KALGREEN & KALGREEN

[2020] FCCA 2119

FEDERAL CIRCUIT COURT OF AUSTRALIA

KALGREEN & KALGREEN [2020] FCCA 2119

Catchwords:
FAMILY LAW – Property – interim property – proceedings part-heard on final basis – where husband has failed in obligation to provide full and frank financial disclosure – where husband has engaged in financial dealings with matrimonial property unilaterally – where wife appointed sole trustee for sale.

FAMILY LAW – Costs – costs of the Independent Children’s Lawyer for costs of interim hearing – where interim hearing set down inter alia on purported interim parenting application by father – where father did not press a parenting application at interim hearing – where Court makes order against father for costs of the Independent Children’s Lawyer.

Legislation:

Bankruptcy Act 1966 (Cth)

Family Law Act 1975 (Cth), ss. 79, 117

Farm Debt Mediation Act 1994 (NSW)

Cases cited:

Jones & Dunkel (1959) 101 CLR 298
Waugh & Waugh (1999) 27 Fam LR 63
M & DB (2006) 36 Fam LR 454

Applicant: MS KALGREEN

Respondent: MR KALGREEN

File Number: SYC 1834 of 2018

Judgment of: Judge Morley

Hearing date: 29 April 2020

Date of Last Submission: 6 May 2020

Delivered at: Sydney

Delivered on: 6 August 2020

REPRESENTATION

Counsel for the Applicant: Mr Coleman SC

Solicitors for the Applicant: Edwards Family Lawyers

Solicitors for the Respondent: Ms Hall on behalf of KPW Lawyers

Solicitors for the Independent Children's Lawyer: Mr Holmes on behalf of Holmes Donnelly & Co Solicitors.

ORDERS

THE COURT NOTES THAT:

A.The following definitions apply for the purposes of these orders:

a.‘Wife’ means Ms Kalgreen;

b.‘Husband’ means Mr Kalgreen;

c.‘B Street, Suburb C property’ means the property situated at and known as B Street, Suburb C in the State of New South Wales, being the whole of the land contained in Folio Identifier ... together with the improvements, fixtures and fittings erected thereon and/or attached thereto, Of which the parties are the registered proprietors as joint tenants;

d.‘CBA’ means the Commonwealth Bank of Australia Limited;

e.‘B Street, Suburb C Mortgage’ means the mortgages having registered numbers ... and ... granted to CBA by the parties and which mortgages are secured upon the title to the B Street, Suburb C property.

f.‘D Farm’ means:

i.The property situated at and known as E(1) Street, Town F, in the State of New South Wales, being the whole of the land contained in Folio Identifiers ... and ... together with the improvements, fixtures and fittings erected thereon and/or attached thereto, of which the husband is the sole registered proprietor; and

ii.The property situated at and known as E(2) Street, Town F, in the State of New South Wales, comprising of Folio Identifier ..., of which the husband is the sole registered proprietor.

g.‘CBA Farm Debt Facilities’ means:

i.The mortgage having registered number ... granted to CBA by the husband for which the Wife and G Company are guarantors and which is also secured over the title to the B Street, Suburb C property, securing the H Business Loan account numbers ...89 (‘HBL1’) and ...41 (‘HBL2’);

ii.The CBA Overdraft account ...27 secured against the title to the B Street, Suburb C property and the D Farm; and

iii.The CBA Business Credit card ...69 unsecured, in the husband’s sole name.

h.‘Debt owing to J Pty Ltd’ means the debt owing by the parties for renovation works to the B Street, Suburb C property as invoiced by J Pty Ltd currently at $58,841.16;

i.‘K Ltd’ means K Ltd;

j.‘Debt owing to K Ltd’ means the debt (including principal, interest and legal fees) owing by the Husband to K Ltd in respect of which a Statement of Claim was filed in the New South Wales District Court and judgment entered in the sum of $174,460.20 on 10 July 2019, in respect of which a bankruptcy notice has been filed and served;

k.‘Caveat’ means the caveat lodged by K Ltd over the husband’s interest in the B Street, Suburb C property.

l.‘Husband’s debt to N’ means the husband’s debt to his former lawyers in these proceedings, N Law Firm.

THE COURT ORDERS THAT:

1. That orders l, 2, 4, 7, and 8 of the Orders made by the Federal Circuit Court of Australia on 11 September 2019 be varied to provide that the Wife be solely appointed as the Trustee for the sale of the D Farm and in their stead orders 2, 3, 4, 5, and 6 herein be made as orders of the Court.

