Jepson and Jepson and Ors - [2017] FamCA 1013

FAMILY COURT OF AUSTRALIA

JEPSON & JEPSON AND ORS

[2017] FamCA 1013

FAMILY LAW – PROPERTY – Interim proceedings – Where the wife previously commenced proceedings in the Supreme Court of New South Wales – Where receivers were previously appointed by the Supreme Court to facilitate the sale of former matrimonial property – Where the matter was transferred to the Family Court of Australia – Where the receivers seek orders to complete the sale of the property pursuant to a contract of sale – Where caveats have been registered on the property by a company, the husband’s mother and the wife’s former solicitors – Where the value of the property is not agreed between the parties – Where the receivers argue that the property should be sold for $4.2 million as they have been unable to sell the property at a higher price for 18 months – Where the husband, wife and third and fourth respondents seek orders that the property not be sold without the prior consent of the husband and the wife – Where the Court is not in a position to approve a sale at $4.2 million as the property has been previously valued and subject to significantly greater offers – Where the sale may have been influenced by public knowledge of the matrimonial dispute – Where valuers estimated a property value of approximately $6.1 million – Where orders are made for the property to be sold by the husband and wife with a listing price of $6.1 million.

Conveyancing Act 1919 (NSW) s 66G Family Law Act 1975 (Cth) ss 31, 34, 106A
APPLICANT (FIRST DEFENDANT):	Mr Jepson

RESPONDENT (PLAINTIFF):

Ms Jepson

SECOND RESPONDENTS (RECEIVERS):

Mr Oakley and Mr Haight

THIRD RESPONDENT:

K Pty Limited

FOURTH RESPONDENT:

Ms B Jepson

FIFTH RESPONDENT:

C Firm

FILE NUMBER:

SYC

2100

2016

DATE DELIVERED:

14 November 2017

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Loughnan J

HEARING DATE:

13 November 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Pritchard SC

SOLICITOR FOR THE APPLICANT:

Allsop Glover Lawyers

RESPONDENT IN PERSON:

Ms Jepson

COUNSEL FOR THE SECOND RESPONDENTS:

Mr Marshall SC

SOLICITOR FOR THE INTERVENOR:

Gillis Delaney Lawyers

COUNSEL FOR THE THIRD AND FOURTH RESPONDENTS:

Mr Pritchard SC

SOLICITOR FOR THE THIRD AND FOURTH RESPONDENTS:

Allsop Glover Lawyers

COUNSEL FOR THE FIFTH RESPONDENT:

Mr Hill

SOLICITOR FOR THE FIFTH RESPONDENT:

C Firm

Orders

Orders are made in respect of a property at L Street, Suburb P in the State of New South Wales (“Suburb P”), by way of variation of orders made by the Supreme Court of NSW on 18 April 2016 as varied by that Court on 7 June 2016, in accordance with the orders sought at paragraph 1 of the Application in a Case of the husband filed 10 November 2017, as amended and as set out hereunder:
“11 For the purpose of the receivership, the Receivers have the power to do all things necessary to effect the sale of the Properties, subject to orders 12A and 17 herein, as if they were the registered proprietor of each of the Properties, including but not limited to the power to execute a contract for sale or each of the Properties in the name of the Plaintiff.
12A. Notwithstanding any other order, with the exception of order 17 herein, no settlement of any sale of [Suburb P] by the Receivers shall be permitted without the prior written consent of the Plaintiff and the First Defendant.
17. The Plaintiff and the First Defendant shall co-operate and do all acts and things and sign all necessary documents to effect the sale of the Properties and for that purpose the following shall apply:
(a)The Properties shall be listed for sale by private treaty with a real estate agent to be chosen by the Plaintiff and the First Defendant;
