King & Hampton

[2007] FamCA 1500

FAMILY COURT OF AUSTRALIA

KING &  HAMPTON [2007] FamCA 1500

FAMILY LAW – PROPERTY – Settlement in relation to marriage - Interlocutory applications related to payment of cross collateral fixed rate interest only loans where the facility had expired and the bank had declined to refinance – sale of property and refinance proposal of husband’s adopted – dispute about documents

Family Law Act 1975 (Cth)

APPLICANT: Ms King

RESPONDENT: Mr Hampton

FILE NUMBER: SYF 2705 of 2006

DATE DELIVERED: 14 December 2007

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 26 November 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Testart

SOLICITOR FOR THE APPLICANT: Westminster Lawyers Pty Ltd

COUNSEL FOR THE RESPONDENT: Mr Schonell

SOLICITOR FOR THE RESPONDENT: Pearson Family Lawyers

Orders

1. A draft of orders giving effect to the decisions set out in the Reasons for Judgment is to be submitted by the solicitors for the husband no later than 4pm Monday 17 December 2007. 

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2705 of 2006

MS KING  

Applicant

And

MR HAMPTON  

Respondent

REASONS FOR JUDGMENT

[To assist in later editing for anonymity initials will be used at times to identify the parties and for ease of identification they may also be referred to as ‘husband’ and ‘wife’ though they have been divorced for many years and each has since remarried]

Interlocutory applications

1. Since the case was argued the parties have attempted to resolve the more central issue and delivery of judgment was delayed to allow that to occur, but it has been to no avail and decisions now have to be made about a number of interlocutory applications. 

2. First some of the background has to be recorded. To do that, information has to be selected from detail presented in a number of affidavits filed to date, no easy task when the history is fragmented throughout those affidavits, there is no common account of the more significant past developments or the structure of their business arrangements, and movement from the affidavit of one to the other reveals gaps filled by evidence that is yet unaddressed and its acceptance or otherwise therefore unknown.  This will be corrected in due course, but for now it means a broad view has to be taken of the history and their current circumstances.  I trust what follows of it is sufficiently uncontentious and enough to give the decisions an adequate context. 

Short history

1. The husband (51) and the wife (38) were married in the United States in September 1995.  They separated eight years later in October 2003.  They were divorced in March 2005.  They have no children together but the husband has two children from a prior marriage, both now adults.  The husband married his current wife, Ms Y, in the United States in April 2005.  The wife married her current husband, Mr C, in the United States in July 2005.  They have a child who is presently aged almost 15 months. They separated in May of this year when Mr C left the residence they share in Sydney. The husband and his wife live in the United States. 

2. Until a business was established in early 2002 the husband was employed by a well known Australian entertainment company.  On his evidence, the wife was a musician. When they married he owned assets more particularly described in paragraph 38 of his affidavit filed 22 March 2007 which included real property at M and B in Sydney, both subject to mortgages, along with savings, motor vehicle and superannuation.  Both real properties were the subject of financial re-arrangements over the years and both were subsequently sold.  The wife’s asset position at the time is not clear. 

3. Over the years real property was purchased in either the husband’s name or in the name of a company established during the course of their relationship.  The detail given of those transactions need not be cobbled together; what follows will suffice:

   ·    In 1996 a flat in London, the A property, was acquired in the husband’s name.  Whatever was contributed from savings, the husband borrowed money from the Royal Bank of Scotland to fund the purchase.  It has been leased over the years and is still retained.  In his financial statement of June 2006, he estimated the property to have equity of around $73,000.  The rent has been applied towards the mortgage instalments and expenses and the husband has paid the shortfall. 

   ·    In 1997 an apartment identified for present purposes as the R1 property was acquired in the husband’s name.  Again, whatever the funding necessary, part of it came from secured bank borrowings.  It was a property in the short to medium term furnished rental market and has been sold since separation. 

   ·    In 1999 an apartment identified here as the R2 property was purchased in the husband’s name.  No common account is given of the funding arrangement save to say, again, there were secured borrowings from a bank. The property is leased to an accommodation provider, though nothing is said of its terms, and the lease income has been applied towards paying the mortgage interest and expenses.  The property is retained.  The husband has recently obtained a valuation for $1.75 million which is an advance on an earlier valuation of $1.4 million. 