2. That the wife is hereby appointed as the sole Trustee for the sale of the D Farm and shall do all acts and things and sign all documents necessary so as to effect a sale of the D Farm and any farm equipment remaining at the D Farm for the best price reasonably obtainable in the following manner:

   (a)Continue to list the D Farm for sale within seven (7) days from the date of these orders with Mr L of M Real Estate Agent (‘the agent’) by private treaty or as may be recommended by the agent;

   (b)The parties by this order hereby authorise and direct the agent and solicitor acting on the sale of the D Farm to communicate with both parties but to obtain instructions only from the wife in relation to all aspects of the sale of the D Farm;

   (c)The listing or reserve price for the purpose of such sale shall be as advised by the agent to the wife (and copied to the husband) in writing and shall not be more than $1,650,000;

   (d)The husband shall cooperate in every way with the sales process including (without limiting the generality of the foregoing):

   (i)Permitting access to the property to the agent including the provision of any keys;

   (ii)Doing or saying nothing to hinder or prevent a sale being effected;

   (iii)Ensuring the D Farm including the grounds are in a neat and clean condition at the time of inspections by the agent and prospective purchasers;

   (iv)Not attending any auction for the sale of the property;

   (v)Not communicating with any potential buyers or bidders.

3. That in the event that the D Farm is not sold within 8 weeks of the date of being listed for sale by private treaty (‘the listing period’), then the property is to be remarketed for a further 8 weeks, (the ‘further listing period’) at a reduced price as recommended by the agent in writing to the wife (and copied to the husband).

4. In the event that the D Farm remains unsold after the expiry of the further listing period, the property shall thereafter be marketed at a further reduced price of no less than 5% per period of 8 weeks until sold.

5. THAT THE COURT NOTES that the wife reserves her rights as to the treatment by the Court of the H Business Loans, the Overdraft and the K Ltd debt (and any interest and penalties incurred thereon) if such debts are discharged on sale of the D Farm pursuant to order 9 of the Orders made on 11 September 2019.

6. That forthwith and within 7 days of the date of making of these orders, the wife by her lawyers shall inform the agent, CBA, the lawyers acting for K Ltd in relation to the K Ltd debt and J Pty Ltd in writing as to the terms of these orders and shall be at liberty to provide a sealed copy of these orders to each creditor.

7. That pending further order the husband is restrained by injunction from:

   (a)Transferring, assigning, leasing, encumbering or alienating any asset in which he has an interest except with the prior written consent of the wife and upon providing the wife with 14 days’ notice in writing and only in compliance with these orders; and

   (b)Entering into or incurring any further debt.

8. That pending further order the husband shall forthwith direct 50% of the lease payments for the D Farm to the wife.

9. That the husband forthwith and within 48 hours of the making of these Orders do all things and acts and sign all documents necessary for CBA to grant viewing access to the wife to the H Business Loans and to the Overdraft.

10. That the husband does by these orders authorise and consent to the wife entering into an arrangement with the CBA to suspend repayments in respect of the B Street, Suburb C mortgage and order 4 of the orders made by the Court on 11 July 2019 be suspended.

11. That each party Comply with their obligations to provide full and frank disclosure of their financial circumstances and ensure that such disclosure is up-to-date within 7 days of the date of making of these orders including but not limited to the husband providing all documents requested in the letter from the wife’s lawyers to the husband’s then-lawyers KPW Lawyers dated 2 March 2020.

12. The Respondent Husband pay the Independent Children’s Lawyer’s costs of 29 April 2020 fixed in the sum of $1,050.00, such payment to be made by the Respondent Husband to the Legal Aid Commission of NSW within 12 months.

IT IS NOTED that publication of this judgment under the pseudonym Kalgreen & Kalgreen is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 1834 of 2018

MS KALGREEN

Applicant

And

MR KALGREEN

Respondent

REASONS FOR JUDGMENT

Introduction

1. These are property settlement and parenting proceedings under the Family Law Act 1975 (Cth) (‘the Act’) between Ms Kalgreen as the applicant (‘the wife’) and Mr Kalgreen as the respondent (‘the husband’).

2. The parties commenced cohabitation in 2004, married in 2006, and separated on 5 September 2017. There are three children of the marriage:

   a)X, born in 2007;

   b)Y, born in 2009; and

   c)Z, born in 2012.

3. The children live with the wife in the former matrimonial home at B Street, Suburb C (‘the B Street, Suburb C property’) and spend time with their father pursuant to interim orders.

4. The husband lives at Suburb O.

5. Included in the matrimonial asset pool are two parcels of real property:

   a)The B Street, Suburb C property, the former matrimonial home, occupied by the wife and the children of which the husband and wife are the joint tenants; and

   b)A rural property at E Street, Town F in New South Wales, being the rural property known as ‘D Farm’, composed of three separate titles (‘the D Farm property’). The husband is the sole registered proprietor of each of the three titles composing the D Farm property.

