Mitty and Mitty and Ors

[2008] FamCA 972

FAMILY COURT OF AUSTRALIA

MITTY & MITTY & ORS [2008] FamCA 972

FAMILY LAW – PROPERTY – CAVEATS – application for injunction restraining the lodging or maintaining of caveats against a property – sale to proceed to completion

Family Law Act 1975 (Cth)

APPLICANT: Ms Mitty

1^st RESPONDENT: Mr Mitty

3^rd RESPONDENT: Mitty Pty Ltd

4^th RESPONDENT: Ms N

5^th RESPONDENT: Ms S

6^th RESPONDENT: Mr M

FILE NUMBER: SYC 8326 of 2007

DATE DELIVERED: 6 November 2008

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

ORDERS MADE: Newcastle

JUDGMENT OF: Justice Fowler

HEARING DATE: 24 October 2008

ORDERS MADE: 27 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton

1^ST RESPONDENT: In person

COUNSEL FOR THE 3^RD, 4^TH AND 5^TH RESPONDENTS: Mr Brzostowski SC

6^TH RESPONDENT: Excused from attendance

Orders

THE COURT NOTES that in these Orders:

A.       “Husband” means Mr Mitty born … July 1967.

B.“T Property” means the property situated at … Road, T and being the property described in Title Reference …/… and in respect of which R Pty Limited is the registered proprietor.

C.“H Capital” means H Capital Pty Limited, ABN …, being a company registered in the State of New South Wales and having its registered office at …, NSW and in respect of which the husband is the Director, Secretary and Shareholder.

AND THE COURT NOTES that this matter having been heard on Friday,
24 October 2008 and the making of these Orders being a matter of urgency the Court makes the Orders on the basis that it will in due course publish its Reasons therefore.

AND IT IS ORDERED THAT:

1. The husband in his own capacity and as sole director and shareholder of H Capital do all acts and things and sign all documents necessary to withdraw the caveats lodged on the T property by the husband and by H Capital.

2. The husband thereafter in his own capacity and as director and shareholder of H Capital be restrained by injunction from doing any act or thing to cause a caveat or other encumbrance to be registered on the T property and from doing any act or thing to interfere with the sale of the property.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8326  of 2007

MS MITTY

Applicant

And

MR MITTY

1^st Respondent

And

MITTY PTY LTD

3^rd Respondent

And

MS N

4^th Respondent

And

MS S

5^th Respondent

And

MR M

6^th Respondent

REASONS FOR JUDGMENT

Introduction

1. Before the Court are interim applications.  The wife seeks orders by way of injunction restraining the husband and a company, of which he is the sole shareholder and director (H Capital Pty Limited (“H Capital”)), from lodging or maintaining caveats against a property.  The wife’s father, Mr W, is the sole director and shareholder of R Pty Ltd, which is the registered proprietor of that property.

2. The application has been heard following the hearing of a notice of motion filed by the husband on behalf of himself and H Capital in the Supreme Court of New South Wales in its Equity Division, in which the husband sought orders permitting the filing of further caveats against the title to the property in terms of caveats previously filed and which had lapsed.

3. Justice Hammerschlag in the Supreme Court made a permissive order in relation to the lodgement of the caveats but, noting that this matter was listed before this Court, stayed the operation of those orders until 24 October 2008.  On 27 October 2008 I made the orders set forth above and indicated I would later publish my Reasons.

Background Facts

1. The husband claims that R Pty Ltd holds the property in trust for either himself or H Capital.  In submissions before me he referred to it being held for the benefit of the husband and wife at one stage, but I think that this was a statement of a general practical nature and not a statement of law.

2. There is in the principal proceedings however, a clear dispute between the husband and the wife in which each seeks an alteration of their property interests.

3. The husband said that the sum used for the purchase of the property was a sum which was borrowed from the National Australia Bank and was secured on the subject land and also on the former matrimonial home at W.

4. The loan to the National Australia Bank is in default and the bank has entered into possession of the property at W.  The bank it seems will take action leading to it entering into possession of this property in the event that its debt is not met.

