North and North

[2007] FamCA 189

FAMILY COURT OF AUSTRALIA

NORTH & NORTH [2007] FamCA 189

FAMILY LAW - PROPERTY – Procedural Directions

APPLICANT: Mrs North

RESPONDENT: Mr North

FILE NUMBER: SYF 2674 of 2002

DATE DELIVERED: 6 March 2007

PLACE DELIVERED: Sydney

JUDGMENT OF: O'Ryan J

HEARING DATE: Application/Response and written submissions

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richardson SC

SOLICITOR FOR THE APPLICANT: Broun Abrahams Burreket

COUNSEL FOR THE RESPONDENT: Mr Laughton SC

SOLICITOR FOR THE RESPONDENT: North Shore Lawyers

Orders

1. The application in a case filed on 21 February 2007 by the wife be dismissed.

1. The response to an application in a case filed on 21 February 2007 by the husband be dismissed.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2674 of 2002

Mrs North

Applicant

And

Mr North   

Respondent

REASONS FOR JUDGMENT

Introduction

1. Before me for hearing are applications for interlocutory financial relief.  On 21 February 2007 an application was filed on behalf of the Wife in which she seeks that the Husband forthwith execute and deliver to B Mortgages Ltd an “Acceptance of the Terms of Approval” and other documents that may be required.  On 21 February 2007 a response was filed on behalf of the Husband and he seeks that the Wife’s application be dismissed, that the parties forthwith submit a “[B] Loan Offer” dated 21 February 2007 to Macquarie Bank Ltd in accordance with its right of refusal and the parties forthwith accept the said B loan offer conditional upon Macquarie Bank not providing a loan offer on the same terms as the B Commercial loan offer.

2. In support of her application the Wife swore an affidavit on 15 February 2007.  In support of his response the Husband swore affidavits on 16 and 21 February 2007.  The hearing proceeded by way of written submissions.

3. This latest controversy is but another dispute in what has been long and protracted litigation in which, from time to time, I have been asked to make what in reality are commercial decisions in relation to the management of the parties’ financial affairs. 

4. It has always been assumed that I have the jurisdiction and power to make the orders sought and at no time have I ever questioned this approach.  However, I note that submissions were made on behalf of the Wife as to the jurisdictional basis for the orders sought by the Husband. 

5. In this judgment I will repeat a great deal of what I have said in earlier judgments and in particular a judgement delivered on 22 December 2006. 

6. The Husband was born in July 1941 and the Wife was born in May 1943.  The Wife contends that the parties commenced cohabitation in October 1968 and the Husband contends that it was in August 1969.  The parties were married in August 1969.  The Husband contends that the parties separated in October 1990 and the Wife contends it was in March 1995.  The parties were divorced in April 2002.  There are two children of the marriage a son born on in January 1974 and a daughter born in April 1976. 

7. There are pending proceedings for settlement of property which were commenced by application filed on behalf of the Wife in 2002.  The principle reason that the proceedings for property settlement have not been concluded is because of proceedings in the Supreme Court of New South Wales by investors in property called the A Development site, for the return of their capital plus interest, or alternatively, a declaration that they were entitled to an interest in part of the development site.  Those proceedings were settled on 23 October 2006, upon the basis that the Defendants to those proceedings, the Husband, the Wife, and N Pty Ltd pay the Investors the sum of $1,600,000, inclusive of costs.  Further, proceedings were brought by ANZ Capel Court Pty Ltd against the Husband in respect of allegedly unpaid borrowings for the purpose of the Husband conducting a business selling wool futures and wool.  Those proceedings were compromised on the basis that there be a verdict for the defendant in the principle proceedings and a verdict for the cross-defendant on the cross-claim, with each party to bear his, her or its own costs.  The property settlement proceedings can now be concluded and the hearing has been fixed for nine days commencing on 4 June 2007.

8. The Wife has repeatedly asserted that the Husband has pursued for himself a strategic advantage.  The financing facilities already are running with interest at about a thousand dollars per day and there is a great economic cost to the parties in any delay.  The delay to the proceedings otherwise, as a consequence, amongst other things, of the Supreme Court proceedings has been very substantial.

9. The parties have significant and valuable assets.  I received a draft joint statement of assets and liabilities and the following appears:

   Assets

   $$     

   ·AP1 (h/w)  18,000,000   22,000,000

   ·AP2 (h/w)  -                 -

   ·AP3  -                 -

   ·BP1 (h)  -                 -

   ·BP2 (h)  -                 -

   ·ARP (50%) (h)  -               nil

   ·Loan Agreement with S, D and the son (h/w)  -    not known

   ·W (h/w)  7,200,000     6,500,000

   ·Rural L   1,350,000     1,350,000

   ·G and adjacent farms at T and MA (h/w)  1,500,000     1,500,000

   ·Plant and equipment on farms (h/w)  100,000        17,800

   ·Stock on farms (h/w)  -       131,702

   ·N Pty Ltd Superannuation Fund (h/w)  1,150,000     1,500,000

   ·CBA Savings Account (@ 30.11.2006 US$2,762) (w)                 3,517          3,517

   ·P Savings Bank Account (@ 30.11.2006) (w)  48,046        48,046

   ·TAB Account (@ 30.11.2006) (w)  459             459

   ·Westpac Bank Account (@ 30.11.2006) (w)  1,485          1,485

   ·MN Account (h)  830             800

   ·I Credit Union Account (S1 & S2) (h)  81,400        97,000

   ·Broun Abrahams Burreket, Controlled Monies Account #1 (h/w) 17,688        17,688

   ·Broun Abrahams Burreket, Controlled Monies Account #2 (h/w) 57,062        57,062

   ·Land Tax Refund money paid to the husband (h)  nil        43,635

   ·100 IBM shares (h)  200             200

   ·Antique furniture (h/w)  40,000    not known

   ·Paintings (h/w)  50,000    not known 

   ·Gold & jewellery (h/w)  40,000    not known

   ·Other furniture and contents (h/w)  -                 -

   ·2 x Vintage Bentley motor vehicles (w)  40,000    not known

   ·2001 Mazda Protégé (w)  9,000          9,000

   ·Nissan motor vehicle (h)  500          1,000

   ·WS Australia (h/w)  nominal    not known

   ·Futures deposits (h)              nil     not known

   Total29,690,187   33,279,394

   Liabilities

   ·Macquarie Bank Limited (@ 7 December 2006)                   5,500,000     5,481,050

