Knowles and Gaudi and Anor - [2008] FamCA 436

FAMILY COURT OF AUSTRALIA

KNOWLES & GAUDI AND ANOR

[2008] FamCA 436

FAMILY LAW – PROPERTY – Transaction to defeat claims – Whether mortgage registered to husband’s mother was a sham

APPLICANT:

Ms Knowles

RESPONDENT:

Mr Gaudi

SECOND RESPONDENT:

Mrs Gaudi

FILE NUMBER:

MLF

3755

2005

DATE DELIVERED:

23 June 2008

PLACE DELIVERED:

Townsville

PLACE HEARD:

Melbourne

JUDGMENT OF:

Monteith J

HEARING DATE:

5, 6, 7, 8, 9 & 12 May 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Smallwood

SOLICITOR FOR THE APPLICANT:

Pearsons Barristers and Solicitors Pty Ltd

COUNSEL FOR THE RESPONDENT:

Mr Hoult

SOLICITOR FOR THE RESPONDENT:

Lampe Family Lawyers

COUNSEL FOR THE SECOND RESPONDENT:

Mr Werner

SOLICITOR FOR THE SECOND RESPONDENT:

Dellios, West & Co.

Orders

The property known as and situated at M more particularly described in Certificate of Title Volume … Folio … be sold forthwith, with the wife to have sole conduct of the sale (“the sale of [M property]”).
The Court declares that the second mortgage expressed to be in favour of the husband’s parents registered on the title to the M property secures payment to the second respondent in the sum of:
(a) $150,000, plus
(b)interest calculated from 10 February 2006 at the rates prescribed from time to time by the Penalty Interest Rates etc 1983 (Vic).
The wife engage a real estate agent (“the agent”) to effect the sale as soon as practicable, on such terms and conditions as the agent recommends, at a reserve price of $480,000 or such other reserve as the President of the Real Estate Institute of Victoria recommends in writing.
The husband and the second respondent sign all documents and do all things necessary to facilitate and conclude the sale, including a discharge of the second mortgage in registrable form upon the request of the wife or the agent.
Should the husband or the second respondent fail to sign any document referred to in paragraph (4) hereof within two (2) days of the request of the wife or the agent, then a Registrar of the Family Court of Australia, Melbourne Registry, be and is hereby authorised and directed to sign any such document on behalf of the husband and/or the second respondent
The proceeds of sale of M property (after payment of all expenses of and incidental to the sale) be applied as follows:
(a)In payment of all amounts secured by the registered first mortgage in favour of St George Bank Limited;
(b)In payment to the second respondent of the aggregate of the following amounts:
(i)$150,000, plus
(ii)$39,211.50 being interest calculated at penalty rates from 10 February 2006 to 5 May 2008, plus
(iii)$49.2813 per day for each day thereafter to the date of payment
(c)$5,536 to the wife (being repayment of the amount incurred by her to obtain a certificate of occupancy for M property).
(d)So much of the proceeds to the wife as necessary to result in her receiving 80 percent of the asset pool calculated in accordance with the List of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] FamCA 436
Decision Date: 23 June 2008

CaseChat Overview and Summary

In the matter of *Knowles and Gaudi and Anor*, Monteith J of the Family Court of Australia considered a dispute between a wife and her husband, and the husband's parents (the second respondent), concerning the sale of a property and the distribution of its proceeds. The primary dispute revolved around the quantification and priority of a second mortgage registered on the property in favour of the husband's parents.

The court was required to determine the precise amount secured by the second mortgage, including the applicable interest rate, and how the proceeds of the sale of the property should be distributed. This involved determining the order of priority for various claims against the sale proceeds, including the first mortgage, the second mortgage, specific debts owed to the wife, and the parties' respective entitlements to the remaining asset pool. The court also had to address the husband's responsibility for capital gains tax arising from the sale and the allocation of rental income and outgoings pending settlement.

Monteith J ordered the sale of the property, with the wife to have sole conduct of the sale. The court declared that the second mortgage in favour of the husband's parents secured $150,000 plus interest calculated from 10 February 2006 at penalty rates. The proceeds of sale were to be applied first to the first mortgage, then to the quantified second mortgage debt, followed by a payment to the wife for certificate of occupancy costs. The remaining proceeds were to be distributed such that the wife received 80 percent of the agreed asset pool, with certain arrears of spousal maintenance and costs orders to be deducted from the husband's share and paid to the wife. The husband was to be solely responsible for any capital gains tax. The court also ordered the immediate payment of the proceeds from the sale of the former matrimonial home to the wife and the return of personal effects.

Orders

Orders of the court

The property known as and situated at M more particularly described in Certificate of Title Volume … Folio … be sold forthwith, with the wife to have sole conduct of the sale (“the sale of [M property]”).

