Kendall & Kendall (No 2)
[2024] FedCFamC1F 237
•12 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kendall & Kendall (No 2) [2024] FedCFamC1F 237
File number: SYC 5218 of 2020 Judgment of: BRASCH J Date of judgment: 12 April 2024 Catchwords: FAMILY LAW – INTERIM PROPERTY – Where parties agreed on sale of unit in which husband resides – Where husband seeks sale of former matrimonial home too, were wife and children reside – Where both parties sought interim distributions of funds – Where trial in six months time – Orders made for sale of unit and distribution of the proceeds. Legislation: Family Law Act1975 (Cth) ss 79, 80 Cases cited: Bearup & Bearup (1993) FLC 92-412; [1993] FamCA 72
Medlow & Medlow (2016) 54 Fam LR 389; [2016] FamCAFC 34
Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466; [2009] FamCAFC 166
Division: Division 1 First Instance Number of paragraphs: 46 Date of hearing: 11 April 2024 Place: Sydney Counsel for the Applicant: Mr Sansom SC Solicitor for the Applicant: Solari & Stock Lawyers Counsel for the Respondent: Mr Matthews KC with Mr Bunning Solicitor for the Respondent: Archbold Legal Solutions ORDERS
SYC 5218 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS KENDALL
Applicant
AND: MR KENDALL
Respondent
ORDER MADE BY:
BRASCH J
DATE OF ORDER:
12 APRIL 2024
THE COURT ORDERS BY CONSENT:
1.The husband and wife shall do all acts and things and sign all necessary documents to list for sale the property at 1 H Street, Suburb C, New South Wales (“the Suburb C unit”) and for that purpose the following shall apply:
(a)The President of the Real Estate Institute of New South Wales (or his or her agent) shall elect the Real Estate Agent to sell the Suburb C unit “the Agent”);
(b)Such sale is to be by conducted by private treaty or auction as recommended by the Agent;
(c)The sale price at which the Suburb C unit shall be listed shall be mutually agreed upon by the parties or in the absence of agreement reached within 14 days of the date of these Orders, as recommended by the Agent;
(d)The parties shall each cooperate in every way with the Agent including (without limiting the generality of the foregoing):
(i)Making the key available to the Agent;
(ii)Allowing inspection of the Suburb C unit at all reasonable times requested by the Agent;
(iii)Doing or saying nothing to hinder or prevent a sale being effected;
(iv)Ensuring the Suburb C unit, including the grounds, are in a neat and clean condition at the time of inspection by the Agent and prospective purchasers; and
(v)Signing all documents requested by the Agents in relation to the listing for sale of the Suburb C unit, except a contract or agreement for sale which has not been authorised by the parties’ solicitors;
(e)The parties instruct a solicitor/conveyancer to have the carriage of the sale of the Suburb C unit being such solicitor/conveyancer as agreed between the parties and in default of agreement within seven (7) days, the wife is to nominate three (3) solicitors/conveyancers within seven (7) days of the default date and the husband is to select one of those solicitors/conveyancers within a further seven (7) days, the solicitor/conveyancer to be appointed by way of that process, providing that if a party fails to comply with this Order then the other party is to select the solicitor/conveyancer (“the solicitor/conveyancer”);
(f)Neither party may confer on any Agent, without the consent of the other party, any right to any sole or exclusive agency in respect of the Suburb C unit or to any commission;
(g)If the Suburb C unit is listed by private treaty, then in the event the property fails to be sold by private treaty within three (3) months of listing, then each party must take all reasonable steps and sign all necessary documents to then cause the Suburb C unit to be sold by auction in accordance with the terms and conditions in these Orders;
(h)In the event that the Suburb C unit does not reach the reserve price at the auction, the parties shall negotiate with the highest bidders or any such interested persons and effect the sale of the Suburb C unit at a selling price as agreed between the parties, or failing agreement on the day of auction the parties shall accept the recommendation of the Agent and/or the Auctioneer as to the selling price of the Suburb C unit and shall sell the Suburb C unit at that price;
(i)In the event that the Suburb C unit is not sold by auction or by private negotiation within fourteen (14) days after the said auction then the parties shall do all acts and sign all necessary documents and pay all moneys as necessary to procure a second auction within a further five (5) weeks of the date otherwise upon the same terms and conditions as applied to the first auction except the reserve price be reduced by 10 per cent or otherwise agreed upon between the parties;
(j)For the purpose of the transfer of the Suburb C unit referred to in these Orders:
(i)Each of the parties will do all acts and things and sign all documents requested by the solicitor/conveyancer to ensure the orderly progress of and to give effect to, the sale, including but not limited to the solicitor’s/conveyancer's reasonable costs agreement, discharge of mortgage request and transfer;
(ii)Each of the parties will do all acts and things and sign all documents and instruct their representatives to do all acts and things necessary to give effect to the settlement via the electronic conveyancing platform, Property Exchange Australia known as PEXA (“the electronic conveyancing platform”);
(iii)In the event either party is self-represented at any time, then that party will nevertheless instruct a subscriber to the electronic conveyancing platform for the purposes of the settlement, and will meet their own costs of the practitioner instructed by them; and
(iv)The parties will pay their own electronic conveyancing fees and in the event one party meets the other party's fees at the date of settlement, the party who did not pay their own fees will reimburse the other party within seven (7) days of the date of settlement.