   ·Plaintiffs in the Supreme Court proceedings  1,650,000     1,600,000

   ·NAB Overdraft (@ 17 November 2006)  24,000        24,252

   ·Ms T, Mr T and B Pty Limited  300,000    not known

   ·RS  20,000        22,886

   ·S & D  800,000               nil

   ·DB  Nil    not known

   ·Mr TH  Nil        40,000

   ·WW and Partners  -          2,750

   ·Ms D (tax work to April 2006)  20,000          7,500

   ·Ms D (other work)  10,000    not known

   ·NAB MasterCard  200             200

   ·F Projects Pty Limited  225,000                 -

   ·North Shore Lawyers  90,000        67,043

   ·I Visa Card  nil    not known

   ·ANZ MasterCard  nil    not known

   ·NAB MasterCard  200             200

   ·ANZ Visa Card  not known               nil

   ·NAB Visa Card  not known               nil

   ·Broun Abrahams Burreket and counsel  100,414       100,414

   ·Mr WH (@ 30.11.2006)  210,000       210,000

   ·Interest on advance from Mr WH             nil    not known

   Total(8,949,814)   (7,556,295)

   Financial Resources

   ·Tax losses (as at 30 June 2000)  -        80,531

   ·Tax losses (as at 30 June 2000)  -       669,973

   ·Tax losses since 30 June 2000  -    not known

   ·Tax losses since 30 June 2000  -    not known

   Total750,504

   Net assets and liabilities (excl financial resources)  $20,790,121 $25,723,099

   Pausing there, subject to updating evidence, including valuation evidence, both parties agree that they have assets of a net value in excess of  $20,000,000.

10. The significant assets of the parties comprise real estate being;

    ·W  

    ·Rural L

    ·G and adjoining farms at T and M

    ·Y properties

    ·A Development site

11. The A Development site comprises:

    ·      AP1

    ·      AP2

    ·      AP3

    ·      BP1

    ·      BP2 and

    ·      ARP.

12. The real estate known as Y owned by the N Limited Superannuation Fund. 

13. In a Judgment of March 2005 I said that the Wife seeks an entitlement of 50 per cent of the net assets which includes an amount from the proceeds of sale of the A Development site; W; and Rural L.  I also said that the Husband seeks that the Wife receive an entitlement of about 25 per cent of the net assets and that it include W.  He seeks to retain the A Development site; the M properties; the G properties and, at that time, the Y properties.  In the property settlement proceedings the Wife is seeking a sale of the A Development site and the Husband is seeking to retain the properties.

14. Before the hearing in early June the parties have to obtain loans to meet the following commitments:

    ·Pursuant to orders of 12 September 2006 an amount of $800,000 to pay legal fees.

    ·Pursuant to orders of 24 October 2006 an amount of $1,600,000 to pay the Investors settlement by April.

    ·As from April 2007 refinance a Macquarie Bank Ltd facility of $5,600,000 plus provision for interest and holding costs.

    The Husband is seeking that I make orders that deal with the above three issues.  He seeks that the parties accept a loan arranged by B.  The Wife seeks that the parties should accept a loan proposal from B for an amount to meet the commitments pursuant to the orders of 12 September and 24 October and then deal with the Macquarie Bank refinance issue in April 2007 as the parties have in the past.

15. The Husband seeks that the parties submit the B proposal to Macquarie Bank because the Macquarie Bank facility, is subject to an agreement contained in an Investment Facility and Guarantee Agreement.  Particularly, Item 23 (iv) contains a right of first refusal in the following terms:

    The customer will not accept any offer to refinance this facility (offer) without first giving the lender 14 days notice of the terms and conditions of the offer.  The lender may within that 14 day period agree to finance the property on the same terms as the offer in which case the parties will proceed with the finance on those terms.  If within that 14 day period the lender does not agree to finance the property on the same terms as the offer the customer may refinance the property as it thinks fit but not on more beneficial terms than those contained in the offer.

    To the extent that Macquarie Bank has a right of first refusal, it is incumbent upon the parties, for the purposes of the rollover, to put any further facility to Macquarie Bank, for the purposes of giving it an opportunity to meet the existing offer from B.

16. The Husband contended that the Wife’s application should be rejected.  Alternatively, the application should be stood over until 16 March 2007, to enable an offer of B of 20 February 2007 to be put to Macquarie Bank pursuant to the right of first refusal, to give Macquarie Bank an opportunity to meet its terms and to enable the final drawn down of the additional $200,000 from Macquarie Bank to be achieved, for legal fees.  He seeks that the Wife be directed to sign all documents and do all things necessary to put the B offer of 20 February 2007 to Macquarie Bank pursuant to its right of first refusal and if Macquarie Bank is prepared to meet its terms, then the facility remains with Macquarie Bank.  However, if Macquarie Bank is not, then the facility through Balmain Commercial becomes available to the parties to accept.

17. So far as the Wife is concerned she simply seeks to give effect to orders already made in these proceedings by consent on 12 September 2006 and varied on 23 October 2006.  The Wife seeks that the Court give effect to its own orders which were agreed to by the Husband.

Background

1. The Husband contended that in 1979 he purchased AP1 and AP2.  The Husband contended that in 1984 he purchased AP3.  The Husband contended that in 1987, at different times, he purchased BP1 and BP2.  The Husband contended that in 1994 he purchased ARP. Thus by 1994 the parties had acquired all of the properties that make up the A Development site.

2. The Wife contended that in May 1995 the only encumbrance on the A Development site was a commercial bill facility from Westpac Bank in the sum of $1,000,000 drawn down to $460,000 and a separate fully drawn facility of $30,000. 

3. In 1997 the Westpac Bank commercial bill facility was paid out in the sum of $1,187,116 from a commercial bill facility obtained from the ANZ Bank in the sum of $2,250,000. 

4. In July 1999 the ANZ Bank issued a notice of termination in respect of the loans.  In 1999 the parties borrowed $550,000 from Australian Unity secured by mortgage on the title of BP2.

5. In May 2001 an advance was obtained from Macquarie Bank for $3,030,000 which was increased by $250,000 to $3,280,000 and the ANZ Bank facility was paid out.

6. The property proceedings were commenced on 1 March 2002 when an application was filed on behalf of the Wife.  On 15 April 2002 the Husband filed a response.

7. In May 2003 the Macquarie Bank advance was increased by $1,610,000 for the purpose of meeting various obligations including development application costs for the A Development site and a project at W.  The interest in respect of the Macquarie Bank facility was capitalised and the facility pursuant to which advances were made expired on 23 April 2005. 

8. In May 2003 the A Development site was rezoned for medium density development by the New South Wales government.  The Wife said that she agreed to the increase in the Macquarie Bank facility so that steps could be taken to obtain a development application in respect of the A development site and also W.

9. On 28 May 2004 the following orders were made:

   Discovery

   1.      That the documents discovered by the husband in these proceedings be made available for inspection by the wife, her legal representatives, expert accountants and/or expert consultants:

   (a)continuously until Friday 4 June 2004; and

   (b)thereafter upon receipt of 24 hours written notice from the wife at an appropriate office space similar to the office space used thus far.

   2.      That the husband provide a written response to the wife within 7 days as to the location and identity of the documents requested by the wife in her facsimile dated 27 May 2004 and where such documents are no longer in the possession or control of the husband the husband shall indicate in the written response the circumstances in which those documents ceased to be in his possession or control.

