Gaines & Cotton

[2021] FCCA 1586

FEDERAL CIRCUIT COURT OF AUSTRALIA

Gaines & Cotton [2021] FCCA 1586

File number(s):	NCC 3092 of 2020
Judgment of:	JUDGE COSTIGAN
Date of judgment:	13 July 2021
Catchwords:	FAMILY LAW – interim property orders – whether the Court has jurisdiction to make property orders for an application proposedly filed out of time – whether to order the sale of the matrimonial property
Legislation:	Family Law Act 1975 (Cth), ss 44(5), 44(6)
Cases cited:	Strahan & Strahan [2009] FamCAFC 166; [2009] FLC 93-466; (2009) 241 FLR 1; (2009) 42 Fam LR 203 Osferatu & Osferatu [2012] FamCA 408
Number of paragraphs:	64
Date of last submission/s:	6 July 2021
Date of hearing:	6 July 2021
Place:	Newcastle
Solicitor for the Applicant:	Gillard Family Lawyers
Solicitor for the Respondent:	Toronto Legal

ORDERS

NCC 3092 of 2020

BETWEEN:

MR GAINES

Applicant

AND:

MS COTTON

Respondent

ORDER MADE BY:	JUDGE COSTIGAN
DATE OF ORDER:	13 JULY 2021

THE COURT ORDERS PENDING FURTHER ORDERS THAT:

1.Insofar as it is necessary, time for the filing of the applicant’s Initiating Application is extended to 19 August 2020.

2.The parties must do all acts and things and sign all documents, writings and instruments necessary to sell the property at B Street, Suburb C in the State of New South Wales (‘the property’) and in doing so must do the following:

(a)Within 7 days of the date of these Orders, the applicant provide the respondent with a list of three (3) real estate agents nominated by the applicant for the purposes of effecting the sale and within a further 7 days, the respondent shall nominate one of the real estate agents to have conduct of the sale (‘the agent’);

(b)The list price of the property will be such list price as the parties mutually agree and in the absence of any agreement reached, the price nominated as market value by the agent;

(c)Instruct an agreed solicitor/conveyancer to prepare the Contract for Sale for the property;

(d)Sign all documents requested by the agent for the sale of the property; and

(e)Sign the Contract for Sale and any other necessary documents as requested by the solicitor/conveyancer.

3.The respondent must cooperate in every way with the agent including but not limited to:

(a)making house keys available to the agent;

(b)allowing the inspection of the property at all reasonable times requested by the agent;

(c)doing or saying nothing to hinder or prevent a sale being effected; and

(d)ensuring the property, including its grounds and dwellings are maintained and are in a neat and presentable condition at the time of inspection by the agent and prospective purchasers.

4.Pending the completion of the Sale:

(a)The respondent shall have the sole right to occupy the property; and

(b)The respondent shall pay all costs necessary to keep the property insured at its current level of cover.

5.If the purchaser of the property consents to the release of the deposit monies prior to the settlement of the sale (‘the settlement’) then:

(a)The balance of the deposit monies (net of any costs, commissions and expenses of the sale) be paid to the respondent upon the basis that the monies received by the respondent shall be on account of her property settlement entitlement; and

(b)The remaining 50% be placed in the trust account of the applicant’s solicitor pending further order.

6.After the sale of the property the parties must hold the proceeds of sale in trust and pay the proceeds in the following manner and priority:

(a)All legal costs, auction costs (if any), agent’s commission and all other expenses connected with the sale of the property;

(b)Rates adjustments;

(c)Sufficient monies to pay the outstanding mortgage to the Commonwealth Bank, home loan account number …40; and

(d)If the parties are unable to negotiate the early release of the deposit prior to the settlement referred to in Order 5 above then the sum of $20,000 is to be paid to the respondent.

(e)The Balance to be held on trust pending a final property settlement.

7.The applicant is at liberty to provide a copy of these Orders to the Commonwealth Bank.

8.The parties have leave to apply to the Court with respect to the sale of the property as may become necessary in order to give effect to these Orders.