6. Neither party owns any other real estate property.

7. The parties have a loan account in their joint names with the Commonwealth Bank of Australia (‘CBA’) relating to purchase of the B Street, Suburb C property and secured on the B Street, Suburb C property, and owing a sum of about $381,000 (‘the B Street, Suburb C mortgage’).

8. There are two loan accounts with the CBA on which the husband is the borrower and the wife is guarantor. Both are cross-secured on both the B Street, Suburb C property and the D Farm property, one with a debit balance of $541,482, and the other with a debit balance of $798,170 (‘the CBA farm debt loans’).

9. The parties are jointly indebted to J Pty Ltd for a debt accrued in relation to renovations to the B Street, Suburb C property in the sum of $58,840 (‘the J Pty Ltd debt’).

10. The husband is indebted to K Ltd Operations Ltd (‘K Ltd Operations’) in the sum of $181,000 (‘the K Ltd debt’). K Ltd Operations have registered a caveat on title to the B Street, Suburb C property in relation to the K Ltd debt.

11. The husband is indebted to his former solicitors, N Solicitors (‘N’), in a sum of $30,000 (‘the N debt’).

12. Both K Ltd Operations and N have instituted and pursued proceedings against the husband for recovery of the relevant debts, and each have obtained a judgment against the husband. Each have had bankruptcy notices issued and served upon the husband in late December 2019, in relation to their respective judgment debts.

13. The husband’s Bankruptcy Act 1966 (Cth) proceedings were before the Federal Court of Australia (‘the Federal Court’) on 4 February 2020, at which time the husband made an application to have those proceedings transferred to join these proceedings in the Federal Circuit Court of Australia. That application was considered and rejected by a Justice of the Federal Court, and on that day, a Registrar of the Federal Court found that the husband had committed an act of bankruptcy in relation to each bankruptcy notice. It is anticipated that a creditor’s petition will be issued by each of K Ltd Operations and N against the husband, if they have not already done so. However, I note that the husband currently has some relief from the continuance of those proceedings due to the SARS-CoV-2/COVID-19 pandemic (‘COVID-19 pandemic’) moratorium in relation to bankruptcy matters.

14. Pursuant to interim orders made on 11 July 2019, the wife is responsible as between the husband and wife for all payments due and owing to CBA in relation to the B Street, Suburb C mortgage, and the husband is responsible for all payments due and owing to CBA in respect of the CBA farm debt loans.

15. Since the proceedings were commenced by the wife filing her Initiating Application on 23 March 2018, the matter has been before the Court on 15 occasions, that number not including Chambers hearings, either of the mentions on 24 March 2020 or 3 April 2020 in relation the conduct of the proceedings in light of the COVID-19 pandemic, or any telephone procedural mentions with a Registrar. Up to the time of this interim hearing, there had been four Applications in a Case filed by the husband seeking orders for sale of one or both of the real properties, and interim orders in the Initiating Application and two subsequent Applications in a Case filed by the wife seeking orders for sale of the D Farm property.

16. On 11 September 2019, following an interim hearing, I made an order appointing the husband and wife jointly as trustees for sale of the D Farm property. I also made machinery orders for how that was to be achieved:

    a)The proceeds of sale were to be applied, after payment costs and commissions relevant to the sale, to repayment of the CBA farm debt loans, the K Ltd Debt, the J Pty Ltd debt, and the N debt; and

    b)Any balance then remaining was to be held as controlled moneys in the joint names of the parties by the wife’s solicitors, pending further orders.

17. To satisfy all of those debts from that sale, a sum of $1,990,492 would be required as the net proceeds of sale after any incurred costs and/or commission of sale.

18. Mr L of M Real Estate was identified by the parties pursuant to the orders to be their agent. Mr L had submitted a marketing proposal to the parties on 18 September 2019, in which he suggested that the property could be marketed at a price range of $1,700 to $2,100 per acre. That formulated into a projected sale price of between $2 million and $2,400,000. Mr L was appointed as the agent by the parties on 26 September 2019.

19. On 7 November 2019, the husband had a telephone discussion with Mr L about the pricing for the property for an auction date set for 5 December 2019. Subsequent to that discussion, Mr L sent an email to the husband, a copy of which is annexure K-5 to the husband’s affidavit, the text of which is:

    Mr Kalgreen,

    As per your call today re: pricing decision when conducting an inspection.

    With the current seasonal conditions, the market is not as confident as it has been in recent times. But if west of Town P has recently sold at $1850 per acre, then Town F should be worth $2000 per acre. But we will soon see.

    Please understand this is purely sales talk, and not to be used as a value. The market will tell us that when we get to the auction.

