Lamb and Menotti - [2018] FamCA 278

FAMILY COURT OF AUSTRALIA

LAMB & MENOTTI

[2018] FamCA 278

FAMILY LAW – ENFORCEMENT – question of whether an order enables the court to vary the payment date or discharge of mortgage date as a machine order or a substantive right – held to be a machinery provision.
FAMILY LAW – PROPERTY – orders made in 2017 for the sale of a business premises and accusation by the wife that the husband was not properly pursuing the sale and she sought to be appointed as trustee for sale – evidence indicates that neither party had been diligently pursuing the sale but there was a dispute with the landlord of the business premises over a rent review which the court accepted held up the potential sale – no order made.

Family Law Act 1975 (Cth)

Bray and Bray (1998) FLC 91-968
Ravasini and Ravasini (1983) FLC 91-312

APPLICANT:

Mr Lamb

RESPONDENT:

Ms Menotti

FILE NUMBER:

ADC

465

2008

DATE DELIVERED:

1 May 2018 (in chambers)

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

11, 17, 27 April 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Jordan

SOLICITOR FOR THE APPLICANT:

Jordan & Fowler

COUNSEL FOR THE RESPONDENT:

Mr Jackson

SOLICITOR FOR THE RESPONDENT:

Starke Lawyers

Orders

That the time for the wife to satisfy the requirements of paragraph (8) of the orders made on 14 November 2017 is extended to a date as soon as practicable after these orders as the Westpac Banking Corporation mortgage encumbering the parties’ property at Suburb E is discharged.
That the wife’s application for her to be appointed as the trustee for the sale of the B business and any other variation of paragraphs (1)-(6) of the orders of 14 November 2017 is dismissed.
That the husband’s application filed 22 March 2018 and the wife’s response thereto filed 13 April 2018 are otherwise dismissed.

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 Lamb & Menotti 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 MELBOURNE