PENDING FURTHER ORDER, THE COURT ORDERS THAT:
2.Upon completion of sale of the Suburb C unit the proceeds of sale be paid in the following manner and priority:
(a)All costs and expenses of sale, including legal costs and disbursements, Agent's commissions, advertising expenses and auction expenses (including repayment of any such expenses as have been paid by either or both of the parties);
(b)In discharge of the mortgage over the property to Westpac;
(c)To pay all strata levies owing in respect of the property;
(d)No more than $200,000 be paid by the wife to the ATO as follows:
(i)$56,656 for the outstanding debt of Kendall Holdings Pty Ltd;
(ii)$50,432 for the outstanding debt of M Pty Ltd; and
(iii)The balance to the wife for her personal tax liability;
(e)Any balance to the husband via his solicitor’s Trust Account.
3.From the date of this order, the wife is to pay the mortgage secured over the property at B Street, Suburb C, New South Wales.
4.In the event the wife does not meet the mortgage as and when due, then the following Orders 5 to 6 apply.
5.The husband and wife shall do all acts and things and sign all necessary documents to list for sale the property at B Street, Suburb C, New South Wales (“the B Street property”) and for that purpose the following shall apply:
(a)The President of the Real Estate Institute of New South Wales (or his or her agent) shall elect the Real Estate Agent to sell the B Street property “the Agent”);
(b)Such sale is to be by conducted by private treaty or auction as recommended by the Agent;
(c)The sale price at which the B Street property shall be listed shall be mutually agreed upon by the parties or in the absence of agreement reached within 14 days of the date of these Orders, as recommended by the Agent;
(d)The parties shall each cooperate in every way with the Agent including (without limiting the generality of the foregoing):
(i)Making the key available to the Agent;
(ii)Allowing inspection of the property at all reasonable times requested by the Agent;
(iii)Doing or saying nothing to hinder or prevent a sale being effected;
(iv)Ensuring the property, including the grounds, are in a neat and clean condition at the time of inspection by the Agent and prospective purchasers; and
(v)Signing all documents requested by the Agents in relation to the listing for sale of the property, except a contract or agreement for sale which has not been authorised by the parties’ solicitors;
(e)The parties instruct a solicitor/conveyancer to have the carriage of the sale of the B Street property being such solicitor/conveyancer as agreed between the parties and in default of agreement within seven (7) days, the wife is to nominate three (3) solicitors/conveyancers within seven (7) days of the default date and the husband is to select one of those solicitors/conveyancers within a further seven (7) days, the solicitor/conveyancer to be appointed by way of that process, providing that if a party fails to comply with this Order then the other party is to select the solicitor/conveyancer (“the solicitor/conveyancer”);
(f)Neither party may confer on any Agent, without the consent of the other party, any right to any sole or exclusive agency in respect of the B Street property or to any commission;
(g)If the B Street property is listed by private treaty, then in the event the property fails to be sold by private treaty within three (3) months of listing, then each party must take all reasonable steps and sign all necessary documents to then cause the B Street property to be sold by auction in accordance with the terms and conditions in these Orders;
(h)In the event that the B Street property does not reach reserve price at the auction, the parties shall negotiate with the highest bidders or any such interested persons and effect the sale of the property at a selling price as agreed between the parties, or failing agreement on the day of auction the parties shall accept the recommendation of the Agent and/or the Auctioneer as to the selling price of the B Street property and shall sell the B Street property at that price;
(i)In the event that the B Street property is not sold by auction or by private negotiation within fourteen (14) days after the said auction then the parties shall do all acts and sign all necessary documents and pay all moneys as necessary to procure a second auction within a further five (5) weeks of the date otherwise upon the same terms and conditions as applied to the first auction except the reserve price be reduced by 10 per cent or otherwise agreed upon between the parties;