9.The matter is adjourned to 30 August 2021 at 9.30 am for directions in the Federal Circuit Court of Australia sitting in Newcastle.

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment under the pseudonym Gaines & Cotton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

JUDGE COSTIGAN

INTRODUCTION

1. These are interim property proceedings where the issue in dispute is the sale of the former matrimonial home at B Street, Suburb C (‘the property’). The applicant defacto husband Mr Gaines (‘the applicant’) seeks to sell the property in circumstances where he asserts that the respondent de facto wife Ms Cotton (‘the respondent’) is unable to maintain the mortgage repayments and the mortgage has fallen into significant arrears.

2. The respondent lives at the property with the parties’ two children. She seeks to retain the property and says that she is able to meet the mortgage loan payments as they fall due and clear the arrears.

   ISSUES IN DISPUTE

3. The following interim issues are in dispute between the parties:

   ·Whether the Court has jurisdiction to determine financial matters in respect of this de facto relationship;

   ·Whether the property should be sold pending the final hearing of these proceedings; and

   ·If the Court ordered the interim sale of the property what, if any, orders should be made to facilitate the re-accommodation of the respondent and children.

   BACKGROUND

4. The parties to these proceedings were both born in Australia. The applicant is 48 years old and the respondent is 45 years old.

5. The parties commenced cohabitation in or around 1995 according to the applicant, and in 1998 according to the respondent. There are two children of the relationship X aged 16 and Y aged 13.

6. In December 2016 the applicant and the respondent purchased the property for $350,000. It was purchased with a joint loan of $322,000 (and mortgage insurance of $9,443)[1] from the Commonwealth Bank.

   [1] Applicant’s affidavit filed 28 June 2021 at [14]

7. In her affidavit of 2 July 2021 (an affidavit which her solicitor did not seek to rely on at the interim hearing) the respondent said she paid a deposit of $35,000. The property was registered in the joint names of the parties as tenants in common.

8. The parties separated on 19 August 2019 at which time an apprehended violence order was made for the protection of the respondent. The applicant did not return to the property.[2] Nor has he made any payments on the mortgage or towards the outgoings on the property since separation.

   [2] This may be a matter to which the provisions of section 102NA of the Act applies.

9. The respondent remains living at the property with the children. She deposed to being ‘responsible for the repayment of the mortgage bills, feeding and clothing of our two children, school fees, sporting fees, the children’s mobile phones so that Mr Gaines can call them and all other household expenses’[3]. 

   [3] Respondent’s affidavit filed 19 April 2021 at [21]

10. The respondent deposed that she was twice forced to defer the mortgage repayments during Covid-19 as she lost her two casual jobs as a cleaner with Employer D and Administration Officer for the Employer E. The respondent also deposed that, ‘Even though the mortgage payments had been deferred, I paid approximately $12,620 since January 2020 in 17 payments.’[4]

    [4] Respondent’s affidavit filed 2 July 2021 at [38]

11. It is the applicant’s case that towards the end of 2020 he became aware that the mortgage was in arrears and obtained a further deferral from the Commonwealth Bank which was in place until 22 June 2021. 

12. As at the 9 June 2021 the applicant says the balance owing on the mortgage was $336,968.29 and the arrears or overdue payments totalled $16,610.

13. There was no evidence that the Commonwealth Bank has issued a Default Notice.

    PROCEDURAL HISTORY

14. The applicant commenced these proceedings by way of an Initiating Application filed on 19 August 2020 seeking final parenting and property orders. When the applicant filed the Initiating Application he was self-represented.  He sought orders for:

    (1)Equal shared parental responsibility;

    (2)The children to reside with me for half the time;

    (3)Financial Settlement of 50% of the equity in house, car, contents, bank accounts and all other assets.

15. The respondent was served with the applicant’s documents on 12 September 2020.

16. The matter came before me in a duty list on 13 October 2020 at which time the applicant was represented by a solicitor and the respondent was self-represented.  I made orders for the applicant to file any amended initiating application by 30 October 2020 and the respondent to file her response material by 20 November 2020. I also made orders for the parties and children to attend a Child Inclusive Conference on 24 February 2021.