(b)The list price of the Properties shall be such amounts as is instructed by the Plaintiff and the First Defendant;
(c)The sale price of the Properties shall be such amount as is instructed by the Plaintiff and the First Defendant;
…
(d)With respect to the appointment of a real estate agent:
(i)The First Defendant shall within 7 days from the date of these orders provide to the Plaintiff in writing the names of three real estate agents;
(ii)The Plaintiff shall within 14 days from the date of these orders respond to the First Defendant in writing nominating one of the real estate agents as the agent for the sale of the [Suburb P] Property;
(iii)In the event the wife fails to nominate with the time afforded her under these orders, the First Defendant shall appoint a real estate agent of his choosing to be the agent for the sale of [Suburb P].
(e)With respect to the listing price for [Suburb P], the listing price shall be the figure of $6.1 million.
(f)In the event that an offer is made by a purchaser, and the offer is not less than 2.5 percent below the listing price (“the first listing price”), the parties must accept the offer.
(g)If within 6 months there are no offers equal to or above the first listing price, then [Suburb P] must be put up for Auction, with a marketing campaign lasting no less than 2 months. The reserve price shall be set at no less than 5 percent below the listing price (“the second listing price”). In the event a final bid is made at Auction that is equal to or above the second listing price, then the parties are to cause the real estate agent for [Suburb P] to accept the bid.
(h)In the event that [Suburb P] is passed in at Auction, then { Suburb P] is to be put to Auction every 6 weeks until it is sold. The second reserve price is to reduce by 1.5 percent at each successive auction of [Suburb P] (“the successive listing prices”). If a final bid is equal to or over the successive listing reserve price for each successive auction the parties must accept that bid.
(i)In the event that one party refuses to sign any document to give effect to the provisions of this order, then the Receivers have the right to sign those documents on their behalf or any party can make an application pursuant to s. 106A of the Family Law Act 1975 (Cth) to the registrar, who is authorised to sign any documents required to give effect to these orders.
(j)The Receivers are restrained from making any representation whatsoever that the sale of [Suburb P] is subject to any Court Order or that the sale of [Suburb P] is a forced sale.
The Court notes the undertaking of Ms B Jepson to pay as and when they fall due any insurance costs associated with the Suburb P property until further order.
That Undertaking shall be reduced to writing, filed in the Court and served on the other parties within fourteen days from the date of these orders.
Order 1 is made on the basis of that undertaking and on the basis that until further order, the receivers are excused from making any payments by way of outgoings on the Suburb P property or for the purpose of marketing or preparing the property for sale.
The company, K Pty Limited, Ms B Jepson and C Firm are joined as the third, fourth and fifth respondents respectively.
The Application in a Case filed on 19 October 2017 by the Receivers is dismissed.
Except as already provided for in these orders, no orders are made in respect of the orders sought by the wife in her document titled “Orders by Ms Jepson” (Exhibit 4 dated 14 November 2017).
Leave is granted to any party or any person affected by these orders to apply on giving seven days’ notice to the Court and to each other party. That leave is to be exercised by the filing of an Application in a Case, supported by an affidavit.

