is approximately $1.38 million.  Hence, assuming the property is valued at $1.7 million the parties’ equity in the C Town property is likely to be slightly in excess of $300,000.

5. It is evident from the affidavit material filed to date that there is a serious conflict between the parties as to their respective contributions.  Those matters will be determined upon a hearing of evidence at the final hearing. 

6. In the interim, the wife submits that the orders for sale are necessary in order to protect and preserve the parties’ property pending the final hearing.  In circumstances where the husband has demonstrated his inability to meet the current mortgage liability, it was submitted that there is little prospect of him being able to retain the property at the conclusion of these proceedings in circumstances where it is likely that he will be required to refinance those liabilities and in addition, make a payment to the wife.

7. Having regard to the history of loan payments with respect to the C Town property I accept that submission; the parties have fallen into arrears under the mortgage and with respect to Council rates payable on the property.  That has been the position since at least May 2014.  The mortgagee has served a default notice on the parties.  Notwithstanding that notice and the spectre of these proceedings the husband has not been in a position to discharge those arrears.  Having regard to his employment history and his evidence as to his prospects for future employment, I am satisfied that it is unlikely that he will be in a position to discharge the arrears payable to the bank or the council.

8. A mortgagee sale of the C Town property is likely to significantly erode the parties’ equity in the property.  Further, a sale of the property in those circumstances may adversely impact upon the parties’ credit rating.  Having regard to those matters I am satisfied that it is appropriate that there be a sale of the property in the terms of the orders made by me dated 2 December 2014 so as to preserve and protect the property of the parties.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 22 December 2014.

Associate: 

Date:  22 December 2014