Koustous and Koustous

[2010] FamCA 527

FAMILY COURT OF AUSTRALIA

KOUSTOUS & KOUSTOUS [2010] FamCA 527

FAMILY LAW – PROPERTY – Interim

Family Law Act 1975 (Cth)

Pierce (1999) FLC 92-844

APPLICANT: Ms Koustous

RESPONDENT: Mr Koustous

FILE NUMBER: MLC 9957 of 2009

DATE DELIVERED: 29 JUNE 2010

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 29 JUNE 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: MS STOIKOVSKA

SOLICITOR FOR THE APPLICANT: BERGER KORDOS LAWYERS

COUNSEL FOR THE RESPONDENT: MR DUFFY

SOLICITOR FOR THE RESPONDENT: DAVIS ZUCCO LAWYERS

Orders

1. That there be orders in accordance with the minutes of proposed orders marked Exhibit “A” sealed and attached hereto AND IT IS DIRECTED that such minutes remain upon the Court file.

2. That the husband pay the wife’s costs of $4500 relating to these interim proceedings but the payment thereof be stayed until the final determination of the proceedings between the parties.

3. That all outstanding interim applications be otherwise dismissed.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9957  of 2009

MS KOUSTOUS

Applicant

And

MR KOUSTOUS

Respondent

REASONS FOR JUDGMENT

1. On 29 June, 2010 after a contested hearing, I pronounced the orders that are set out at the start of these reasons.  I indicated that I would deliver these reasons later. 

2. The application came before me in the judicial duty list on 29 June, 2010.  It was an application of the wife.  She relied on four affidavits. 

3. The wife sought orders which can be simply stated.  She desired that the incomplete house be completed by trades persons then put on the market for sale and the proceeds be paid out to satisfy creditors and the remaining moneys be held on trust.  She also sought that to give effect to that type of order, the husband remove personal chattels and working equipment. 

4. The husband further opposed the wife’s application.  He said that he should be given an “option” to buy the “interest” of the wife in the home if he was able to do so.  He relied on two affidavits. 

5. The husband sought orders that in the event he was unable to buy out the interest of the wife, the house be sold and that trades persons who had done work on the home be paid. 

6. It is common ground between the parties that the secured creditor, the ANZ Bank, which holds a mortgage over the former matrimonial home has served notice of default but is withholding action to enforce their security under the mortgage pending the determination of these court proceedings. 

7. If I accept that the husband has little prospect of purchasing the interest of the wife, the sale of the home is inevitable and the only question is whether the parties are best served by the renovations or completion of the building being done first. 

8. The husband’s financial position is at best precarious.  Subsequent to the separation of the parties, he ceased working fulltime and his evidence is that he now works for his father for $40 per hour for four hours per day.  In addition, he receives New Start Allowance.  Clearly, on that income, he has insufficient capacity to service a mortgage.  The second point made by the husband was that he would wish to call upon his family for assistance, but that too was fraught with difficulty because there was no evidence as to their capacity to pay, let alone their willingness.

9. The evidence of the wife concerning her own financial position is similarly precarious.  She has no income other than tax-payer supported benefits.  She concedes she cannot afford to keep the property. 

10. In the circumstances, whilst the husband’s desire to buy out the wife is admirable, it clashes with his stated desire to immediately sell the property and pay the creditors. 

11. The power to make the type of order sought, lies in s 114 of the Family Law Act 1975 (Cth) (“the Act”). It relevantly provides:

    (1)      In proceedings of the kind referred to in paragraph (e) of the definition of matrimonial cause in subsection 4(1), the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including:

    …

    (3)      A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.

12. Section 4 of the Act provides the definition of matrimonial cause and paragraph (e) reads:

    (e)proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship (other than proceedings under a law of a State or Territory prescribed for the purposes of section 114AB); or

13. There is on foot between the husband and the wife an application for an order clearly arising out of their marital relationship.  The question then remains as to whether it is proper or otherwise appropriate for the court to make the order in the proceedings. 

14. By way of background, the parties were married in December 1995 at which time, the wife arrived in Australia.  She was born in Greece and until arriving in Australia, was engaged as a hairdresser.  It is the husband’s position as set out in his affidavit that although the wife has not been employed since 1995, she has the necessary skills as a hairdresser and can so obtain employment in that market.  That is unrealistic in the circumstances.  Since the wife arrived in Australia, she has not been involved in the employment market at all.  That too creates an interesting dilemma because in final submissions, counsel for the husband submitted that despite the wife’s claim of impecuniosity, she had an entitlement to about $11,000 by way of a tax refund if she signed the necessary tax return.  Why she would sign a tax return when she has not been in employment remains a mystery.  The only inference that could be drawn is that distributions were being made by a trust to which I shall return in just a moment. 