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 Jepson & Jepson and Ors 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: SYC2100 of 2016

Mr Jepson

Applicant (First Defendant)

And

Ms Jepson

Respondent (Plaintiff)

And

Mr Oakley and Mr Haight

Second Respondents (Receivers)

And

K Pty Limited

Third Respondent

And

Ms B Jepson

Fourth Respondent

And

C Firm

Fifth Respondent

REASONS FOR JUDGMENT

These are proceedings in the context of proceedings for settlement of property between husband and wife. The matter was listed yesterday and the hearing proceeded all day. I indicated to the parties that I would deliver judgment this morning and excused them and their legal representatives on delivery of judgment.
By way of an Application in a Case filed on 19 October 2017, the applicants, Mr Haight and Mr Oakley, as receivers seek orders pursuant to s 31 and s 34 of the Family Law Act1975 (Cth) (“the Act”) to complete the sale of a property at number L Street, Suburb P in the State of New South Wales (“the Suburb P property”) pursuant to a contract for a sale entered into by them on 16 October 2017.
The third respondent, C Firm and Ms B Jepson, the husband’s mother, have caveats registered on the title of the Suburb P property. The receivers seek orders that those caveats be withdrawn on the undertaking of the receivers to provide seven days written notice before the distribution by the receivers of any surplus from the proceeds of sale of the Suburb P property. The husband, his mother Ms B Jepson, and a company, K Pty Limited oppose the orders sought by the receivers and, among other orders, seek, in effect, that the husband and the wife have carriage of the sale of the Suburb P property and that, although not removed or discharged, the receivers stand down from their task.
It was submitted on behalf of the husband, Ms B Jepson and K Pty Limited (who, for the purposes of these proceedings, appear in one interest and are represented by one counsel), that the husband is the sole director and the wife is the sole shareholder of K Pty Limited. The wife, too, opposes the orders sought by the receivers, and she joins in seeking the orders sought by the husband, his mother and the company. The wife also seeks that the receivers be formally removed and that the proceedings be transferred back to the New South Wales Supreme Court as far as they relate to the receivers.
C Firm were formerly the wife’s lawyers, and they seek to retain priority in the disbursement of the proceeds of sale of the Suburb P property when and if there is such a sale.
There is some complexity to the background of the proceedings and it is necessary to set it out in some detail. The husband and the wife were married on 12 December 1998 and separated in November 2015. They have two children who are aged 18 and 16.
The wife attempted to sell the Suburb P property after the parties separated and retained an agent for that purpose. In April 2016 proceedings were commenced by the wife in the Supreme Court of New South Wales. Those proceedings were apparently taken to sever the interests of the husband and the wife in two properties in the City Q area, the Suburb P property and a property at Suburb R. Although at least the Suburb P property was in the sole name of the wife, I was told in submissions yesterday that the concept of severance was to deal with an equitable interest held by the husband in that property. The proceedings were said to be taken under s 66G of the Conveyancing Act 1919 (NSW).
I do not really understand how those proceedings would lie, and I note that an order was subsequently made to transfer the proceedings to this Court for determination under the Family Law Act 1975 (Cth). In any event, in the short term, and representing the urgent issue which prompted the wife to take proceedings in the Supreme Court, she sought interlocutory orders for the eviction of the husband from the Suburb P property. I have been provided with a copy of the reasons given by Slattery J on 13 April 2016. The judgment commences:
A wife, now separated from her husband, brings these proceedings against him in the Equity Division of this Court. In her Summons, she seeks, as plaintiff, the restoration of possession of the family home and a holiday house, both of which are registered in her name, to end what she says is a trespass to her land by her husband, the first defendant.
This action should have been commenced in the Family Court of Australia. It is now being transferred there pursuant to the Jurisdiction ofCourts (Cross-Vesting) Act (NSW) 1987 (“the NSW Cross Vesting Act”), s 5(1)(b). In the Court’s opinion the proceedings should be so transferred. The parties both agree with this course.
But urgent issues confront this couple. In the Equity Duty list the wife seeks immediate possession of this matrimonial property, the family home and the holiday home, and other incidental relief, to restrain the continuation of what she claims is a trespass before proceedings are transferred to the Family Court.
The wife says she was forcibly excluded from the family home about a month ago. She seeks to restore her possession to what she claims is the status quo ante with a Court-ordered reversal of her eviction by the husband. She also seeks restoration of possession as against the husband’s new partner, the Second Defendant, who the wife claims also now occupies the family home with the husband.
Slattery J then recited that the husband and the wife owned two houses. That is a property at Suburb R and the Suburb P property, being, respectively, a holiday home and their main residence. A bitter matrimonial dispute arose between husband and wife in the second half of 2015. On 20 November 2015, they signed an informal settlement document, not drafted by lawyers, not approved by a court and, at best, evidencing an informal arrangement between the parties, and that document provided for the wife to live, at least temporarily, in the holiday home.
Slattery J observed that that document is consistent with the propositions put by both of the parties; that this was a very temporary arrangement, on the wife’s argument, and should not have been treated as a relinquishment of the main property by her, and, on the husband’s argument, it was an agreement that the wife would live indefinitely at the holiday home. There was a dispute between the parties before Slattery J as to who had lived in the main home at Suburb P thereafter, but it was found by his Honour that on 20 March 2016 the husband executed a plan which resulted in the wife being locked out of the family home.
