HARRIS & ANDERS

[2015] FamCA 685

FAMILY COURT OF AUSTRALIA

HARRIS & ANDERS [2015] FamCA 685

FAMILY LAW – PROPERTY – Interim distribution – husband’s application for the release of the proceeds of sale of the former matrimonial home to discharge a debt in his sole name – where the proceeds of sale comprise almost the entirety of the non-superannuation assets – where the wife denies that the debt is a joint liability of the parties –orders made dismissing the husband’s application

Family Law Act 1975 (Cth)

Gabel & Yardley [2008] FamCAFC 162; (2008) FLC 93-386
Kowaliw & Kowaliw (1981) FLC 91-092
Strahan & Strahan (Interim property orders) [2009] FamCAFC 166; (2011) FLC 93-466

APPLICANT: Mr Harris

RESPONDENT: Ms Anders

FILE NUMBER: MLC 5822 of 2015

DATE DELIVERED: 20 August 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 5 August 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Matta

SOLICITOR FOR THE APPLICANT: Marshalls & Dent

COUNSEL FOR THE RESPONDENT: Mr Panna QC

SOLICITOR FOR THE RESPONDENT: Pearce Webster Dugdales

Orders

(1)That the interim orders sought by the husband in his Initiating Application filed 30 July 2015 be dismissed.

(2)That the interim orders sought by the wife in her Response to initiating application filed 11 August 2015 be dismissed.

(3)That all extant applications be listed for a Conciliation Conference on a date to be fixed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Harris & Anders 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  5822  of 2015

Mr Harris

Applicant

And

Ms Anders

Respondent

REASONS FOR JUDGMENT

Introduction

1. This matter came before me in a Judicial Duty List upon the application of the husband seeking orders for the release of the proceeds of sale of the former matrimonial home in order to discharge a debt owed by him to B Pty Ltd (in liquidation) (“B”).

2. The wife opposes that application.

The Parties

1. The husband is the applicant in the proceedings.  He is aged 50 years and is currently unemployed. 

2. The wife is the respondent in the proceedings.  She is aged 45 years and has part-time employment as a health professional.

3. The parties married in 1999 and separated in December 2013.

4. There are two children of the marriage - C aged almost 13 years and D aged 10 years.  The children live with the wife and spend time with the husband on three nights per fortnight. 

The Proceedings

1. The husband commenced proceedings by Initiating Application filed 30 July 2015.  The final orders sought by him are as follows:-

   (1)That the assets, liabilities and financial resources of the parties be divided on such terms as this Honourable Court deems just and equitable.

   (2)That the Applicant Husband be excused from further particularising the orders sought by him pending settlement of the debt owed to [B Pty Ltd] (in liquidation) and the discovery process being concluded.

2. At the commencement of the hearing before me leave was granted to the wife to file her Response to Initiating Application dated 5 August 2015.  In her response the wife also seeks orders that there be a settlement of property between the parties upon such terms as the Court considers just and equitable.  The wife seeks to be excused from further particularising her claim pending full disclosure by the husband of his financial circumstances.

3. With respect to his interim application, the husband relied upon the following material:-

   ·Initiating Application filed 30 July 2015;

   ·Affidavit of the husband filed 30 July 2015; and

   ·Financial statement of the husband filed 30 July 2015.

4. The interim orders sought by the husband in his Initiating Application were as follows :-

   …

   (2)    That the Applicant Husband and the Respondent Wife forthwith do all such acts and things and sign all such documents necessary to release the nett proceeds of sale of the former matrimonial home situate at [E Street, Suburb F], held in a Commonwealth Bank controlled money account to pay, settle and discharge the debt owed to [B Pty Ltd] (in Liquidation).

   (3)    That the Respondent Wife pay the Applicant Husband’s costs of and incidental to this Application on such basis as this Honourable Court deems just.

5. The material relied upon by the wife in support of her response is as follows:-

   ·Response to Initiating Application dated 5 August 2015;

   ·Affidavit of the wife sworn 5 August 2015.

6. The matter was conducted on the papers.  Each party relied upon the material referred to above and their counsel’s oral submissions.  Given the nature of the hearing, contentious facts cannot be determined without evidence being properly tested.  Accordingly, in determining the matter, I have relied upon those facts which are agreed or not in issue.