15. The wife has been engaged in home duties with the care of the three children of the parties.  Those children are aged 13, 11 and 7 and a half. 

16. The marriage relationship came to an end in July 2009.  Initially, the wife left the home but obtained an intervention order as a consequence of which, the husband was excluded. 

17. The husband is by trade, a builder.  It seems that in 1995, he had an interest in three units which were encumbered but in which he had significant equity, but he was at that time, also a director and shareholder of N Constructions Pty. Ltd. 

18. According to the wife, the husband operated N Constructions Pty. Ltd. although he only held one of four shares.  The other three shares were held by his mother, his father and his brother.  It appears that N Constructions Pty. Ltd. is not only a trading entity but also the trustee of a family discretionary trust.  It was asserted by the wife that the husband earns an income as a contractor.  Just exactly how his current financial position arises is unclear. 

19. The wife asserted that she had little by way of assets at the commencement of the relationship.  This is relevant because of the question of whether it is realistic in the circumstances for a valuation to be undertaken of the former matrimonial home in its present state and for the interest of the wife to then be quantified.  It is clear there is a contribution argument between the parties.  The equity in the three units owned by the husband at the commencement of the relationship was ultimately translated into cash that went towards the former matrimonial home.  The initial contribution is now almost fifteen years ago and to some extent, it must be seen to have lost some weight but having regard to the Full Court decision in Pierce (1999) FLC 92-844, that contribution must be assessed and given some weight. It is clear therefore that there is a dispute between the parties making the prospect of the husband being able to determine the wife’s interest at this stage for the purposes of buying her out, unlikely.

20. In March 2008, the husband ceased fulltime employment with the family entity to enable the construction of the now former matrimonial home.  The husband was the owner-builder.  In May 2009, the parties moved back into the home notwithstanding it did not then have an occupancy certificate and the work was incomplete.  Only weeks later, the husband was excluded from the home by virtue of the intervention order.  In July 2009, he moved to live with his parents at which time, he ceased all employment.  In March 2010, he resumed on a part-time basis as I have set out above.  

21. On 1 June, 2010, Senior Registrar FitzGibbon made an order in contested proceedings that the husband pay spousal maintenance of $500 per week.  I do not have the benefit of the reasons of the Senior Registrar but I noted at the time of the hearing before me, no application for review had been lodged.  When I raised the subject, the husband’s counsel told me that the review application was being lodged on the same day. 

22. Counsel for the wife noted that the husband had not complied with the spousal maintenance orders of 1 June, 2010. 

23. On the evidence, the mortgagee ANZ Bank, is threatening to sell up the parties’ interest in the former matrimonial home but that process has been stayed pending this hearing.  There is therefore considerable urgency about the matter. 

24. From the husband’s perspective, there are a number of creditors now demanding payment in relation to the renovations done or the building work done, on the home.  The wife disputes some of those expenses.  They appear to have been outstanding for a long time. 

25. No suggestion was made by the husband as to how those creditors would be paid other than if the house was sold, they should be paid from the proceeds. 

26. The argument between the husband and the wife came down to a question of whether the home should be sold as it currently is or whether the various renovations should be completed.  The latter requires some thought because neither party is in a position to pay the creditors and the mortgage is currently in arrears.  The wife’s solution however was that she would borrow two lots of $20,000 from her cousins to enable the work to be done whereupon, the sale could immediately follow.  Part of the dilemma however is that the husband has considerable chattels and equipment on the property, including in a garage that needs to be repaired.  The completion work cannot be undertaken until those items are moved.  The husband’s position was that he had nowhere to put the items and certainly could not remove them in any event, in seven days.  The wife agreed that 21 days was more realistic and the husband then agreed.  As I pointed out, notwithstanding the husband’s protestation about having to take the items and put them somewhere, if his application had been successful and the property was sold, he would have had to remove those items over the ensuing months in any event.  There is therefore no reason in my view why the items cannot be removed with 21 days and then the renovations begun. 

27. The parties had also acquired some stone blocks which had been intended to be used on the front fence at the property.  With the breakdown of the relationship, that prospect came to an end.  The blocks have been sitting on the nature strip of the property and the council has now threatened action.  The wife said she obtained a forklift and moved the blocks off the nature strip to avoid any fine and has put them in the garage.  She has indicated that she does not desire to use the blocks in the front fence but rather, render it and in those circumstances, there is valuable stone that could otherwise be sold to assist in the relieving of the pressure on the mortgage.  The husband seemed to accept that that was a sensible course of action. 