   Single experts

   3.      That the husband and the wife shall within 14 days each nominate to the other in writing a list of expert evidence required in these proceedings and an expert to provide that evidence.

   4.      That the parties and their legal representatives shall confer in person within 28 days of the date of these orders for the purposes of agreeing upon the person to be appointed a single expert witness for each category.

   5.      That all instructions to the single experts appointed pursuant to Orders 3 and 4 shall be in writing and approved by both the legal representatives for the wife and the legal representative for the husband.

   6.      That within 7 days of the appointment of an expert the husband and the wife shall each pay to the trust account of their legal representative an amount equal to one half of any quote provided by the expert so appointed.

   7.      Any single expert appointed pursuant to these orders shall provide to the Court and the legal representatives of each party a copy of the report at the same time.

   8.      That each party do all acts and things, provide all necessary authorities and cooperation to any single expert appointed pursuant to these orders.

   Lay evidence

   9.      That the parties each file on or before 1 September 2004 all affidavits containing evidence upon which they shall seek to rely at the final hearing of these proceedings.

   10.     That the parties each file on or before 1 September 2004 a Financial Statement.

   Mention

   11.     That the proceedings be listed for further mention in the complex causes list before Her Honour Justice Moore on 24 September 2004 at 9.30 am.

   12.     That each party have liberty to approach the Associate to Her Honour Justice Moore to arrange to re-list the matter on 7 days notice to the other party in relation to the implementation of these directions.

10. On 27 August 2004 the Wife filed an application in relation to the appointment of single experts and on 15 September 2004 the Husband filed a response.  On 20 September 2004 the following orders were made:

    Applications

    1.      The wife file and serve any amended Application for final orders by 1 October 2004.

    2.      The husband file and serve any amended Response to the Amended Application for final orders by 22 October 2004.

    Valuation

    3.      Pursuant to Rule 15.45 of the Family Law Rules (2004) :

    (a)[Mr SH] of [PS] Pty Limited be appointed a single expert witness as to the market value of the rural real estate (including attached water licences) known to the parties as:

    (i)“[G]”;

    (ii)“[DR]”;

    (iii)“[RC]”;

    (b)[Mr L] of [C] be appointed a single expert witness as to the value of the real estate known as and situate at [PL] being:

    (i)Lot […] in […];

    (ii)Lot […] in […];

    (iii)Lot […] in […];

    (iv)Lot […] in […].

    (c)[Mr D] of [RH] Asset Services be appointed a single expert witness as to the value of any motor vehicle (excluding 2 vintage Bentley motor vehicles), furniture, personalty and/or other items such as plant and equipment not otherwise able to be valued by any of the other experts appointed. 

    (d)[Ms E] of [H] be appointed a single expert witness as to the value of any entity or corporation owned by the husband or the wife, any tax or prospective tax liability of the husband, the wife or such entities and any other matter agreed between the parties that requires the evidence of an expert accountant.

    (e)[Mr S] and [Mr W] of [CS] International be appointed a single expert witness as to the value of:

    (i)[W];

    (ii)The properties comprised within the [A] development known as and situate at:

    A.[AP1];

    B.[AP2];

    C.[AP3];

    D.[ARP];

    E.[BP1];

    F.[BP2];

    (iii)[Sydney Properties Y].

    4.      The letters of instructions to the joint experts appointed pursuant to Order 3 be in the form(s) annexed to these orders.

    5.      Order 3 hereof is subject to any agreement the parties may reach as to the value of any item of property.

    6.      The issue, if any, as to the extent to which the costs of the valuations in order 3 are ultimately borne as between the parties be reserved to the trial judge of the applications for final orders.

    Other evidence

    7.      The husband file and serve any amendments to the Joint Case Summary document including a response to the matters requiring further details on or before 8 October 2004.

    8.      The husband and the wife each file an updated Financial Statement on or before 22 October 2004.

    Liberty to apply

    9.      In the event of non-compliance with these Orders either party has liberty to list the matter before me by arrangement with my Associate.

    10.     In the event any Application is made relating to third parties, such Application shall be listed in the first instance for directions before me on 21 October 2004.

    11.     Each of the husband and the wife shall also serve a copy of the amended application in order 1 hereof and the response in order 2 hereof on any third party whose interests may be effected by the orders sought in the amended application and response together with written notice that any appearance by such third party in the proceedings should be made on 21 October 2004.

    12.     The proceedings be listed for further mention before me at 9.30 am on 21 October 2004

1. On 1 October 2004 the Wife filed an amended application for final orders.

2. On 21 October 2004 the following orders were made:

   1.      That the husband shall file and serve an Amended Response by 10 November 2004.

   2.      That the wife shall provide to the legal representatives for the husband an electronic copy of both her affidavits of documents within 7 days.

   3.      That the wife forthwith provide access to her discovered documents for the purposes of scanning at the premises of the wife’s solicitors provided that at all times a paralegal from the office of the husband’s legal representative is present.

   4.      That the husband shall within 7 days cause to be provided to the legal representatives for the wife:

   (a)copies of all contracts, agreements and other documents relating to the transactions referred to at items 417, 421 and 433 together with any correspondence pertaining to those transactions; and

   (b)documents recording the title particulars in respect of all of the rural land at or adjacent to the [G] and other farming properties that the husband contends he or the wife hold at law or beneficially.

   5.      That the husband shall within 15 days cause to be provided to the legal representatives of the wife a complete response to the draft case summary document including a response to the parts of the document where further detail is sought.

   6.      That the wife’s legal representatives provide to the parties for which Mr Simpson appears, a copy of the orders made 20 September 2004 and the letter of instruction to the valuer of the A project and those parties have liability to re-list the matter before O’Ryan J. on 3 days notice if they object to the form of that letter.

   7.      That within 14 days the parties for which Mr Simpson appears shall serve on the wife and the husband a Statement of Claim.

   8.      That the husband shall produce by 10 November 2004 to the wife and the parties for which Mr Simpson appears a document which contains an outline of the husband’s contentions as to the claim of those parties relating to the [A] project.

   9.      That the matter be adjourned to 9.30 am on Friday 12 November 2004.

   10.     That a copy of these directions be sent to all of the persons/entities listed in Order 1 of the wife’s amended application and that those persons/entities shall appear on 12 November 2004 if they wish to participate in these proceedings.

3. On 12 November 2004 I made an order that by 4.00 pm on 26 November 2004 the Husband provide the Wife and her lawyers with particulars of his proposal in respect of the refinancing of the Macquarie Bank facility which was due by April 2005.  On 15 November 2004 the Husband’s solicitors sent a facsimile to the Wife’s solicitors in which it was stated that the Macquarie Bank would require repayment of the loan facility in April 2005. 

4. On 15 November 2004 the Husband filed an amended response.   On 19 November 2004 the Wife filed an application seeking injunctions.