Slattery J observed that the husband entered the property deliberately and with security guards at a time when he knew the wife was temporarily absent from the property. She had gone shopping. He had the locks changed and, when she returned, she could not enter the property. Ultimately, on 13 April, the judge considered the balance of convenience as to the occupation of the home and made an interim order whereby the wife would occupy the home. Importantly, his Honour proposed, and the parties agreed, to orders that would have trustees for sale appointed for both properties.
The receivers say that from April to August 2016, where possible, they maintained existing arrangements put in place by the wife, with the agents and solicitors who had been working towards the sale of the properties. The receivers engaged a real estate agency called J Group for the purposes of the sale of the Suburb P property, they being agents who had been engaged by the wife in February 2016. Throughout 2016 to early 2017, the receivers say that they were provided with information about potential purchasers for the Suburb P property, however, none of those persons substantiated their interest or made a satisfactory offer within the recommended price range and commensurate with updated valuation opinions. On 16 and 17 May 2016 the receivers were informed by C Firm, the wife’s lawyers, about potential purchasers but neither of those potential purchasers paid a deposit or submitted a signed counterpart contract.
Another potential purchaser offered $9 million but also failed to pay a deposit or submit a signed counterpart contract. The receivers notified the wife of the difficulties with that purchaser on 30 May 2016. In late May 2016, J Group informed the receivers of a potential purchaser, a Ms H. On 7 June 2016 orders were made in the New South Wales Supreme Court varying the orders made on 18 April 2016 converting the applicant’s appointment to court appointed receivers. I was told yesterday that that change may have had something to do with the responsibility of the receivers for liabilities. On that date the Supreme Court proceedings were formally transferred to this Court.
On 18 October 2016 the receivers notified the husband and the wife that they had received a signed counterpart contract for the sale of the Suburb P property for $6,100,000, that a deposit of $610,000 had been paid and that the receivers intended to accept that offer based on valuations obtained for the Suburb P property and an updated opinion from a valuer, Mr N. Ms H was the only person to have paid a 10 per cent deposit and submitted a signed counterpart contract at an acceptable price since the receivers’ appointment in April 2016. The wife filed an application in a case seeking an order that the receivers be restrained from exchanging contracts for that price. On 25 October 2016 I made a direction by consent that the receivers would be justified in not exchanging the contracts with Ms H for a sale price of $6.1 million for the period up to the end of 6 December 2016. At about the time of the wife’s application the receivers had negotiated a non-exclusive agency agreement with another agent, Robinson Property.
On 8 December 2016 the receivers became aware that Ms H was no longer interested in purchasing the Suburb P property. On 22 February 2017 the receivers appointed Mr D of X Company and Mr M of E Company to sell the Suburb P property. On 1 May 2017 I made orders that the receivers sell the Suburb P property by auction if no suitable offers were received by private treaty within three months. There were no such offers and an auction was arranged for 11 October 2017. The wife applied for an order cancelling that auction and on 3 October 2017 her application was dismissed.
The then solicitors for the wife sent a letter to the solicitor for the receivers advising among other things that the wife relied upon a valuation by Mr S to assess that $7 million should be the reserve price set at the auction. On 9 October 2017 the ANZ Bank gave notice to the receivers of a judgment debt of $11.7 million against the husband and that they had issued a bankruptcy notice to him.
On 11 October 2017 the auction of the Suburb P property was held. The low reserve was set at $4.5 million and the high reserve price at $5 million. The property was passed in at $4.2 million. On 13 October 2017 the receivers gave notice of their intention to exchange conditional contracts on 16 October 2017 at 5.00 pm for the sale of the Suburb P property to the highest bidder from the auction for a sale price of $4.2 million. The agents received a 10 per cent deposit into their trust account. The terms of the exchanged contract require that settlement occur on 15 December 2017. The contract which is dated 16 October 2017 includes a special condition at clause 41 which provides:
41.1If any proceedings to set aside this contract or restrain completion of it are commenced in any court of competent jurisdiction or if any order is made setting aside this contract or restraining completion of it, the Vendor may by written notice to the Purchaser rescind this contract and the provisions of Clause 19 will apply. The Vendor’s decision will be final and binding on the Purchaser.
41.2Despite anything else contained in this contract, the Purchaser agrees that if the Vendor has not, within 30 days of the date hereof, obtained a judicial direction to the effect that the Vendor would be justified in completing this contract, then the Vendor may elect by written notice to the Purchaser to either complete this contract or rescind this contract, and if the Vendor elects to rescind then the provisions of Clause 19 will apply. An election by the Vendor to rescind this clause must be exercised within 7 days of expiry of the 30 day period and in this respect time is of the essence.
41.3The Purchaser acknowledges and agrees that any rescission of this contract by the Vendor pursuant to this clause 41.
(a)will not be a breach of this contract for the purposes of Clause 19.2.3; and
(b)the Purchaser waives any rights it may have to claim for damages, costs, or expense arising directly or indirectly from any rescission of this contract by the Vendor pursuant to this Clause 41.

