Harris and Dewell

[2017] FamCA 486

FAMILY COURT OF AUSTRALIA

HARRIS & DEWELL [2017] FamCA 486

FAMILY LAW – PRACTICE AND PROCEDURE – STAY – Where the husband seeks a stay of the final property orders pending the determination of an appeal to the Full Court – Where the husband asserts that his compliance with the orders will result in him obtaining a capital gains tax liability – Where the basis of husband’s appeal to the Full Court is, inter alia, that the primary judge failed to consider his anticipated capital gains tax liability – Where the refusal to grant a stay would, to this extent, render the appeal nugatory – Orders made staying the property orders subject to certain conditions.

Trahn & Long (No. 2) [2008] FamCAFC 194

APPLICANT: Mr Harris

RESPONDENT: Ms Dewell

FILE NUMBER: SYC 5809 of 2011

DATE DELIVERED: 12 July 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 7 July 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lloyd SC

SOLICITOR FOR THE APPLICANT: Horton Rhodes Legal

COUNSEL FOR THE RESPONDENT: Mr Millar

SOLICITOR FOR THE RESPONDENT: Karras Partners

Orders

IT IS ORDERED

1. That the Orders 2, 3 and 4 of the Orders made on 4 November 2016 be stayed on the following conditions:

   1.1 That within 14 days of the date of these Orders the husband do all acts and things required to cause the outstanding balance of the mortgage secured over the property at B Street, Suburb C (“Suburb C”) to be reduced to $1,600,000 and shall thereafter be restrained from causing or permitting the amount outstanding to exceed that sum.

   1.2 That the husband forward to the wife monthly statements from the relevant mortgagees showing the balance of the mortgage then outstanding in relation to Suburb C.

   1.3 That pending the determination of the Appeal, the husband pay and be solely responsible for all mortgage repayments and any encumbrances secured over Suburb C and shall make all payments as they fall due.

   1.4 That the husband forthwith cause the sum of $500,000 to be paid in partial compliance with Order 4 made 4 November 2016.

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 Harris & Dewell 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 SYDNEY

FILE NUMBER: SYC 5809 of 2011

Mr Harris

Applicant

And

Ms Dewell

Respondent

REASONS FOR JUDGMENT

1. On 4 November 2016, Judgment was delivered (“the first instance judgment”) and Orders made in proceedings between Ms Dewell (“the wife”) and Mr Harris (“the husband”) after a hearing of five days. The husband’s father was the second respondent in those proceedings.

2. The Orders provided, inter alia, for the transfer, unencumbered, of the former matrimonial home to the wife and the payment to her of a sum of money.

3. The Reasons for Judgment delivered on 4 November 2016 demonstrate the complexities of the matter. It is sufficient here to state that the matter was complex and involved, inter alia, the question of whether certain valuable assets, primarily real property held by corporate entities, were the property of the husband or of the second respondent.

4. The husband has appealed against those Orders and a Cross-Appeal has been lodged by the wife. The Appeal was part-heard on 2 May 2017 and will be completed on 12 October 2017. The second respondent is a party to the Appeal.

5. Before me are the following applications:

   ·    The husband’s application to stay the Orders 2 to 4 made on 4 November 2016, pending the determination of the Appeal;

   ·    The wife’s response to that application seeking its dismissal;

   ·    The wife’s application filed 15 May 2017 seeking to enforce that portion of the Orders made 4 November 2016 which required the transfer of the unencumbered property to her.

6. The second respondent is not a party to the present proceedings.

7. If the husband’s application to stay the Orders of 4 November 2016 is successful, the wife’s application to enforce the transfer of the former matrimonial home must fail and therefore it is convenient to deal firstly with the husband’s application.

8. The relevant orders are Orders 2 to 4 made on 4 November 2016 which are reproduced below:

   (2) That within 90 days of the date of these Orders, the husband shall:

   (a) Transfer to the wife all of his right, title and interest in the property at [B Street, Suburb C] (“the [Suburb C] property”) being the land in Folio Identifier …, free of encumbrance.

