LASKARI & LASKARI

[2011] FamCA 385

FAMILY COURT OF AUSTRALIA

LASKARI & LASKARI [2011] FamCA 385

FAMILY LAW - PROPERTY SETTLEMENT - INTERIM PROCEEDINGS – Sale of real property

Strahan & Strahan [2009] FamCAFC 166

APPLICANT: Mr Laskari

RESPONDENT: Ms Laskari

FILE NUMBER: SYC 450 of 2010

DATE DELIVERED: 25 February 2011

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 25 February 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr J Lloyd SC

SOLICITOR FOR THE APPLICANT: Diamond Conway Lawyers

COUNSEL FOR THE RESPONDENT: Mr R Schonell SC

SOLICITOR FOR THE RESPONDENT: Vizzone Ruggero & Associates

Orders

1. Within 14 days after service of a notice under s52B of the Real Property Act on the parties or either of them in relation to the property at … J Street, Suburb B, they shall list that property for sale and, unless they agree to the contrary in writing, the conditions of sale shall be in accordance with paragraph 4 sought by the husband in his Amended Application in a Case filed 23 February 2011, as set out hereunder, substituting for 15 January 2011 “6 weeks from date of receipt of the notice”; for 20 January 2011 “7 weeks from the date of receipt of the notice”; and for 28 February 2011 “12 weeks from the date of receipt of the notice”:

4.        That the [Suburb B] Property be sold and for the purposes of the sale:

4.1 The Husband and Wife do all things necessary to cause the [Suburb B] Property be listed for sale by public auction no later than 6 weeks from the date of receipt of the notice with the auction date no later than 12 weeks from the date of receipt of the notice:

4.1.1The reserve price of the [Suburb B] Property be determined by the Husband and Wife jointly, within 7 weeks from the date of receipt of the notice, failing which the Husband is authorised to instruct in writing the President of the Real Estate Institute of New South Wales or his or her nominee to determine the reserve price.

4.1.2The Husband have authority to conduct the sale of the [Suburb B] Property including appointing and signing an Exclusive Agency Agreement with the agent or agents to conduct the sale and to appoint and sign a Cost Agreement with the solicitor/conveyancer to act in relation to the sale.

4.1.3The parties shall pay equally towards the costs of the auction.

4.1.4The parties will each cooperate in every way with the agents including but not limited to:

(a) Making the key available to the agents;

(b)Allowing inspection of the [Suburb B] Property at all reasonable times as requested by the agents;

(c)Doing or saying nothing to hinder or prevent a sale being effected including ensuring that the [Suburb B] Property including the grounds are in a neat and clean condition at the time of inspection by the agents and prospective purchasers; and

(d)The Husband will be entitled upon reasonable notice once per week to enter and view the state of repair of the [Suburb B] Property and attend to any repairs if necessary.

4.1.5In the event that the bidding at the auction does not reach the reserve price the parties may negotiate with the highest bidders or any other interested person and effect a sale of the [Suburb B] Property at a price which is not more than 5% below the reserve price.

4.1.6In the event that the [Suburb B] Property is not sold by auction or by private negotiation within fourteen (14) days after the said auction then the Applicant and the Respondent do all acts and sign all necessary documents and the Applicant and the Respondent shall equally pay all monies necessary to procure a second auction within a further five (5) weeks of that date otherwise upon the same terms and conditions as applied to the first auction.

1. Unless the parties agree to the contrary in writing pending the sale of the property known as … J Street, Suburb B being Folio Identifier … (“the Suburb B Property”):

(a)That the husband pay the mortgage to the National Australia Bank (“NAB”) secured against the Suburb B Property;

(b)That the husband pay all other outgoings on the matrimonial home as and when they fall due; and

(c)That the wife have exclusive occupation of the Suburb B Property.

1. In aid of these orders an order is made in terms of paragraph 5 of that application as set out hereunder:

5.That in the event that either party refuses or neglects to execute any document or instrument necessary to give effect to all or any of these orders (“the defaulting party”), the Registrar or a Deputy Registrar at the Family Court of Australia at Sydney be appointed pursuant to s106A of the Family Law Act, to execute such deed or instrument in the name of either party and to do all other acts and things necessary to give validity and operation to the deed or instrument AND FURTHER, the defaulting party pay the cost of any application or proceedings in relation to obtaining the Registrar’s signature.