(j)For the purpose of the transfer of the B Street property referred to in these Orders:
(i)Each of the parties will do all acts and things and sign all documents requested by the solicitor/conveyancer to ensure the orderly progress of and to give effect to, the sale, including but not limited to the solicitor’s/conveyancer's reasonable costs agreement, discharge of mortgage request and transfer;
(ii)Each of the parties will do all acts and things and sign all documents and instruct their representatives to do all acts and things necessary to give effect to the settlement via the electronic conveyancing platform, Property Exchange Australia known as PEXA (“the electronic conveyancing platform”);
(iii)In the event either party is self-represented at any time, then that party will nevertheless instruct a subscriber to the electronic conveyancing platform for the purposes of the settlement, and will meet their own costs of the practitioner instructed by them; and
(iv)The parties will pay their own electronic conveyancing fees and in the event one party meets the other party's fees at the date of settlement, the party who did not pay their own fees will reimburse the other party within seven (7) days of the date of settlement.
6.Upon completion of sale of the B Street property the proceeds of sale be paid in the following manner and priority:
(a)All costs and expenses of sale, including legal costs and disbursements, Agent's commissions, advertising expenses and auction expenses (including repayment of any such expenses as have been paid by either or both of the parties);
(b)In discharge of the mortgage over the property to Westpac; and
(c)To the parties as agreed by the parties in writing or, failing agreement, are to be held in Trust for both parties pending further order, under the existing Trust Account arrangement.
BY CONSENT IT IS FURTHER ORDERED:
7.In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these orders then the Registrar of the Court be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute such deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the deed or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
BRASCH J:
These are my ex tempore reasons. I will correct the transcript for grammatical errors and to make my oral reasons more amenable to the written word.
Yesterday I heard competing Applications in a Proceeding. In short, the wife seeks the sale of a unit in which the husband resides and after the payment of the mortgage and usual costs of sale, $200,000 be paid to her to service some ATO debts. She then asks for any remaining balance be made available for accounting costs. The husband agrees that the unit be sold but also asks for the sale of the former matrimonial home in which the wife and their three children reside. He proposed that after the payment of the mortgage and usual costs of sale, $500,000 be paid to each party.
During the course of the hearing, the wife said she would be responsible for the mortgage relating to the former matrimonial home if she remains there on this interim basis. Similarly, during the hearing the husband asked that if there were any proceeds left from the sale of the unit (if I just sold the unit), then he receive some funds. He rejected the idea that he stay in the unit and he pay its mortgage and the wife remain in the former matrimonial home and she pay its mortgage.
The trial of the matter was originally listed for five days this week. For reasons which are irrelevant to the current applications, the trial dates were vacated and the matter re-listed for trial commencing 18 November 2024.
Background
The wife was born in 1975, and the husband was born in 1969. The parties commenced cohabitation in 1997 and were married in 2001. They separated under one roof on 23 September 2019. The separation under one roof continued until the husband left the former matrimonial home in late 2020.
There are three children of the marriage, Ms GG born 2000, Mr HH born 2004, and JJ born 2013. Obviously, only JJ is under 18 years but the older children are nevertheless children of the marriage. The children live with the wife in the former matrimonial home.
During the relationship, the parties wealth was largely created through J Business, which was owned by a corporate entity as a trustee for a family trust. The parties used a range of corporate entities and trusts, including an entity called M Pty Ltd.
