HOLBERT & HOLBERT
[2019] FamCA 566
•22 August 2019
FAMILY COURT OF AUSTRALIA
| HOLBERT & HOLBERT | [2019] FamCA 566 |
| FAMILY LAW – PROPERTY– Interim property settlement – application by the wife for sale of real property of the parties located in the UK and interim property distribution – cross application by the husband for sale of former matrimonial home – where the wife and children continue to reside in former matrimonial home and the wife seeks to retain former matrimonial home as part of the final property settlement – where the husband submits that former matrimonial home will not be able to be retained at final settlement and should be sold now – where not clear whether it will be necessary to sell former matrimonial home at final settlement – orders for the sale of real property located in the UK and interim property distribution |
| Family Law Act 1975 (Cth) ss 75(2), 79(4), 80(1)(h) |
| In the Marriage of Bearup (1993) FLC 92-412 Gabel & Yardley (2008) FLC 93-386 Harris and Harris (1993) FLC 92-378 Strahan & Strahan (Interim Property Orders) (2011) FLC 93-446 In the Marriage ofZschokke (1996) FLC 92-693 |
| APPLICANT: | Ms Holbert |
| RESPONDENT: | Mr Holbert |
| FILE NUMBER: | (P)MLC | 2024 | of | 2018 |
| DATE DELIVERED: | 22 August 2019 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | McEvoy J |
| HEARING DATE: | 28 May 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dixon SC |
| SOLICITOR FOR THE APPLICANT: | Scanlan Carroll Pty Ltd |
| COUNSEL FOR THE RESPONDENT: | Mr Mawson QC |
| SOLICITOR FOR THE RESPONDENT: | Coote Family Lawyers |
Orders
The following properties be sold forthwith at fair market value by an agent appointed by the Wife:
(a) D Street, City G, the UK;
(b) B Property, Town F, the UK.
Upon settlement of the sale of the properties pursuant to order 1 hereof, the proceeds of sale be applied by priority as follows:
(a) to pay the costs of and incidental to the sale;
(b)to discharge the applicable, disclosed mortgages encumbering title together with any arrears of rates, taxes and charges payable at law;
(c)to pay the amount of A$250,000 to the Wife, A$100,000 of which to be set aside for the payment of mortgage instalments on the property at J Street, Suburb K; and
(d) the balance to be distributed equally between the Husband and the Wife.
By 4:00pm on Friday 30 August 2019 the parties file and serve any written submissions in support of any application for costs arising out of or incidental to the Wife’s Amended Application in a case filed 17 May 2019.
By 4:00pm on Friday 13 September 2019 the parties file and serve any written submissions in reply to any application for costs.
Save and except for any application for costs as set out herein, the Wife's Amended Application in a Case filed 17 May 2019 and the Husband’s Response to Application in a Case filed 10 May 2019 be otherwise dismissed, and all extant applications for final orders be placed in the list of cases awaiting allocation to a judicial docket.
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 Holbert & Holbert 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 MELBOURNE |
FILE NUMBER: (P)MLC2024/2018
| Ms Holbert |
Applicant
And
| Mr Holbert |
Respondent
REASONS FOR JUDGMENT
Introduction
By an Amended Application in a Case filed 17 May 2019, the Wife seeks the sale of certain assets of the relationship by way of an interim property settlement.
In particular, the Wife seeks orders for the sale of two properties in the UK held by the parties jointly, with the proceeds of sale (after deduction of the costs of the sale and the discharge of relevant mortgages and other charges) to be distributed $250,000 to the Wife and the balance thereafter divided equally between the parties. It is the Wife’s position that $100,000 of the payment to her will be set aside to meet ongoing mortgage repayments over the former matrimonial home over the next 12 months.
The Husband opposes the making of these orders. While he accepts that assets must be realised to meet the ongoing living expenses of the parties and the children, along with the costs of litigation, it is his position that the former matrimonial home in Suburb K will not be able to be retained and should be sold now to meet these expenses. He further submits that there are various complications attending the sale of the UK properties, including that the properties are currently tenanted and that 60 days’ notice to the tenants of an intention to place the properties on the market for sale would be required; that the property market in and around City G, where the properties are situate, is weak, and a sale unlikely to obtain a profitable result; and he cites inheritance tax and capital gains tax liabilities that will crystallise upon sale.