Just returning to the chronology. On 16 October 2017, the husband and his mother offered to pay $4,502,500 for the Suburb P property. I understood that the rationale for that offer was that it was the amount that would have been received on a higher valuation, less agent’s commission. The receivers sought details as to the availability of funds to complete a purchase, having particular regard to the fact that they were on notice that the husband was indebted as to more than $11 million and that a bankruptcy notice had issued. The receivers were not satisfied with the answers. On 19 October 2017, the receivers filed the Application in a Case that is before the Court.
That Application seeks a range of orders. They are not all pressed as the submissions lodged on behalf of the receivers make plain, but they seek, firstly, a direction pursuant to s 31 and s 34 of the Act that the receivers would be justified in completing the sale of the Suburb P property under the contract of 16 October 2017. They seek an order in relation to a tax clearance certificate for capital gains tax (“CGT”) for the wife. The submissions make plain that that is no longer pressed or required. They seek that the wife provide to them details in writing of her tax file number, address and so on. And I understand, again, that order is no longer pressed.
They seek provision by the wife to them of, in effect, an address for service in the proceedings. I gather that is no longer required. They seek authority to execute the transfer in their own name for the purpose of conveying title to the purchasers. They seek orders under s 34 or s 114 requiring the wife to give vacant possession of the property, to deliver up keys and to remove her goods and chattels. Upon provision by them of an affidavit verifying default of the wife in relation to that previous order for vacant possession, they seek the issue of a writ of possession.
They seek orders that would facilitate the execution of the writ. They seek an order that the former solicitors for the wife be joined as third respondent in the proceedings. They seek that the husband’s mother be joined as a fourth respondent in the proceedings. They seek that the caveats lodged by that company and by the husband’s mother be removed on certain conditions.
As I say, the husband, his mother, Ms B Jepson and K Pty Limited, at least for the purposes of these interlocutory proceedings, appear in the same interest. They seek a variation of the original orders made on 18 April 2016 which would have the effect or which would aim to have the effect of authorising the receivers to stand down in relation to their role; that would prevent the receivers selling the property without the prior written consent of the husband and the wife; and that would require the husband and the wife to cooperate in signing all documents and doing all things for the purposes of selling the property. They propose a method by which an agent would be appointed. They propose that the listing price of the property would be $6.1 million. They propose that they accept an offer not less than 2.5 per cent below the listing price. The order actually says, “In the event that an offer is made by a purchaser, and the offer is not less than 2.5 per cent of the listing price the parties must accept the offer.” I think what the husband means is – “and the offer is not less than 2.5 per cent below the listing price” otherwise the order would make no sense. In the event that within six months there are no offers equal to or above the first listing price, then the property must be put for auction with a marketing campaign of no less than two months. Reserve price set at no less than 5 per cent – I think they mean 5 per cent below the listing price. In the event that a final bid is equal to or above that reduced price the parties are to accept that price. If passed in they propose a further reduction by 1.5 per cent at each successive auction until the property is sold.
They seek an order under s 106A of the Act that authorises the registrar to sign. They seek an order that – it is a bit hard to know what it means. That the receiver has the right to sign. Perhaps that is also an order under s 106A or any of the parties would have leave to make an application. I think in summary, it is a s 106A order. They seek a restraint against themselves making any representation whatsoever to the effect that the sale of the Suburb P property is subject to a court order or is a forced sale.
The first issue then is the receivers application for the Court’s approval for a sale at $4.2 million. As I say, the husband and the wife, the husband’s mother and the company seek an order that there be no sale without the consent of the husband and the wife, and that the husband and the wife have carriage of the sale. In the event that they are not successful in obtaining that order, the husband, his mother, the company and the wife seek an order that the Court not give approval to the current contract but put the receivers to making the election that is referred to in the contract. As I indicated to the parties during submissions, that last option seems to me to be highly unsatisfactory. The purpose presumably of that approach would be to leave the receivers to be challenged at some later time in relation to the decision they made to take up that sale at the offered price, and if nothing else, it seems to me that the history of these proceedings suggests that the right to take action alone could only be a Pyrrhic victory.
As I also indicated to the parties yesterday, in my view I am not in a position to approve a sale at $4.2 million. Without seeking to understate the efforts of the receivers and the agents they retained, their case is in effect that $4.2 million is the right price because they have been unable to sell the property for 18 months and the most recent sale campaign led to an auction which ultimately resulted in a highest offer of $4.2 million. The problem with that is it is highly unlikely that the property is worth only $4.2 million. The property was bought 20 years ago, the evidence suggests, for about $3.85 million, or something of that order. Since then it has been valued and subject to offers significantly greater than $4.2 million.
On 18 October 2016 there was a purchaser at $6.1 million, and that sale was only prevented by court order. That price is about the average of all valuations obtained over time. The receivers had commissioned three valuations of the Suburb P property. A Mr N provided a valuation of the property dated 2 May 2016 for 6.75 million. On 10 October 2016, Mr N updated that opinion. He said that the property was worth $6.75 million but stated:
The recent publicity surrounding the registered proprietor’s prevailing financial circumstances, which has occurred subsequent to our previous valuation report, would exacerbate those impacting non standard factors. It is our experience such impacts often result in a discount below the otherwise current market value of up to 15%.
Mr N then opined that when considering “other than standard market forces the likely realisable price achievable in constrained circumstances or non-market conditions is $5,750,000.” Mr N provided a further updated valuation on 18 April 2017 at $6.25 million.
Mr G of F Valuers provided a valuation of the Suburb P property dated 24 June 2016 for $5.99 million. Mr G provided an updated valuation dated 10 October 2016 and referred to a possible increase of 2 to 5 per cent in the market value of the Suburb P property from $5.99 million to between $6.1098 million and $6.2895 million, but indicated that such an increase was not supported by market evidence. Mr G provided a further updated valuation on 21 April 2017 of $6,199,650. At the wife’s request T Valuers provided a valuation of the Suburb P property in May 2017 at $7 million. The receivers requested that Mr N and Mr G both review that report and in a report dated July 2017 Mr G stated:
In setting a reserve price it is normal practice to give consideration to market feedback during the marketing period together with any reliable offers received. The property is currently being marketed by a high profile local agent and it is recommended that prior to setting a reserve consideration be given to the market feedback provided by the agent together with previous valuation advice received. It should be noted however that due to the potential market stigma, based on the time on market, the original valuation amount and subsequent offer of $6,100,000 may not be replicated.
Both Mr N and Mr G expressed doubt in their reports of the per square metre analysis undertaken by T Valuers. The receivers obtained a further valuation of the Suburb P property by the Z Group dated 5 September 2017 at $4.8 million. The wife had also tendered to the Court a valuation from 15 December 2001 at $3.8 million. She tendered a third valuation dated 9 May 2016 which was an insurance replacement valuation to reflect the current day replacement costs escalated to August 2019 for $9,062,503.
It is one thing for the owners or the parties to settle on a proper sale price. However, for the Court to be satisfied about a proper price absent imminent danger of a catastrophic loss, in my view the evidence before the Court must permit a confident finding. In this case a confident finding requires independent expert evidence and the opportunity for the evidence to be tested. At this stage this is not a “sell at all costs” situation. Although the circumstances since April 2016 have been financially destructive, in my view, within reason, the Court should promote achieving the best price reasonably obtainable over achieving an immediate sale.
Reflected in what the valuers have said, a complicating factor in these proceedings is the fact that there is apparently a limited market for City Q property. In this case that market has been made aware that the sale is connected with court proceedings, that the vendor is a receiver and that the indicative price for the property has significantly reduced. There have been newspaper articles about the sale and about the travails of the husband and the wife in the City Q press. Of course, it is not possible to be certain about these things, but one would anticipate that such matters could interfere with the property being received by the market on its merits when presented for sale.
I canvassed with the applicants’ counsel the detriment of granting the orders sought by the other parties – if I can call them that. Mr Marshall SC, for the receivers, said that his clients were responsible for outgoings in relation to the property, and that they had borrowed money last year from Ms B Jepson (about $88,000) which was used to satisfy the first mortgagee for a period in relation to the first mortgage. They have borne other expenses in terms of maintaining the property, including an insurance bill at about $12,000 a quarter and so on.
In relation to those matters, an undertaking was offered by Ms B Jepson, the husband’s mother, to meet the insurance payments until further order. When I asked what would be the expectation of the receivers in relation to outgoings, I was told, in effect, that there would be none. Without anybody indicating that they would satisfy the first mortgagee, it was said that negotiations would continue by the wife and perhaps others with the first mortgagee, to keep it at bay and otherwise the husband, the wife, and perhaps others but not the receivers, would be responsible for other outgoings on the property, including, presumably, negotiating a basis on which any marketing costs or sale costs that have to be met upfront, could be addressed in the short-term.
The receivers have borrowed money for the purposes of discharging their obligation but those debts and the interest will presumably be part of the disbursements claimed by them in discharging their role. It is an understatement to say that there is a significant dispute in relation to the quantum of the receiver’s disbursements and remuneration, but those are matters for another day and not to be dealt with at this stage.
On that basis I indicated to the parties that I intended to refuse the receivers’ application for permission to complete the sale under the 16 October 2017 contract. In my view, the appropriate order is that the orders proposed on behalf of the husband, Ms B Jepson and the company, and supported by the wife, be put in place. That will be done on the basis of the undertaking offered by Ms Jepson. It will be done on the basis that the receivers are not required to make any payments in respect of the property, and it will be done on the basis that any of the parties can bring the proceedings back if there is a concern about the property not being sold.
At the moment, the calculation is that there is something in excess of $300,000 in equity in the property, if it was sold at $4.2 million. Therefore, looking at the worst case scenario, a sale at that price would satisfy all of the known obligations and assumes full payment in relation to the receiver’s remuneration and disbursements and in relation to the wife’s former solicitors and so on.