In mid-2020 (after separation under one roof) a new entity, X Pty Ltd was registered. The husband was its director but remains its shareholder. The wife says the husband, in reality, owns and controls this entity. The husband says it is his employer. He also says he has been able to borrow funds from it in the vicinity of almost $30,000. These competing contentions will be a matter for trial.
The wife contends that the husband ran down J Business and subsequently ‘phoenixed’ that business into a new entity, EE Pty Ltd, registered early 2021. The husband says the wife caused J Business to shut down. The trial will expose both propositions to daylight.
The wife contends J Business ought go into the balance sheet with a value of $1.82 million (as earlier assessed by a Single Expert in June 2021) on account of his wasting of that asset. The husband denies the conduct as alleged and says the business is only worth its plant and equipment of approximately $70,000. The husband’s conduct of J Business and its value will be, no doubt, the subject of rich cross-examination at trial. However, on this interim basis, I cannot make any findings about what is said by either party.
The wife contends the husband controls the EE Pty Ltd entity and receives undisclosed benefits from it. She complains about his non-disclosure of his interests in EE Pty Ltd and the FF Family Trust. She highlights the name of the trust is likely made from the husband’s name. This too will be a matter for findings arising out of the trial.
The wife initiated proceedings on 3 August 2020. Thereafter, the parties sold four of six real properties netting just on $1.25 million. These sums funded partial property settlements, and the balance was paid into a trust account in joint names and applied to matrimonial outgoings, mortgages, experts’ fees and liabilities.
The two remaining properties are the properties the subject of these applications. One is a unit at Suburb C said to be worth $1.5 to 1.7 million and with a mortgage of $1,203,683. The husband lives here, although the wife disputes that. The other property is the former matrimonial home also at Suburb C, said to be worth $4.2 million (albeit the valuation some years old) with a mortgage of $1,003,756.
The parties’ mortgages are in arrears in the vicinity of $14,210. The amount now in trust is less than $14,000. There are outstanding strata levy bills for the unit of just over $66,000.
Overall, the wife indicated the property pool to be in the vicinity of $6.6 million including superannuation and the business at the wife’s figure.
Material
The husband and wife each relied upon the material set out in their respective Case Outlines.
The parties helpfully provided an agreed Minute of Order for the sale of the unit, and were agreed that it would form the template for the sale of the former matrimonial home if so ordered. The parties also provided Trial Directions, which I will issue separately to the orders relevant to these Reasons.
Legal principles
Both parties seek interim property settlements from the sale of a property or properties to fund the distributions sought by each. They both proceed with their respective applications on the basis that s 79 and s 80(1)(h) of the Family Law Act1975 (Cth) (“the Act”) confer power on the court to make orders for an interim property settlement. I agree; that is an entirely orthodox approach. I add though that s 80 of the Act is not itself a source of jurisdiction to make the orders sought. Rather it provides ways in which the power in s 79 may be exercised.
It also must be borne in mind that whilst each applicant does not need to show a compelling reason for the respective distribution of funds as sought (Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”) at [132]-[135]), Strahan does not stand for the proposition that an interim property order will be made just for the asking. I accept the submission of the wife’s Senior Counsel to that effect, without demur from the husband’s King’s Counsel.
The Full Court decision of Strahan sets out, in essence, two stages for the consideration of applications for interim property orders:
(a)Whether the circumstances of the case trigger the Court’s power to invoke s 80(1)(h) of the Act to make an order for interim property adjustment. At this stage, the “overarching consideration” is the interests of justice (Strahan at [132]). This has been called the “procedural step”; and
(b)The second stage, being the “substantive step”, requires consideration of s 79 of the Act albeit acknowledging this is an interim, not a final hearing (Strahan at [135]).
The starting point is the identification of the parties properties and their interest in them (Medlow & Medlow (2016) 54 Fam LR 389 at [69] (“Medlow”)). The Full Court also said in Medlow at [86] that:
The onus was clearly upon [the applicant] to establish that there were sufficient assets available for the interim distribution and that the effect of any interim order was capable of being reversed as part of the final hearing or at least would not defeat [the respondent]’s property claims. The onus was not on the [respondent] to adduce such evidence.