    I had another inspection yesterday and hopefully 2 more next week. As I also said on the phone, there is, as you would know, not much to report from an inspection, as people don’t really disclose what they are thinking as it’s business.

    Regards,

    Mr L

    Director, M Real Estate.

20. I have set the email out in full because the husband asserts in his affidavit:

    On 7 November 2019, I contacted Mr L to talk about what price he is suggestion when conducting inspections. Mr L responded with an email quoting “That a property sold west of Town P recently at $1850 per acre, then Town F should be worth $2000 per acre.”[1]

    The quote contained in paragraph 38 is not an exact quote from the annexed copy of the email, but the difference makes no matter.

    [1] Husband’s affidavit filed 29 April 2020, [38].

21. In paragraph 41 of his affidavit, the husband refers to receiving a Campaign Report from Mr L on 3 December 2019, and then deposes that:

    The report detailed that inquiry was exclusively local, including a relative. The agent confirmed he had not received any offers or indications of price. Mr L then revised his appraisal from $2000 per acre to between $1390 and $1680 per acre, some 20 per cent below what he had quoted in his email less than 4 weeks prior.[2]

    [2] Husband’s affidavit filed 29 April 2020, [42].

22. The husband’s evidence in paragraph 42 is a misinterpretation of the email. In the email, Mr L makes it quite specific that the second paragraph of his email, for which he uses the device of inverted commas at start and end, was:

    …purely sales talk, and not to be used as a value.

23. The husband refers to the mention by Mr L in his “sales talk” of $2,000 per acre as “his appraisal”, when Mr L was specific that it was no such thing. I find that the meaning conveyed by the email of 7 November 2019 from Mr L to the husband (copied to others, including the wife) was that when dealing with prospective purchasers making inspection of the property, he would use the words in inverted commas in the second paragraph of the email, as “purely sales talk”, and that nothing therein was to be taken as a statement of opinion as to value, or as the husband preferred to term it, Mr L’s “appraisal”.

24. On 19 November 2019, Mr L contacted the husband and the wife asking for their instructions as to reserve price.

25. On 21 November 2019, the wife wrote to the husband asking him to advise her of his suggested reserve price for the D Farm property. The wife did not receive a response.

26. On 28 November 2019, the wife again wrote to the husband asking for his suggestion as to reserve price, and herself suggesting a reserve of $1,640,000. The husband responded the same day with a message describing the wife’s suggested reserve as “ridiculous”, but did not himself give a suggested figure for a reserve price.

27. The wife again contacted the husband by email on 29 November 2019, indicating that her basis for suggesting the reserve price of $1,640,000 was to achieve a sum that would enable the parties to cover the debt associated with the D Farm property and to achieve a quick sale. The wife asked the husband to advise her by 2 December 2019 of his suggested reserve price.

28. On 2 December 2019, Mr L again emailed both the husband and the wife seeking their instructions in relation to a reserve price.

29. On 3 December 2019, the conversation between the husband and Mr L referred to above occurred, and Mr L forwarded the email discussed above to the husband.

30. On 4 December 2019, Mr L again emailed both the husband and the wife seeking their instructions on reserve. The wife contacted the husband and initiated a discussion about the reserve price. The wife had stated her reserve price of $1,640,000 on 28 November 2019, but had not received a suggested reserve price from the husband. At 1.00PM on 4 December 2019, the husband emailed to the wife and stated that his suggested reserve was $1,950,000. The wife suggested that they compromise and instruct a reserve to Mr L at $1,795,000. The husband’s response was that he was adamant that, “$1,950,000 is my final,” and that it was based on $1,680 per acre.

31. On 5 December 2019, the auction took place. The husband attended but the wife did not. The only bidder was Mr Q, a friend of the husband’s since childhood. Mr Q’s bid was $1,400,000, and the property was passed in. Later that day, Mr Q made a further offer of $1,750,000, subject to his ability to garner additional finance.

1. Sometime after the auction, Mr L was advised by Mr Q that his application for additional finance was not successful.

2. On 9 December 2019, Mr L emailed both the husband and the wife asking for instructions for an agreed listing price for the property. The wife emailed the husband with a suggestion that the property be listed for sale at $1,640,000. She did not receive a reply.

3. On 20 December 2019, the wife contacted the husband and asked him to pay the Auction and Marketing fees of $11,000 payable to M Real Estate from the moneys being received by the husband as rent from the lessees of the D Farm property.

4. The order made on 11 September 2019 had provided that:

   All costs incurred by the parties in appointing the agent, the valuer and the solicitor will be shared equally between the parties, and will be deducted from the proceeds of sale and reimbursed to the parties prior to a distribution of the net proceeds between the parties takes place.