1. Leave to either party to restore to the list on seven days’ notice to the Court and to the other parties in relation to that issue.

1. That Order 5.1 and Order 5.3 made by this Court by consent on 7 May 2010 be discharged.

1. That if practicable any future interim applications in these proceedings be listed in the first instance before Justice Loughnan.

1. That the costs of the parties be reserved.

1. The proceedings are adjourned to 9:00 am on 18 March 2011 before a Registrar for a teleconference.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 450 of 2010

Mr Laskari

Applicant

And

Ms Laskari

Respondent

REASONS FOR JUDGMENT

1. These are interlocutory proceedings in the context of proceedings for settlement of property.  There is an Application in a Case filed on behalf of the husband whereby he seeks a sale of a property which is the former matrimonial home and distributions from that sale. Events have overtaken that application and the parties are on notice through a letter to the husband from the National Australia Bank that in the event that the property is sold, the bank would seek to hold, at least temporarily, any equity over and above sale costs and the discharge of a particular facility until it is satisfied in relation to the value of assets that represent the security for other debts. 

2. The wife has filed a Response to that application in which she seeks a number of orders.  That Response has not been served on persons affected by the orders sought, and so a further date will be needed for that.  For the purposes of today, the wife seeks that the husband’s application be dismissed.

3. The husband was born in 1962, and he is 48 years of age. The wife was born in 1968, and she is 42.  The parties were married in 1989.  The wife says they separated in October 2008.  The husband says that occurred on 25 April 2009.  They have two children:  S, who was born in 1995 and is 16 years of age;  and N who was born in 1997 and is 13 years of age. 

4. The husband’s parents arrived in Australia in 1984, and they started a retail business the next year.  As I say, the husband and wife were married in May of 1989.  In 1989, they bought a property at Suburb M.  They agree that their respective families contributed significantly to that purchase.  There is a dispute about a further injection of funds from the wife’s parents as to the amount, the nature of the advance and whether it has been repaid.  In 1990, K Proprietary Limited was incorporated to act as a trustee for the Laskari Trust.  The parties sold the Suburb M property and bought a property at Suburb C. That was later sold and they bought a property at J Street, Suburb B in June 1999 for about $1.6 million. That is the former matrimonial home and the property that is the subject of the application today. 

5. On 18 July 2007, the Laskari Property Unit Trust purchased a shop, at D Street, Suburb E (“D Street”) for nearly $5 million, subject to a substantial mortgage to the National Australia Bank. A week or so later, K Proprietary Limited was appointed as the trustee of that trust. 

6. A retail business operates out of the D Street premises. The business involves the husband and wife, the husband’s brother and his wife; and the husband’s parents.  It is the husband’s case that the business has recently suffered a significant downturn. 

7. Orders have been made, I think initially in terms agreed between the parties, for the husband to subsidise the wife’s household by way of spousal maintenance, child support and mortgage payments. Orders were made in terms agreed between the parties on 7 May 2010 providing for a distribution of moneys from a bank account, periodic payments of $500 a week to the wife’s account, mortgage payments on the property, some expenses in relation to a motor vehicle, including running expenses and a lease, and rates and utilities and insurance in respect of the home. The orders included a notation in relation to child support matters. 

8. The matter came back to Court in October 2010 and Ainslie-Wallace J made some orders in contested proceedings which provided in relation to one mortgage payment falling due at the end of October, that the wife be responsible for the payment rather than the husband. At that time the parties were waiting for a report from a Ms F, who was providing valuation evidence in respect of the business. I take it that the order was made on the basis that the husband said he couldn’t afford to make the payment himself. 

9. The matter was adjourned to 4 November 2010. The report was still not to hand. On that date, Cleary J made an order garnisheeing the wages of the husband to effect compliance with the original obligation of May 2010.  Ms F’s report was released on 15 November 2010. Apart from an interest in a superannuation fund and a valuation of a loan owed to the husband, there was no value attributed to the company that ran the business.  A Conciliation Conference was conducted in November, and the matter comes before me today. 