5. On 25 November 2004 I made the following orders:

   2.      That the Husband and the Wife do all acts and things necessary to prepare the Income Tax Returns and other Financial and Statutory Returns necessary for each of the parties, [N] Pty Limited, [N] Pty Limited Superannuation Fund and any other entity for which such returns are usually prepared for the years ended 30 June 2002, 30 June 2003 and 30 June 2004.

   3.      That the Husband, […], is hereby restrained from entering into any agreement purporting to deal with, in any way, his interest in the [A] Development site or the property known as [W], or to confer any right, present or future in relation to the said properties or any development thereof, or to compromise, vary or deal with the rights, contractual or otherwise of each of the persons and corporations named in paragraph 1 of annexure “A” to the Wife’s amended application filed in proceedings No. SY2674 of 2004 in the Family Court of Australia without first having given 14 days notice in writing to the solicitor for the Wife (specifying the nature and comprehensive particulars of the proposed transaction, including providing a copy of any relevant agreement or instrument).

6. In a letter dated 22 November 2004 from Macquarie Bank to the Husband it was said that the facility expired in April 2005 and “to enable the progression of these projects to a development phase we advise MACQUARIE BANK LTD would consider assisting with funding and expanding the existing facility term subject to the necessary due diligence as to project feasibility and satisfactory customer ([N]/[F] Properties) assessment”.  In the letter it was also said “…we understand you have a joint venture agreement with [F] Properties Pty Ltd to participate in these developments”.  The Wife was not advised about this joint venture.

7. On 9 December 2004 the Wife’s solicitors wrote to the Husband’s solicitors and said:

   There are obviously inaccuracies in either the representations your client has made to Macquarie Bank or the correspondence from Macquarie Bank, given the reference in their letter to a joint venture agreement.  We had understood that there was no joint venture agreement in place.  Please confirm in writing whether or not this is correct.

   In the present situation our client could not agree to an extension of a Macquarie Bank facility.  Neither can she wait any longer for your client to come up with a viable alternative to sale.

8. On 14 December 2004 the Husband’s solicitors wrote to the Wife’s solicitors and said:

   The fact is that our client proposes to proceed in the usual way to obtain an extension of the term of the current Macquarie Bank facility. 

   …..

   Our client is not aware of any call up of the loan nor (as you will see from Macquarie’s letter) is there any suggestion that the loan will not “rollover” as it has done previously.  The fact is that since the loan was last extended the property has increased its core value by way of the gazettal. 

   We also confirm our statement to Mr Burreket at Court that there is no other agreement, joint venture or otherwise between our client and [F] other than contained in the documents which were the subject of your client’s last application.

9. On 19 January 2005 the Wife filed an application seeking the sale of the properties which comprise the A Development site. 

10. On 4 February 2005 the Husband’s solicitors wrote to the Wife’s solicitors and said that “the only documents supplied to Macquarie was a copy of the [F] agreement which you have and that was submitted not in connection with the extended term application but in connection with the proposed future facility which would commence after settlement with [the Wife]”. 

11. The Husband was seeking the Wife’s agreement for a refinancing of the existing facility with Macquarie Bank together with an amount to meet the capitalisation of interest and an amount to cover future expenses.  He was not seeking the Wife’s agreement to borrow any further amounts which may be expended on ultimate development of the site.

12. An amended response was filed on behalf of the Husband on 11 March 2005.  The Husband sought that the Wife transfer her interest in the A Development site to him and he transfer his interest in a property at W to the Wife.  The Husband also sought that the parties effect a distribution of the assets of the N Pty Ltd Superannuation Fund as to 72/100^th to the Husband and 28/100^th to the Wife in satisfaction of the respective vested entitlements in the fund.  The Husband also proposed that upon distribution of the assets of the superannuation fund he pay $353,125 to the Wife and the Wife transfer to him her interest in Y properties.  The only assets of the superannuation fund are the Y properties. 

13. On 22 March 2005 I made the following orders:

    1.      By 23 April 2005 the husband and the wife do all acts and things and execute all deeds, documents, instruments and writings including as directors as [N] Pty Ltd necessary to refinance by extension of the existing facility or otherwise the Macquarie Bank Limited multiple advance facility for approximately $4,650,000 which is currently secured on the titles of [W]; [AP1], [BP1]; and [BP2] for a further term of 12 months or such further term as the parties may agree upon in writing and further borrow an additional amount as is necessary to pay the interest on the extended or further facility on a capitalised basis and the sum of $100,000 to pay holding costs in relation to the real estate which is described as the [A] Development or [PA].

    2.      The parties have liberty to apply in relation to the implementation of Order 1.

    3.      The Application filed on behalf of the wife on 19 January 2005 be dismissed.

    4.      The Response filed on behalf of the husband on 1 March 2005 as amended on 10 March 2005 be dismissed.

    5.      The husband file and serve by 4.00 pm on 31 March 2005 an Amended Response for a final property settlement order.

14. In my reasons for judgment I said that

    65     I accept that the husband genuinely seeks to retain the property and continue with the development.  The most significant matter therefore, in my view, which militates against a sale at this time is that to so order would defeat the final orders sought by the husband.  For this reason I am not going to make the orders sought by the wife.  It may be different if it was readily apparent that the property had to be sold at this time or may ultimately have to be sold.  However, in my view, at this stage, having regard to the respective contentions as to the net value of the assets it may be that the husband is able to retain the development as part of his entitlement even if the wife ultimately receives an entitlement of a value equal to one half of the value of the net assets of the parties.”

    …

    77     I have come to the conclusion that the only appropriate option in this case, at this time, is to order a refinancing of the existing facility with capitalised interest and an amount of $100,000 to cover holding costs.  This will probably require a borrowing of about $5,500,000 or perhaps more.

    78     This will enable the status quo to be maintained in relation to the assets of the parties pending the resolution of the Family Law proceedings.  The husband cannot complain because the refinancing would have to occur even if the properties were transferred to him.  The wife, in my view, has the comfort of knowing that all assets are preserved pending the determination of the Family Law proceedings.  Insofar as the wife complains about the additional cost she must have known that there would be a delay in the finalisation of the Family Law proceedings having regard to the claims made by the investors.  Further, she can always argue at the final hearing that the husband by his actions or inaction caused financial waste which is relevant to assessment of the respective ultimate entitlements.  Even with the additional costs the parties have very significant equity in their assets whichever values are adopted. 

    79     Given the absence of an agreement between the parties, in my opinion, the option of refinancing is the only just and appropriate outcome at this time.  It may have to be reviewed if there is a significant delay in the resolution of the Family Law proceedings or if other relevant events intervene.

15. For the purposes of the proceedings in the Supreme Court L prepared a valuation report dated 20 March 2006 of the properties that comprise the A Development site.  The site was described as a very large irregular shaped development site comprising six individual properties over six titles.  The basis of the valuation was “As is” site value without development application consent.  On this basis it was valued at $20,000,000.  It included ARP.  It is not entirely clear but I believe that the Husband contended that if ARP was excluded then the value is $18,000,000.  In the report the valuer set out a value of each lot comprising the site but noted that the values of each lot represented an apportionment of the overall “englobo site value” and said that if these values are to be assessed on an individual basis a different value of each lot “will result.”  The amount apportioned to AP2 was $9,566,577.12 and the amount apportioned to AP3 was $2,251,714.