   ·    Later in 1999 an apartment identified as the R3 property was purchased in the husband’s name. All or most of it came from secured bank borrowings.  It was also a property in the short term accommodation market and it was sold earlier this year.  The sum of $475,861 was received on settlement and of that the husband deposited $177,290 to his account to discharge arrears owing in respect of the NAB 1 – 5 loans [see below] and the other $298,570 was credited to his line of credit with the NAB which he had used in part to acquire property with his present wife overseas [also see below]. 

   ·    In 2000 an apartment identified as the L property was purchased in the husband’s name for $1.4 million.  The purchase price and additional funds came form bank borrowings.  The parties lived there after settlement and the wife has occupied it since, shared with her current husband Mr C until he moved out some months ago.  They paid the levies and outgoings in that time.  It is part of the wife’s application for final property orders to retain this property. The husband has a recent valuation for $2.3 million though there has also been mention of valuations of $1.8 million and $1.65 million held by the bank and by the wife.  Mr C expressed interest in buying the apartment some months ago and made an offer of $2.25 million but it was not taken up. 

4. Other transactions occurred over time through a company incorporated in 1996, N Pty Limited, of which the wife was [and remains] the sole director and shareholder. Its activities from inception are not clear.  However, it is said to be the trustee of the Hampton Superannuation Fund [little is said about the fund] established in 1996 and trustee of the Hampton Investment Unit Trust [nor is much said about this] established the following year.  Later the trustee acting in its capacity as trustee for the Hampton Unit Trust purchased a property at T for $190,000.  This comes from the husband’s evidence, though it is vague, and the wife’s evidence is silent about it.  Apparently it was later sold.  In early 2002 as trustee of the Superannuation Fund the company purchased an interest in a chalet in Victoria.  It is retained and is on the rental market which produces some income. 

5. In 1997 O Pty Limited was incorporated.  The parties were appointed directors and they hold the shares equally.  Later a unit trust was established, eventually renamed the O Unit Trust, but it is not clear who holds the units [the wife says at one point they are her parents and the parties].  In any event, the following year O Pty Limited purchased a commercial property in T which was leased and operated as a restaurant.  There is contrary evidence about the rent and its application.  The property has been sold recently and settlement has not yet occurred. 

6. To summarise, the real property still held and registered in the husband’s name [related at least to the dealings so far mentioned] is the A property, the R2 property, and the L property where the wife lives with her infant daughter and the chalet is still held by N Pty Ltd for the Superannuation Fund. 

7. The husband remains indebted to the Royal Bank of Scotland by reason of finance related to the purchase of the A property.  The Australian properties are the subject of cross collateral security held by the National Australia Bank.  There are five fixed rate interest in arrears loans [‘loans 1-5’] and each party has a line of credit with the NAB.  In the husband’s case, the evidence refers as times to his line of credit as the ‘7^th NAB loan’.  The other line of credit is a facility to $275,000 available to the wife and Mr C jointly which, as I apprehend the history, was used to purchase a share in a livestock business although it may have been applied elsewhere. 

8. The NAB facility expired in late June and the debt was not repaid.  By then arrears had accrued over the preceding months. The NAB has declined to refinance the facility and the spectre of foreclosure and sale of the properties secured is at the heart of most of the applications.

9. Returning to the history, in 2002 a business was established to operate within the entertainment industry.  According to the wife’s evidence, she and the husband had laid the necessary groundwork for several years beforehand.  Whatever the preparatory work, it culminated in the establishment of a web of companies and trusts through which the business has been conducted since and includes a business partner, Mr V. Described generally as ‘[F1 Company]’, the business generates income from various functions within the national and international entertainment industry.  Mr V lent money to the business which was not repaid as agreed and the husband contends this has consequences for ownership proportions. There are associated companies: F2 Company, and F3 Company incorporated in Hong Kong and owned as to 50% by F1 Company and 50% by the husband’s current wife, Ms Y.  The husband also has an interest in another company incorporated in California, F4 Company whose shares are held as to 50% by a company in which he has no interest and by F5 Company in which he has a 40% interest. 