10. The husband approached the National Australia Bank in November. I do not know how he did that, whether that was by telephone or in writing. If it was in writing I have not been given a copy of that writing. The National Australia Bank said in response:

    We refer to your recent inquiries with NAB in relation to the proposed sale of the property at [J Street, Suburb B].  We note that you and [the wife] are currently party to Family Court of Australia, Sydney, legal proceedings involving your NAB facilities and accounts. As you will be aware, the property secures the following facilities and accounts under a first registered mortgage guaranteed by you and [the wife] to NAB dated 18 August 2008:  firstly, a home loan at $1.130 million;  secondly, a FlexiPlus Mortgage Facility with a limit of $100,000;   thirdly, a commercial bill facility at $4.965 million;  fourthly, NAB Business Plus facility limit of $850,000;  fifthly, an NAB Business Plus facility limit of $700,000;  business combination loan at $414,584;  a documentary letter of credit with a facility limit of $180,000;  bank guarantee facility limit of $20,000 and a Market Rate Facility of $400,000.

11. I added those up to about $8.7 million – $8,759,584;  having said that, and there may be evidence here on the point but I am not sure whether each of those facilities is fully drawn. The letter goes on:

    Under the terms of the above facilities and the mortgage, NABs consent is required for any release of an existing security.  To enable NAB to properly consider your request for a discharge of the mortgage over the property, NAB will require that you provide at your expense a current valuation of the property and all other security properties held by the NAB, namely, [D Street, Suburb E], New South Wales and [P Street, Suburb B].

    The evidence is that the latter property was bought by the husband’s brother, Mr G, and his wife from the husband’s parents. I am told on behalf of the wife that transfer has yet to be registered. 

12. The letter goes on:

    In light of the legal proceedings you and [the wife] are party to, and in the event that any sale of the property is scheduled prior to the current valuations being provided for all security properties being provided to NAB, NAB will require that the full net proceeds, including the deposit from the sale of the property, to be paid to NAB, which funds NAB will hold in escrow and place on term deposit pending receipt of the current valuations and completion of NABs assessment of the adequacy of the remaining security held in support of your outstanding obligations under the facilities and accounts.  Should you have any questions, please do not hesitate to contact me. 

13. It is alleged that the husband has an interest in property in Europe which has a value of the order of €6 million. It is the husband’s case that his entitlement to a property in Europe came as a surprise to him as a result of his parents keeping that a secret, that in any event, it is subject to a life estate and has a value more like €600,000.

14. The husband points to the evidence of the single expert, Ms F, that the business has no value and submits that the trading figures entirely support the contention that the business has been trading at a loss. 

15. The husband’s brother, Mr G says that the trading loss for the period 1 July 2010 to 31 January this year was of the order of $398,000.  It is his evidence that steps have been taken by his family to accommodate the downturn. Car leases have been surrendered, salaries are reduced and new business plans are being developed to address what is seen as the impact of the global financial crisis on the terms of trade of the enterprise. 

16. The wife says that as a result of things she has been told, including by the husband and members of the husband’s family, both about assets overseas and about the running of the business, cause her not to accept at first blush the necessity for the former matrimonial home to be sold. It is submitted that there is no evidence that the husband or his brother have taken steps to exhaust all other possibilities to mollify the bank. For example, there is no explanation as to why the home would be sold in priority to the business premises or the P Street, Suburb B property. 

17. There is no evidence as to the nature of the approach made by the husband that elicited the letter of 27 November 2010 from the bank. There was no effort to enlist the wife in the approach to the bank to achieve an outcome that might preserve the former matrimonial home or its equity. There is no evidence of any effort by the husband to convince the wife that the course proposed is necessary. There is no evidence for example, that there has been consideration of the husband drawing on a business loan account which in submissions was said to be worth $60,000 or $40,000. Ms F says about $42,000. 

18. In a decision of Strahan [2009] FamCAFC 166, the Full Court revisited the approach that has been taken over time to interim property proceedings. The issue in that case was releasing funds for interim costs. But the Full Court also discussed in that decision the question of interim property proceedings, in any event. At paragraph 99, the Full Court said:

    In Harris the Full Court said at 79,929:

    We do not doubt that the Court has power in a proper case in section 79 proceedings to make what might conveniently be described as an interim order, that is an order dealing with some of the property of the parties prior to the final hearing.  We do not consider that it is necessary to draw a distinction in terminology between an “interim” order and a “partial” order.  But in the exercise of that power, the following matters need to be considered:  firstly, the exercise of the power should be confined to cases where the circumstances presented at that time are compelling.  

