Harvey and Harvey

[2016] FamCA 644

FAMILY COURT OF AUSTRALIA

HARVEY & HARVEY [2016] FamCA 644

FAMILY LAW – PROPERTY – Interim sale of property – application by the wife for the sale of the former matrimonial home – cross-application by the husband for the sale of an investment property – where the bank has issued notices of default and demand with respect to loans secured against the former matrimonial home – where the husband seeks to retain the former matrimonial home as part of the final property settlement – where the wife seeks to retain the investment property  as part of the final property settlement – interim orders for the husband to discharge the arrears on the loans and for the sale of the former matrimonial home in the event he does not comply

Family Law Act 1975 (Cth)

Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; (2011) FLC 93-466

APPLICANT: Ms Harvey

RESPONDENT: Mr Harvey

FILE NUMBER: MLC 2362 of 2014

DATE DELIVERED: 25 July 2016

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 25 July 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Berger

SOLICITOR FOR THE APPLICANT: Berger Kordos Lawyers

THE RESPONDENT: In person

Orders

1. That within 21 days the Husband do all acts and things and sign all documents necessary to discharge all outstanding balances due and payable to the Bank of Queensland for Account Number … and Account Number … (“the BoQ Loans”).

2. That until further Order, the Husband be solely liable for all loan repayments due on the BoQ Loans as and when they fall due.

3. In the event the Husband defaults on Orders 1 and/or 2 herein, the property situate at B Street, Suburb A (“the Suburb A property”) be placed on the market for sale by public auction (“the sale”).

4. In the event the Suburb A property is to be sold pursuant to Order 3 herein, it be placed for sale by public auction with the following conditions:

   (a)       That the reserve price be as agreed between the parties, and in default of agreement, as recommended by the selling agent;

   (b)       That the real estate agent/auctioneer be agreed by the parties by both forwarding to the other a proposal from their preferred agent to the other within seven (7) days; and

   (c)       In default of agreement the agent/auctioneer be nominated by the President of the Real Estate Institute of Victoria.

5. That upon the sale, the proceeds be applied:

   (a)       First, to meet the costs and expenses of the sale;

   (b)       Second, to discharge all BoQ Loans;

   (c)       The balance to be held in an interest bearing trust account in the joint names of the parties until further Order.

6. That there be liberty to apply in respect of the terms of the sale.

7. That within 7 days, the Wife do all acts and things to serve a copy of this Order on the Bank of Queensland and their solicitors, Thomson Geer.

8. That the wife’s Application in a Case filed 13 July 2016 and the husband’s Response to an Application in a Case filed 21 July 2016 be otherwise dismissed.

9. That Reasons for Judgment be transcribed and remain on the Court file.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Harvey & Harvey 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 2362 of 2014

Ms Harvey

Applicant

And

Mr Harvey

Respondent

EX-TEMPORE REASONS FOR JUDGMENT

1. The matter of Harvey comes before me today upon the Application in a Case filed on behalf of the wife on 13 July 2016.  That application is supported by her affidavit filed the same day.  The wife in that application seeks the sale of the property situate at B Street in Suburb A.  The application is made in circumstances where the loan facility secured over the title to that property, being loans from the Bank of Queensland, have fallen into arrears and that bank has sought to serve notices of default and notices of demand in respect of the loan liabilities.

2. The application is opposed by the husband.  The husband has filed a Response to an Application in a Case on 21 July 2016.  His response is supported by his affidavit filed that day.  The husband, in that response, seeks an order that the parties’ investment property at Suburb C be sold, and that the proceeds of sale of that property be applied towards the reduction of the loan liabilities to the Bank of Queensland.

3. The background to the matter is as follows. 

4. The wife is Ms Harvey.  She is aged 43 years and engaged in employment as a health professional. 

5. The husband is Mr Harvey. He is aged 42 years. He is also a health professional. 

6. The parties commenced cohabitation in 2001.  They married in 2002, and separated in July of 2013.  There are three children of the marriage;  D, aged 13;  E, aged 11;  and F, aged eight.  The children live with the wife, and spend time with the husband.  Final orders in respect of parenting arrangements were made in 2015.

7. The parties have competing property applications before the Court.  Those proceedings are listed for a final hearing before me, to commence on 8 November 2016. 

8. The background to the application before me is as follows.  The wife deposes in her affidavit, sworn 5 July 2016, that she has had communication with the Bank of Queensland.  There are two loans from that bank, which are secured over the title to the Suburb A property.  The payments due in respect of those liabilities total approximately $8,000 per month. 

9. It is common ground between the parties that until, certainly this year, the husband has continued to service the liabilities, that is, the monthly payment liabilities with respect to those loans.  The balances outstanding under those loans total approximately $1.4 million.  The property against which they are secured, that is, the Suburb A property, was last valued in 2014, and then had a value of approximately $1.85 million.  The parties have engaged a valuer to prepare an updated report and expect that that report will be released to them within the next week or so.

10. The Suburb C unit was also valued in 2014, and I am told, then had a value of approximately $360,000.  That property is also to have an updated valuation shortly.  The parties have significant liabilities in addition to the Bank of Queensland loan, in particular there is a looming taxation liability as a result of the failure by the husband to lodge his income tax returns for a period of approximately seven years between 2008 and 2014.  It is anticipated that the liability for those years will be in the order of $1.7 million. 

11. The husband informed the Court that he is in the process of engaging in negotiations with the Australian Taxation Office (“the ATO”) and is hopeful that he may be able to reduce the extent of that liability. 