10. An accountant, Mr G, has been appointed a single expert to report on the value of interests held in the group and he is still engaged in that process.  It is anticipated his report will be available in February and no doubt it will provide a clearer picture of rights and potential entitlements within the structure, as well as those related to other entities established for other purposes. But one reading of the evidence suggests the ultimate recipient of distributions from the head trust - at least in so far as these parties’ entitlements are concerned - is P Pty Limited, incorporated in 2002, and the parties appointed directors and allotted shares equally.  P Pty Ltd acts as trustee of the P Trust which is a discretionary trust of which the parties are both potential beneficiaries.  A copy of the Trust Deed has not yet been filed with any affidavit but from references to lists of documents amongst the material, I see it is available. 

11. The husband has continued to work in the business throughout and holds an executive position.  The wife worked in the business until 2005 and has had no active involvement since.  She has received no income or distributions from the business, at least since she ceased working in it in 2005. 

12. From some point at least since 2006 there has been ongoing dispute about the financial arrangements.  This is reflected in correspondence between solicitors as well as emails between the parties which has canvassed arrears on the NAB loans [accruing during the latter half of 2006], there has been argument about the sale of properties to raise funds to pay the interest on debt, there have been disagreements about the receipt and application of rents and about the wife’s occupation of the L property which has not been earning income, and demands have been made of the husband for half of all funds received by him from F1 Company and his associated work in the business.  The latter apparently comes from a view taken about the wife’s entitlements, but my reading of the evidence suggests, noted earlier, that she is a beneficiary in a discretionary trust which is the ultimate recipient of the net income from the enterprise and not, for example, the holder of shares to which there is attached an entitlement to income.  Mr G’s report no doubt will clarify the position. 

13. After separation the husband and Mr V purchased a property in the United States where the husband lived but it was sold in less than a year.  The husband has since purchased with his current wife, Ms Y, real property in China, London and the United States:

    ·The apartment in China was purchased in August 2005 for USD $200,000, funded by drawing $78,000 or thereabouts from his NAB line of credit and the balance was borrowed from the China Eastern Bank.  The property has been leased, the rent paid to the loan with the China Eastern Bank and he pays the shortfall and outgoings from his income. 

    ·The following month they purchased an apartment in the United States for USD$920,000, funded in part by a mortgage for USD$825,000 in favour of a bank in the United States.  That is their home. 

    ·In 2006 they purchased a property at W, London for 675,000 pounds funded in part by borrowing 575,000 pounds from the Royal Bank of Scotland and the balance came from drawings by the husband of almost $180,000 from the NAB line of credit.  The property is leased and he pays the shortfall on repayments as well as outgoings. 

14. To summarise, the husband increased his line of credit debt with the NAB by approximately $258,000 to acquire property in China and London jointly with his wife.  Of the money received from the sale of the R3 property earlier this year he applied part of it towards the arrears by then referable to the 1 – 5 loans and the balance of $298,570 went to his line of credit account.  It is said the loans related to property acquired with his present wife are not in arrears and there has been nothing to gainsay that. 

15. By now there is a history of activity – or inactivity as the case may ultimately be – to address the expiration of the facility with the NAB and the arrears accrued through refinancing. Having declined to refinance the debt, the Bank referred the matter to the relevant internal department to take action for recovery; however, to this point they have withheld taking the necessary steps to allow the parties an opportunity to refinance elsewhere. The Bank’s right to repayment looms while interest accrues at $1,266 per day [as at 10 July - exhibit 6].  In the meantime, the wife and Mr C developed a proposal to purchase the L property which, as noted earlier, the husband did not take up at the price offered and efforts to resuscitate the proposal this last week have come to nothing. 

16. The activity with the Bank and between the parties and their solicitors has been accompanied by court proceedings which have been dealt with in part and the decisions required here relate partly to a review of orders made by a Judicial Registrar and in part deal with remaining applications.  A brief summary:

    ·    Ms K filed an application on 20 June seeking a mix of orders.  On 22 June consent orders were made by a Judicial Registrar obliging the parties to do all things necessary to seek refinance of the loans, restraints were imposed on dealings with their interest in what were defined as ‘the entities’ or realty located here and overseas, rental income was to be applied towards loan repayments or into an interest bearing trust account, and responsibility for payment of interest and debt pursuant to refinance arrangements or for past payments was reserved for the trial judge at the final hearing.  The orders also obliged the parties to provide financial information and copies of documents, amongst other orders. No alternative finance was obtained. 