17. The applicant did not file his amended initiating application until 30 November 2020 which was virtually identical to his earlier application.

18. On 22 February 2021 the respondent filed her response seeking final and interim parenting orders only.

19. On 2 March 2021 the parties and children attended a Child Inclusive Conference with Family Consultant F. 

20. On that same date the applicant filed an application in a case seeking interim orders for the sale of the property.  Specifically he sought orders for:

    (1)Within 14 days of the date of these Orders both parties must do all acts and things and sign all documents, writings and instruments necessary to sell the property at B Street, Suburb C in the State of New South Wales (“the property”) and in doing so must do the following:

    (a)List the property for sale by private treaty with Real Estate Agent Suburb G and Suburb C (“the agent”);

    (b)The list price of the Property will be such list price as the parties mutually agree and in the absence of any agreement reached the price nominated as market value by the agent;

    (c)Instruct an agreed solicitor/conveyancer to prepare the Contract for Sale for the property;

    (d)Sign all documents requested by the agent for the sale of the property;

    (e)Sign the Contract for Sale and any other necessary documents as requested by the solicitor/conveyancer.

    (2)The Respondent Wife must cooperate in every way with the agent including but not limited to:

    (a)making house keys available to the agent;

    (b)allowing the inspection of the property at all reasonable times requested by the agent;

    (c)doing or saying nothing to hinder or prevent a sale being effected;

    (d)ensuring the property, including its grounds and dwellings are maintained and are in a neat and presentable condition at the time of inspection by the agent and prospective purchasers;

    (3)Pending the sale of the property the Respondent Wife must pay the following in relation to the property as they fall due:

    (a)All mortgage payments, including any arrears;

    (b)All land and water rates, including any arrears;

    (c)All household insurances.

    (4)After the sale of the property the parties must hold the proceeds of sale on trust and pay the proceeds in the following manner and priority:

    (a)All legal costs, auction costs (if any), agent’s commission and all other expenses connected with the sale of the property;

    (b)Rates adjustments;

    (c)Sufficient monies to pay the outstanding mortgage to the Commonwealth Bank, home loan account number …40;

    (d)The Balance to be held on trust pending a final property settlement.

21. On 3 March 2021 Registrar Glendenning made interim consent parenting orders.

22. On 14 March 2021 I listed the matter for interim hearing in relation to financial issues and directed the respondent to file her response to an application in a case and supporting affidavit by 30 April 2021. 

23. The respondent did not file a response and did not file an affidavit until 2 July 2021, though as previously noted she did not seek to rely on that affidavit at the interim hearing.

24. The interim defended hearing was conducted remotely and electronically via the Microsoft Teams platform. Both parties were legally represented. Mr Shearston appeared on behalf of the applicant and Mr Parker appeared on behalf of the respondent. The hearing started 30 minutes after the appointed time as Mr Parker was unavailable having been caught in traffic.

25. After hearing submissions from each of the parties’ legal representatives, interim judgment in relation to the sale of the property was reserved.

    THE APPLICANT’S POSITION

26. The applicant sought interim orders for the sale of the property. He relied on the following documents:

    ·Application in a Case filed 3 March 2021;

    ·His affidavit filed 2 March 2021 and 28 June 2021; and

    ·His Financial Statement filed 30 November 2020.

27. The applicant submitted that since separation the respondent has failed to meet the mortgage repayments and there are significant arrears. The Commonwealth Bank may commence enforcement proceedings in order to secure the property for sale. The increasing arrears are reducing the pool of matrimonial assets available for distribution and adversely affecting the applicant’s credit rating.

28. The applicant is in receipt of a disability support pension and says he does not have the capacity to engage in paid employment due to his diagnosis of Attention Deficit Hyperactivity Disorder (ADHD) and back pain which restricts his mobility.