Therefore there is a small margin. In simple terms, that would mean if the property is sold today, it could sell for $300,000 below the $4.2 million price and still not have any creditor at risk. There might come a time when somebody feels that there is such a risk and something else has to be done.
The wife was asked what she envisaged as the timetable. The orders specify something, but the wife said that in her mind the property would be withdrawn from the market for three months, presumably to give the market an opportunity to forget the pejorative circumstances of the sale. Thereafter she proposes a substantial sales campaign. That sounds like a minimum of six months and perhaps longer. That is what I am inclined to do.
As to the remaining procedural matters I indicated that I would make the third parties – if I can call them that – parties to the proceedings. That is K Pty Limited, the husband’s mother and C Firm.
Many of the other issues – obviously vacant possession and such orders – they fall away for the time being. In any event I would be disappointed and surprised if, in a sale where the wife was actively engaged in the processes of sale, it was necessary for her to be removed under a writ of possession. For the time being, those issues all fall away and I am told the taxation certificate for CGT has been provided. Presumably the relevant addresses and contact details have been provided. If not, each party has a responsibility to maintain an address for service within the jurisdiction. Here the wife’s solicitors have ceased to act, and the wife is obliged to maintain an address for service and to notify the parties by filing a notice of address for service in relation to that issue.
There is then a dispute which relates to the priority for disbursement of the proceeds of sale. The wife is the mortgagor of the Suburb P property. Y Company is the first registered mortgagee. In paragraph 11 of an affidavit filed 1 November 2017, Mr Oakley, one of the receivers, sets out the amounts to be paid upon the completion of the sale of the Suburb P property. The amount required to discharge the first registered mortgage is estimated at $2,951,061, and that includes $10,000 in enforcement costs. Next, Mr Oakley says are the expenses of the receivership which Mr Oakley says would rank in equal priority to the registered mortgage, totalling $448,035.94. Agent’s commission – which include agent’s commission, advertising costs and the receiver’s liability under the NAB loan facility they raised to pay certain expenses. Then there is the costs of Local Court proceedings - commenced by J Group in relation to an asserted commission of the sale of the Suburb R property. There are council rates at $10,000; conveyancing costs and adjustments on the settlement of the Suburb P property - $10,000; gardening, maintenance on the Suburb P property up to a total of $3000. Finally there are legal fees, including GST, of $237,993.20.
Next, the receiver’s remuneration, including GST, for the period 18 April 2016 to the date of completion of the contract, which was $436,900 up to 24 October 2017. Then, a balance of funds of $374,000 roughly, which would remain to be paid to C Firm, to Ms B Jepson and the balance to be distributed.
In his affidavit Mr Oakley said that the amounts claimed by the receiver do not include any allowance which the receivers may seek to quarantine to indemnify themselves as receivers against the cost of defending claims made by the husband and the wife against them. There are allegations that the receivers have breached their duties, which the receivers deny.
In addition there were the costs which the receivers may incur in connection with achieving vacant possession and any future costs. In the hearing before me, Mr Marshall SC for the receivers said that notwithstanding Mr Oakley’s deposition, and notwithstanding a similar statement made to some of the parties in earlier correspondence, the receivers do not seek to quarantine any part of the net proceeds of sale of the Suburb P property to indemnify themselves in the way that was foreshadowed about future claims.
The controversy about the priority of disbursement of the proceeds of sale relates to three things.
The receivers assert that, in accordance with general law, they would be one of the first in priority for their remuneration. Next, there is a dispute as to the priority that Ms B Jepson would have as a result of her agreement with the receivers to advance $88,000. That agreement was made in 2016. Thirdly, there is a dispute about the priority that would be given to C Firm, the former solicitors for the wife. I prevaricated about this yesterday because it seemed to me that there are some issues that required careful thought and I wondered whether it was necessary at this stage to provide an answer to those things given that the property is not to be sold under the 16 October 2017 contract..
However, it would be helpful to the parties to say something about those matters. Ultimately, these issues need to be dealt with on the basis that if there is a problem the parties would be careful not to interfere with a potential sale, but would reserve the issue by preserving any funds that would be available to address the issue and have the argument about priority at a later time. The orders of 18 April 2016 were varied by Slattery J on 7 June 2016. Order 13 of the June orders provides:
The Receivers have power to borrow moneys which may be secured by a charge over Suburb P for:
(a)the costs of maintenance and preparation for sale of Suburb P and Suburb R;
(b)the costs of meeting the payment of principal and interest on any loans secured against Suburb P or Suburb R.
In June 2016 the husband’s mother, Ms B Jepson, paid $88,723.97 to Y Company. The receivers subsequently signed a loan agreement dated 23 November 2016 as borrower, concerning Ms Jepson’s payment to Y Company. That agreement stipulates that the receivers are not liable to repay Ms B Jepson until the Suburb P property has been sold and they have applied the proceeds of sale to properly satisfy the orders made in the Supreme Court on 7 June 2016. The agreement gives Ms B Jepson a charge over the property. On 16 August 2016 she lodged a caveat on the property. The operative order after its variation in June is order 18 and it reads:
Upon sale of either, or both, [Suburb R] or [Suburb P], the Receivers shall pay the proceeds of sale in the following manner and priority:
(a)To discharge any mortgage or encumbrance; and then
(b)Payment of agent’s commission and advertising or other expenses, if any, payable on the sale of the Properties including the various costs, fees, loans and commissions provided for in Orders 13 and/or 14 hereof;