    ·    On 24 August the wife filed a further application seeking orders not only for the sale of properties in Australia [excluding the L property] and the A property but also for the sale of properties owned by the husband jointly with his current wife Ms Y in London and China.  Ms Y had not been given notice of the application and in so far as it dealt with properties of which she is a part owner, it was ultimately not pressed. The application proposed the sale proceeds be put towards the 1-5 loans with the balance invested pending further order, amongst other orders. 

    ·    The matter came back before the Judicial Registrar on 12 September when various orders were made including (by consent) the sale of the T property owned by O Pty Limited for $900,000, with the net proceeds to be put towards the 1-5 loans.  It was further ordered that the husband take steps immediately to sell the R2 property with the sale proceeds to be applied after costs towards reduction of the 1-5 loans but the sale order was stayed and liberty given to have the matter listed before me on giving 48 hours notice. The husband subsequently filed an application for review of the sale order and consequential orders. 

17. The T property has been sold and the net proceeds of around $850,000 will be applied towards the reduction of 1-5 loans.  The latest figures [exhibit 5] show those debts to total $3,613,909.  Add to that the husband’s line of credit amounting to $358,699 and the wife’s line of credit with Mr C of $275,000, the total comes to $4,247,608.  Once the T sale proceeds are deducted, the balance will be around $3.4 million.  Of course the figures are approximate and change daily.  The parties have agreed to each service their own line of credit facility, but it remains to determine how they will discharge the debt to the NAB. 

Proposals – The husband

1. The husband has arranged refinance for $1.1 million with the Commonwealth Bank.  To discharge the balance of the debt he proposes the sale of the L property.  The orders he seeks are to be found in exhibit 1.  Essentially that is for a sale of the L property at $2.3 million to Mr C and if not taken up within 21 days it be sold by public auction within 6 weeks of being placed with an agent at a reserve price of $2.3 million and if not sold at auction or later negotiation to be re-listed for sale at intervals with a reduced reserve until it is sold and the sale proceeds would be applied towards repayment of the 1-5 loans.  Pending the refinance of the balance of the loans, that refinance to be secured over the R Street property, the parties pay half of all expenses when they fall due pursuant to the loans.  He also seeks orders about the letting of the chalet and the application of the income along with the rental income from R2 property towards the 1-5 loans.

Proposals – The wife

1. The wife opposes that. The orders she sought in her application underwent transformation and amendment in the course of submissions when concessions were rightly made about obstacles to certain orders as initially drafted.  Putting aside the orders relating to their lines of credit, what remained of her application or was added is summarised and dealt with below:

   Order 4:

   (a) Essentially this proposes the husband pay the money he received from the sale of the R3 property [and the sale proceeds of R2 property if sold] to the 1-5 loans - being proceeds it is said he retained or applied to his line of credit account, or towards the debts related to the London, China and United States properties owned with his wife, or towards the debt related to the A property. 

   (b) It is not disputed that the husband applied some of the money from the sale of R3 property to the 1-5 loans and he deposited the remainder of $298,570 to his line of credit account. The debt owing via that account had previously been increased by around $258,000 to pay deposits on the purchase of the China and London properties, and so it can be said that a portion of the R3 property sale proceeds went towards repaying debt the husband incurred for his own purposes rather than repaying the debt that related to the property sold. 

   (c) But the application to have the husband redraw the funds from the line of credit account and re-deposit it to the 1-5 loan accounts must fail.  Quite apart from the inference that it is not open to him to do so by reason of the expiration of the facility with the NAB and their refusal to refinance, it would do nothing to address the overall level of debt and the means by which the debt can be discharged so as to avoid foreclosure and sale of all the properties secured.  To make an order in the terms sought would very likely put the husband in prima facie breach and would be to no avail in any event addressing the pressing issue of a financier being entitled to immediate repayment of their capital. What happened is an incontrovertible part of the financial history and obviously regard will be had to it in the assessment of entitlements in due course. 

   Order 5

   (d) This relates to the wife’s application that R2 property be sold and will be addressed later.

   Orders 6 and 7

   (e) These were abandoned. 

   Orders 8 and 9

   (f) Order 8 initially sought an order against the husband to account to the wife for all funds received by him ‘directly or indirectly since separation from the [F1 Company], the Entities and by way of [… entertainment] related or derived income he receives or has received.’  Order 9 sought payment by him forthwith of all funds so described.  These applications were withdrawn and re-drafted and what is now sought [exhibit 4] by order 8 is production forthwith of the documents ‘in respect of any and all money received by him directly or indirectly since separation from the [F1 Company] Group, [P Pty Ltd] and/or the [P] Trust by way of [… entertainment] related or derived income and any other payment or emolument not by way of profit which he receives or has received.’  The revised order 9 seeks payment forthwith of half of all the money so described. 