5. The wife’s evidence is that she had no funds available to pay the fees and that the husband was receiving the rental income from the D Farm property which on the husband’s evidence was a sum of $200,000 during 2018 and 2019. The husband responded to the wife saying that “There is no $ available”.

6. On 4 February 2020, the husband appeared, represented by a legal practitioner, in the Federal Court in relation to bankruptcy notices that had been served on him in relation to the K Ltd debt and the N debt, and, as described above, it was found by the Registrar that he had committed an act of bankruptcy in relation to each notice.

7. On 16 March 2020, Mr L again contacted both the husband and the wife by email, seeking instructions on an agreed listing price, and recommending a listing price of $1,650,000. The wife advised Mr L that she agreed with his recommendation. In the email from Mr L to the wife, he included the comment:

   As I have previously communicated, there is uncertainty in the marketplace that D Farm is genuinely for sale, and a perception that the vendors are simply seeking a market value for the property. To give the market confidence, I suggest that you agree on a price and we advertise it.

8. The husband did not respond to Mr L.

9. The wife followed up with the husband by an email to him on 18 March 2020, seeking that he respond to Mr L. The wife did not receive a response.

10. On 19 March 2020, the wife’s solicitors wrote to the husband’s solicitors requiring that they ask their client to immediately either agree to Mr L’s proposed listing price of $1,650,000 or “provide instructions to the agent to commence the auction process”.

11. Finally, on 13 April 2020, the husband advised Mr L of his proposed listing price at between $2 million and $2,100,000, and revealed that he had entered into a new lease with the lessees of the property for a further 12 months.

12. This again left Mr L in a situation of having conflicting instructions from his two vendors in relation to the listing price of the D Farm property.

13. On 29 March 2020, the wife’s solicitors wrote to the husband’s solicitors, noting that they had not received a reply to their letter of 19 March 2020. The wife’s solicitors also indicated that if the husband did not instruct Mr L by 4.00PM on 31 March 2020 that he adopted Mr L’s suggested listing price of $1,650,000, then the wife would move the Court for an order that she be appointed as sole trustee for the sale of the farm. She had sought that order previously in January 2020 in response to an Application in a Case by the husband filed 14 January 2020, seeking that the B Street, Suburb C property be sold. Both the Application in a Case and her Response were withdrawn before hearing.

14. The same letter sought the husband’s agreement to either a joint approach, or an approach by the wife with the husband’s consent, to CBA seeking an arrangement with the bank for suspension of the payments relating to the B Street, Suburb C mortgage due to her financial circumstances in consequence of the COVID-19 pandemic. She proposed a suspension of approximately six months.

15. The wife gives evidence that she had been complying with the Court’s orders made 11 July 2019 for her to meet the required payments in relation to the B Street, Suburb C mortgage, but that the husband had failed to comply with the order that he meet the required payments relating to the CBA farm debt loans. This was despite the husband receiving, over the relevant period, a sum of about $200,000 by way of rent payments from the lessees of the D Farm property. Ultimately, this lead to the parties being in arrears on those loans of “approximately $50,000”. Once again, the letter advised that if the wife’s proposal in this regard was not agreed to, she would move the Court for orders to that effect “at your client’s risk as to costs.”

16. Exhibit A1 relied upon by the wife is a print of emails dated 28 April 2020 between Ms R Mediation Services, a NSW Rural Assistance Authority panel mediator, indicating that she had been asked by CBA to organise a date for a mediation under the Farm Debt Mediation Act 1994 (NSW) (‘the Farm Debt Mediation Act’). Exhibit R1 relied on by the husband was also a print of an email dated 28 April 2020 to the husband from Ms R advising that a farm debt mediation could proceed with the participation of the CBA.

17. That the parties should take all available steps to engage with not only CBA but also K Ltd in farm debt mediation was a matter agitated strenuously on behalf of the wife by Mr Coleman SC in his submissions in the interim hearing on 11 September 2019. The husband’s response on that occasion was first to assert that farm debt mediation was not available, and when it was shown in terms of the legislation and on the evidence to be available certainly in relation to the CBA farm debt loans, and arguably, but not certainly, in relation to the K Ltd debt, the husband continued to show a disinclination to engage with that process.

18. The thrust of the written submissions presented by Mr Coleman SC for the wife were that the evidence indicated a deliberate path of action by the husband to frustrate a sale of the D Farm property, with a view to maximising the prospects of the CBA taking action to force the sale of the B Street, Suburb C property. He submitted that only by making the orders as sought by the wife appointing her as the sole trustee for sale of the D Farm property will the Court’s orders of 11 September 2019 be “enforced”, and result in a sale of that property and an easing of the parties’ debt burden.