   (b) Pay to the wife the sum of $2,132,078.

   (3)That pending compliance with Order (2), the husband shall be restrained from further encumbering or charging the [Suburb C] property.

   (4)That the husband’s superannuation interests with VV Super Plan pursuant to membership number .. (“the Plan”) shall be split to create a superannuation interest for the wife as follows:

   (a)Pursuant to section 90MT(2) of the Family Law Act 1975 (Cth) (“the Act”) and Regulation 27 of the Family Law (Superannuation) Regulations (“the Regulations”) the Court determines that the amount in relation to the husband’s superannuation in the Plan is $2,672,825.

   (b)Pursuant to Section 90MT(4) of the Act the Court allocates a base amount to the wife in respect of the husband’s superannuation interests in the Plan of $1,100,000.

   (c)Pursuant to section 90MT(1)(a) of the Act whenever a splittable payment becomes payable in respect of the husband’s superannuation in the Plan the wife is entitled to be paid an amount calculated in accordance with the Regulations where the base amount is $1,100,000 and there is a corresponding reduction in the entitlement of the husband at the time of the splittable payment.

   (d)That the operative time for payment under this Order is four business days after service of this Order.

   (e)That the Trustee of the Plan shall do all acts and things and sign all documents required to calculate the entitlement and make payment to the wife pursuant to these Orders.

   (f)That having been accorded procedural fairness in relation to the making of this Order, this Order binds the Trustee of the Plan.

THE HUSBAND’S APPEAL

1. By his Notice of Appeal filed 1 December 2016, the husband appeals Order (2)(b) and Order (4). He does not appeal Order (2)(a).

2. The husband seeks to stay Order (2)(b) on condition that he pay the sum of $300,000 to the wife; reduce the mortgage outstanding over the former matrimonial home to $1,800,000 and be restrained from further encumbering it; and continue to pay the mortgage payments.

3. In relation to Order (4), the order that the husband seeks in the Appeal, in substitution for Order (4), is an order that he pay to the wife the sum of $500,000 in lieu of the amount of $1,100,000. In relation to the stay of Order 4, Senior Counsel for the husband did not make submissions against the condition of the stay of Order 4 being partial compliance by way of a payment to the wife of $500,000.

4. In summary, the husband, in his Grounds of Appeal, asserts that findings as to the wife’s contribution and section 75(2) factors were manifestly excessive; that I failed to take relevant liabilities into account and that he was denied procedural fairness in not being allowed to adduce evidence of the effect of Capital Gains Tax (“CGT”) on the sale of assets which would need to be sold in order to comply with the Orders.

5. He asks the Full Court to re-exercise its discretion, an outcome which would appear unlikely in circumstances where the husband asserts that there is a significant liability (the CGT) in relation to which there is no evidence at all.

THE WIFE’S CROSS APPEAL

1. The wife appeals against Order (2)(b).

2. In her Grounds of Appeal she asserts, inter alia, that I erred in failing to find that the real estate held by corporate entities is the property of the husband; that the reasons were inadequate and that the assessment of contributions was plainly wrong.

3. She also asks the Full Court to re-exercise its discretion or, in the alternate, that there be a re-hearing.

4. The most likely outcome, should either the Appeal or the Cross-Appeal be allowed, is a re-hearing.

5. If there is a re-hearing, neither party will be bound by the orders which they seek from the Full Court and each will be able to amend their applications seeking different orders.