16. On 6 April 2006 I made the following orders:

    1.      The husband file and serve by 4.00 pm on Wednesday 19 April 2006 an application for partial property settlement together with any affidavits in support of that application.

    2.      The matter be listed for mention before me at 2.15 pm on 21 April 2006.

17. On 19 April 2006 the Husband filed an application and material in support.  On 21 April 2006 I made the following orders:

    1.      The parties have liberty to arrange with my Associate a hearing date of the application filed on behalf of the husband on 19 April 2006.

    2.      In relation to the application referred to in the preceding Order the wife file and serve within 28 days a response to the said application together with any affidavit material in support of that response.

    3.      The husband file and serve within 28 days a financial statement in accordance with the Family Law Rules.

    4.      In the event that the parties are able within the next seven days to settle the proceedings commenced by the application referred to in Order 1 hereof then the parties may lodge with my Associate a Minute of the Consent Order which will be dealt with in chambers.

    5.      As to the applications for final orders the proceedings are adjourned generally with a liberty to restore by arrangement with my Associate.

18. In April 2006 the Wife agreed to a further re-finance/extension to April 2007 of the Macquarie Bank facility.  The Wife contended that the debt owed to Macquarie Bank at April 2007 will have increased from $4,500,000 to $6,040,000 or more than $1,500,000.  The Wife contended, and I agree, that she has done everything necessary to extend the Macquarie Bank facility.

19. On 2 June 2006 the Wife filed a response and material in support.

20. On 11 September 2006 the Husband filed a Financial Statement and a further affidavit.

21. On 12 September 2006 the following orders were made by consent:

    1.      The parties forthwith shall do all acts and things and sign all documents necessary to jointly apply to the Macquarie Bank Limited, and/or such other institution as the Husband and the Wife may agree to in writing, for such sum as is necessary having regard to the capitalization of interest on the following terms:

    1.1     interest to be capitalised;

    1.2     for a term of 12 months;

    1.3     the funds to be held in 3 categories;

    1.3.1$400,000 for the Wife’s legal costs;

    1.3.2$400,000 for the Husband’s legal costs;

    1.3.3interest;

    1.4that the property known as [AP2] be offered as security.

    2.      The Husband and the Wife shall each be restrained from drawing down on the funds allocated in 1.3.1 and 1.3.2 other than to directly pay a sum:

    2.1to a lawyer on the record and/or counsel instructed by lawyers for legal costs directly related to:

    2.1.1these proceedings;

    2.1.2the Supreme Court proceedings brought by the investors; and

    2.1.3the District Court proceedings brought by ANZ Capel Court.

    2.2to an expert in relation to work directly related to the proceedings referred to above, providing the same has first been approved by that party’s lawyer as being directly related to those proceedings.

    3.      Within 24 hours of any draw down pursuant to Order 2, the lawyers for the party so drawing funds shall submit to the other party’s lawyers details of the amount drawn, the payee and the proceedings to which the amount relates.

    4.      The parties do all acts and things and sign all documents necessary to obtain the advance referred to in Order 1.

    5.      The parties shall do all acts and things and sign all documents necessary to sell the property known as and situate at [MA] being the whole of the land comprised within Certificate of Title […]  (“[…]”) to [Mr H] and [Ms H] for the sum of $69,000 on the basis that any deposit paid pending settlement is invested unless the Husband or the Wife otherwise agree.

    6.      On settlement of the same of Lot 3 the parties shall do all acts and things and sign all documents necessary to pay the proceeds of sale in the following manner and priority:

    6.1agent’s commission;

    6.2in payment of the legal costs of the sale of $1,100 incl. GST plus disbursement to [Mr Z];

    6.3the remainder, to a controlled monies account opened by Broun Abrahams Burreket (“the control account”).

    7.      The Husband and the Wife do all acts and things and sign all documents necessary to pay the $41,603.95 cheque drawn on [L] to the control account to be drawn upon on the joint instructions of the parties.

    8.      The Husband and the Wife be restrained from drawing on the control account without the joint written approval of both of them.

    9.      The matters remaining in the Applications of 19 April 2006 and 2 June 2006 be listed for hearing by arrangement with my Associate.  [14 December 2006]

    10.     The Wife’s costs of and incidental to the proceedings today be reserved.

    11.     The Husband within 21 days serve on the Wife’s lawyers a schedule of the payments the Husband contends he has made which are enumerated in Exhibit JWN2 to his affidavit of 8 September 2006.

    In summary, for present purposes the parties were ordered to apply jointly to the Macquarie Bank for a loan of $800,000 to pay their legal costs.

22. The Wife contended that despite the above orders no loan approval that met with the requirements of the orders was available until January 2007.  The Wife contended that in the intervening period the Husband obtained from B Commercial several loan proposals that he asked her to accept and which did not meet with the express requirements of the orders.

23. On 23 October 2006 the proceedings commenced by the Investors in the Supreme Court of New South Wales, for the return of funds, plus interest which they had invested were settled on the basis that the Husband, the Wife and [N] Pty Ltd would pay the Investors, the sum of $1,600,000 inclusive of costs.  It was also agreed that the payment to the Investors would be made by 23 April 2007.

24. On 24 October 2006, by consent, orders were made varying some parts of the orders made on 12 September 2006.  Order 1.3.3 was varied by the insertion of “$1,600,000 to satisfy the obligation in the Supreme Court Settlement”.  Order 2 was amended by the insertion of Order 2.3 “to satisfy an obligation pursuant to the Supreme Court Settlement”.  I noted that contemporaneously with the execution of short minutes the parties entered into orders as defendants to proceedings in the Equity Division of the Supreme Court which determined the interests of certain investors.  I also noted that the parties had agreed in the Supreme Court settlement to pay the Investors the sum of $1,600,000 in six months and the purpose of the amendment was to enable monies to be obtained so that payment could be made within that time.  I also noted that the Wife sought that the advance be for a term of two years and the Husband insisted on five years.  Further, that the Husband was on notice that, notwithstanding the five year term of the advance, the Wife may seek orders that the debt be repaid and the relevant security obligations discharged promptly after the making of a final property order and that any costs associated with an early repayment of the loan that might otherwise have been avoided are paid by the Husband.

25. In summary, on 24 October 2006 the orders made on 12 September 2006, by which the parties were directed to forthwith apply jointly to Macquarie Bank, or such other bank as they agreed upon, for a loan of $800,000, to pay their legal costs, were varied to increase the loan by the sum of $1,600,000 which was the amount due to the Investors by 23 April 2007.  The Husband contended that he negotiated delayed payment arrangements so that payment to the Investors and the “rollover” of the Macquarie Bank facility both occur at the same time.

