Koch and Kest

[2019] FamCA 873

FAMILY COURT OF AUSTRALIA

KOCH & KEST [2019] FamCA 873

FAMILY LAW – PROPERTY – Interim property orders and injunctions from disposing of funds – Sale of former matrimonial home and distribution of proceeds of sale – Order for wife and children to live in a former investment property of the parties and husband to pay all outgoings – Payment of debts from a controlled monies account.

Family Law Act 1975 (Cth)

APPLICANT: Ms Koch

RESPONDENT: Mr Kest

FILE NUMBER: SYC 8089 of 2018

DATE DELIVERED: 12 July 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Henderson J

HEARING DATE: 12 July 2019

REPRESENTATION

COUNSEL FOR THE APPLICANT:

SOLICITOR FOR THE APPLICANT: Diana Perla & Associates

COUNSEL FOR THE RESPONDENT:

SOLICITOR FOR THE RESPONDENT: Armstrong Legal

Orders

1. The husband’s Application in a Case, filed 12 April 2019 is dismissed.

2. The husband is to forthwith transfer the balance of the J Bank Account: …92 to the joint K Bank Line of Credit Acc: …29 and is thereafter restrained from removing any further sums from the K Bank Line of Credit pending further Order.

3. The monies to be transferred by the husband from his J Bank Account will be less the amount he is required to pay for his 2019 tax, $56,400 with such transfer to occur within 7 days of the date of these Orders.

4. Both parties are to do all acts and things including, if required, attending upon the K Bank bank to ensure that the Line of Credit is not to be accessed by either of them, unless it is accessed jointly.

5. Any mortgages with K Bank are to be signed by both parties jointly and neither is able to deal with any mortgages solely.

6. The husband is to pay all interest instalments of the mortgages in respect of the properties at Suburb F, being Account number: …07 and Suburb G, being Account number: …18 and the Line of Credit …29.

7. The husband to pay all outgoings on the Suburb F and Suburb G properties as and when they fall due, pending the sale the Suburb F property.

8. The husband will give notice of the termination of the lease to the tenants at the Suburb G property in sufficient time to permit the wife and children to move in when the settlement of the Suburb F property occurs.

9. The wife will have exclusive occupation of the Suburb G property thereafter.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Koch & Kest has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8089 of 2018

Ms Koch

Applicant

And

Mr Kest

Respondent

REASONS FOR JUDGMENT

1. The matter of Koch and Kest is an interim application for competing property orders. The husband withdrew his application for parenting orders due to his ill health. This was a child-focused and responsible position for him to take.

2. The mother’s application for final undefended parenting orders was listed for hearing on 12 July 2019. Mr Magee acted for the husband and Ms Perla for the wife.

3. The parties have agreed to sell the former matrimonial home at Suburb F, reducing significant debts, of nearly $1,300,000 if not $1,600,000. The wife and the three children, two of whom soon to be over 18 years and a two year old, will move into what has been the parties rented property at Suburb G. Therefore, the wife and children will be housed.

4. The issues for determination for me were as follows:

   a)Who should pay the mortgage on the Suburb G property and the other outgoings when the wife moves in;

   b)Whether the husband’s tax debt of $56,400 should be paid from monies currently held in an offset account approaching some $302,000 and injuncted by order of the Court from being used by either party, particularly the husband. The tax debt of $56,400 is now crystallised; and

   c)What should happen to the balance of that money?

5. The husband is the only income earner. The wife does not work and is supported by Centrelink benefits and child support. The husband’s income comes from an insurance policy by way of income protection, taken out during the marriage, and now being paid to him and to him solely. That is some $15,390 per month, and he receives rent from the Suburb G property of $4,116 per month. As I have said, the wife has no income, only Centrelink benefits and child support.

6. The husband has outgoings to pay from his income on the Suburb F property, the Suburb G property and the property he purchased at Suburb H, post-separation. He pays child support and it is in arrears. Ms Perla, the wife’s solicitor, took me to the wife’s Affidavit at paragraph 12, which set out her calculation of his current debt situation, his income, and what he has to pay. He might have some $853 per week when he paid all outgoings on his debts, tax and the mortgages on an interest and principal rate. Therefore, it was obvious that the Suburb F property needed to be sold.

7. The husband has been able to organise a moratorium, as it were, on a financial hardship basis for a reduced payment on the Suburb F property. That is soon to come to an end, and he will be required to pay some five and a half thousand dollars per month on that mortgage thereafter. The loan on the Suburb F property is $1,600,000, and will be extinguished when sold. This will leave, what I regard, as two modest loans, one of $405,000 for the Suburb G property and $470,000 for the Suburb H property, to be paid by the husband from his income. Then his payments will be based upon a mortgage debt of some $875,000, not as is currently the case, $2,400,000. The parties certainly took the appropriate step in agreeing to sell the Suburb F property.

8. I read the following material for the parties.

9. For the husband:

   a)Application in a Case and Affidavit, filed 12 April 2019;

   b)Financial Statement, marked exhibit 1, with the current tax debt of $56,500; and

   c)Exhibit 2, anticipated 2020 tax debt.

10. For the wife:

    a)Response, Affidavit and Financial Statement, filed 8 July 2019;

    b)Exhibit 1, the husband’s current bank accounts, a credit card, two bank accounts, and ANZ, Westpac and Commonwealth Bank account statements, indicating his spending patterns;

    c)Wife’s case outline; and

    d)Wife’s balance sheet.

11. The short chronology is as follows.

12. The husband is 46 and the wife is 44.

13. They commenced cohabitation in 1997 and married in 1998.

14. The parties had two children during this time, Ms B, born in 1999 and Ms D, born in 2000. The evidence is that Ms D has some significant health issues, including anorexia, and although she is 17, requires significant attention from her mother.