THE LAW

1. In relation to the application for the stay, the Full Court in Trahn & Long (No. 2) [2008] FamCAFC 194 said:

   38.These principles, both in the general law and in respect of parenting proceedings, are well settled (see The Commissioner of Taxation of the Commonwealth of Australia v Myer Emporium Limited (1986) 160 CLR 220 at 230; Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685. Jennings Constructions Limited v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681; Clemett and Clemett (1981) FLC 91-013; JRN & KEN v IEG & BLG (1998) 72 ALJR 1329 at 1332). The authorities stress the discretionary nature of the application which should be determined on its merits. Principles relevant to this matter included the following:

   ·       the onus to establish a proper basis for the  stay is on the applicant for the stay however it is not necessary for the applicant to demonstrate “special” or “exceptional” circumstances;

   ·       a  person who has obtained a judgment is entitled to the benefit of that judgment;

   ·       the person who has obtained a judgment is entitled to presume the judgment is correct;

   ·       the mere filing of an appeal is insufficient to ground a stay;

   ·       the bona fides of the applicant;

   ·       a stay may be granted on terms that are fair to all parties – this may involve a court weighing the balance of convenience and the competing rights of the parties;

   ·       a weighing of the risk that an appeal may be rendered nugatory if a stay is not granted – this will be a substantial factor in determining whether  it will be appropriate to grant the stay;

   ·       some preliminary assessment of the strength of the proposed appeal - whether the  appellant has an arguable case;

   ·       the desirability of limiting the frequency of any change in a child’s living arrangements;

   ·       the period of time in which the appeal can be heard and whether existing satisfactory arrangements may support the granting of a stay for a short period of time; and

   ·       the best interests of the child the subject of the proceedings.

2. The stay is not ordered as a matter of right and the onus is upon the applicant for the stay, in this case the husband, to establish the proper basis.

3. It is important to note that, here, the wife does not seek to maintain the correctness of the first instance judgment and that she too seeks different orders from those made on 4 November 2016.

4. The gravamen of the submissions of the husband is that, in order to transfer the matrimonial home to the wife unencumbered, he will be obliged to sell a number of investment properties. He sought, as a condition of the stay, to maintain the mortgage at $1,800,000. In submissions, Senior Counsel for the husband told the Court that the mortgage has been reduced to $1,680,000 and will be reduced to $1,600,000 within 14 days. The husband agreed to provide the wife with monthly mortgage statements.

5. On behalf of the husband, it was submitted that, in order to comply with Order 2(a) he would need to sell properties with an accumulated net value of $1,600,000 and apply the proceeds of the sales to the mortgage. He submits, in the Appeal, that, if he is obliged to sell properties, he will accrue a liability for CGT on the completion of the sales. One of the grounds of the husband’s appeal is that the imposition of CGT was not taken into account in the first instance judgment.

6. In its simplest terms, the husband submits that he would be required to sell real property and accrue a CGT liability in order to comply with the Orders, whereas if he is successful in the appeal and any consequent re-hearing, he may have been able to hold at least some of those properties.

7. To that extent, refusal to stay would render the appeal, at least in part, nugatory.

8. On behalf of the wife it was submitted that the husband could use other assets, in particular, the equity in his share portfolios. However, as Senior Counsel for the husband submitted, the disposal of shares would also have CGT implications and the same argument would apply in the appeal.

9. As to the merits of the respective Appeal and Cross-Appeal, it is sufficient to say that the Full Court has already heard argument for a day and will hear argument for a further day.

10. The wife is living in the subject property. The husband is maintaining the mortgage. No doubt she would be comforted by holding the unencumbered title to the property but no other argument is advanced to elevate that interest above the detriment to the husband of enforcement of the Orders.

11. The husband has paid the wife $300,000 by way of partial property settlement.

12. The balance of convenience favours the granting of the stay on condition that the husband reduce the mortgage to not more than $1,600,000; that he maintain the payments on the mortgage; and that he cause the sum of $500,000 to be paid to the wife’s nominated superannuation fund.

THE WIFE’S ENFORCEMENT APPLICATIONS

1. The wife’s applications will be stood out of the list.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 12 July 2017.

Associate:

Date:  12/7/2017