Fraser and Fraser
[2013] FamCA 843
•30 October 2013
FAMILY COURT OF AUSTRALIA
| FRASER & FRASER | [2013] FamCA 843 |
| FAMILY LAW – PROPERTY – Interim applications by both husband and wife to sell assets – consideration as to relevant matters – on the facts before the case Court not satisfied that orders as sought should be made – applications dismissed. |
| Family Law Act 1975 (Cth) s 114 |
| Strahan & Strahan (Interim property orders) [2009] FamCAFC 166 Marchant [2012] FamCAFC 181 |
| APPLICANT: | Mr Fraser |
| RESPONDENT: | Ms Fraser |
| FILE NUMBER: | PAC | 920 | of | 2013 |
| DATE DELIVERED: | 30 October 2013 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Foster J |
| HEARING DATE: | 14 October 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr MacPherson |
| SOLICITOR FOR THE APPLICANT: | Bell Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Glenbrook Legal Services |
Orders
That the parties’ interim applications as to property are dismissed.
Proceedings are adjourned to a procedural hearing before a Registrar on a date to be fixed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Fraser & Fraser 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 PARRAMATTA |
FILE NUMBER: PAC 920 of 2013
| Mr Fraser |
Applicant
And
| Ms Fraser |
Respondent
REASONS FOR JUDGMENT
The Proceedings
These are proceedings as to property and parenting.
The applicant husband filed an initiating application on 6 March 2013 seeking property orders that in summary provided for a sale and division of the proceeds of sale of the family home at C Town, that the husband retain the parties’ business trading as B Pty Ltd at C Town, and that there be a splitting order in the sum of $35,000 from the husband’s superannuation in favour of the wife.
The husband filed an amended application on 4 September 2013 seeking, in addition to property orders, parenting orders in relation to the children of the marriage that in summary provided that the parties have equal shared parental responsibility for the children, that the children reside primarily with him and that the children spend defined time including alternate weekends and half school holidays with the mother.
On 2 April 2013 the wife filed a response to the husband’s initial application. In that response she sought orders as to property that in summary provided for a sale of the family home with net proceeds payable to the wife, that the husband pay to the wife an additional sum of $70 000, that the wife transfer to the husband her interest in the business at C Town, and that there be a splitting order in the sum of $75 000 from the husband’s superannuation in favour of the wife.
The present application for determination is the husband’s application in a case filed on 4 September 2013. In that application the husband sought interim orders in relation to parenting and interim orders seeking a sale of the family home at C Town. He relied upon his affidavit in support of the application in a case filed on 4 September 2013.
The wife has filed an amended response seeking orders in relation to parenting on 11 October 2013 together with a response to the application in the case and an affidavit in support of that response on the same day.
The matter came before the Court on 14 October 2013 and the parties agreed to interim orders in relation to parenting that in summary provided that the two youngest children live with the mother and that the children spend time with the father as agreed between the mother and father in writing with such writing to include SMS or e-mail correspondence and in default of agreement each alternate weekend from after-school Friday to before school Monday commencing on 25 October 2013.
Background
The husband is 45 years of age and the wife is 49 years of age.
The parties commenced cohabitation in 1990 and married in 1991.
The parties separated on 2 September 2012 at which time the husband vacated the family home.
There are four children of the parties’ marriage; Ms D now aged 21, Ms E now aged 17, F born in 1999 and now aged nearly 14, G born in 2005 and now aged 8.
The two eldest children presently live with the father who is residing in his parents’ home at H Town. The eldest child Ms D gave birth to a child in 2013.
The two youngest children continue to live with the mother in the family home.
At cohabitation
At the commencement of the parties’ cohabitation the husband was in full-time employment as a tradesman He owned a block of land on which the present family home now stands. That land was unencumbered having been purchased by the husband in about 1984 for the sum of $18 000. The husband also had a motor vehicle at that time.
At this time the wife had no assets of any significance and was working through an employment agency doing temporary office assignments. The wife obtained full-time employment shortly after the marriage and remained in that employment until shortly before the birth of the second child in 1996. Thereafter the wife obtained employment at the I Hospital and supplemented her income by home based merchandise sales. After the birth of the third child in late 1999 the wife remained out of salaried employment until 2006 although she continued to sell from home.