1. On behalf of the Husband it was submitted that the effect of the settlement of the Investors proceedings was that, because the Investors had caveats on AP2 and AP3 which the Investors asserted supported an entitlement under the loan agreements between the parties and the Investors, the “securities” were freed up, and became available to be used as security for further borrowings if those borrowings became necessary.

2. The Husband contended that in October 2006 he was assured by representatives of both Macquarie Bank and Balmain Commercial that the properties at AP2 and AP3 would be sufficient security to secure the increased advance.

3. On 2 November 2006 I made the following orders:

   1.The parties do all acts and things and sign all documents and authorities necessary to ensure that Order 3.5(c) made on 20 September 2004 be complied with prior to 4.00 pm on 8 December 2006.

   2.Each of the Husband and the Wife file and serve by 4.00 pm on 28 February 2007 an affidavit setting out his/her evidence in chief and an affidavit setting out the evidence in chief of each lay witness each party proposes to call at the hearing.

   3.Each of the Husband and the wife file and serve by 4.00 pm on 28 February 2007 a financial statement in accordance with the Family Law Rules.

   4.The parties do all acts and things and execute all authorities and documents to implement Orders 3.1, 3.2, 3.3 and 3.5 made on 20 September 2004.

   5.The parties lodge with my Associate by 4.00 pm on 13 December 2006 a draft Joint Statement of Assets and Liabilities.

4. On 22 November 2006 I made the following orders:

   1.Within seven days the Husband file and serve an amended interim application.

   2.Within seven days thereafter the Wife file and serve any amended response.

   3.Pursuant to r 15.45 Family Law Rules (2004):

   3.1     [WW], valuer, be appointed as single expert witness as to the market value of [Y Properties].

   3.2     Letter of instruction be in the form as is relevantly attached to Orders made 20 September 2004.

   4.Within seven days the Wife deliver to [Ms D] all documents in her possession or control identified in the letter of [Ms D] dated 21 November 2006 and identify to Husband’s solicitor in writing the items that are not in the Wife’s possession or control and if known where they may be located.

   5.It be NOTED that the documents required by the preceding Order are only those necessary to enable the preparation and filing of income tax returns for the [N] Pty Ltd Superannuation Fund for the financial years ended 30 June 2002 to 30 June 2006 inclusive.

   6.It be NOTED that the Husband opposes the appointment of [WW] as the single expert in relation to the value of the properties in [Y] and he contends that there is a prospective purchaser who is prepared to pay an amount of $1,350,000 which represents the current market value.

5. Both parties signed a letter dated 22 November 2006 addressed to Balmain Commercial making application for a loan facility for $2,400,000 plus an amount for estimated interest.  The security offered was a registered mortgage over [AP2].  This was done to implement the orders made on 12 September 2006 and 24 October 2006 and the parties agreed, as the orders contemplated, that they may seek finance from an institution other than the Macquarie Bank.

6. On 1 December 2006 an amended application was filed by the Husband and on 8 December 2006 an amended Response was filed by the Wife.  I heard these applications on 14 December 2006.  There were seven issues I had to deal with namely:

   ·First, the Husband sought the sale of the Y properties owned by the N Superannuation Fund and the distribution to the parties of their interests in the Fund.

   ·Second, the Husband sought that the Wife do all acts and things necessary to prepare the income tax returns and other financial and statutory returns necessary for each of the parties, N Pty Limited, N Pty Limited Superannuation Fund and any other entity for which such returns are usually prepared for the years ended 30 June 2002; 30 June 2003, 30 June 2004, 30 June 2005 and 30 June 2006.

   ·Third, the Husband sought that an order made on 24 October 2006 be varied to include the costs of proceedings commenced by the Husband in the Supreme Court of New South Wales against Mr E and others.

   ·Fourth, the Husband sought what he contended were reimbursements of payments made by him for the joint benefit of the parties.

   ·Fifth, the Wife sought that various payments be made for what I described as holding costs.

·Sixth, the Wife sought that the A Development site be sold.

·Seventh, the Wife sought that the parties give instructions to a single expert accountant to provide a report in relation to the N Superannuation Fund.

1. The Wife contended that in early December 2006 she asked the Husband to make a fresh approach to Macquarie Bank for legal fees and he refused.

2. On 22 December 2006 I made the following orders:

   1.The Husband and the Wife do all acts and things necessary to prepare the Income Tax Returns and other Financial and Statutory Returns necessary for each of the parties, [N] Pty Limited, [N] Pty Limited Superannuation Fund and any other entity for which such returns are usually prepared for the years ended 30 June 2002, 30 June 2003 and 30 June 2004, 30 June 2005 and 30 June 2006.

   2.For the purposes of implementation of Order 1 hereof [Ms E], the Single Expert Accountant forthwith be jointly instructed by both the Husband and the Wife to consider the necessity and reasonableness of all requests for information and documentation made by [Ms E] and to advise the parties accordingly and each of the parties shall provide all such information and documents that [Ms E] advises is required.

   3.Pending further order each of the Husband and the Wife pay one half of the fees and expenses of [Ms E].

   4.Order 2.1 of 24 October 2006 be varied by the inclusion of the following: “2.1.4 Proceedings commenced by the Husband in the Supreme Court of New South Wales no 20420/06”.

   5.The Husband and the Wife do all acts and things necessary to jointly instruct [Ms E] the Single Accountant Expert to prepare a report in relation to the following matters:

   5.1Whether the [N] Pty Ltd Superannuation Fund is a complying superannuation fund.

   5.2If not, what would need to be done to make the said superannuation fund a complying superannuation fund.

   5.3What are the respective entitlements of each of the Husband and Wife in the said superannuation fund and how were such entitlements arrived at.

   6.The amended Application filed on 1 December 2006 on behalf of the Husband be dismissed.

   7.The amended Response filed on 8 December 2006 on behalf of the Wife be dismissed.

3. The Husband contended that as a result of my refusal to order a sale of the Y property he “set about getting competitive offers for the whole facility” from both B Commercial and Macquarie Bank.

4. The Husband contended, and it is not disputed, that at this time the parties required loans to pay legal fees of $800,000 and by 22 April 2007 an amount of $1,600,000 to pay the Investors settlement.  As well, the Macquarie Bank facility was due to be paid out or rolled over by 23 April 2007.  The Macquarie Bank facility is in the sum of $5,600,000 plus provision for interest and holding costs. 

5. In mid January 2007 an employee of B Commercial advised the Wife’s solicitors that B Commercial was no longer putting together a loan to pay legal fees and the Investors settlement and had been told by the Husband to discontinue that approach.  Further, the solicitors were told that B Commercial was putting together a much larger facility that included refinancing the Macquarie Bank facility.  The Wife had not given her approval for such an approach.  B Commercial assumed that the Husband had the Wife’s approval.  The solicitors for the Wife then advised B Commercial to proceed with the original loan proposal.  The solicitors for the Wife were advised that once the term of approval was issued then a valuation could be done in a week and the funds made available a few days later.  At no time were the solicitors told that B Commercial had any concern about the suitability of AP2 as security.