For the reasons that follow there will be orders that the two UK properties be sold and that, after payment of the relevant costs and discharge of the relevant liabilities, $250,000 be paid to the Wife and the balance be distributed equally between the Husband and the Wife. $100,000 of the Wife’s $250,000 is to be set aside for the ongoing payment of the mortgage over the former matrimonial home pending final settlement of the matter.
The parties
The Wife is 41 years old, and is employed as an Office Worker on a part time basis. She resides at the former matrimonial home at J Street, Suburb K (“the Suburb K property”).
The Husband is 45 years of age and currently resides in the UK. In his affidavit in the substantive proceedings filed 12 April 2018 he deposed to plans to split his time between Australia and the United Kingdom in light of the children remaining in Australia with the Wife. The Husband holds employment in L Pty Ltd (City G), which primarily operates out of the UK, and he deposes to holding directorships in a number of other entities.
The parties commenced the relationship in 2004 in the UK, were married in 2006, and separated on a final basis on 26 February 2018. The parties relocated to Australia in 2014 where the Wife and the children remain.
There are two children of the marriage, Y, born in 2010 (aged nine), and X, born in 2014 (aged five). The children reside at the former matrimonial home with the Wife.
Procedural History
Proceedings with respect to financial matters were instituted by the Wife in this Court on 28 February 2018.
On 18 July 2018 orders were made by Registrar George with the consent of the parties providing for the Husband to pay $100,000 to the Wife within 14 days thereof, with such amount to be characterised at final hearing. The orders further provided that the husband continue to pay by way of interim spousal maintenance, the mortgage instalments, rates, and house and contents insurance in respect of the former matrimonial home as and when they fall due, along with the children’s education and childcare expenses.
Relevantly to this interim application, on 13 November 2018 Johns J made orders with the consent of the parties requiring the parties to jointly approach their bank to request a Line of Credit (in addition to the current mortgage of the Suburb K property) with a facility limit of $250,000 (“the LOC”). The orders directed that upon the LOC being put into place, the Wife be at liberty to draw up to $200,000 on the LOC (to be characterised as a part property settlement) for, amongst other things, her legal, accounting and valuation expenses in these proceedings, and necessary living expenses. The orders also provided that the orders of 18 July 2018 continue until further order, save that the Husband’s obligation to pay mortgage instalments over the Suburb K property shall be limited to the payments he would have been obligated to make had the LOC not been undertaken, with any additional required payments to be met from the undrawn component of the LOC.
The Current Application
The genesis of this interim application was the Wife’s Application in a Case filed on 24 April 2019. Time was abridged for service of the Wife’s application, and it was heard in the Judicial Duty List on 1 May 2019. However in circumstances where the husband currently resides in the UK and had not had an opportunity to respond to the wife’s application, the parties consented to the application being adjourned off to the next Judicial Duty List on 28 May 2019 to allow the Husband to file answering material and for them to have discussions in relation to the orders for further discovery sought by the Wife.
Counsel for the Husband also indicated that he would seek instructions on the question of whether the Husband would meet mortgage repayments over the former matrimonial home as and when they fell due, prior to the adjourned date, or otherwise obtain an extension from the parties’ bank of the moratorium over mortgage repayments that had expired on 28 April 2019.
The application was listed again in the Judicial Duty List on 28 May 2019, the Husband having obtained an extension of the moratorium over mortgage repayments until 1 July 2019. The Husband had filed his Response to the Wife’s Application in a Case and supporting affidavit material, and the Wife had filed an Amended Application in a Case and an affidavit in response to the Husband’s affidavit.
The Wife relied upon the following material in support of her application:-
a)Amended Application in a Case filed 17 May 2019;
b)Affidavit of the Wife sworn 24 April 2019;
c)Affidavit of the Wife filed 17 May 2019.