19. Mr Coleman SC referred to the Full Court authorities of Waugh & Waugh[3] and M & DB,[4] and submitted that the wife satisfied both limbs of the test for injunctive relief to preserve components of the matrimonial asset pool. Mr Coleman SC argued that she demonstrably, on all of the evidence, had an existing claim to an order altering property interests under section 79 of the Act, and that she had shown on the evidence that there was a danger that the claim may be defeated or prejudiced unless the relief was granted.

    [3] Waugh & Waugh (1999) 27 Fam LR 63.

    [4] M & DB (2006) 36 Fam LR 454.

20. The danger referred to above is that the failure to pay required payments on the CBA farm loans by the husband was eroding the parties’ equity in both real properties given the cross-security of the CBA farm debt loans. Further, a failure to sell the D Farm property pursuant to the intent of the orders made 11 September 2019 could, in all probability, find CBA taking action to realise on their security for the CBA farm debt loans by entering into possession of and proceeding with a mortgagee sale of both the D Farm property and the B Street, Suburb C property. That course of action by CBA would defeat the wife’s ultimate aim in the property settlement proceedings of retaining the B Street, Suburb C property.

21. Whilst the husband’s proposed final orders as set out in his Response filed 21 May 2018 contemplates a sale of the B Street, Suburb C property and retention by him of the D Farm property, his subsequent Applications in a Case of 25 March 2019, 4 July 2019, and 5 September 2019 all seek orders for sale of the D Farm property.

22. It was further submitted by Mr Coleman SC for the wife that the bid at auction submitted by Mr Q and his subsequent offer to buy following the auction, subject to obtaining finance, which failed, were shams and a concoction between Mr Q and the husband. Mr Coleman SC refers to the failure by the husband to present any evidence from Mr Q, and submits that the Court can draw a ‘Jones & Dunkel inference’ that any evidence from Mr Q would not have assisted the husband’s case.[5] On the basis of the available evidence, I cannot make any finding that the bid and offer to buy by Mr Q was a collusion of some nature between Mr Q and the husband.

    [5] Jones & Dunkel (1959) 101 CLR 298.

23. In the wife’s affidavit of 29 April 2020, she gives evidence of matters relating to the family’s S private health cover, and makes assertions in relation to steps taken by the husband in relation to that health cover. I do not find that the evidence in that affidavit or the issues surrounding the alterations to the method of payment of the S health cover assist in relation to the issues before the Court in the interim hearing.

24. Throughout the chain of interim hearings in this matter, it has been apparent that the husband is aware of his obligation to make full and frank disclosure of all matters relevant to the property issues between the parties, and that the obligation is ongoing, but yet persists in entering into significant financial arrangements without notice to, let alone full and frank disclosure to, the wife. For example:

    a)His proposed put and call option agreement with the lessees of the D Farm property;

    b)His lease agreements with Mr and Mrs T, the tenants of the D Farm property; and

    c)His negotiations for a proposed deed of forbearance with the CBA.

25. I have reviewed and taken into account in these Reasons the whole of the submissions made by Mr Coleman SC for the wife, and by Ms Hall for the husband.

26. The husband was successfully served with two bankruptcy notices – one in relation to the K Ltd debt and the other in relation to the N debt. The husband attended before the Federal Court on 4 February 2020, and, on his evidence in his affidavit:

    On that day, an act of bankruptcy was declared against me for both N and K Ltd Pty Ltd. Costs were also awarded against me for the application.[6]

    [6] Husband’s affidavit filed 29 April 2020, [61].

27. The way was open for both K Ltd and N to each file a creditor’s petition against the husband and seek to have a sequestration order made. With the advent shortly thereafter of the COVID-19 pandemic, legislation was passed by the Commonwealth to give temporary debt protection to persons who may otherwise be respondents to bankruptcy proceedings. This may or may not be a reason why the husband has not had creditors petitions filed against him. But at the expiration of the initial six-month relief period, it may be that the process will begin to move again and the husband becomes a bankrupt.

28. On a sale of the B Street, Suburb C property, as I understand the evidence, the CBA is entitled to require repayment before releasing their security of the CBA farm debt loans, and the B Street, Suburb C mortgage. However, on the evidence as I currently understand it, on a sale of the D Farm property, CBA is only entitled to require repayment of the CBA farm debt loans to release their security. Any excess proceeds of sale are required by order 9 of the orders made on 11 September 2019 (an order the wife does not seek to disturb in her application) to be paid in satisfaction, in this order, of the K Ltd debt, the J Pty Ltd debt, and the N debt.

