Lovine and Connor

[2009] FamCA 1220

FAMILY COURT OF AUSTRALIA

LOVINE & CONNOR [2009] FamCA 1220

FAMILY LAW – PROPERTY – Interim – Wife seeks orders that the husband provide funds to enable her to complete the construction of a home where the evidence is insufficient to enable the Court to be confident about values and impacts associated with tax

Family Law Act 1975 (Cth)

Strahan and Strahan (2009) FamCAFC 166

APPLICANT: Mr Lovine

RESPONDENT: Ms Connor

FILE NUMBER: MLC 9419 of 2009

DATE DELIVERED: 10 DECEMBER 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: THE HONOURABLE JUSTICE CRONIN

HEARING DATE: 8 DECEMBER 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR SWEENEY

SOLICITOR FOR THE APPLICANT: TAUSSIG CHERRIE & ASSOCIATES

COUNSEL FOR THE RESPONDENT: MR BROWN SC

SOLICITOR FOR THE RESPONDENT: LANDER & ROGERS

Orders

1. That paragraph 1 of the orders sought by the wife in the response filed 20 November 2009 is refused.

2. That all interim applications between the parties are otherwise dismissed.

3. That any application for costs arising out of the orders made on 8 December 2009 and this day be the subject of written submission to be filed and served by 15 January 2010 and any reply thereto by 22 January 2010 and such determination be made in chambers.

4. Alternatively to paragraph 3, should the parties not seek specific orders in relation to costs, all costs of the parties are otherwise reserved to the trial judge.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel, including Senior Counsel to attend.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9419  of 2009

MR LOVINE

Applicant

And

MS CONNOR

Respondent

REASONS FOR JUDGMENT

1. Mr Lovine to whom I shall refer as “the husband” and Ms Connor to whom I shall refer as “the wife” respectively had applications in the Judicial Duty List on 8 December 2009.  Most issues between the parties were resolved and I made orders with their consent.

2. The unresolved issue to which these reasons relate concerns an interim dispute about whether a residential building should be completed and at whose expense.

3. The husband was the applicant in the proceedings filed on 20 October 2009 to which the wife responded on 20 November 2009.  Despite the fact that the husband was the applicant, it was the wife who had the carriage of the proceedings because of the order that she sought. 

4. It was the wife’s application therefore that the residential building at R should be completed and the husband should provide the necessary capital for that to occur.

5. There were two significant issues about the wife’s position.  The first was that she acknowledged that all she wanted to do was to complete the R property.  The land had been purchased by the parties for $340,000 and about $800,000 had been spent on the building project.  It seemed common ground that the acquisition and building was commenced for the purposes of obtaining a residence in which the wife was to live.  There is evidence before the Court as to where the funds came from and that was not an issue in dispute.

6. Senior counsel for the wife suggested that there was some forensic challenge by the husband concerning the wife “dragging her feet” in relation to the completion of the building and her proposal was that given the appropriate opportunity, she would have everything completed by the second week of March 2010.  The second issue however was that the funds had to be provided from the resources within the control of the husband and, the wife pointed to a share portfolio which the husband valued at $2.6million.  She conceded that the liquidation of some of those assets to enable the completion of the building may give rise to taxation issues.

7. Attached to her affidavit, the wife annexed a list of her estimates of expenditure to complete the task and she expected that to be around $103,000.

8. Senior counsel for the wife suggested that as a matter of practicality, an order should be made that the parties have liberty to apply in the event that there was some unforeseen circumstance that delayed the completion date.

9. It was at that point however that a significant concession was apparently made by the wife which had not been previously known to the husband.  Mr Brown SC indicated that upon the completion of the property, the wife proposed to put it on the commercial market to be rented.  Mr Sweeney of counsel for the husband indicated that this was news to the husband because at all times, it had been the project of the wife with the purpose of providing a residence for her. 

10. It is of some significance that both parties are currently living in the matrimonial home in T and part of the husband’s application before the Court was that he have sole occupation of that property. 

11. Mr Sweeney said that the husband had no difficulty about the wife completing the property at her leisure but the issue then became one of whether it was financially viable and prudent to undertake the task when the objective had now changed and the property was to be placed on the commercial market for rental.  It must be remembered that the parties are in the throes of litigating about a property settlement.  Mr Sweeney argued that putting money into the property to complete it on the basis of the evidence before the Court was not a good solution.  In essence, the absence of the evidence was telling.

12. The background of the parties is relatively simple but it has some bearing on the decision that I have to make. 

13. The parties were married in August 2000 and there are two children aged 8 and 6 years.  In December 2006, the parties seemed to separate under one roof but to all intents and purposes, have continued on with their daily lives to the extent that the children may not have been aware of the breakdown of the relationship.

14. It was the husband’s evidence that in December 2006 when the R property was purchased, it was the wife who was designing and constructing the home and although the property is owned by a bare trust, the wife was the registered owner-builder for that purpose.

15. It was the husband’s evidence not denied by the wife that in about May 2008, the wife informed him that once the house was completed, she would move into the R property and he accepted that decision.  The wife filed an affidavit in reply to the husband predominantly because it was the husband’s application for exclusive occupancy of the former matrimonial home.  In her affidavit, the wife said that it was their intention for her to relocate with the children to the R property once it was completed after financial matters had been completed as well.  She said it was never her intention to move out of the home until the financial settlement had been reached.  She then went on to say that there was no reason why they could not live in the home on a continuing basis and she continue her role as she saw it as the primary parent of the children.

16. The parties sought that I determine the matter on the basis of the evidence presented and without it being tested. It is only possible to do so on the evidence that is largely uncontroversial.