In support of his application, the Husband relied on the following material:-
a)Response to Application in a Case filed 10 May 2019;
b)Affidavit of the Husband sworn 10 May 2019;
c)a letter to the Husband from H Company of City G, dated 3 October 2018.
The orders now sought by the Wife which are the subject of dispute are as follows:-
a)That the following properties, be sold forthwith at fair market value by an agent appointed by the Wife:
i)D Street, City G, the UK;
ii)B Property, Town F, the UK.
b)Upon settlement of the sale of these properties, that the proceeds of sale be applied by priority as follow:
i)to pay the costs of and incidental to the sale;
ii)to discharge the applicable, disclosed mortgage encumbering title together with any arrears of rates, taxes and charged payable at law; and
iii)to pay the amount of AUD$250,000 to the Wife ($100,000 to be set aside for payment of the mortgage on the Suburb K property); and
iv)the balance be distributed equally between the Husband and the Wife.
c)That the Husband pay the Wife’s costs of this Application on an indemnity basis.
The orders sought by the Husband which the wife resists are as follows:-
a)That the Wife’s Application in a Case filed 29 April 2019 be dismissed.
b)That the Suburb K property be forthwith placed on the market for sale.
c)That the Wife pay the Husband’s costs, upon an indemnity basis, of responding to her Application in a Case filed 29 April 2019.
The Wife had also sought orders requiring the Husband to provide discovery of certain documents in relation to his financial situation and that of his business interests in the UK, and for the sale of the Husband’s Vehicle 1 and the Husband’s Vehicle 2. During the course of the interim application the parties had discussions and were able to come to an agreement in respect of these matters, and orders were made with the consent of the parties on 28 May 2019. This included orders for the sale of the Vehicle 1 and Vehicle 2, with the proceeds of such sale to be applied to mortgage repayments of the Suburb K property.
Relevant Principles
Section 80(1)(h) of the Family Law Act 1975 (Cth) (“the Act”) empowers the Court to make interim orders for partial property settlement pursuant to s 79 of the Act. Although it is generally preferable for there to be one final hearing in s 79 proceedings, the court’s power can “... properly be exercised by a succession of orders until the power to make orders with respect to property is exhausted”: Gabel & Yardley (2008) FLC 93-386 at 82,957 [57] (Bryant CJ and Coleman J).
Regarding the circumstances in which the court may make an order for a partial property settlement pursuant to s 79, the Full Court In the Marriage ofZschokke (1996) FLC 92,693 at 83,216 (Baker, Finn and Hannon JJ), said as follows:
If the order is to be made under s 80(1)(h), it would seem that regard should be had to the requirement in s 79 that the orders be just and equitable and this would require the Court to undertake at least some brief consideration of the matters in s 79(4) including those referred to in s 75(2). If on a brief consideration of those matters, it seems likely to the Court that the party who is the applicant for the interim order for an advance of funds from the other party 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 order sought to be made (cf Wilson and Poletti).
In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-446, the Full Court described the consideration of an application for interim property distribution as requiring a two-step process. Firstly, there must be circumstances enlivening the power to make the order. In agreeing with the Full Court in Zschokke, Boland and O’Ryan JJ said at [132] that in order to make an interim property order “… [i]t is not necessary to establish compelling circumstances” and that “[a]ll that is required is that in the circumstances it is appropriate to exercise the power”, the “overarching consideration” being the interests of justice. Their Honours added at [137] that:
… “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.
The second step requires a consideration of the matters set out in s 79.
Notwithstanding the broad discretion the Court has to make an interim distribution of property, the Full Court has held that an interim property order should not compromise the final outcome of any property settlement, and either the remaining property needs to be adequate to meet the legitimate expectations of the parties upon final exercise of the power (see, for example, Zschokke at 83,220), or the interim order must be capable of being reversed or adjusted (see Harris and Harris (1993) FLC 92,378 at 79,929 – 79,930 (Nicholson CJ, Fogarty and Moore JJ)). Accordingly, caution must be exercised in respect of the interim realisation of assets, particularly real property (see In the Marriage of Bearup (1993) FLC 92,412, at 80,218 regarding the care to be taken when contemplating orders for the interim sale of the former matrimonial home). This is all the more so given the nature of an interim hearing and that the Court will rarely have all the evidence before it.