    As a generality, the interests of the parties and the Court are better served by there being one final hearing of section 79 proceedings.  However, circumstances may arise before there can be a final hearing which dictate that some part of the property of the parties should be the subject of orders.  A common example is where both parties agree to the disposal of some assets pending trial.  However, we do not consider that it is confined to cases where the parties consent.  Urgent situations may arise where it is necessary to exercise this power if injustice is to be avoided.  

    Examples include cases where it’s necessary to do so to avoid an asset being eroded or lost in the intervening period, and cases beyond the maintenance power where an order in favour of one party is necessary to preserve or obtain a home for or is otherwise necessary for the welfare of children.

19. The Full Court in Strahan takes up the quote a bit later, paragraph 2:

    It is an exercise of the section 79 power.  Consequently, it must be performed within those parameters.  Since it is not the final hearing the Judge is unlikely to have the final findings, but the exercise must fall within that general framework and the material available at that time.

    Paragraph 3:

    Of necessity it’s likely to be a somewhat imprecise exercise.  Consequently, it must be exercised conservatively and the Judge must be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so.

20. In a decision of Hickey, the Full Court noted that an order for settlement of property may be comprised of a number of individual orders. By inference those orders can be made at different times.  In Strahan, the Full Court seemed to walk away from much of the law in the line of cases of Polletti and Zschokke and others which talked about the features of a case that would warrant interim costs, and it was at pains to say that there were no particular threshold issues in relation to the making of an order of this sort. I think what is left after Strahan is that the Court should act cautiously. I am not sure that it is necessary that the Court be satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at a final hearing.  If that was the case, then that would exclude making orders in 90 per cent of the cases we have. 

21. There is power under section 79 (and I would have thought under section 114) to order the sale of the former matrimonial home.  As things stand, such an order would frustrate orders sought by the wife in the substantive proceedings.  These are interim proceedings. This hearing is conducted on the papers. I am not permitted to make findings of fact about disputed issues without independent evidence that excludes one version or wholly supports another.  In the interlocutory stages of these proceedings, the parties have already asked the Court to make orders to preserve this home by requiring the husband to provide funds to service the mortgage. 

22. Later, on one occasion, the Court was persuaded to relieve the husband, just for one payment, of the obligation to pay the mortgage.  On a subsequent occasion, another Judge was persuaded to issue a garnishment order enforcing the obligation.  A way of looking at this, I think, is to consider the competing aims, as the wife is seeking to preserve a particular asset within the jurisdiction, the notional equity of the parties in the former matrimonial home at Suburb B, and the husband is seeking to preserve any overall equity in the parties, or on a more pessimistic view, seeking to limit the parties’ indebtedness.  Both those aims focus on preserving the subject matter of the litigation. 

23. As to the financial circumstances, on 27 November 2010 the NAB said that the parties owed about $8,759,000. Ms F says that the retail business has no value.  The most recent evidence is that it trades at a loss. A single expert says that the business premises at D Street are worth $4,060,000.  The wife might argue that they are worth more.  The former matrimonial home at J Street, Suburb B has an agreed value of about $4 million.  In terms of the assets within the purview of the National Australia Bank, P Street in Suburb B may have a value of $2.7 million.  I think the husband’s brother said that was a value obtained for the purposes of a transfer between members of the family. 

1. So those assets total about $10.7 million. They are not the assets of the parties, but they are relevant, because they are the assets to which the bank can have recourse and to which the owners of the business can have recourse.  The result of the husband’s proposal would be that the wife and children would no longer have accommodation in the former matrimonial home.  The National Australia Bank would hold not just the $1.3 million which is specifically secured against the home but also any remaining equity. The bank has a call on those assets now.

2. On the bare facts, the debt is $8.7 million, and the assets are $10.7 million.  There is some controversy about those values. The frustration of the case is that the husband and the wife are in exactly the same interest unless there is some mischief afoot. It is hard to imagine a logical reason for the wife to frustrate action intended to preserve the assets of the parties.

3. The husband knows exactly what the financial circumstances of the business are.  He knows what financial interests are held in Europe. Why then has he not made every effort to satisfy her about this? From the wife’s point of view, of course, the mischief is that the husband is hiding assets, that there is something in the running of the business that results in the profit and loss statements and the other trading accounts not reflecting the true financial position of the business. That there is something in the transactions between the members of the husband’s family that either means that there are substantial assets in Europe, beyond those that are declared, in which the husband has an interest. 