The Medlow Full Court continued at [83], referring to Strahan and other authorities, that an interim order for the distribution of property must be “amenable to adjustment on a final hearing”. Plainly, the nature of an interim hearing is such that the Court cannot properly evaluate the evidence. Accordingly, it was said, the Court should take a conservative approach including whether there is likely to be sufficient resources of the parties available at final hearing to accommodate any “adjustment issue”.
Both parties apply for interim property orders. Each thus carries the onus on satisfying me that the respective distributions each seeks can be accommodated at final hearing. But that is not the dispositive answer to the question before me.
Discussion
The wife says the pool is in the vicinity of $6.6 million, including superannuation. That includes:
(a)The unit at Suburb C said to be worth $1.5 to 1.7 million and with a mortgage of $1,203,683. It is held in the name of the parties’ family trust;
(b)The former matrimonial home, also at Suburb C, said to be worth $4.2 million (albeit the valuation some years old) with a mortgage of just over $1 million. It is in joint names. The husband estimates its value at $6 million;
(c)J Business worth $1.82 million on the wife’s case (or about $70,000 for the husband) - the husband accepted in submissions this is the “major line item in dispute”;
(d)Various vehicles and chattels;
(e)The wife also asserts 12 add backs, and the husband concedes five;
(f)Tax commitments and CGT, strata levy arrears for the unit, loans, credit cards and other asserted liabilities; and
(g)Superannuation interests of less than $400,000.
If the pool is $6.6 million on the wife’s case, or some lesser sum on the husband’s case (taking account, inter alia, the disputed business valuation and disputed add backs pressed by the wife) then there are sufficient assets available for the interim distribution of $200,000 on the wife’s case and two lots of $500,000 on the husband’s. Plainly, the effect of any interim order is capable of being reversed as part of the final hearing and/or will not defeat either party’s claim (Medlow at [86]).
Indeed, the parties are agreed that the $500,000 distribution to each proposed by the husband is well within their ultimate entitlements. It must then be that the $200,000 sought by the wife is also within her range of entitlements. With these appropriate concessions, it is therefore unnecessary for me to make a preliminary assessment of the parties’ entitlements as might otherwise be the case in an application for interim property orders.
Both parties say they are in parlous financial circumstances. The wife says she will borrow from family and others to meet the mortgage if I were minded to allow her to stay in the former matrimonial home on an interim basis.
The wife’s case is, in summary:
(a)The husband’s case for money is “vague”;
(b)Selling the former matrimonial home will not only be disruptive to her but the three children of the marriage, albeit only one is under 18. I was taken to the decision in Bearup & Bearup (1993) FLC 92-412 and in particular at 80,218:
Trial judges must approach the sale of matrimonial property prior to the hearing of substantive applications for settlement of property with the utmost caution. Such orders, in my opinion, should only be made for the purpose of preserving assets or in the payment of either spousal or child maintenance. There was no justification in my view, having regard to the facts of the case in an interlocutory application, to require the sale of the former matrimonial home, albeit to satisfy debts, when the sale of the vacant land at Yowie Bay could have achieved the same result and leave money to spare.
(c)The wife may be able to keep the home if she receives about 70 per cent of the pool and on her valuation of the business;
(d)The husband’s purchase of the rural holding via an entity “KK Pty Ltd” was “curious” and speaks against his alleged parlous financial circumstances;
(e)The husband is the controller of EE Pty Ltd and in turn, it and the X Pty Ltd business are “related”;
(f)The husband’s description as a labourer does not sit well with his work and ability to holiday. He has previously described himself as a tradesperson;
(g)The husband’s claim to incapacity for some physical work does not sit well with the wife’s photos of him doing a sport;
(h)I would not accept the husband’s income is only $700 per week when he fails to disclose the benefits received from EE Pty Ltd. Further he has the ability to make mortgage payments “at least for the unit” – but that is a moot point now, given it is agreed it will be sold;
(i)The husband is not contributing to the outgoings for the unit;
(j)I would not accept the mortgagor bank is on the verge of taking action over the arrears in the mortgages;
(k)The ATO wants their money;
(l)I should take a cautious approach and not sell the former matrimonial home which the wife seeks to keep and where she and the children reside;
(m)Justice and equity is served by only selling what is necessary;
(n)Noting the trial is only in November 2024, the wife will meet the mortgage referrable to the former matrimonial home if permitted to stay in the interim; and
(o)Payment of the loan for tax was not required by the bank when another unit was sold.