6. By letter dated 31 January 2007, which was received on 1 February 2007, B Commercial offered terms of an approval for a facility of $3,100,000 to cover legal costs and the payment to the Investors.  The principal advance was for $2,400,000 and with capitalised interest of $700,000 the total of the loan facility was $3,100,000.  The security for the loan was stated to be AP2.

7. By letter dated 2 February 2007 the solicitors for the Husband wrote to the solicitors for the Wife and advised that the Husband was unable to instruct his solicitors as he was without available funding.  It was also said that the ongoing delay in the Husband’s ability to properly fund and instruct his lawyers would necessitate a variation to the current directions.

8. In an e-mail dated 2 February 2007 from Macquarie Bank there was discussion about a possible loan facility that refinanced the exiting advance and provided funds to pay the parties legal costs and the Investors settlement.  It was submitted that Macquarie Bank have offered to refinance the existing facility, plus provide funding to pay out the Investors, but not to pay legal fees of $800,000, as was ordered by me.  The loan is for $9,140,000.  Macquarie Bank agrees to pay legal fees of $600,000.  However, there is $200,000 not drawn down.  The terms of the offer are an interest rate of 1.95 % above bills and a commitment fee of $30,000, to be drawn from the existing facility.  In addition, it charges a 1% variation fee of the further advance.  That would be an additional $30,000.

9. On 4 February 2007 the Husband wrote to the Wife in relation to his delay in obtaining a loan to pay legal fees and he advised that the reason he did not proceed with the loan in September 2006 for $800,000 was because he considered that the sale of the Y property was a far better way to raise money than borrowing.  As seen, I did not accept the Husband’s application to sell the Y property. 

10. On 5 February 2007 the Wife signed and returned the acceptance section of the Terms of Approval for Loan from B Commercial.

11. On 5 February 2007 the Wife received a letter dated 2 February 2007 from B Commercial in which was enclosed Terms of Approval and Letters of Offer for two loans.  The first loan was for the amount of $3,100,000 identified above and the second was for a facility for $6,900,000 being a principal advance of $5,500,000 and capitalised interest of $1,400,000.  The security was stated to be AP1; BP1 and BP2 and W.

12. On 5 February 2007 the Wife’s solicitors wrote to the Husband’s solicitors and advised that the Wife had signed and returned the Terms of Approval for the B Commercial loan for $3,100,000 and requested that the Husband also do so.  As well, the solicitors referred to the letters received by the Wife on 5 February 2007 from B Commercial about two loans and advised that the Wife did not agree.  It was stated that the Wife was never invited to make an approach to B Commercial about a refinance of the Macquarie Bank facility and that the Husband had sought from B Commercial approvals for facilities without the consent or approval of the Wife.

13. By letter dated 7 February 2007 B Commercial wrote to the parties and it is titled summary-terms of approval.  In this document, notwithstanding what was previously stated, the mortgage amount is said to be $3,100,000 for Loan 1 and $6,900,000 for Loan 2.

14. On 7 February 2007 the solicitors for the Husband wrote to the solicitors for the Wife and advised that the Husband never regarded the agreed orders for borrowing to inhibit his ability to commercially achieve the best outcome and that it “has become clear to” the Husband that “such an outcome involved a global funding arrangement and he has now achieved competitive bids from two lenders”.

15. On 8 February 2007 the solicitors for the Husband sent a facsimile transmission to the solicitors for the Wife.

16. The Husband contended that on 9 February 2007 he sent a letter to the Wife explaining that the value of AP2 would be greatly reduced if it were valued in isolation from the “several lands that give it access.”

17. Then by letter dated 13 February 2007 B Commercial wrote to each of the parties and advised that a second set of documents which the Wife had questioned incorporated the loan approval to pay legal costs and the Investors settlement being described as the first loan and extended the approval to $10M to refinance the Macquarie Bank facility.  In the letter the author gave four reasons for extending the approval and the first was that it is felt that “there is substantial valuation risk in considering lending against BP2 on its own”.  In relation to what is said in this letter the Wife made a number of responses.  The Wife contended that B Commercial are backtracking from the proposal to lend $3,100,000 as a stand alone proposition.  I agree.  Next, the Wife contended that the letter of 13 February 2007 from B Commercial responds to a letter sent by her solicitors to the solicitors for the Husband.

18. On 15 February 2007, in an email to the Husband, Macquarie Bank indicated that to extend the term of its facility, that is of the $6,000,000 facility beyond 24 April 2007, “further security would most likely be required”.

19. On 15 February 2007 B Commercial wrote to the parties and set out what were described as “further thoughts on the valuation issues”.

20. By facsimile transmission dated 19 February 2007 Macquarie Bank wrote to the parties and advised that it was not prepared to waive its right in relation to Item 23(iv) of the Facility Agreement dated 4 April 2001 as varied on 28 June 2001, 8 May 2003, 19 May 2005 and 20 April 2006.

21. There remains undrawn from the Macquarie Bank facility approximately $200,000.  On 20 February 2007 the Husband provided a further authority to Macquarie Bank to enable drawdown of the remaining funds to pay a joint debt of the parties to the National Australia Bank of $20,000 and approximately $100,000 to the lawyer of each party, on account of legal fees.  On behalf of the Husband it was submitted that those funds should be sufficient to “tide” over the outstanding fees and to enable further preparation of the proceedings given the hearing date of 4 June 2007, for two weeks.

22. Then on 20 February 2007 B Commercial wrote to the parties and confirmed a loan approval of $10,000,000 on the security of AP1, AP2, AP3, BP1, BP2 and W.  On behalf of the Wife it was submitted that the stated purpose of the loan in the loan offer is incorrect and could not be relied upon to support a loan whose purpose is clearly not for that set out in the loan offer.

23. The latest B Commercial proposal made on 20 February 2007 is a loan for $10,000,000 at an interest rate of 1.75% per annum on the 90 day bank bill rate.  The security required is AP1 and AP2, BP1 and BP2 and W whereas the Macquarie Bank facility requires all of those properties plus AP3.

Conclusion

1. The hearing proceed in a truncated way in that neither party was cross-examined.  In the result, there are a number of issues that at present I am unable to resolve.  However, such issues will be addressed at the hearing of the applications for property settlement when the parties are cross examined.

2. The applications for property settlement which commenced in this court in 2002 are now fixed for final hearing in June 2006.  I am only interested in what will happen between now and that hearing. 

3. On behalf of the Husband it was submitted that it is absolutely essential, for preserving the value of the development site, that the development site remain as a whole.  To do otherwise is to destroy its value.  It was submitted that there can be no prejudice to the Wife for the loan facility incorporating the first loan and the Macquarie Bank facility to be provided by the same lender.  Indeed there are significant advantages by way of interest and costs savings.  It was submitted that the Wife has identified no prejudice if the funding is to proceed in the way proposed by the Husband and indeed there are significant advantages.