29. However, with neither property sold, there is every likelihood that either or both of K Ltd Operations or/and N will proceed in bankruptcy against the husband. In the event that a sequestration order is made against the husband, then his bankrupt estate will vest by power of the legislation in his receiver in bankruptcy, and the receiver will join in these proceedings with a view to realising on the husband’s bankrupt estate consequent upon final orders for the payment of his creditors. In the event that a sequestration order is made against the husband, he will not be an active participant in a sale of the D Farm property pursuant to the orders made 11 September 2019, and the fate of the B Street, Suburb C property will, in effect, become a matter between the wife and the husband’s receiver in bankruptcy.

30. I find that if there is no satisfaction of both the K Ltd debt and the N debt as soon as possible by means of a sale of the D Farm property, that there is a very real likelihood of the husband becoming a bankrupt by having a sequestration order made against him based upon his acts of bankruptcy under the bankruptcy notices relating to each of those debts.

31. I find that the husband’s conduct in relation to the proposed sale of the D Farm property, pursuant to the orders made on 11 September 2019, has been such as to frustrate and delay that sale by:

    a)Insistence on a sale at a price beyond the agent’s clear advice;

    b)His response since mid-2019 to the wife’s proposal that the parties engage with at least the CBA and, if possible, K Ltd under the Farm Debt Mediation Act; and

    c)His failure to comply with the order made on 11 July 2019 for him to pay all payments due and owing to CBA in respect of the CBA farm debt loans.

32. Because of those actions listed, there is a very real risk that the CBA may seek to realise on its securities, enter into possession of both the D Farm property and the B Street, Suburb C property, and proceed with a mortgagee sale.

33. I find that the husband’s failure to comply with the order made 11 July 2019 to pay all payments due and owing to the CBA on the CBA farm debt loans is causing erosion of the parties’ equity in the matrimonial property pool.

Conclusion – interim property orders

1. Accordingly, I find that it is proper to make orders 1 to 8 of the orders sought by the wife in her Application in a Case.

2. In view of the totality of the evidence before the Court in relation to the husband’s conduct in relation to full and frank disclosure, particularly on an ongoing basis, I find that it is appropriate to make order 9 as sought by the wife in her Application in a Case.

3. In view of the evidence of the wife in relation to her current financial circumstances, in consequence of the effect of the COVID-19 pandemic on her income, and her evidence of the refusal by the husband to cooperate with her in relation to approaches to the CBA in relation to the B Street, Suburb C mortgage, I find that it is appropriate to make order 10 as sought by the wife in her Application in a Case.

4. As the matter is currently part-heard on its final hearing, and the prospects of further hearing dates being available prior to the turn of the year 2021 is very small, I find that it is appropriate to made the order in relation to both parties complying fully with their obligation to make full and frank disclosure as sought in order 11 in the wife’s application in a case.

Costs

1. In her Application in a Case, the wife seeks an order that the husband pay the costs of these interim proceedings and also of the Court-initiated interim hearing on 3 April 2020 in relation to proceeding with or vacating the further hearing dates of 28 and 29 April, resolved by orders in favour of the wife’s position, and vacated.

2. I note that there have been a number of orders made in the course of these proceedings relating to the issue of costs as between the husband and the wife, including:

   a)On 5 July 2019, when the costs of the wife of that day and of 2 July 2019 were reserved;

   b)By order 17 of the orders made on 11 September 2019, when the wife’s costs application in relation to her costs of that day was adjourned to the final hearing of the matter;

   c)An order made on 28 January 2020 reserving the costs of the parties of that day; and

   d)An order made by consent on 10 March 2020 that the wife’s costs of and incidental to responding to the husband’s Application in a Case filed 10 January 2020, and appearing at the directions hearing on 28 January 2020, be reserved to be determined by the trial judge when the matter continues in final hearing.

3. In the subject Application in a Case, the wife seeks an order that the husband pay her costs of and incidental to the application, and that the husband pay her costs of 3 April 2020 in the sum of $2,019.60.

4. I find that it is appropriate that all of those aforementioned costs applications be stood over to the final hearing of this matter.

The costs application by the Independent Children’s Lawyer

1. On 3 April 2020, the husband was represented by Senior Counsel, and it was made forcefully clear that the husband intended to agitate an interim application for further interim parenting orders. Also on 3 April 2020, Mr Coleman SC for the wife handed up a document headed “Interim Orders Sought by the Wife dated 3 April 2020” that set out the orders that she then sought in her Application in a Case in these proceedings.

2. It was on the basis of both assertions that further interim orders were sought – the husband as to parenting, the wife as to property – that I set the matter down “for consideration of any interim application being made by way of an Application in a Case and any Response to an Application in a Case at 10:00AM on 29 April 2020,” and made directions for the filing of any Application in a Case by the wife by 14 April 2020, with any Response to an Application in a case by the husband be filed by 27 April 2020.