15. On 7 January 2005, the parties separated but remained living under the same roof until 2008.

16. The parties divorced in 2009.

17. They recommenced a de facto relationship in 2010.

18. In 2017, the parties had their third child, X.

19. The husband allegedly attempted to take his life in 2018, and the parties separated finally in June 2018.

20. On 23 October 2018, the wife took $135,000 from the joint savings account. This is the day after the husband informed her he would no longer financially support her and the children.

21. At that time, the husband had ceased his employment and his business, Business C. The husband took the remaining $149,000 from the joint savings account. The parties had some $300,000 in joint savings at separation. Clearly they were doing well.

22. The husband drew down a line of credit of $500,000 in October 2018. This is borrowed money.

23. The husband cancelled the wife’s credit cards. The husband purchased a new property. The husband cancelled the private health fund for the family.

24. The matter comes before the Court on an urgent basis. The husband had already purchased his property, so injunctions were made, restraining him from removing about $300,000 that was in his J Bank account.

25. Thus, whilst at the time of their second separation, the parties were in a reasonably healthy financial position, that is not the case today.

26. Although the husband makes much of the wife taking $150,000, his drawing down of the line of credit of $500,000 is a far more significant factor and he has incurred interest on that drawing down. The money he and the wife each took at separation was savings, to which they were each entitled.

27. The husband purchased his property at Suburb H, with part of the $649,000 he then had available to him. When the wife was able to get the matter to Court, there was only some $300,000 of that sum. There is clearly a real justiciable issue, concerning the disposal by the husband of the balance of the monies he took by way of savings and a drawdown on the line of credit. This is particularly relevant, when during this period of time, the husband was earning an income and receiving rent from the Suburb G property, because all the properties are in his name.

28. Now, to his credit, he had the mortgage on the Suburb F property reduced by a hardship provision and to a modest figure, which he was able to pay, but that has run its course and it will be back to the full amount shortly.

29. As best as I can ascertain, the parties may receive $200,000 or even less net from the sale of Suburb F. They are listing it for $1,800,000, the debt is $1,600,000. The husband’s application is that he has use of the $300,000 which is currently restrained, to pay his tax. I find that is an irresistible application. The tax debt has been crystallised at $56,400, and I will allow him to pay that sum from that money.

30. Otherwise, I agree with the wife’s position that the remainder of the monies, which are currently in a J Bank account, be placed in an offset account in both parties’ names with the K Bank, with neither to be able to draw out the money unless they both sign.

31. Thus, it will not be a situation where either can, on their own, draw down these monies with K Bank. Also, this will defray interest, in respect of their loan, with K Bank over the Suburb G property and the line of credit. This is particularly important, given the pending sale of Suburb F as although the parties are agreed to put on the market for sale, it may be some time before it is sold.

32. Placing the remainder of that money, some $240,000, into an offset account, will reduce the effective current line of credit debt from $500,000 to $240,000 immediately, and would reduce the interest payments. This too is most important, pending the wife and children moving to the Suburb G property as the Suburb F property is being sold, and the totality of that debt being reduced. This is a sensible, practical and proper approach, which protects both parties’ interests.

33. When the Suburb F property is sold, I will make an order that the net proceeds of sale of that property, if any, are also paid into the offset account, again, in both parties’ name with both to sign, save for any amount of child support arrears, which is to be deducted from the net proceeds of sale of the Suburb F property. If needed, the husband can adjust or account for this at the final hearing. This is his debt and the wife clearly needs the money now.

34. Upon the sale of the Suburb F property, the loan requiring payment of $5,024 per month will be extinguished. The husband will then have the Suburb G mortgage of $1,637, line of credit currently $2,109 per month reduced due to money in the offset account, and the wife has assessed that this payment will be reduced to something like $830 per month.

35. The husband will continue to have the Suburb H outgoings of some $2,400 per month, for Suburb G of $400 per month, together with the current mortgage, a total payment by him to maintain and provide for the Suburb G property, his property at Suburb H and the outgoings on Suburb G of $5,267 per month, on an income gross of $15,390 per month.

36. This would leave the husband with $10,000 per month for him to pay his tax and his legal fees, provide for his personal expenditure and pay his child support. I form the view the husband has, upon sale of Suburb F, capacity to pay the mortgage on the Suburb G property on an interest-only basis and the outgoings, being rates, taxes and water rates, when the wife and children move into Suburb G. I have also formed the view on the evidence that the husband can maintain the Suburb F property mortgage, pending the sale of that property. He is the only person with any income.

37. I reject his application to set aside money from the current J Bank money to pay his 2019/2020 tax. That is a matter for the future.

38. I hope, that by placing of the remainder of the J Bank money into a joint K Bank account forthwith, may defray the bank taking action. The payment of that money, combined with an agreement to sell the Suburb F property, is the only way forward for the parties, and the bank will be desirous of that occurring. Thus, it is imperative that this happens as soon as possible.

39. From a reading of the wife’s annexures, being husband’s exhibit 1, his bank accounts with Commonwealth Bank, ANZ and MasterCard, the husband has been spending significant income on a discretionary basis and withdrawing significant cash, sometimes weekly. This level of expenditure will be taken into account at a final hearing, as this insurance policy is also a matrimonial asset. The husband can reduce his discretionary expenditure for a period of time, sufficient to ensure the Suburb F mortgage is paid given he has spent thousands of dollars, expenditure unknown to the wife or anyone else, and has withdrawn at times $1,500, $2,500, and sometimes $3,500 in cash within a period of three days. The wife has no idea what that money has been spent on. The wife has obtained scant benefit from this joint matrimonial asset because it has been paid entirely to the husband and has been entirely in his control.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Henderson delivered on 12 July 2019.

Associate:

Date: 3 December 2019