On an interim basis, I cannot make findings about some of these contentions, for example, items (d)-(h).
The husband says the sale of just the unit will yield little, if anything to the parties. The parties’ maths on the topic was as follows:
Item
Wife value
Husband value
Unit value
$1,700,000
$1,500,000 – $1,700,000
(The latter figure was used for arguments sake at the hearing to demonstrate how little would be realised)
Mortgage
- $1,203,683
-$1,203,683
Commission
-$25,500
-$40,000
Costs of sale/ conveyancing
-$5,000
-$2,500
Strata levy debt
The wife’s Order 2.3 proposes payment of “all strata levies owning [sic]”. She deposes to the same amount.
-$66,006
-$66,006
Sub-total payouts
-$1,300,189
-$1,312,189
Potential surplus
$399,811
$187,811 - $387,811
Less cross-collateralised tax debt loan of $277,806
The wife says it is unlikely to be called in by the bank because it was not on the sale of another unit.
Quantum is agreed.
The husband says there is “no suggestion that the bank wont [sic] call that debt in”.
CGT
The husband says the above does not provide for CGT, which would make the situation worse – albeit some time down the track when CGT is payable
The husband says there is, essentially, little point in just selling the unit. Instead, he says, the sale of both properties would alleviate the parties’ financial stresses and provide $500,000 for each to live on, use for rent or otherwise use in the lead up to the trial.
The husband also submitted:
(a)He is contributing to the outgoings for the unit via the money in trust, in the same way the outgoings for the former matrimonial home are met;
(b)The funds in trust are almost depleted;
(c)The idea each stays in their respective homes and each pays that mortgage is “not pragmatic. Both are in dire financial circumstances”;
(d)The cross-collateralised tax debt is really a loan to Westpac;
(e)With $500,000 each, both parties can pay rent;
(f)Sale of both properties would save the parties the costs of valuations;
(g)Justice and equity sees both properties being sold;
(h)The rural property purchase and finance from LL Pty Ltd and then a Mr MM was not curious; and
(i)Selling both properties now is pragmatic.
Like the wife’s submissions, there are a number of issues raised by the husband that I cannot determine on this interim basis.
Disposition
It is agreed the unit be sold. The wife says the cross-collateralised loan for a tax debt will “unlikely” be called in by the bank. I have no idea what the bank may do. If it is called in by the bank, contrary to her assessment, then there will be less available for distribution. The wife acknowledged that risk at the hearing.
The wife seeks $200,000 from the proceeds for the purpose “of payment by her of her personal income tax liabilities to the Australian Tax Office for income tax, including arrears and penalties, for the years ended 30 June 2020, 2021, 2022 and 2023” (Wife’s response filed 3 April 2024, p.6).
However, the wife also deposed:
6.… Apart from the mortgage defaults, I am receiving letters of demand for outstanding debts to the ATO for the family business [Kendall Holdings Pty Ltd] ($56,656), [M Pty Ltd] ($50,432) and for myself personally ($135,310)…
(Wife’s affidavit filed 13 March 2024, paragraph 6)
That was an affidavit of the wife’s that the husband relied upon.
The first two debts are probable matrimonial liabilities. The third is the wife’s personal tax liabilities, including post-separation financial years, but the wife says the tax liabilities are a result of distributions from matrimonial Trusts and capital gains tax from the disposal of matrimonial assets. At the end of the day, the wife sought $200,000 to service tax liabilities. She annexes letters from the ATO saying in summary they intend to report the debt to credit reporting bureaus.
If the various ATO liabilities are not serviced, then they will likely sit on the balance sheet anyway (at least on the wife’s side of the ledger) and be accruing interest; that is not in anyone’s benefit. I will take the wife’s proposed order for payment of $200,000 to the ATO and set that across the two corporate liabilities she deposed to, and the balance to the wife’s personal debts. It will not clear the wife’s obligations but will make in roads. It will remain open to the parties at trial to argue whether any of the tax debts be apportioned to one or both parties. I am well satisfied the effect of this interim order is capable of being reversed as part of the final hearing, whilst also satisfying obligations to the ATO.