3. It was in consequence of the husband’s assertion that he would be seeking further interim parenting orders on 29 April 2020 that Mr Holmes, the Independent Children’s Lawyer, appeared when the matter was called on 29 April 2020. I voiced that there was no application before me for interim parenting orders, and asked the representatives for the parties if the Independent Children’s Lawyer was needed, and received response from Ms Hall on behalf of the husband that he was not.

4. Mr Holmes made application that the husband pay his costs for his appearance, and indicated a quantum of $1,050 composed of the Legal Aid grant made to him in a sum of $900 for preparation for further interim hearing on parenting issues, and a Legal Aid grant for his appearance, which he limited to one hour at $150. Mr Holmes reminded the Court that when the husband had indicated on 3 April 2020 that he would be making application for interim orders, the Court had indicated that the Independent Children’s Lawyer was therefore specifically not released from appearance on 29 April 2020, and that in consequence, Mr Holmes did prepare for further interim hearing on parenting issues, and appeared.

5. On 3 April 2020, I asked Mr Coleman SC if the wife intended to seek any interim parenting orders on 29 April 2020, and he responded that she did not. I then asked Mr Sansom SC appearing for the husband if the husband intended to seek any interim parenting orders on 29 April 2020. Mr Sansom SC sought instructions, and advised the Court, “I understand that will be the case,” and I sought clarification of possible ambiguity, to which Mr Sansom SC responded “He will, he will,” indicating that he was instructed by the husband that the husband would be seeking interim parenting orders on 29 April 2020.

6. The husband did not have an interim application before the Court on 29 April 2020 seeking interim parenting orders. I made a direction giving the husband opportunity to make written submissions in relation to the Independent Children’s Lawyer’s oral application for costs in the sum of $1,050 by not later than 4.00PM on 6 May. Those written submissions were received on 6 May 2020, and I have taken those written submissions into account.

1. Costs in relation to matters under the Act are governed by section 117 of that act. Subsection (1) states the general rule that, subject to certain sections that do not apply, each party to proceedings under the act shall bear his and her own costs. Subsection (2) provides that if in the opinion of the Court there are circumstances that justify it in doing so, the Court may, subject to the further subsections and the applicable rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the Court considers just.

2. In considering what order, if any, should be made under subsection (2), the Court must have regard to those matters set out in (a) to (g) in subsection (2A).

3. I further note that subsection (4) provides that in proceedings where an Independent Children’s Lawyer has been appointed, if the Court considers that a party to the proceedings would suffer financial hardship if that party had to bear a proportion of the costs of the Independent Children’s Lawyer, then the Court must not make an order under subsection (2) against that party in relation to the costs of the Independent Children’s Lawyer. Under subsection (5), the Court must disregard the fact that the Independent Children’s Lawyer is funded under a Legal Aid scheme or service established under a Commonwealth, State, or Territory law or approved by the Attorney General.

4. I have before me the Financial Statement of the husband, sworn or affirmed by him on 23 October 2019, indicating his evidence of his income and expenses, assets and liabilities.

5. The husband is not in receipt of assistance by way of Legal Aid.

6. The appearance of the Independent Children’s Lawyer before the Court on 29 April 2020 and the action taken by the Independent Children’s Lawyer in applying for an receiving a grant of Legal Aid to cover his preparation for an interim hearing on parenting issues on 29 April 2020 were both caused by the husband’s action in indicating strongly to the Court on 3 April 2020 that he would be agitating an application for further interim parenting orders on 20 April 2020.

7. The husband did not do so, even though a Response to Application in a Case seeking extensive further interim parenting orders going to parental responsibility, shared care, and special occasions was filed on behalf of the father on the Commonwealth Courts Portal during the currency of the interim hearing on 29 April 2020, that document being signed by the husband’s solicitor and dated that day.

8. I find that the conduct of the husband in leading the Court to require the appearance of the Independent Children’s Lawyer before the Court on 29 April 2020, and then failing to present the foreshadowed application for hearing on that day, constitutes a circumstance that justifies the Court in making an order as to costs in favour of the Independent Children’s Lawyer, and in the amount sought by him.

9. I find that an order that the husband pay the Independent Children’s Lawyer’s costs of 29 April 2020 in the sum of $1,050 will not cause the husband to suffer financial hardship if that order is made payable within three months, due to the evidence that the husband receives a sum of $1,538 per week rent from Mr and Mrs T who are the tenants of the D Farm property.

10. Under an order I have indicated that I intend to make, the husband would still retain one half of that amount per week, being $769, and on the evidence, the husband is not making payments to the CBA in relation to the CBA farm debt loans in the sum of $1,469, as claimed in his said Financial Statement.

11. Accordingly, I make the costs order as set out at the start of these Reasons.

I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of Judge Morley

Associate: 

Date: 6 August 2020