FILE NUMBER: ADC 465 of 2008

Mr Lamb

Applicant

And

Ms Menotti

Respondent

REASONS FOR JUDGMENT

The present interlocutory dispute to which these reasons relates, concerns two main issues:
(a)Is the court’s power to vary a property order exhausted by effluxion of time? or, is a payment date in an order, now long-past, part of a machinery order that can be altered?
(b)What, if any, enforcement order should be made from the same substantive orders in (a) above relating to the sale of another major asset of the parties?
On 27 April 2017, after allowing a limited time for the parties to argue their respective submissions, I ordered that:
(a)The relevant order was a machinery provision and accordingly, time could be extended; and
(b)The substantive orders contained sufficiently clear details such that no further involvement of the court was required.
The orders just mentioned were not the precise wording of the orders and they can be seen as part of these reasons. I said I would give written reasons as soon as practicable. These are those reasons.
The parties to this dispute are Mr Lamb (“the husband”) and Ms Menotti (“the wife”). Their property (and spousal maintenance proceedings) have been in the court system since 2008 in one form or another. After a six day hearing in Adelaide in 2017, I made final orders against which, no appeal has been filed.
The relevant orders which are the focus of the immediate interlocutory application were as follows:
(1)The husband and the wife in their capacities as directors of B Pty Limited forthwith sell the B business and upon the sale, the proceeds be applied:
(a)first, to pay all commissions and expenses directly associated with the sale;
(b)secondly, to pay all legal expenses arising from the sale;
(c)thirdly, to pay all creditors of the business (other than the husband and the wife) but specifically the Australian Taxation Office obligations of the business;
(d)fourthly, to pay all staff obligations (other than the husband and the wife) of the business; and
(e)fifthly, to place the balance into a trust account operated by the solicitor for the husband, in the joint names of the parties, to be divided as set out in paragraph 12.
(2)For the purposes of implementing the sale of the business, the husband forthwith nominate three business brokers and no later than 14 days after being so provided with those names, the wife choose one broker.
(3)For the purposes of implementing all necessary conveyancing work required for the sale of the business, the husband nominate three solicitors and no later than 14 days after being so provided with those names, the wife choose one solicitor from those nominated.
…
(5)For the purposes of assessing the price to be sought for the sale of the business, in default of agreement, the broker nominated by the wife as appointed by paragraph (2) of these orders, shall nominate the relevant price at or above which, the business shall be sold.
…
(8)That until 4.00pm on 16 December 2017, the wife may elect by writing to the solicitor for the husband, to retain E Street, Suburb E at a fixed value of $1.4 million, but with an encumbering mortgage of $513,842. If she so elects, the husband forthwith transfer to her any interest he has in Suburb E within 30 days thereafter but simultaneously with such transfer, the wife provide to the husband evidence of the mortgagee’s discharge of the husband’s obligations under any mortgage encumbering Suburb E. Thereafter, the sum of $886,158 shall be notionally added to the amount held in trust under paragraph 1(e) of these orders.
…
(11)If the wife has not completed the requirements of paragraph (8) by the date there set out, or by such extended time as the parties agree, the husband and the wife forthwith place E Street, Suburb E on the market for sale, and upon the sale, the proceeds be applied:
(a)first, to pay all commissions and expenses directly associated with the sale;
(b)secondly, to pay all legal expenses arising from the sale;
(c)thirdly, to discharge the mortgage encumbering the Suburb E property to a maximum sum of $513,842 (with the wife being responsible for any sum greater than that amount); and
(d)fourthly, to place the balance thereafter into the trust account referred to in paragraph (1)(d) hereof.
(12)After the settlement of the sale of the Suburb E property and the business, and the completion of the requirements of paragraph (9), the net balance shall be divided as to:
(a)65 per cent to the wife, less the costs referred to in paragraph (13); and
(b)35 per cent to the husband, plus the costs referred to in paragraph (13).
…
Those orders can be simplified. There are essentially two assets here. The first is a leasehold business premises and the second is a home. In respect of the latter, the parties agreed it was worth $1.4 million but encumbered by a mortgage to the Westpac Bank of about $514,000. However, as to the business, there was a dispute about the values albeit no expert evidence was provided. That led to the following statements in my reasons:
[135]The absence of a value gives rise to the problem of altering the interests in anticipation of a sale. I know the outer limit of the business because the wife says it is worth $2 million. I know the lower limit because the husband says it is worth $550,000. Having regard to the proposal of the husband which I intend to accept, the ultimate dispute in percentage terms is relatively modest. The parties have urged an alteration of property interests using percentages.
[136]Of the two proposals, I find the husband’s is more realistic having regard to the assessment of entitlements to which I turn in a moment. He at least calculated his anticipated value on the income stream and had been involved in getting it on the market.
It will be seen that I gave the wife an opportunity to retain the home but Order (8) applied. It is uncontentious that the wife gave the relevant notice but did not provide evidence later of the discharge of the Westpac Bank mortgage according to the required time under the order. She had not organised finance.
In respect of the business, it is unclear just what is contentious. The husband says the stumbling block to a sale is the landlord’s rent review. The wife denies any knowledge of that.
The apparent impasses led to the husband’s application filed on 22 March 2018. He sought a variety of orders but relevantly now seeks:
1.That Mr CC of Mr CC Real Estate be appointed as the agent to sell the home;
2.The parties jointly have the conduct of the sale;
3.The property be sold by public auction with a reserve of $1.4 million;
4.That $5000 be allocated for auction advertising costs and agents’ disbursements;
5.That a named conveyancing company be appointed in respect of the sale.
By her response, not filed until 13 April 2018, the wife relevantly sought the following orders:
(a)That the transfer of the home to the wife be affected forthwith;
(b)A caveat lodged by the husband’s solicitors to secure fees be removed.
In the alternative to those orders, the wife sought that she have the conduct of the sale of the home. In respect of the business, the wife sought orders that:
(a)Within seven (7) days, the husband give necessary and proper instructions to “the agreed business broker” in order to ensure a timely manner of sale;
(b)Written instructions be copied to the attention of the wife’s solicitors; and
(c)In the event that the husband failed to give proper written instructions, the wife be appointed as the trustee for the sale of the home. (My emphasis).
The wife also sought spousal maintenance but later abandoned that application.
The matter originally came on for hearing by a video link to Adelaide on 11 April at which time a request for an adjournment was made by the wife which I granted.
Another hearing was convened for 17 April 2018. The wife was represented by counsel who appeared by video link from Sydney and again, the matter was adjourned at the request of the parties.
Before dealing with the technical issues, it is to be noted that the wife relied upon affidavit material which was at best confusing, and at worst unhelpful. The nub of the wife’s case was that she now had finance made available to her such as would be able to discharge the Westpac Bank mortgage. For whatever reason, all of her evidence was focussed upon establishing that the money would satisfy the debt. No reference was made to the source of those funds nor were any documents produced as to that source other than the fact that there was a nominated firm of lawyers in New South Wales involved. This, I described as “cloak and dagger”.