Shortly after the commencement of cohabitation the parties’ contracted to construct a home on the husband’s block of land. The parties had saved about $14 000 and the balance of the construction costs of $85 000 was borrowed by way of a secured mortgage over the land. The total cost of construction was about $99 000.
The parties and the children occupied this home throughout the cohabitation.
In 2003 the parties purchased a vacant block of land at C Town for $210 000. Most of the purchase price was funded by mortgage. In early 2007 the parties sold the land for $300 000 making a profit of about $90 000.
In late 2006 the husband left his employer after 22 years of employment. The husband withdrew his non-preserved superannuation entitlement and together with the profit from the sale of the land the parties had a capital sum available to them. With part of those funds they purchased in June 2007 a motor vehicle for $55 000.
The franchise
The parties thereafter purchased a B Pty Ltd franchise in the C Town Shopping Centre for $280 000. The purchase price was fully funded by a commercial loan secured over the matrimonial home from the ANZ Bank. The parties are the directors and sole shareholders of the franchisee company Fraser Pty Ltd.
The franchise agreement was for a period until 17 April 2016 and the parties were granted an initial lease over the business premises until 20 October 2011.
The husband asserts that the business has not been sufficiently remunerative to pay to the parties’ proper wages in their work as proprietors. In the first year of the business the parties had recourse to capital funds available to them and thereafter were able to draw some funds from the business in addition to the business meeting the mortgage payments to the ANZ Bank. The husband says the parties lived a “frugal, but comfortable life”. The wife asserts that drawings from the business were about $750 per week before separation.
The wife worked in the business during school hours and after separation the wife gradually withdrew from the business and in late 2012 ceased to attend at the business.
At the time of separation the parties had approximately $37 000 in joint funds and the wife withdrew those joint funds and placed those funds into accounts in her own name.
Following a request from the husband in February 2013 the wife paid $10 000 into the business account so as to facilitate the business meeting its expenses. The wife has also drawn funds from time to time from the business account unrelated to the business itself.
The franchise extension
The business premises are leased to the parties company by the franchisor that in turn is the primary tenant from Coles who own the shopping centre.
The husband has been in negotiations with the franchisor company over the lease of the business premises since mid-2012. There is presently no written sublease in relation to the business premises and the premises are occupied on a week-to-week basis following the expiration of the initial lease on 20 October 2011. The husband says he has been informed that no fresh lease of the business will be offered until such time as there has been a renovation and refit of the business premises.
A letter of offer to the parties’ franchisee company reveals that a new lease for the period 21 October 2011 to 20 October 2016 has been offered but such lease will contain no option to renew for a further term. The franchisor has offered to extend the period of the existing franchise to align with the proposed new lease of the premises with first an option to renew the franchise agreement for a further term until 19 October 2021 with a second option to renew the franchise for a further term to 19 October 2026.
The offer from the franchisor in respect to the first further extended franchise term to October 2021 is conditional upon the parties being granted a new lease of the business premises to coincide with that extension period, payment of a renewal fee of $20 000 plus GST and refurbishment of the premises to the requirements of the franchisor as at October 2016. The second option term is subject to similar conditions.
The letter of offer also offers in effect a further extension period beyond 19 October 2026 on conditions.
However as a consequence of the initial lease term expiring in October 2011 with, it appears no option to renew, the franchisor as a condition of the grant of a new lease until October 2016 requires an acknowledgement that the franchise premises will be refurbished as soon as possible so as to comply with the present requirements of the franchisor.
The husband says that the cost of the refurbishment as required by the franchisor would be in the order of $50 000 and that he has no available funds to meet that cost and undertake the refurbishments upon which the grant of a new lease term for the premises themselves appears to be based. The franchisor has provided for the purposes of the present application it appears an estimate of the refurbishment costs in the sum of $191 798.
Regrettably the husband has not provided the Court with any further correspondence or information subsequent to the franchisor’s letter of offer dated 5 June 2012. Without further objective documents the Court at present is not satisfied that the request for a present refurbishment is a valid consideration in the context of the grant of a new lease term where the initial franchise term will not expire until 2016. The Court would have expected correspondence on behalf of the parties with the franchisor in relation to this demand. Yet no correspondence subsequent to the initial letter of offer has been provided to the Court.
The expired lease to the premises and the current franchise agreement are not in evidence.
The husband seeks an immediate sale of the matrimonial home that is presently occupied by the wife and the two younger children of the marriage. The mortgage payments on the home are an obligation of the franchise to pay and there is no evidence before the Court that those payments are in arrears.