29. The applicant’s Financial Statement clearly contained a number of errors. Doing the best it can the Court notes that the applicant disclosed a total weekly income of $450 derived from his disability support pension.  He stated his estimated weekly expenditure was $482.67 which includes: car loan repayments of $162 per week, child support of $20.67 and other personal expenditure of $300.  He does not have housing costs as he moves between the residences of his parents.

30. The applicant estimated the total value of property that he owns to be $255,500 which includes: his one half share of the value of the property at $230,000, a Motor Vehicle 1 valued at $17,500, household contacts of $5,000 and $3000 for tools.  He holds no superannuation.

31. The applicant estimated his liabilities as at 30 September 2020 to be $199,971 being his share of the outstanding mortgage in the sum of $169,971 and the balance due on his car loan of $30,000.

    THE RESPONDENT’S POSITION

32. At the interim hearing the solicitor for the respondent informed the Court from the virtual bar table that the respondent wished to raise a jurisdictional issue. The argument was that the applicant did not file his application for property orders within the standard application period and this Court did not have jurisdiction to deal with the matter.

    HAS THE APPLICATION FOR PROPERTY PROCEEDINGS BEEN FILED OUT OF TIME AND IF SO, SHOULD LEAVE BE GRANTED FOR THE APPLICATION TO BE HEARD OUT OF TIME BE GRANTED?

33. Pursuant to section 44(5) Family Law Act 1975, an application must be brought within the two year period after separation (the “standard application period”).

34. The parties do not agree on the date that the de facto relationship commenced. The applicant said it was 1995 and the respondent said it was 1997 or 1998. Nothing much turns on this for the purposes of this application.

35. The respondent claims the parties separated in ‘approximately August 2018’. Her solicitor said that the applicant was ‘escorted from the property by police on 18 August 2018.’ If that were the case, it would have been a relatively simple matter for the respondent to provide a copy of the provisional or interim apprehended violence order.  No such evidence was adduced.

36. The applicant gave sworn evidence by way of affidavit that the relationship ended on 19 August 2018. In his initiating application the applicant also referred to the date of separation being 19 August 2018. The respondent did not dispute the date in her response or in any affidavit filed subsequently. For those reasons I prefer the evidence of the applicant.

37. Having found the de facto relationship ended on 19 August 2018, the time for the parties to bring an application for a de facto property division expired on 19 August 2020. The applicant filed on the last day he could bring the application without leave.

38. Even if I am wrong and the application has not been brought within the standard application period I find that the applicant should be granted leave to proceed out of time pursuant to section 44(6). This is because I am satisfied, firstly that the applicant has a reasonable prima facie case in the matter because:

    (a)It is a long relationship on either parties’ version, of at least 20 years;

    (b)The property was jointly acquired by the parties during the relationship, was in existence at the time of separation and is the only asset of significance in the asset pool;

    (c)Both parties depose to making direct financial and non-financial contributions to the acquisition and maintenance of the property during the relationship including by way of inheritances; and

    (d)While the pool of assets is small, there is property capable of being divided.

39. Secondly, I am satisfied that the applicant would suffer hardship if he were denied leave to pursue his claim as it would see a significant disparity in the distribution of the de facto property pool. He would also continue to be liable for the mortgage repayments and any arrears.

40. Finally, I am satisfied that if there was a delay in commencing these proceedings that it has in no way prejudiced the respondent. Her position is no different to what it would have been had the proceedings been filed one day earlier.

    WHETHER INTERIM PROPERTY ORDERS SHOULD BE MADE TO FACLITATE THE SALE OF THE PROPERTY

41. Neither party’s proposed orders will finally determine the financial relationships between them.

42. The principles as to applications for interim property provision are well settled. In Strahan & Strahan,[5] the Full Court held that there is a two stage approach to considering an Application for an order for partial property distribution prior to final hearing. Boland & O’Ryan JJ commented:

    [132] ‘In relation to the first stage, 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.’