The Court declares that the second mortgage expressed to be in favour of the husband’s parents registered on the title to the M property secures payment to the second respondent in the sum of:

(a) $150,000, plus

(b) interest calculated from 10 February 2006 at the rates prescribed from time to time by the Penalty Interest Rates etc 1983 (Vic).

The wife engage a real estate agent (“the agent”) to effect the sale as soon as practicable, on such terms and conditions as the agent recommends, at a reserve price of $480,000 or such other reserve as the President of the Real Estate Institute of Victoria recommends in writing.

The husband and the second respondent sign all documents and do all things necessary to facilitate and conclude the sale, including a discharge of the second mortgage in registrable form upon the request of the wife or the agent.

Should the husband or the second respondent fail to sign any document referred to in paragraph (4) hereof within two (2) days of the request of the wife or the agent, then a Registrar of the Family Court of Australia, Melbourne Registry, be and is hereby authorised and directed to sign any such document on behalf of the husband and/or the second respondent

The proceeds of sale of M property (after payment of all expenses of and incidental to the sale) be applied as follows:

(a) In payment of all amounts secured by the registered first mortgage in favour of St George Bank Limited;

(b) In payment to the second respondent of the aggregate of the following amounts:

(i) $150,000, plus

(ii) $39,211.50 being interest calculated at penalty rates from 10 February 2006 to 5 May 2008, plus

(iii) $49.2813 per day for each day thereafter to the date of payment

(c) $5,536 to the wife (being repayment of the amount incurred by her to obtain a certificate of occupancy for M property).

(d) So much of the proceeds to the wife as necessary to result in her receiving 80 percent of the asset pool calculated in accordance with the List of Assets and Liabilities marked “A” and annexed to these orders (such list having been agreed between the parties save for the liability to the second respondent which pursuant to paragraphs (2) and (6) of these orders have now been declared owing and quantified).

(e) The residue to the husband subject to paragraph (7) hereof.

Prior to the payment to the husband of any sum pursuant to paragraph 6(e) hereof the sums of:-

(a) $21,000 arrears of spousal maintenance owing to the wife as at 3 May 2008; and

(b) $3,400 being amounts outstanding and owing to the wife pursuant to costs orders made in her favour;

be deducted from any such amount and paid to the wife.

The husband be solely responsible for any capital gains tax assessed as a result of the sale of M property and shall indemnify the wife and hold her harmless with respect to same.

Pending settlement of the sale of M property the husband be entitled to receive all rental from the property and shall make all mortgage payments due pursuant to the first mortgage to St George Bank Limited as and when they fall due and pay all rates and outgoings on the property as and when they are incurred.

10.

The proceeds of sale of the former matrimonial home, being $345,106, currently held in trust on behalf of the husband and wife be forthwith paid to the wife for her sole benefit.

11.

The husband deliver all personal photographs and effects of the wife in his possession, together with all photographs of the children of the parties within seven (7) days to the office of the wife’s solicitors, Messrs Pearsons, for the wife’s retention.

12.

Paragraph 5 of the husband’s Amended Response filed 5 December 2007 is dismissed.

13.

Each party retain any superannuation to which they are or may become entitled for their sole benefit.

14.

Unless otherwise specified, each party to retain for their sole use and benefit all chattels, money, cars and property currently in their respective possession.

15.

General liberty to apply.

“A”

List of Assets and Liabilities

Cash (sale proceeds of S property)

$345,106.00

M property value

$480,000.00

Superannuation husband

$38,000.00

Water and rates arrears

$4,817.00

Interim Distribution

$50,000.00

Harley Motorcycle

$8,900.00

Withdrawn Superannuation

$8,000.00

Cash in home

$32,000.00

Total

$966,823.00

Less Liabilities:

First Mortgage

$230,000.00

Certificate of Occupancy Cost

$5,536.00

Net Total

$731,287.00

WIFE PROPOSES DIVISION AS FOLLOWS:-

Wife to receive 80% : $585,029.00

Husband to receive 20% : $146,257.00

The wife should also receive $5,536.00 being debt repayment for certificate of occupancy, in addition to her percentage entitlement, which has already been factored into the asset pool calculation.

The wife should also receive, from the husband’s share, $24,400.00, being arrears of spousal maintenance of $21000, and costs of $3,400.00 outstanding pursuant to costs orders made.

Total due to wife $614,965.00

The wife has received already $25,000.00 interim payment, and $2,000.00 cash taken by her at separation.

Total due to wife after adjustments re receipts $587,965.00

The husband has received already $25,000.00 interim payment, $8,900.00 for the Harley, $8,000.00 superannuation, $4,817.00 in rates he failed to pay, and which have now been paid out of sale proceeds, $38,000.00 in superannuation, and $30,000.00 in cash.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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