5. The National Australia Bank has informed R Pty Ltd that the bank will provide a discharge of the mortgage registered on the title to the property, to enable a sale which has been negotiated by R Pty Ltd to proceed to completion, albeit that the proceeds of sale will not fully discharge the Bank’s loan.

6. The purchaser of the property, the Court has been advised, has served on R Pty Ltd a notice to complete.

7. This was not information which was available to His Honour Justice Hammerschlag.  It was in the absence of this information that His Honour was to remark (Exhibit L):

“Favouring the grant of the relief is the fact that there is in any event a caveat on the property which would inhibit completion of the transaction entered into with the neighbouring purchasers.  There is no urgency so far as that is concerned.  The purchaser has not served a notice to complete. …”

The subsequent service of that notice, in my view, has changed the balance of convenience and the urgency attendant on the matter.

1. There are alternatives available to the purchaser in the event that that notice is regularly served and they would include recision or an action for specific performance.

2. In either case, such a proceeding would add to a plethora of litigation which seems to be currently engaging the husband and the wife and their respective families.  My task has to be in a case of this nature to seek the course which minimises costs (or losses).

3. It is acknowledged by the wife that if R Pty Ltd has dealt with the property to the detriment of the husband that he has a claim which would fall within the accrued jurisdiction of this Court, since it would arise out of the same substratum of facts underlying the parties’ claims against each other for alteration of their property interests.

4. Tendered into evidence (Exhibit Q) without objection before me is a valuation of the subject property by a Mr J, who offers the opinion that the current value of the property is $155,000.  This evidence of value was not available to His Honour Justice Hammerschlag who expressed concern as to whether a price of $200,000 from an adjoining neighbour was the best price procurable.  It certainly is in excess of Mr J’s valuation.

5. It was argued by the husband that the land would have a higher value if a building permit was procured for it.

6. The evidence of the valuer is that the land does not by reason of its size permit of the erection of a dwelling on it.  The husband notes that an application was made to the local council for such permission.

7. Tendered before me (Exhibit CC) is a notice of refusal of that application in January 2008.  The husband has pointed to the terms of the refusal and the possibility of an appeal or review in relation to it.

8. In the event no such application was or has been made and many months have passed.  In my view, that is not a basis, given the pressing nature of the parties’ current problems and the attitude of the bank and the purchaser, which would justify not proceeding with the sale.

1. Indeed the valuer makes the following comment in relation to the property

   
   

   (Exhibit Q):

   “However, as a result of its area and town planning requirements, it does not have the likelihood of a building permit.  Consequently, it is only suitable as a small grazing lot, hence it’s (sic) most likely purchaser is an adjoining, or neighbouring, property owner.  If neither of the aforementioned are “in the market”, an extended selling period could be anticipated.”

2. Mr J, the valuer notes the price reflects a pro rata rate of approximately $9,728 per hectare and that rural grazing land in the area ranges in value from $5,000 per hectare to $6,000 per hectare.  The selling price is said, therefore by him, to be in excess of the normal range of value and, in his opinion, reflects a premium being paid by an adjoining owner to increase the size of their presently small holding, as one would expect.

3. Mr J points to comparable sales evidence as supporting his valuation.

4. The husband produced two valuations previously made.

5. A valuation made by HT Valuers (Exhibit Z) is based on an assumption, it seems, that an application could successfully be made to zone the land for intensive agriculture and the valuation was based on the assumption that that approvals would be procured.  They have not, and the application was not made for intensive agriculture approval and, in any event, it seems the Council indicated that it was unlikely to be granted.  That assumptive valuation in any event was dated 16 May 2007.

6. The husband also produced a valuation by K Valuers (Exhibit Z) but that was dated in 2006.  In that valuation comparisons were referred to which were properties on which residential permission had been granted or where there was an existing dwelling.  The comparable sales evidence was from 2004 and 2005.  The valuation was based on a valuation with a dwelling entitlement less an allowance of $100,000 as being the valuer’s then assessment of the value of the entitlement.  The valuation is not current and therefore I will not rely upon it.