Background

1. During the parties’ marriage, between 2004 and 2008, the husband entered into a series of managed investment schemes with B.  The husband alleges that the wife was aware of those investments.  Further, he deposes that the parties received distributions from those investment schemes during the marriage and that the parties had the advantage of tax savings as a result of the investments. 

2. In April 2009 B was placed into public administration; B is currently being wound up by administrators. 

3. Proceedings were issued by B against the husband in September 2014 in the Supreme Court of Victoria.  It is alleged in those proceedings that the husband owes B the sum of $340,563.68 plus legal costs.  A Summons and Writ with Statement of Claim was served on the husband through his solicitors on 10 July 2015. 

4. A Notice of Appearance was filed on behalf of the husband on 14 July 2015 and procedural orders were made at a directions hearing on 17 July 2015.  The husband is required to file a Notice of Defence with Proper Basis Certificate and an Over-Arching Obligations Certificate in the Supreme Court of Victoria by 19 August 2015.

5. The husband deposes that he has engaged in some negotiations with B regarding the claimed debt.  Those discussions have not resolved the proceedings.

6. Currently, interest of approximately $4,150.00 per month is accruing with respect to the alleged debt to B.

7. In December 2013, following the parties’ separation, they sold the former matrimonial home at Suburb F for the sum of $1,398,000.  Settlement of that sale occurred on 5 February 2014 and the proceeds of sale totalled approximately $334,000.  From that sum, $10,000 was released to each of the husband and the wife.  The balance of the proceeds of sale and the deposit received was invested on behalf of the parties in a controlled money account with the Commonwealth Bank of Australia.

8. In March 2015, by agreement between the parties, a further sum of $60,000 was released to each of them from that account.

9. The current balance standing to the credit of the parties in the Commonwealth Bank account is approximately $307,000. 

10. The husband seeks the release of those funds to enable him to discharge the alleged debt to B. 

11. The wife opposes that application.  In her affidavit sworn 5 August 2015 the wife denies any liability for the B debt. 

12. The wife denies the husband’s allegation that that debt is a joint liability or that it was “secured against the former matrimonial home” as is alleged by the husband at paragraph 11 of his affidavit filed 30 July 2015.  In support of that allegation the wife annexes to her affidavit a copy of the title search of the former matrimonial home which discloses that the sole encumbrance noted on title was a mortgage to Westpac Banking Corporation. 

13. It is alleged by the wife that the husband entered into the investment scheme in B following discussions with a financial advisor he met club.  The wife deposes that she stated to the husband that she was against his investing in such schemes, that she did not understand them and she did not believe that the parties had sufficient funds to invest or risk on such ventures.

14. At paragraph 25 of her affidavit the wife deposes that she was informed of the investment in B “after the event” and that the investment in that scheme was presented as a fait accompli. 

15. Having regard to those circumstances, the wife opposes the application of the proceeds of sale of the former matrimonial home to the discharge, or partial discharge, of the alleged B debt.

16. In support of that position the wife points to the fact that the application of the proceeds of sale to that liability would effectively exhaust the totality of the parties’ non-superannuation interests.  The wife relies on paragraph 17 of the husband’s affidavit filed 30 July 2015 which sets out the husband’s assessment as to the value of the parties’ assets, liabilities and financial resources.  The husband there deposes that the  assets of the parties are valued at approximately $339,000, of which the proceeds of sale of the former matrimonial home account for approximately $307,000.  The B debt is there noted as having a value of $340,563.68.  The parties have superannuation entitlements totalling $419,460. 

17. As can be seen from the husband’s evidence, the effect of the orders he seeks will be to exhaust the parties’ pool of assets, save for some modest savings and two motor vehicles, leaving only the division of superannuation as a live issue.

18. During submissions, I invited counsel for the husband to particularise the final relief sought by him.  He was unable to do so save to say that on any view there was a very limited amount of funds available to be divided between the parties.

The Law

1. Pursuant to s 80(1)(h) of the Family Law Act1975 (Cth) (“the Act”) the Court has the power to make orders pursuant to s 79 of the Act for partial property settlement.