   (g) The question of the provision of documents is the subject of another application and that will be dealt with shortly.  But no order could be made in the terms proposed by order 9.  The first issue that would have to be resolved is the source of power to make the order. Spouse maintenance pursuant to s 72, interim property settlement pursuant to s 79, or injunctive relief pursuant to s 114(3) in aid of the s 79 claim all suggest themselves as possibilities.  But the first is excluded in this case not only because it is statute barred but it is not available on the facts in any event, and there are neither the facts nor the argument to support such an order under the other two heads of power.  In other words, it could not be an order for interim property settlement because it would fall outside the principles discussed by the Full Court in Harris and Harris (1993) FLC 92-378 at p. 79,929 to the effect that the exercise of the power to make orders for interim property settlement should be confined to cases where the circumstances are compelling, the exercise of the power must be performed within the general framework and parameters of s 79 [ie a just and equitable outcome having regard to contributions evaluated pursuant to s 79(4) and any relevant s 75(2) adjustments], and conservative exercise of the power means the Judge must be satisfied the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing. The views of a differently constituted Full Court in Bassi and KD Sales Force Specialists Pty Ltd v Maas (1999) FLC 92-867 alters none of that. Nor could such an order be supported by the ‘just or convenient’ criteria of s 114(3) when there could be no finding of the balance of hardship or prejudice or other relevant considerations from adopting such a course. 

   Order 10

   (h) This proposes the application of the rent from the R2 property, the A property and the chalet [the restaurant has since been sold] after payment of commissions, rates and other associated costs to the husband’s NAB account for payment of all interest repayments, fees and charges related to the 1-5 loans. 

   (i) Whether the application of rent from the chalet, which is owned by the Superannuation Fund, poses a problem for its status as a complying fund, I could not say and no one dealt with it one way or the other.  If not, there could be no objection to the rent from both properties being put towards paying debt, whether that be the NAB while ever the loans are undischarged or elsewhere. 

   Orders 11 and 13

   (j) This was abandoned and replaced. 

   Order 12

   (k) This is about production of documents and will be dealt with later. 

   Order 14

   (l) This was redrafted and seeks to have the shortfall between the income received from rent of the chalet, the R2 property, and the A property [the restaurant can now be excluded] and the payments required to service the 1-5 loans to be paid from the husband’s income.  This issue will be discussed shortly. 

   Orders 15, 16 and 17

   (m) These were abandoned. 

   Order 18

   (o) This was redrafted and seeks an order that the husband pay the strata levies and other expenses associated with the L property.  This will also be dealt with shortly. 

1. In her later application filed 24 August 2007 the wife sought the sale of the properties at R2 and A as well as properties owned jointly by the husband with his wife Ms Y in China and London.  It has already been mentioned that without the proper notice having been given to his wife, the latter component of her claim was not pressed.  She opposes the sale of the L property. 

Orders re debt

1. In the final analysis the central question revolves around what is to be done to address the NAB debt so as to preserve assets from further escalation of debt as a result of unpaid interest, foreclosure and sale of the properties that remain. 

2. In her case the wife complains that the husband has failed to account to her for the funds he has received directly or indirectly since separation from the F1 Company Group and from fees he has received as executive producer and he has failed to pay her half of the funds so received but kept all profit and fees for himself.  It is necessary to put this aspect of her case aside at this stage because it has within it the inherent problem of what I believe to be the structure established for the enterprise to earn income which I have already mentioned; namely, the end recipient on their side of the ownership scales is a discretionary trust of which she is a beneficiary which probably means [though I have not seen the Trust Deed] that income and/or capital is distributed at the discretion of the trustee.  She is a director with the husband of the trustee, I understand, but has apparently not participated – or possibly been notified about meetings – in any decision about that. Making decisions about distributions in the role of director of the trustee is one thing, and it is quite another to persist with an argument that virtually asserts equal entitlement to any profit available for distribution.  The point has no merit if the structure is as I have described it. 