A valuation of the franchise notes as follows:
a)That the franchise agreement provides for a $200 000 “buyback” clause, however, as the document appears to be undersigned such offer would lapse;
b)The subject business has a $9000 per week turnover, which is not great from a coffee lounge within a major complex;
c)The net profit is poor when compared with like businesses in other centres and the proprietors had not been able to take large drawings and in fact according to the financial statements do not really have a large enough income to support a decent lifestyle;
d)This leads me to wonder whether all of the turnover has been declared as after paying the mortgage there would be little surplus to take cash from the till;
e)The major cause of poor profitability in this instance would appear to be the rent which in 2012 was $61,248 per annum or 28 per cent of gross profit including a 5 per cent of gross turnover escalation clause;
f)An astute purchaser of a business located in a major centre would be very conscious of the rental structure firstly and secondly what type of income is being earned from the business;
g)On this occasion neither of these factors are attractive;
h)The unsigned lease indicates that the premises are to be upgraded upon the change of tenancy another major cost factor to a prospective purchaser.
The husband seeks an order for sale of the home and pending further order an investment of the net proceeds of sale. The result of the sale would be that the business would be relieved of its obligation to pay mortgage payments that are approximately $600 per week.
The wife seeks an interim order for sale of the franchise business. However that business at present has no lease in relation to its premises. A sale in such a circumstance would be problematic.
The circumstances in which the Court can make interim property orders are well settled (Strahan & Strahan(Interim property orders) [2009] FamCAFC 166).
In Marchant [2012] FamCAFC 181 the Full Court considered the principles in the following terms at [24]-[28]:
In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”), the Full Court (Boland, Thackray and O’Ryan JJ) undertook a comprehensive review of the authorities and identified relevant principles and guidelines to be followed in respect of interim property orders pursuant to ss 79 and 80(1)(h) of the Act.
It follows from the joint judgment of Boland and O’Ryan JJ in Strahan that there are two stages to the hearing of such an application and that the first question on an application for such an order is whether the Court should exercise its discretion to entertain the application. Whilst it is not necessary for an applicant to establish compelling circumstances for that question to receive an affirmative answer, it is necessary to establish that it would be appropriate for the Court to exercise the power and the, “...overarching consideration...” as to appropriateness is the interests of justice. Recognising that in the context of s 79 proceedings, the interests of justice will usually be best served by one single and final determination of property orders, it will not be appropriate to exercise the power merely because, on such a final determination, the applicant would receive the interim property sought or in excess of that sought.
We think it is important to highlight that whilst the discussion of the first question in the joint judgment in Strahan includes examples, including by reference to other cases, where the appropriateness criteria would be met, there was no attempt to define or exhaustively identify those circumstances or categories of cases meeting that criteria. That is understandable, given the discretionary nature of the adjudication involved and the wide range and variety of circumstances presented from case to case, so that any such attempt would likely prove to be futile. Nevertheless, the joint judgment in Strahan emphasised both the importance of the interests of justice normally being served by a single and final determination of s 79 orders and that establishing only that the applicant’s ultimate entitlement would cover or exceed the interim claim was not sufficient, on its own, to establish that the application ought be entertained.
It also follows from Strahan that if the first question is answered affirmatively, and the second or substantive stage is reached, because the jurisdiction under s 79 of the Act is being exercised, the provisions of that section must be considered and applied, but with limitations given that it is not the final hearing ([135]). As their Honours Boland and O’Ryan JJ noted at [136], because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate, provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order, the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal, and must be capable of alteration at any time prior to, or as part of, a final exercise of the s 79 power.
However, if it is established that it is likely that the applicant would only be receiving what he or she was entitled to receive when the power was exhausted, that would be sufficient to enable the order sought to be made ([137]).
Under section 114 of the Act the Court can make injunctive orders in relation to property of the parties as it considers proper with respect to the matter to which the proceedings relate. Usually such power is used to preserve or protect property pending hearing. There is no impending risk demonstrated on the evidence. Indeed the evidence as referred to above appears peculiarly incomplete.
In considering the circumstances of the present interim applications as referred to above the Court is not satisfied that orders as sought by both parties appropriate or proper.
The interim applications as to property are both dismissed.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 30 October 2013.
Associate:
Date: 30 October 2013
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