And that is a reference back to the capacity of the receivers to borrow money. The order continues:
(c)Payment of the legal costs and outlays relating to the sale; and then
(d)the Receivers’ costs and disbursements, including all costs incurred by them in the period from18 April 2016 to the date of these orders; and then
(e)the balance shall be paid by the Receivers into an interest bearing account...
(f)the receivers are to be indemnified from the funds received by them to the indemnity they would have been entitled were they acting as trustees for sale.
It was asserted on behalf of Ms B Jepson that she falls within “discharge any mortgage or encumbrance” in Order 18(a). It seems to me that she is right. A charge was given over the property by the receivers in respect of the debt and it seems to me that that is an encumbrance. If not then certainly it fits within the description in 18(b). There is a provision in the agreement between the receivers and Ms Jepson which says:
Notwithstanding anything to the contrary, the Borrowers shall not be liable to the Lender unless the Borrowers have sold the [Suburb P] Property. The Borrowers shall use the proceeds of sale of that property to satisfy the payments required to be made pursuant to orders 18(a) to 18(d) inclusive of the Supreme Court of NSW Orders dated 7 June 2016 and shall otherwise not be liable to the Lender.
It was asserted on behalf of the receivers that that clause means that Ms Jepson does not rank in the priority set out in 18(a) to (d). I do not follow the argument. I can assume that the clause was included in this agreement for a reason. That reason may be to do with isolating the receivers from the corpus of the estate made up of the net proceeds of sale of Suburb R and Suburb P so that if, for some reason, Ms Jepson was not satisfied out of the net proceeds of sale then she could not sue the receivers personally. That may well be it, I am not sure, but there is nothing in that clause that suggests there is to be a departure from the rest of the agreement which gives her a charge on the properties for the purposes of her advance.
There is no reason to believe anything other than the plain meaning of 18(a) and (b) would apply to her debt. There is no reason to believe that she does not have priority and, in my view, the combination of the agreement of November 2016 and the orders of June 2016 is that Ms B Jepson falls within the description in 18(a) and if she does not, within the description of 18(b). Next, there is the position of the former solicitors for the wife and they are in a similar position to Ms Jepson.
The solicitors claim to be, with the legal mortgagee and with Ms Jepson, covered by 18(a) of the orders of June 2016. On 7 April 2016 the wife granted an unregistered mortgage to C Firm. On 14 April 2016 they lodged a caveat on the title of the Suburb P property. That caveat was withdrawn on 26 August 2016 but the lawyers informed the receivers that they maintained an equitable interest in the Suburb P property. On 16 October 2016 C Firm informed the solicitors for the receivers that they no longer acted for the wife and that they would proceed to lodge a caveat on the Suburb P property. I do not know that I was told whether that has occurred or not.
The total amount owing in legal fees and disbursements by the wife to C Firm from 30 March 2016 to 16 October 2016 is $562,614.08. There is a dispute, it is said in written submissions, as to the validity of a caveat lodged on behalf of the lawyers and to their entitlement, if any, to receive payment out of the net proceeds of sale of the Suburb P property but that issue was not taken up with me in oral submissions yesterday on behalf of the receivers. I do not know what basis there would be for challenging this. The unregistered mortgage was provided, it is going to be asserted, to the solicitors prior to the appointment of the trustees for sale, now the receivers.
If there is a challenge to the solicitors’ claim then that will have to be separately determined. If there is a challenge about quantum there would perhaps need to be a process about that. However, on the face of it, there is an encumbrance on the property held in the name of the solicitors and they, in the normal course, would be satisfied out of the first order of the sequence identified in paragraph 18 of the orders.
On the other hand the orders do not seem to give the priority that Mr Oakley asserts in his affidavit, to all of the fees of the receiver. It appears as though the orders provide for some of those expenses: agent’s commission, advertising expenses, loans, commissions and so on at 18(b). Legal costs and outlays relating to the sale are included at 18(c). It would seem unlikely that that would include all of two hundred and something thousand dollars in legal fees. They sound a bit more like they would be fees of the receiver independent of the sale, which would fall into (d) as the receiver’s costs and disbursements. The disbursements would include legal fees, you would think, incurred generally in their role. The assertion of Mr Oakley seems to be that the receiver’s fees would be higher up in the sequence of disbursements from the proceeds of sale but that does not seem to be what the orders say. I do not know whether that is going to be of any assistance to the parties, but there it is.
The style of orders proposed on behalf of the husband, Ms B Jepson and the company is a further variation, presumably, of the orders made on 18 April 2016. That is not going to create a very tidy document. However, rather than me venturing to recreate a complete document, I will simply make orders as asked save that I think there is a mistake made in 17(f), which should read “and the offer is not less than 2.5 per cent below the listing price”, and (g) “at no less than five per cent below the listing price”.
The orders will be made in terms of the orders sought in the application of the husband, which is supported by Ms B Jepson and the company. I was already told about an amendment to 17(e) which inserted the figure $6.1 million after the words “figure of” and deleted the remainder of the sentence.
I note the undertaking of Ms B Jepson to pay as and when they fall due any insurance costs associated with the Suburb P property until further order and I order that that undertaking be provided in writing to the Court, that undertaking be filed in the Court and served on the other parties within seven days from today’s date. As I indicated yesterday, I order that the company, that Ms B Jepson and that the solicitors be separate respondents in the proceedings.
The Application in a Case filed on 19 October 2017 by the receivers will be dismissed. Leave will be granted to any party or any person affected by orders made in these proceedings to apply on giving seven days’ notice to the Court and to each other party. That leave is to be exercised by the filing of an Application in a Case supported by an affidavit.
The orders sought by the wife are contained in exhibit 4, and no further orders are made in relation to those orders sought.

I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 14 November 2017.

Associate:

Date: 12 December 2017