The Evidence
In her affidavit sworn 18 October 2018, the Wife deposed that following the date of separation in February 2018 until in or around July 2018, the Husband continued to pay for various expenses for her and the children including mortgage repayments, rates and utilities for the former matrimonial home, home and contents insurance, motor vehicle expenses including insurance, Foxtel, and the children’s childcare, school fees and education expenses. However following the making of the 18 July 2018 orders the wife assumed much of those expenses herself, save for the mortgage repayments, rates, and the children’s childcare and education expenses, which it was ordered by consent that the Husband continue to pay.
As has been mentioned, on 13 November 2018 orders were made for the parties to obtain the LOC and for the Wife to draw upon that credit for her legal, accounting and valuation expenses in these proceedings, and necessary living expenses. While the parties’ explanations of the circumstances leading to the failure to obtain the LOC may differ, it is common ground that the LOC was not obtained by the parties, with the bank refusing the application on the basis that it deemed that the parties would be unable to service the loan. It is the Wife’s evidence that the failure to obtain the LOC was the catalyst for her seeking and obtaining a loan from a Mr E, currently in the amount of $220,000, for the payment of her legal fees. It also appears, at least in part, that it is on this basis that the Wife now seeks the realisation of particular assets for the purposes of an interim property settlement.
In her affidavit sworn 24 April 2019, the Wife deposes that the Husband has been late in making payments required of him under the July 2018 orders, and that the bank statements in respect of the Suburb K property show that the mortgage offset account has been overdrawn each month since separation. The Wife also deposes to becoming aware that the Husband had obtained a stay over the mortgage repayments without her knowledge. She expresses considerable uncertainty as to the Husband’s financial position, and her concern that the bank will foreclose on the Suburb K property at the end of the payment break because the mortgage payments will not be made. The Wife says that she wishes to continue living in the Suburb K property so as to maintain consistency for the children.
For his part, the husband agrees that he has not been meeting the mortgage repayments, stating in his affidavit sworn 10 May 2019 that his financial position is parlous. The Husband accepted that he would not have the capacity to meet the mortgage repayments on the Suburb K property when the then current moratorium expired on 1 July 2019.
The parties purchased the former matrimonial home in 2015 for $1.825 million plus stamp duty. Following the purchase the parties undertook significant renovations of the property. While a formal valuation has not been obtained, both the Husband and Wife estimate the current value of the property to be approximately $3 million with equity of approximately $1.7 million.
It is apparent however, from the Husband’s financial statements, that there is approximately A$863,000 combined equity in D Street and B Property.
In these circumstances, and having regard to the matters set out in ss 79(4) and 75(2) of the Act, the question is whether an interim property settlement is necessary and, if so, whether it would be more just and equitable to require the sale of the two UK properties, or the sale of the Suburb K property.
Bearing in mind, in particular, the age of the children of the marriage, the fact that the children are and have been in the care of the Wife, the existence of considerable equity in the two UK properties, the fact that it is not yet clear whether or not the Suburb K property will have to be sold, and the considerable equity which seems to exist in the Suburb K property, it would seem premature to require the sale of the Suburb K property in which the Wife and children continue to reside and wish to continue to reside.
In all the circumstances therefore the properties at D Street, City G, and B Property, Town F, should be sold as soon as practicable by an agent appointed by the Wife. Upon settlement of the sale of these properties the proceeds of sale should be applied by priority in the manner sought by the Wife in her amended application. Having regard to the fact that the LOC was not obtained, and to the orders made by Johns J on 13 November 2018, it is appropriate that, as the Wife submitted, $100,000 of the $250,000 to be paid to the Wife should be set aside for the payment of mortgage instalments on the Suburb K property, and the Wife should be able to use the remaining $150,000 for her ongoing expenses, including for the conduct of these proceedings.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McEvoy delivered on 22 August 2019.
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