3. It is also said that while the NAB loans were serviced before separation the husband has since allowed them to fall into arrears while he has taken on new debt, related to property bought outside Australia with his present wife, which has been serviced from funds has had available from the business they established together.  Moreover, not only has he failed to service the loans as he had pre-separation but he has applied capital from the sale of one of the properties acquired pre-separation in part towards the reduction of debt which was increased to acquire property outside Australia with his wife.  The upshot has been elevation of debt against property in Australia and the threat of foreclosure by the Bank leading to the sale of property in Australia. Bearing in mind his residence out of Australia, it is said this should be seen as a scheme by the husband to reduce the equity in the properties in Australia so as to defeat what recourse she will have to assets to satisfy her property entitlement. 

4. However, while the analysis of what has occurred is accurate so far as it goes, this could not establish such a ‘scheme’.  Nor, it should be said, could it be objectively seen as doing so.  That is because the gearing of debt related to the Australian properties has been high and in the final analysis it is apparent there is not a lot of equity even if the funds he applied towards the purchase of assets out of the jurisdiction were to be added back to the equation. 

5. The wife’s case accepts that the NAB facility has expired, but the submission is made on her behalf that if interest is now paid on the loans 1-5 the bank may ‘sit tight and wait for the hearing rather than act straight away’.  She maintains therefore that the husband should use funds available to him to pay the arrears and service the loans.  She does not have the funds to do so as she is supported by her current husband and nor has she had available, unlike the husband, any post-separation profits from the business. 

6. Her claim is argued on the basis that the orders she proposes will preserve assets for the property hearing when their entitlements will be determined though her counsel also characterised her claims as being in part related to her desire not to be out on the street with a child by reason of the sale of the L property. 

Conclusion

1. This last mentioned point is superfluous to her argument.  Orders cannot be made here as a back door track to spouse maintenance to which she is not entitled, first by reason of the claim being statute barred without leave and secondly by reason of her re-marriage to Mr C.  In any event, in circumstances where her current husband and father of her young child has been in the process of at least considering the purchase of the L property from the husband for a price upwards from $2 million, it adds nothing to put her case on this emotive footing. 

2. Whether the power to make the various orders discussed comes from s 34 or from s 114 (3) need not be discussed here [see Waugh and Waugh (2000) FLC 93-052 but see discussion in Deputy Commissioner of Taxation v Kliman [2002] FLC 93-113; see also Mullen & De Bry 2006 Fam CA 1380].  Either way, what is sought to be addressed is whether there should be a mandatory imposition of obligations so as to preserve the position as much as possible in the face of non-compliance with a mortgagee’s right to repayment at the expiration of a credit facility when pursuit of those rights by mortgagee sale can only be seen as imminent.  The discretion involved in addressing that question inevitably will be limited to what is necessary to prevent irreparable harm having regard to considerations related to what is just and convenient and as a matter of probable practical reality having regard to the rights of the mortgagee and the parties’ respective circumstances. 

3. One option would be to make no orders and allow the Bank to exert its rights according to the security it holds although that course would preclude available alternatives.  Another is to direct the sale of both properties before the mortgagee does it, but again that probably would exclude the prospect of something being salvaged for the longer term.  Of the options left, one proposed is that the husband be obliged to pay the arrears and then service the 1-5 loans from rent and pay any shortfall from funds available to him.  But it is rejected.  That is because there is no evidence to support a finding that this represents a probable solution.  By that I mean the Bank holds security for a facility that has expired and they are entitled to repayment of their capital – not just to interest on it – and if it was to be asserted that it is possible to have a de facto extension of the facility [presumably on the same terms as the expired arrangement] despite the attitude the Bank has communicated, then it was incumbent on the wife to produce some evidence to that effect.  If there was to be any substance to what amounted to speculation that the Bank would ‘sit tight’ then the person in the Bank with the capacity to make that decision ought to have been called, but they were not. 

4. Boiling down as it does to the sale of one property, on my analysis that has to be the L property.  It is recognised that is where the wife lives and in her application for final orders she proposes retaining it.  It is also recognised that the renewed discussions with Mr C in recent days appear not to have resulted in a sale that would see her remain in occupation.  Nonetheless, while a sale will represent an inconvenience for her when she has a young child, there are clearly funds available for her to be housed appropriately elsewhere.  The L property has to be the choice in the end because the husband at least has presented a plan that will preserve one property through refinancing with another Bank and on the available figures the refinance he has arranged would be insufficient to meet the obligation to the NAB if the L property is preserved and R sold.  In saying that, it is appreciated that a range of values has been advanced for the L property, as low as $1.65 million by the wife, and I do not know what price has been discussed with Mr C more lately or if it has been discussed at all.  But it is reasonable to see the top end of the range at or around $2.3 million as the likely sale price and that is considerably in excess of even the more recent valuation of R.  The husband has refinance available to implement the plan put and that is based on the debt being reduced by more than would come from the sale of R. 