12. The wife deposes in her affidavit, at paragraph 6, that on 21 June 2016, she received a letter from the Bank of Queensland informing her that the mortgage arrears then were in the order of $11,806.30.  That letter also indicated that in the event that the arrears under the loan were not rectified, that the bank reserved its right to exercise its rights under the terms of the loan agreement which could include a sale of the property.

13. It is as a result of those events that the wife has brought her application before the Court.  The position as at today is that the loan continues to be in default.  I was informed from the bar table that the wife was served with notices of default and notices of demand in respect of both loans last week.  Exhibit W1 is the demand in respect of loan account number ….  Exhibit W2 is the demand in respect of loan account number ….  Those notices are both dated 5 July 2016.  They indicate that the liability as at 4 July 2016 under the loans totalled $16,029.93.

14. During the course of the day the matter was stood down to enable the parties to ascertain the current liability with respect to the loans.  It now stands at $19,813.56.  It is submitted on behalf of the wife that she is keen to ensure that the parties preserve and maintain their assets in circumstances where the pool of assets available for division is likely to be modest.  She is keen to avoid a mortgagee’s forced sale of the principal asset of the parties, being the property at Suburb A, and it is on that basis that she seeks a sale of the property at this stage in the proceedings.

15. The position put by the husband is as follows.  First, he maintains that he is not liable in respect of one of the loans secured over the property, that being loan number ...  He asserts in his affidavit material that it is not his signature on the loan agreement.  He alleges that his signature has been forged.  He maintains that he has made that allegation to the bank and that the bank is currently undertaking inquiries with respect to those matters.  I informed the husband during the course of his submissions that I was not in a position today to make any findings with respect to those allegations and that they will be matters that will need to be considered in the context of the final hearing.

16. I reminded the husband that the issue squarely before the Court for today’s purposes was how to deal with the bank to avoid the necessity for a mortgagee’s sale of the Suburb A property.  The husband, to his credit, conceded and acknowledged that there are arrears under the loan.  He conceded that until about four months ago, he had serviced the liability under the loan, but it is his position that he can no longer afford to maintain those payments.  Significantly, in my mind, the husband concedes in his affidavit filed 21 July 2016 that it is likely that both the Suburb A property and the Suburb C property will need to be sold in order to discharge marital debts. He deposes to that fact at paragraph 13 of his affidavit.  Nonetheless, it is his position that he wishes to continue to live in the Suburb A property for the foreseeable future.  It is his position that it is a property familiar to the children; that it provides appropriately for them at times when they are in his care.  Further, he maintains that he attends to the administrative tasks associated with his business at that property and for that reason also seeks to retain the property.

17. This hearing has been conducted on the papers.  I have already referred to the material relied upon by each of the parties, and to the submissions they have made.  The wife was represented by her solicitor.  The husband represented himself during the hearing.  The matter was stood down at the commencement of the day to enable the husband to attend upon the duty lawyer for advice.  Unfortunately, due to the pressures of work the duty lawyer was unable to see the husband today. 

18. Nonetheless, the husband has provided detailed affidavit material, and made thoughtful and careful submissions to me, focusing his mind on the issue squarely before me, that is, how to address the demands made by the Bank of Queensland.  Given the nature of the hearing I am unable to make any determination of contentious facts without the evidence being properly tested.  Accordingly, in determining the matter I have relied upon the facts which are agreed or not in issue. 

19. The Court has wide powers to grant injunctions pending 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. The orders sought by the wife, with respect to the sale of the Suburb A Street property, are orders for the protection of the parties’ property. Further, the Court has powers to make interim property orders pursuant to s 79 of the Act. In Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166; (2011) FLC 93-466, it was recognised by the Full Court that there may be circumstances which justify the exercise of the power pursuant to s 79 and s 80(1)(h) prior to the final hearing.

20. Having regard to the demands that have been made by the Bank of Queensland, in my view, it is necessary that action be taken to rectify the situation so as to avoid the necessity of a mortgagee sale of the Suburb A property.  The husband maintains that the property to be sold, or the property that should be sold in those circumstances, is the property at Suburb C.  The wife opposes that position, due to her hope that she will be able to retain that property as part of her final property settlement.

21. It is a property of modest value.  It is clear from the submissions made on behalf of both parties that the pool of assets likely to be left at the conclusion of the proceedings is modest.  That this is so is as a result of the significant debt to the ATO, which will have to be repaid from matrimonial assets.

22. It may well be that the pool of assets available is less than $500,000.  If that be the case, the entitlements of the wife are likely to be magnified.  She has the day-to-day care for the three young children of the marriage.  There is a disparity in the parties’ income-earning capacities.

23. The reality is I am not in a position to make any findings with respect to these matters where the evidence has not been tested.  However, I am mindful to endeavour to preserve the parties’ rights pending that trial.  Accordingly, in the circumstances, it is my view that the Suburb C property should be retained at this time, until there can be a detailed analysis of the parties’ financial situation in a trial setting.

24. The husband has conceded that the Suburb A property will need to be sold.  I have referred to the part of his affidavit where he makes that concession, quite properly.  What I propose to do is to make orders that will provide him with an opportunity to try to regularise the payments under the Bank of Queensland loans:  that is, that he pay the arrears under the mortgage and that he continue to service the loan liabilities until the trial.

25. If he is able to do that, then the need for a sale before the trial will be avoided.  However, if he is unable to meet those liabilities, then it is preferable that the parties control a sale of the property, rather than the bank actioning its rights under the terms of the mortgage.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 25 July 2016.

Associate: 

Date:  25 July 2016