There was also reference in an earlier affidavit to the discontinuance of proceedings in 2015. It escapes me as to what issue that was directed but, the evidence was drawn by a lawyer and given by that lawyer. Curiously, it did not coincide with my recollection of not only what happened in the trial but also what seemed to be a contentious issue at the time. As it was not relevant to the proceedings, I have ignored it.
Mr Jordan on behalf of the husband pointed to the absence of this new mortgage documentation to highlight that his client was troubled about what equity would remain after the wife’s new (and unnamed) borrowing encumbered the home. He observed that he still had pending claims against the wife in respect of substantial costs but there was also an obligation upon her to satisfy a tax debt. By inference, his position was that if there was some surreptitious borrowing, his position might be put at risk being in mind the nature of the orders which I have set out above.
All of this unseemly lack of cooperation between practitioners was perplexing and ultimately resolved when counsel for the wife indicated that these missing documents would be provided and that all was intended by the wife was for the debt to the Westpac Bank to be paid out. As I observed at the time, the orders will show that whatever equity the wife retained as a result of the transfer would still go into the list of assets and liabilities to be divided on a percentage basis. As will be obvious, that order dividing the equity on a percentage basis arose predominantly because of my uncertainty about what cash would be left over from the sale of the business. That was a matter entirely as a result of the absence of evidence from the parties as to its value.
Needless to say, any potential lender ought be made aware of that risk.
No plausible explanation was given as to why the wife had taken so long to deal with the issues associated with the borrowing of funds. It was made clear that she had not been able to borrow those funds but that did not answer the question.
Mr Jordan on behalf of the husband indicated that his primary submission was that paragraph (8) of the order related to substantive rights of the husband and as the wife’s time had expired, the court’s power was exhausted. I reject that.
In Bray and Bray (1998) FLC 91-968, the Full Court made clear that the distinction between a substantive order and one which is machinery depends upon the construction of the entire order. In Ravasini and Ravasini (1983) FLC 91-312 the Full Court observed that the issue or test was whether the part or parts of the order sought to be changed were parts of a substantive order or whether they were orders made to give efficacy to the substantive order.
On a proper construction of the order here, the concept was to put the equity into the “pool” for division on a percentage basis having regard to the fact that the value of the home and the mortgage were fixed whilst at the same time, giving the wife an opportunity to retain the property. Whether the property was sold or transferred to the wife, the equity would remain the same.
The substantive order here was to divide the equity of the parties in the two main assets on a percentage basis. To give effect to that substantive order, the machinery provision was how to sell it and produce the net proceeds or, alternatively, to allow the wife to put the equity in after she had obtained her own financing arrangements which would have then enabled the husband to be free of any debts to the Westpac Bank.
Using the test in Bray (supra), I am satisfied that the relevant order is a machinery provision and therefore can be altered.
An important issue here is that the wife is out of time and requires an indulgence which calls in the discretion of the court. The absence of a response from the wife and her evasive material in relation to the borrowing of these funds would normally militate against the exercise of discretion. However, I see no prejudice to the husband and therefore the issue is one of balance of convenience and what is ultimately just and equitable. It seems to me that there is every reason to quickly resolve the issue associated with the equity in the home so that the parties can achieve the objective of s 81 of the Family Law Act 1975 (Cth) (“the Act”).
Accordingly, I would exercise the discretion in favour of the wife providing the settlement of the mortgage, and the consequent transfer then required by the husband, takes place effectively immediately.
As the hearing came to an end, the solicitor representing the wife began a discussion from Adelaide to indicate that the settlement was to take place at 12.30 that same day failing which, there were going to be problems. In my view the whole unedifying difficulty here arose from the lack of communication by the wife. In my view, rather than indicate that the settlement had to take place at 12.30 as the wife seemed to say the order should direct, my view is that it should be as soon as practicable with the husband providing the necessary transfer as was required under the orders in the first place.
I turn then to the second issue which relates to the business.
It will be self-evident that I have made the orders for the joint cooperation of the parties in relation to the sale of this business.
For the purposes of the enforcement proceedings, the husband filed an affidavit on 22 March 2018. I do not intend to set out the full details of that however, in his affidavit subsequently filed on 16 April 2018, the husband set out what could only be described as a string of events in which he endeavoured to implement the sale of the business. There is evidence of the nomination of an agent by the wife but the problems in relation to the rent review were raised as long ago as 30 November 2017. The agent nominated by the wife was copied with those details. On 8 December 2017, the various correspondence and emails about the rent review process were copied to the wife’s solicitors which makes the submission of counsel for the wife somewhat confusing when he submitted that the wife knew nothing about the rent issue.
On 22 December 2017, the wife by her solicitor requested further financial records of the business so it must be concluded that at least at that stage, the solicitor for the wife was conscious of what was going on. In the meantime, the rent arrears continued to rise. There has been talk of court action and mortgage demands. On 13 April 2018, the husband received a letter from the Australian Property Institute indicating that the landlord would now join (presumably for the first time) the rent review process.
In her affidavit filed 13 April 2018, the wife attached (contrary to the rules) a string of correspondence which mostly seemed directed towards the income received from the business but it did not address the issue of the rent review dispute.
Nothing in the evidence of the wife would enable me to make an order that she be the trustee for the sale of the business and nothing indicates why there is a problem with the orders that I made. At its highest, the evidence shows the nominated broker wrote on 4 April 2018:
I acknowledge receipt of your letter (solicitor for the wife) however advise that I have not to date received due instructions from (the husband) to market and sell the subject premises. I respectively suggest that you seek an explanation in this regards from (the husband) via his acting solicitor.
I am not sure where that fits into the issue about the rent review which presumably hampers the sale in any event nor am I clear on what negotiations then took place.
Having regard to the confusion about the whole matter, I am satisfied that the orders currently in place are adequate to cover the sale but if I am wrong about that in the foreseeable future, the issue can be brought back to court again.
I raised the issue of costs of the particular proceedings between the parties. Counsel for the wife said that there had been a win for both parties and there was no basis to make an order and the solicitor for the husband indicated that he did not intend to make the application at this time. On the basis of those matters, I can dismiss both application and response.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 1 May 2018.

Associate:

Date: 1 May 2018