17. In her affidavit, the wife said that the details about when the R property would be completed had been provided to the husband but coupled with her inexperience within the construction industry and her responsibilities for the children, it had been later than initially anticipated.  She said the husband had engaged a builder to substantiate the future costs that she had provided to the husband.  Having said that however, Mr Sweeney pointed to the fact that these were simply the estimates of the wife and it was therefore on that material that she was relying.  That clearly raised the question of whether it was an efficacious and prudent decision to put something in the vicinity of $103,000 into a building without evidence as to the impact of that work upon its value or what would ultimately be the value to be put into the pool.

18. The wife went on to point out that there was still significant work to be done and that was reflected in the estimates that she had quoted.

19. The parties had endeavoured to resolve the matter by discussion and mediation and had failed.  She pointed to the fact that she had had the carriage of the construction of the R property to the exclusion of the husband who had shown little interest in it.  She said that the husband now wanted to select the builder and she was opposed to that idea. 

20. It was the wife’s case that there had been no criticism in relation to the works carried out by her nor as to the expenditure incurred.  She could not understand why the husband now wanted to impose conditions which effectively would have forced the completion of the property.

21. The dilemma however as Mr Sweeney pointed out was that the husband was now aware that the wife was not intending to move into the property to live and that put a different complexion on the argument. 

22. The husband filed an affidavit on 4 December 2009 and in it, he asserted that the wife had been obsessive about the details of the features and design of the R property and the wife had gone to extraordinary lengths to realise her vision of an environmentally friendly and sustainable property.  He pointed to the fact that there was no architect or registered builder engaged in the construction and that she had done all aspects of the project including the physical construction herself.

23. It was the husband’s evidence that the R property represented a very large investment in financial terms and the beneficial ownership had been transferred to enable a tax benefit to be claimed.  The transfer to the wife on the basis that the R property was to be her principal residence would have enabled her to claim the entire profit from any development on a subsequent resale as being free from any tax.  The about face as the husband saw the wife’s position of placing the property on the rental market gave rise to all sorts of issues associated with capital gains tax as well as GST on a sale.  That in itself would impact upon the pool of assets.

24. The husband complained that the wife had failed to provide details despite requests and whilst the evidence is limited, it is open to me to infer that there is some substance in the husband’s complaint about lack of information about the R property on the basis of the wife’s offer to put a sundown clause on the completion of the building.  It seems more probable that not therefore that the husband was frustrated about the lack of an obvious ending of the building works.  Whilst that may not be unusual, in the context of the parties living for a considerable period under one roof where there was an agreement about the wife moving out, the husband’s position does not seem unreasonable.

25. The completion of the construction of the R property is also predicated on the basis of the expenditure of capital to be drawn from existing resources.  It is clear on the evidence that those resources are available.  What is not clear is the impact upon those resources from a taxation point of view notwithstanding that could be adjusted in the final trial of any property proceedings.  However, combined with the uncertainty as to the amount involved to complete the R property because of the wife’s own estimates, the drawing down of resources to complete the building seems a vague exercise and perhaps in the circumstances an unnecessary one where there is no evidence as to the prudent nature of the exercise.

26. As Mr Sweeney conceded, there is no reason why the wife could not complete the building at her leisure if she could find the necessary funds to do so.  It also goes without saying that there is no reason why she could not convince the husband to fund the exercise on the basis of a partial property settlement with confirmed orders as to the amounts involved.  None of those matters were proffered to me nor is the evidence such that I could infer what amounts would be involved.

27. Whilst there were no submissions put as to the jurisdictional basis to make the orders proposed by the wife, it is still important to look for the power in the Family Law Act 1975 (Cth) (“the Act”). That power must lie in either s 79 or s 80 of the Act to enable a court to make interim property orders. In either of those cases, any order must meet the interests of justice and equity.

28. As was pointed out in Strahan and Strahan (2009) FamCAFC 166 at paragraph 132, all that is required is that in the circumstances it is appropriate to exercise the power. Once the decision is made to exercise the power, the discretion is unfettered other than the fact that regard had to be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

29. What I am being asked to do here is make an interim property order under s 79 of the Act. Whilst it is conceded by the wife that the pool is between $10million and $13million, one could conclude that little damage would be done to that pool if the various resources of the parties were shuffled around by reducing the share portfolio and completing the R property. I do not feel that I can exercise my discretion to do that in this case albeit that the impact upon the pool might be modest in circumstances where there is no evidence as to precisely what amounts of money are needed to complete the task other than the estimate of the wife. I do not know what impact the completion of the task would have on the value or the taxation implications not only in respect of the ultimate completion of the building but also the drawing down of the share resources.

30. Section 80 of the Act sets out that there are general powers of the Court to do a variety of things including making an order pending the disposal of proceedings. The power in s 80 is also a discretionary power and for the reasons that I have just set out, I do not feel there is sufficient evidence to enable me to feel confident about the order that I am being asked to make.

31. Another possibility although not canvassed by the parties was that there is power under s 114 of the Act to make a mandatory injunction. That provision permits a court to make such order as it considers proper with respect to the property of a party to the marriage. The fundamental question here is that the wife would seek an injunction relating to the property of she and the husband by shuffling the resources around such that it might be seen as an asset protection order. Unfortunately, again for the same reasons to which I have just referred, the evidence is not sufficient to enable me to draw the conclusion that it is appropriate in the circumstances to make the relevant order.

32. Accordingly, the wife’s application for an order in terms of paragraph 1 of the response filed 20 November 2009 is dismissed

I certify that the preceding Thirty Two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: 

Date:  10 December 2009