28. The distinction then about whether or not the renovations should be completed is a fine one.  The wife obtained quotes on 12 May, 2010 indicating that the completion of the work would increase the value of the property.  Market appraisals have indicated that the increase in the sale price could be as much as $500,000.  Incredulous though I was, it is certainly something to consider if there is only a reasonable delay for the work to be completed and it only costs between $40,000 and $50,000.  An alternate market appraisal indicated that the sale price would increase but in any event the work was necessary.  The husband’s position is that there is no necessity for the work to be done.  It was clear on the evidence that the wife was being reasonable by offering in May 2010 for the husband to be involved in the negotiations and discussions about that work.  That position remained unanswered until the wife received the husband’s affidavit in which he indicated that he could not permit that to occur because only he could sign the necessary insurance documents.  I do not accept that as a plausible explanation in the circumstances. 

29. The wife indicated through her counsel that she was prepared to obtain a sworn valuation for the purposes of ascertaining the value of the property for the purposes of a sale and that the work could be done immediately.  Counsel for the husband indicated that his instructions were that the husband would like the opportunity to consider the alternate position of having some say in the work, but having regard to the lack of trust in each other and the delays that have occurred until now, I have little confidence that anything seriously will be done.  I have however decided that the sensible solution is for there to be a few days grace to allow the husband to come up with an alternate proposal for the wife’s contemplation.  I will give the husband until 4:00 pm. next Saturday afternoon for that to occur. 

30. In relation to the husband’s desire to buy the home, when the valuation is done, if he has the capacity to buy out the interest of the wife at that stage, he can put a proposal.  The same dilemma however arises in that he will not know what her interest is unless there is agreement.  On any view of the correspondence tendered by both parties, there is little prospect of that happening.  If that is the case, the sale should proceed and the proceeds ultimately be placed in the trust account. 

31. Section 114 of the Act is not only an injunctive power, it is also one that can be used to protect the assets of the parties. In this case, the mortgagee is threatening to foreclose. The creditors who have undoubtedly done some work in most cases, on the house, are also threatening action. Annexed to the affidavit of the husband was a Magistrates’ Court civil proceeding indicating that one of those creditors had waited more than sufficient time to be paid. All or those are people who could, by taking their legitimate rights, deplete the asset pool. The reason why nothing is happening from the wife’s perspective is because the husband will not sell the property. From the husband’s perspective, the wife is wanting to spend unnecessary sums of money in circumstances where he is prepared to buy out her interest which is difficult at this stage, to quantify.

32. Counsel for the wife pointed to the fact that the solicitor for the husband had not responded to correspondence.  She made specific reference to the fact that the husband had had the quotations in respect of the work and had failed to respond.  Counsel for the husband said his instructions were that the husband had never seen those quotations.  The letter tendered in evidence makes it clear that the husband’s solicitor certainly had possession of those documents and why they were not brought to the husband’s attention is unclear.  It seems in the circumstances therefore that the only way the court can protect the asset base of the parties is to force their hand and arrange a sale.  Both parties ultimately would see a sale as sensible, particularly having regard to the husband’s fallback position.  However, to maximise the assets of the parties, the wife’s proposal to do the renovations on borrowed money makes sense.  If the appraisals relied upon the wife are in any way accurate, the value of the property is likely to increase.  Both parties therefore share in that bonus.  For that reason, it makes sense for the court to declare as proper the course of action suggested by the wife. 

33. Accordingly I will give the husband the opportunity to find the alternate quotes, failing which by 4:00 pm. next Saturday afternoon, the nominated quotations of the wife may be used as set out in paragraph 8 of her application.  In addition, to enable that work to be done, the husband will have to remove all of the items set out in the list of the wife, but allowing him 21 days to do so.  There is no reason why the stone blocks cannot be sold immediately and the moneys to be used for the purposes of discharging some of the debt on the mortgage. 

34. I make it clear also that on the application of the wife that she have sole occupation of the home, the husband is not to be excluded during the periods of time that he comes to take away his goods and chattels and also attends any sale. 

35. I canvassed with each of the parties’ counsel the question of a distribution to each of them upon the settlement of the sale and each agreed that it was sensible for them to have some funds.  In each case, that will occur. 

36. In separate reasons, I have otherwise dealt with the application for costs of the parties. 

I certify that the preceding Thirty Six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  1 July 2010