The wife also seeks that any balance be placed in trust and monies be applied:
…for payment to [NN Accountants] for their fees for work done in relation to the financial accounts up to and including for the year ended 30 June 2023 for [Kendall Family Trust], [Kendall Holdings Pty Ltd], [M Pty Ltd], the [P Family Trust], [R Pty Ltd]; [The Kendall Trust] and [Q Pty Ltd].
I do not consider it just and equitable to provide an unspecified sum for these purposes.
I accept the husband’s submission that should there be any proceeds after all payments, then he receive the balance. Whilst the husband’s real source of income and benefits will be the topic of examination and submissions at trial, the evidence currently before me sees both parties in poor financial circumstances. I also note his lawyers are carrying some of their fees. I am satisfied that if there is any balance left over, any payment to the husband, via his solicitor’s Trust Account, can be re-visited at trial.
The next question is whether I ought sell the former matrimonial home and make a distribution of $500,000 to each party. At first blush, that might seem an attractive option but more is required than the mere fact that at a final hearing the parties will each receive the property being sought, or in this case, an amount in excess of the funds being sought (Strahan at [139]). As Strahan indicates, the Court may need to examine the claim in some detail if it is contended that it lacks bona fides and is simply an attempt to obtain funds (Strahan at [147]).
The wife says the husband’s claim in this regard is “vague”; that is an understatement. Across two affidavits, the husband says little, if anything, about this. He submitted each of the parties can live out of the distributions and pay rent from what was matrimonial capital. There is an irony in that though because he opposed the wife’s original position that she stay in the home and the mortgage be paid from the sale proceeds of the unit – he said that was a “cannibalisation of capital funds”.
The wife does not want $500,000. I am not persuaded to sell the home, but will allow the wife to remain there, on the condition that she meet the mortgage from the date of this order as and when due. I have reached that conclusion for several reasons. First, I cannot rule out the wife’s claim to keep the house on a final basis as being fanciful or simply unachievable. I accept she swore a previous affidavit about selling both properties after trial, but her position before me and in her Amended Initiating Application is to keep the house unencumbered. It may well be the husband’s contentions in his Case Outline at paragraphs 20 to 21 are made out at trial (especially if the home is valued at $6 million as he contends), but I cannot rule it out now. Second, this is the home in which the children reside and have resided since 2015. I accept two children are over 18 years, but in the instability which must have been caused by their parents’ separation and the on-going disputes, one constant they have is a familiar roof over their heads. Third, I do not consider it just on an interim basis to make an order which would see the parties living off $1 million in matrimonial capital, being $500,000 each; the husband said if the wife was also able to use matrimonial funds to meet the mortgage on the former matrimonial home that would, as I said, “cannibalise” matrimonial capital. The same must apply to his proposal. Fourth, it is the wife who will meet the mortgage for the home and that will be the price she pays for staying in the home on an interim basis, with little concomitant cost to the husband in terms of mortgage repayments. Fifth, I am not persuaded the costs of an updating valuation on the home for trial warrants the ensuing disruption to the children. Sixth, the husband’s idea that the parties could “cross guarantee” each other’s rent is fanciful; neither trusts the other and the wife’s mistrust of the husband drips redolent from the pages of her affidavits.
I will however make a further order – if the wife fails to meet the mortgage from the date of this order as and when due, then the home will be sold. If I decided to sell it, the parties agreed I would use the sale of the unit orders as a template for the sale of the former matrimonial home. Whilst I did not raise this condition with the parties at the hearing, sale of one or both properties was the very point of the hearing. The order for sale on default of payment is a logical and natural extension of the competing applications and consequence of the wife saying she would pay the mortgage. Further, if the wife cannot meet the mortgage, then sale will crystalise the property’s value and not add a further pot of arrears into the pool – with the likely argument about who is responsible for those arrears at trial.
I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Brasch. Associate:
Dated: 15 April 2024
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