5. By contrast, having rejected the speculation about relying on the Bank to ‘sit tight’ if the interest is paid, the wife’s proposal of selling R does not address where the additional finance would come from, even by way of supplement to what the husband has arranged with the Commonwealth Bank.  She has no means of providing it and to the extent that she has received $222,000 or thereabouts from Mr C, that has been applied towards her legal costs and not towards loan reduction.  The sale of the A property does not present a solution because the best evidence available at this stage suggests it has little equity to contribute to the solution.  Nor can it be seen as a solution to impose on the husband an obligation to refinance for more than what he has arranged with the Commonwealth Bank, first because time has to be seen of the essence to forestall mortgagee sale and secondly there is no sufficient evidentiary support to see that as likely to succeed and therefore worth the risk of delay.  The orders will therefore provide for the sale of the L property as soon as practicable. 

6. There are consequential considerations.  First, the levies and charges related to the L property can be adjusted on settlement and therefore no orders need be made about those expenses here.  Secondly, there is the question of the application of the rent and payment of shortfall between that and the cost of the refinance facility to be obtained.  That will be resolved by the husband being entitled to receive the rent from the R2 property and it will be applied towards the cost of the refinance.  The rent from the chalet will follow suit if that does not pose a risk to the status of the Superannuation Fund; alternatively, the rent form the chalet will be banked to an account in the name of the Fund.  That will be for the parties to determine.  Any shortfall between the rent and the cost of the refinance facility and expenses will be met in the interim by the husband. 

7. His financial circumstances were set out in his 21 June 2007 affidavit, the figures later corrected by Mr Schonell in an aide memoire. That reflects a shortfall of income from all sources over expenses, taking into account the repayments related to properties owned with his wife.  Those figures may be correct – none of it has been tested at this point – but what it seems to omit is any income that may be available to his wife from which she might contribute to the repayments on properties they own jointly.  Whether or not she has income, I could not say but it seems to me to have been incumbent on the husband to make clear the reason why he should be seen as carrying the whole burden without contribution from a co-owner.  Apart from this, if something has to give to see the remaining debt serviced until the division of their property is agreed or determined then the budget will have to be drawn accordingly and savings found. 

8. I have arrived at decisions I regard as reasonable in all of the circumstances on the state of the evidence as it currently exists.  They may be seen as imposing hardship and inconvenience on each – the wife by reason of the sale of the L property; the husband by reason of his obligation to service a substantial debt without contribution on an interim basis from whatever funds are available to him.  But the current mortgagee will have been satisfied as soon as that can be achieved, the risk of mortgagee sale will have been avoided and there will be at least a property of relatively substantial value retained under refinance for a period that presumably will be sufficient for the question of entitlements to be resolved or determined. 

Documents

1. It remains to resolve the dispute about provision of documents which can be done briefly.  Some documents have been ordered to be provided and some documents have been made available – see the schedule attached to a letter of 11 October from the husband’s solicitors.  The wife seeks more documents as set out in Order 12 filed on 20 June save as amended to exclude documents referable to entities identified as F6 Partners Pty Ltd, N Pty Ltd, the Hampton Superannuation Fund and the Hampton Unit Trust. 

2. The period covered by the application is from 1 July 2001 to date.  Mr Schonell resists any order related to the period before 2005 on the basis that the wife was working in the business until then.  The argument has no merit.  She could not be expected to retain information from that time, on the face of the documents described they are relevant, and the period is not so far back as to be onerous or vexatious.  Having said that, I acknowledge that Mr G has not yet asked for further documents than he has already been given but the availability of documents for legitimate forensic purposes is not limited to what an expert may require.  A period of 21 days for compliance is too tight and unnecessary at this time of the year.  The orders will require production by a date around mid-February which should give sufficient time to have them assembled. 

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate

Date: 14 December 2007