    [5] [2009] FamCAFC 166; [2009] FLC 93-466; (2009) 241 FLR 1; (2009) 42 Fam LR 203

43. Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth) (“the Act”) or in this matter s 90SM of the Act. In the decision of Osferatu & Osferatu [2012] FamCA 408, Watts J at [41] said:

    [41] ‘As was discussed in Harris and confirmed in Strahan, the second step in making an interim property order is to have regard to the usual matters in a section 79 order (ss 79(2) and 79(4) FLA). A detailed inquiry is not required, but there must be some assessment of section 79 factors. Given it is an imprecise exercise, the interim property order has to be “conservative” so that the final outcome of property settlement will not be compromised by the interim property order. Either the remaining property needs to be sufficient to meet the legitimate expectations of both parties at the final hearing, or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.’

1. While the respondent did not advance any alternative argument with respect to the interim orders for sale sought by the applicant, the Court assumes that the respondent opposes the application. She deposed: ‘I have no intention of selling the children’s home.’[6] Nor did the respondent propose any orders that the Court should make in the event that the Court was to order the interim sale of the property.

   [6] Respondent’s affidavit filed 19 April 2021 at [24]

2. The respondent provided no evidence of her capacity to refinance the mortgage or to buy out the applicant’s interest. This seems to be because she maintains a position that the applicant has no financial interest in the property. In her affidavit filed 19 April 2021, the respondent outlined the reasons for her opposition to any sale:

   [22]The mortgage payments were deferred during the Covid 19 pandemic as I lost both of my jobs. The deferment is in place until June 2021.

   [23]I spoke with the Commonwealth Bank on Monday 12 April 2021; Mr H in Financial Difficulty Department and I have an arrangement in place for me to make any payments that I can. I have paid over $2,000 since the end of March 2021.

   ……….

   [26]I believe Mr Gaines is trying to benefit financially from forcing the sale of the family home where his children reside.  The constants threats regarding the sale of the home are unsettling and affecting the mental health of both children. They are upset and devastated that their father is trying to force them out of their home and safe haven.[7]

   [7] It is also concerning that the respondent is discussing these issues with the children.

3. The respondent did not produce any relevant correspondence from the Commonwealth Bank in relation to the purported deferral or that she was able to make the payments as and when they fall due.

4. In her affidavit filed 2 July 2021 the respondent deposed:

   [41]Should I be forced to sell my home the children and I would be homeless with little I [sic] the way of funds left over from the sale.

   [42]My father lives at Town J in an over 55’s village and I have no alternative as far as accommodation.

   [43]I currently work for Employer D and have picked up 15 hour work a week which is just enough to pay the mortgage repayments and my Centrelink benefits pay for the children, and all other bills and household expenses.

5. The respondent’s Financial Statement filed on 21 February 2021 disclosed:

   ·A total average weekly income of $961.53 comprised of income as a casual cleaner and administration officer of $347, parenting payment and jobseeker allowance of $603 and child support of $11.53. There was no evidence as to the amount of extra income she expected from the additional 15 hours of employment as a cleaner and it is highly possible that any increase in salary will also see a reduction in her Centrelink benefits. 

   ·At item 17 the respondent disclosed that a Mr K also lives at the property. She describes Mr K as ‘FWB[8]/ flatmate’. Next to the entry is the figure $200 which presumably is his income. It does not appear that Mr K makes any financial contribution to the respondent’s household.[9]

   ·Her estimated weekly expenditure of $512 includes the mortgage of $430, car and household insurances of $82.24.

   ·Her estimated total of value of property is $418,100 which she deposes is represented by her 100% interest in the property valued at $400,000, savings of $100, household contents valued at $10,000, a diamond ring valued at $5,500 allegedly in the possession of the applicant, and a Motor Vehicle 1 valued at $2,500.

   ·Her estimated liabilities were nil which must be an error given her evidence at [32] of her affidavit filed 2 July 2021, that there is currently $366,000 owing to the Commonwealth Bank under the mortgage.

   ·Her superannuation with Super Fund L was valued at $933.

   [8] Friends with benefits.

   DISCUSSION

6. This is a very modest property pool with one house, some superannuation and a long relationship.

7. The applicant contends that the mortgage arrears have increased by $3,277 since February 2021 and the amount owing as of 9 June 2021 of $336, 968 is greater than the sum initially borrowed in 2016.