4. The combination of those things causes me to be cautious about ordering the sale. There could still be a situation whereby it may be necessary to sell the property.  I indicated to counsel before lunch that I would make an order that forthwith upon the receipt of a 57(2)(b) notice in relation to this property, I would order a sale.  The concern on behalf of the wife is that the husband could initiate something that would cause that to happen.  On his case, he has absolutely no interest in doing so.  His case is that if one element of the house of cards falls, then the bank is likely to move in. 

5. The husband’s brother, Mr G has made a depressing series of speculations about what might happen if the business premises and the business were sold and wound up. He opines that the sale of the D Street property would leave a shortfall of $2.7 million. He thinks that the business could realise a loss of about $4 million as on liquidation the stock would not achieve retail value and of course there would be liquidation expenses. 

6. From Harris, the Court should be cautious about making an order in advance of being able to test evidence and make findings of fact. I have not seen evidence that the husband has acted in accordance with his stated conviction.  There isn’t anything from the husband or Mr G about alternatives to the sale of the home. Mr G says if they sell the D Street property, that would be realised a debt of $2.751 million. That is precisely the same outcome as if the former matrimonial home is sold. I could not find any evidence as to why the family prefers to sell the home. Given that the husband’s case is one of necessity, that evidence should be given. Similarly, as I’ve said, I would have thought a proper course in relation to the bank would have been a conference to settle an approach to the bank, a series of questions to the bank, with both parties or their representatives attending on the bank. If that had been done, we might not be here. 

7. I appreciate that there are disastrous outcomes offered on both sides, but in my view, as at today it is not appropriate that I make the orders sought on behalf of the husband.   

8. I note that the Court has accepted in one instance that there was justification for the husband to be relieved of his obligation of support and for the wife to take it up. In another instance the husband was found to be in breach of the orders and they were enforced against him.

9. As to the husband’s loan account being an available source of funds - Ms F says that there is a loan account of the husband of $43,053.  When you go to the commentary, she says as at 30 June 2010, the husband was owed $83,100, of which she considered $42,291 capable of being repaid at that date.  The appendix E3 to her report reveals that she has established that there are payments due to creditors which leave a liability, and in her opinion, the likely recoverable amount per dollar invested is 51 cents.  That is how she gets from $83,000 to $42,000. 

10. However, it is clear that for that payment to be made, that would mean winding up of the company. There are no other assets available, apart from those that she has noted. Although it might have been nice for the husband to have addressed that issue in his affidavits, I can’t find that the loan account represents an accessible source of funds. The other problem, overall, is that if the company is trading in the negative and then there is a preference given to particular creditors, then there may be issues about the directors’ obligations and some other problems. 

11. It is important to preserve the Suburb B property. Similarly, on the face of the evidence, the husband should be relieved from some of the obligations.  The evidence about the husband’s income is that it has been reduced. However, it is also in evidence that the level of his income was a fiction created by the members of the family to match his obligations. The problem with that is the artificiality of the level of his income. The evidence is that between the members of the husband’s family, decisions have been made, for example, that the salary paid to the husband’s mother and father will be left at the current level but the income received by Mr G and his wife, an income-splitting arrangement  will be reduced. It is impossible to get to the bottom of these issues in a hearing such as this.

12. If I make an unrealistic order I will just cause enforcement problems. There is also the risk of causing hardship to the husband if he is required to pay more than he can afford. On balance, it seems to me that there should be some relief in relation to the orders.  I will require the husband to continue to make the payments that support the household but discharge the order in relation to spousal maintenance. 

13. As to the management of proceedings I was provided with a list of affidavits on behalf of the parties. I think there were two or three affidavits of the husband on the list.  Paragraph 4 of the February affidavit contains the following:

    I refer to my affidavits filed in these proceedings sworn 6 May 2010, 24 July 2010, 11 October 2010 and 28 October 2010 and repeat those affidavits as if the same was set out in this affidavit. 

14. It is not practical for a judicial officer to deal with this sort of matter in a timely way, with a huge amount of material. It would be of assistance if practitioners would try and help the process of deciding cases by confining the material to be read. 

I certify that the preceding thirty seven (37) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 25 February 2011.

Associate:     

Date:              30 May 2011