7. Also missing from the hearing before Justice Hammerschlag was the tender of certain correspondence which was tendered before me, namely:

   a)A letter from Richard Steele and Co., solicitors, (Exhibit DD) acting on behalf of H Capital addressed to R Pty Ltd which in part reads as follows:

   “It is necessary for you to consider the enclosed information in respect of all future actions.  Please note that due to previous years of drought the financial position of [H Capital] Pty Limited is such that the ongoing servicing of the mortgage payments that has previously been effected by [H Capital] Pty Limited is now increasingly difficult.  [H Capital] Pty Limited have contacted the Mortgagee in respect of the mortgages that are services (sic) by [H Capital] Pty Limited has (sic) and discussed the difficulty that is faced in servicing the mortgages with them directly and currently are in such a position that it is unable to make mortgage payments.”

   Later, the letter talks of caveats placed on the properties to seek to protect the registered proprietor [H Capital] and the wife.  The letter invites the recipient to consider the contents in making future decisions that may affect them and H Capital.

   b)In a letter to R Pty Ltd’s solicitor on 10 July 2008, attached to the husband’s  affidavit sworn 17 September 2008, the husband says:

   “I believe that a time frame of only days to weeks exists until the National Australia Bank take security over the property and assets of [R] Pty Ltd.  This situation can be avoided if [R] Pty Ltd makes a payment to the National Australia Bank for $220,000 to remove the mortgage over this asset.  Could you please arrange for this to occur?

   Could you please provide an immediate response to this proposal in order to protect the assets of [R] Pty Ltd.  I am providing this information to you for the benefit of you and your client, and the consequences of any inaction on this matter will be to your clients (sic) own detriment.”

   c)

   In a letter dated 13 July 2008, annexed to his affidavit sworn

   
   17 September 2008

   , the husband acknowledges the potential sale of the property and says, inter alia:

   “…I am reliant on the property being sold a price greater than the loan amount.  As the property has been stripped of value by your client, and due to a very poor advertising campaign presentation by your client, I am now fearful that the property will not be sold at a price great enough to cover my liabilities.  I hold your client responsible for the occurrence of this set of events, and as such, will be seeking compensation from your client if the property is sold at a value lower that (sic) my loan account with the National Australia Bank.”

   This letter directs attention to the price not the sale and the remedy sought in the event that the property was not sold at a price which meets the liability to the bank in the form of a claim for compensation.  In any such claim the husband would have to establish a loss and the letter could reasonably be taken by Mr W as a warning that he had to procure the best price in order to protect his company from actions for compensation, but not that he should not sell the property.

8. It is clear that the husband also has a complaint that an agreement made in a certain deed entered into in July of this year with adjoining neighbours and which was said to have been made known when the subject property was listed for auction and passed in, has been an agreement which has operated to the detriment of the value of the property and that the terms of it would benefit the wife to the extent of, he asserts, $35,000.

9. In his application, the husband seeks an order that if that agreement is proceeded with then any monies flowing to the wife should be retained pending further order of the Court.  I think that this is not on its face an unreasonable request and will be dealt with by me on 2 February 2009 when the matter is next before me and I have had the opportunity to hear from the wife and

   
   

   Mr W in relation to it.

10. Certainly if that money were going to be paid to anyone it should, one would have thought, prima facie be paid to the mortgagee.

11. However, I have come to the conclusion that the balance of convenience requires that the sale proceed to completion.  In coming to this conclusion I have had regard to the following factors:

    a)the need to protect the interests of the parties to this marriage from the costs accompanying the default under the mortgage;

    b)the possible sale by the mortgagee exercising power of sale of the property including but not limited to further interest and default costs;

    c)the premium price procured by R Pty Ltd for the property;

    d)the prospect of further litigation with the purchaser; and

    e)the fact that given that the husband has already indicated his course should the sale not realise what he regards as a reasonable sum.

12. I note that this matter is listed for a Judicial Settlement Conference in December 2008.  I commend to the parties the process of seeking a resolution of this matter by agreement.  Presently there are six respondents to the matter and more may be joined.  It is not generally thought a recipe for a cost-effective and financially sound resolution of this matter.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Fowler.

Associate: 

Date:  6 November 2008