8. The applicant contends that the property is valued at between $450,000 and $480,000.[10] The respondent contends that its value is between $402,000 and $447,000, based on the ‘Commonwealth Bank app’. On those figures, the remaining equity in the property is very small ranging between $65,032 and $143,031. If the Commonwealth Bank was to commence enforcement proceedings there is a risk that any equity would disappear.

   [10] See letter dated 18 August 2020 from Mr M of Real Estate Agent Suburb G & Suburb C annexed to the applicant’s Financial Statement filed 30 November 2020.

9. The applicant contends that being in receipt of a Disability Support Pension, he is unable to contribute to the mortgage repayments and outgoings of the property. The respondent claims that the applicant is working ‘cash in hand’ while claiming benefits and is not contributing to the mortgage payments despite having the capacity to do so. At an interim hearing such claims cannot be tested. The respondent did not commence proceedings herself to protect her own position. In the meantime the arrears and default interest continues to accrue and the equity in the property diminishes.

10. In her Financial Statement the respondent deposed to a gross income of $961 per week and outgoings of $512 which leaves a surplus of income over expenditure of $449 per week. However, the respondent made no provision for other expenditure such as food for two adults and two children, household supplies, utilities, petrol, clothing, medical expenses etc. Nor does the respondent make any provision for payment of Council rates or water rates.

11. Despite her evidence that ‘since July 2019 just about every major appliance in the house has failed’ [11]and she has had to replace white goods and a hot water system, the respondent made no provision for household repairs. When these expenses are taken in account it seems unlikely that there would be much left over from the alleged $449 surplus and the Court could not be satisfied that the respondent has the capacity to meet the mortgage repayments.

    [11] Respondent’s affidavit filed 2 July 2021 at [39]

12. Nor on the evidence that I have read does it seems that there is any likelihood of the respondent being able to refinance the mortgage. Her own evidence was that at the time the parties purchased the property, the respondent was advised by the mortgage broker that the bank ‘would not approve a loan solely in my name.’ [12]

    [12] Respondent’s affidavit filed 19 April 2021 at [15]

13. I also note the respondent’s own evidence that the house is in a state of disrepair and the repair costs needed in order to prepare the property for sale would likely exhaust the net proceeds of sale.[13]

    [13] Respondent’s affidavit file 2 July 2021 at [28]

    CONCLUSION

14. There seems no other alternative for the Court but to order the sale of the property.  Given the delays in this Registry it is unlikely that any final hearing would be allocated before 2023. If the situation remains unaddressed the arrears are likely to rise and any equity which would otherwise be available for division will evaporate.

15. There was no evidence before the Court that the Commonwealth Bank had commenced enforcement proceedings or that such proceedings were imminent which may afford the parties some time to prepare the property for sale.

16. As the children live with the respondent and she receives very limited financial support from the applicant, the respondent will be able to remain living at the property until settlement of the sale.

17. Following completion, the proceeds of sale will be held in trust on behalf of the parties. If the respondent cannot negotiate with any prospective purchaser to remain in possession of the property for limited period after settlement or an early release of the deposit, then there will be an order that the sum of $20,000 be released from the sale proceeds to assist her in accessing alternative accommodation.

18. There will be orders that the respondent ensures the property is kept in a neat and clean condition at the time of inspection by the selling agent and prospective purchasers. 

19. The applicant proposed that Real Estate Agent Suburb G & Suburb C be appointed as the selling agents. In her affidavit the respondent asserted that the director Mr M is a ‘personal friend’[14] of the applicant. The inference appears to be that Mr M may not act in the best interests of both parties.

    [14] Respondent’s affidavit filed 2 July 2021 at [31]

20. I intend to order that the applicant shall provide to the respondent within seven days a list of three estate agents and from that list the respondent is to nominate one estate agent within 7 days.

21. I will adjourn the matter to 30 August 2021 at which time consideration will be given to the allocation of a Conciliation Conference.

I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Costigan.

Dated:       13 July 2021