2. In the decision of Gabel & Yardley [2008] FamCAFC 162; (2008) FLC 93-386 the majority of the Full Court (Bryant CJ and Coleman J) confirmed at paragraph 57 that:-

   … the Court’s power to make orders with respect to settlement of property is not necessarily exercisable at only one time, and can properly be exercised by a succession of orders until the power to make orders with respect to property is exhausted.

3. In Strahan & Strahan (Interim property orders) [2009] FamCAFC 166; (2011) FLC 93-466 (“Strahan”) 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. At paragraph 132 the Full Court stated as follows:-

   …[I]n 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. At paragraph 137 the Full Court concluded that:-

   Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that … the applicant … will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the orders sought to be made”… As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought … then that should be the end of the matter’. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

   (Citations omitted)

Conclusion

1. The orders sought by the husband are in effect orders for partial property settlement, the effect of which will be to apply the whole of the proceeds of sale of the former matrimonial home to discharge a debt in the name of the husband. 

2. That application is made in the face of strenuous opposition by the wife, who disputes her liability for that debt.  It is a debt that is not in her name and the wife says it arises from a scheme entered into by the husband in the face of her opposition. 

3. Counsel for the husband submitted that I should make orders as sought by his client notwithstanding the wife’s staunch opposition.  Counsel for the husband submitted that the evidence of the wife does not meet the “test” prescribed in the decision of Kowaliw & Kowaliw (1981) FLC 91-092, a decision which considers the treatment of financial losses incurred during the course of the marriage.

4. It was submitted on behalf of the husband that the evidence of the wife does not establish that the husband:

   (a)Embarked on a course of conduct designed to reduce or diminish or minimise the value of the parties’ assets; or

   (b)Acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.

5. During the course of the submissions on behalf of the husband I raised with counsel appearing on his behalf the question of how such matters can be determined in circumstances where the evidence cannot be tested.  Whilst seeming to acknowledge that the matters raised by the wife were trial issues, nonetheless counsel for the husband pressed his client’s application.

6. Counsel for the husband referred me to the decisions of Biltoft & Biltoft (1995) FLC 92-614, Prince & Prince (1984) FLC 91-501 and Devopoulos & Devopoulos [2014] FamCA 224 in support of his submission that the wife’s evidence does not support a finding that the husband’s conduct with respect to the investment is such that he should now be responsible for the liability. Each of those decisions relate to the determination of matters after evidence was heard at a final hearing; the parties in this matter have not yet had the opportunity to present their case in a setting where the evidence can be tested.

7. Having regard to the affidavit material filed upon behalf of the wife, I am satisfied that her evidence does raise issues as to how the liability to B should be apportioned.  Her affidavit sets out the history of the husband’s involvement in the scheme and it is her evidence that she was opposed to investment in the scheme from the outset.  The husband denies those allegations.  I am unable to make findings in relation to these matters at an interim hearing.

8. The wife raises issues as to the steps taken by the husband to mitigate the damage; she seeks disclosure by the husband of the payments made by him to service the B debt over the past five years. 

9. The wife also questions whether the husband has the opportunity to make a “hardship application” to reduce the B liability.  It was conceded by counsel appearing for the husband that the legal advice received by the husband in relation to the B claim had not been provided to the wife for her consideration.

10. Having regard to all of the issues raised by the wife, which are challenged by the husband, I am satisfied the question of responsibility for the alleged debt to B is a trial issue.  Until there has been a testing of the evidence in relation to the matters raised by the wife, the Court is unable to make any findings with respect to liability for that debt. 

11. Were the Court to accede to the husband’s application, almost the whole of the parties’ non-superannuation assets would be depleted and the wife would be deprived of the opportunity of seeking adjustment in her favour at trial.  In those circumstances, I am satisfied that it would not be appropriate to make an order in the terms sought by the husband.

12. Accordingly, the orders I make are as follows:-

    (1)That the interim orders sought by the husband in his Initiating Application filed 30 July 2015 be dismissed.

    (2)That the interim orders sought by the wife in her Response to initiating application filed 11 August 2015 be dismissed.

    (3)That all extant applications be listed for a Conciliation Conference on a date to be fixed.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 20 August 2015

Associate: 

Date:  20 August 2015