4. The orders of 12 September 2006 and 24 October 2006 as further amended on 22 December 2006 were specific and provided that the parties apply to the Macquarie Bank, and/or such other institution as the parties may agree to in writing, for such sum as is necessary having regard to the capitalization of interest for a term of 12 months and amount borrowed to be applied as to $400,000 for the Wife’s legal costs; $400,000 for the Husband’s legal costs, and $1,600,000 to pay the Investors.  Further, that AP2 be offered as security.  The parties agreed on another institution and on 22 November 2006 they made an application to B Commercial for a facility on the security of AP2.  B Commercial accepted this application and made an offer to lend an amount of $3,100,000 on the security of AP2 for a term of 30 months and the Wife agreed.  The Wife signed the relevant documentation and returned it to B Commercial.  This facility, if accepted by the Husband, could have been settled within a relatively short time. 

5. The Husband however, changed his mind, perhaps because he was disappointed with what happened on 22 December 2006, and notwithstanding the orders of 12 September 2006 and 24 October 2006 he refused to proceed with the facility asked for and approved and without notice to the Wife made an application to B Commercial for a further facility.  At the request of the Husband B Commercial made an offer of a facility for $6,900,000 on the security of AP1, BP1 AND BP2 and W.  This was to refinance the Macquarie Bank facility that falls due in April 2007.  This is not the subject of any current orders.  It would require Macquarie Bank being offered a right of first refusal.

6. Then, notwithstanding what was clearly provided for in the first B Commercial offer in relation to the facility for $3,100,000 in a letter dated 13 February 2007 B Commercial stated that they are concerned that there is a valuation risk in lending against AP2.  There was no explanation given for the prior representation by Balmain Commercial to the parties that AP2 would be the security.  The parties offered AP2 as security and this was accepted by B Commercial.

7. Then on 20 February 2007 B Commercial advised the parties of approval of a facility for $10,000,000 and there is an issue as to the stated purpose of the facility.  On behalf of the Husband this was referred to as the revised offer.  I also note that the security proposed did not include AP3 and for obvious reasons ARP. 

8. On behalf of the Wife it was submitted that notably in the past Macquarie Bank have not held security over either AP2 or AP3 those properties being the subject of caveats by the Investors, since resolved by the resolution of the Supreme Court proceedings.  The indicative approval from Balmain Commercial, in accordance with what was sought by both Husband and Wife, proposed that the $3,100,000 facility be secured on AP2.  It was submitted that it is extraordinary that having sought the approval on this basis, assumedly acting bona fides, the Husband now contends that the value of this property will not in fact support the facility and he now endeavours to utilise this as a basis for advocating that the Wife’s present application should fail. 

9. The Husband swore an affidavit on 16 February 2007 and he gave what he called his assessment of the security values of the properties.  He contended that it demonstrated that AP2 and AP3 have less value as individual parcels compared to being part of security comprising all properties.  It was submitted that logically, the development land is worth much more as a whole, rather than as a fragmented series of blocks.  This is probably so and is corroborated by the L valuation.  In any event, the Husband contended that the valuation of AP2 taken alone will not be sufficient security for the loan for $3,100,000.  He contended that as separate blocks AP2 has a value of $2,500,000 and AP3 a value of $1,800,000.  As seen, as a portion of the englobo value L put a value of $9,566,577 on AP2 and a value of $2,251,714 on AP3. 

1. On behalf of the Husband it was submitted that the only unencumbered real estate left, once AP2 is taken by B Commercial as security for the $3,100,000 loan, is AP3.  It was submitted that if the Husband’s assessment of AP2 at $2,500,000 and the L valuation of AP3 at a little over $2,000,000 is correct then this gives a security of in the order of $4,000,000 if AP3 is also used.  Even on the Husband’s evidence this would be sufficient security for the facility of $3,100,000.  However, the difficulty is that AP3 represents the “back up security” for the B Commercial loan, and on the face of it would “most likely” be required as additional security to roll over the Macquarie Bank facility.  The Husband said that AP3 cannot he offered as security to B Commercial as it would be required by Macquarie Bank as further security for the April 2007 roll over of the existing facility.

2. In summary, the Husband contends that the B Commercial facility first offered to the parties that was accepted by the Wife and also the B Loan 1 facility can no longer proceed because B Commercial will not accept AP2 alone as security.

3. Submissions were then made about the risks that the parties run, in the event that the security is taken by two separate lenders, as between say B Commercial on the one hand and Macquarie Bank for the rollover on the other.  It was submitted that in the event of a default, and one or other or indeed both seek to exercise their security, the value of the broken down land is far less than the value of the land as a whole.  That is said to demonstrated by AN & Associates comments, and the disquiet which has been expressed by B Commercial about the value of AP3 if it is to be taken as security on its own.  I accept that if the englobo value of the A development site is greater than the sum of the values on an individual basis and there were separate lenders and there was default then the value of the land as a whole may be prejudiced.  However, this assumes that there are risks of default.

4. I will first deal with the valuation issues.  There is no valuation evidence to support the assessments by the Husband and even if he were qualified to do so he gave no evidence explaining how he arrived at the assessments.  I note that in the submissions on behalf of the Husband it was contended that it appears that the Husband for the purposes of establishing a value of $18,000,000, seems to have made an apportionment by multiplying 18/20 by the value ascribed to each parcel of land.

5. Then, and perhaps for obvious reasons, there was annexed to the Submissions of the Husband a copy of a letter dated 21 February 2007 from AN & Associates concerning the valuation of AP2 as a single block rather than being part of a large re-development site.  It was stated that in isolation as a single dwelling home site the value would “represent possibly only 25% of its market when amalgamated with the adjoining land”.  I assume that this might mean that the value could possibly be 25 per cent of $9,566,577 or $2,391,644.  It is very unsatisfactory, amongst other things, because I also have no idea what is the basis of the asserted 25 per cent. 

6. What is troublesome is the application which the Husband made to B Commercial on 22 November 2006 when he obviously accepted that at that time AP2 was sufficient to support the facility of $3,100,000 and yet after the orders of 22 December 2006 he changed this position and estimates that the value is $2,500,000 or approximately 26 per cent of the englobo value.  I observe that in the submissions on behalf of the Husband reference is made to the comments in the letter of 21 February 2007 from AN & Associates and that the Husband in his affidavit of 21 February 2007 said that prior to the settlement with the Investors he had retained and received advise from Mr U about the L valuation.  Thus, the Husband had advice from Mr U before the parties made the application to B Commercial on 22 November 2006.

7. On behalf of the Wife it was submitted that the projections the Husband carried out in his affidavit of 16 February 2007 do not accord with the L valuation and I could place no weight upon his values that are said to be the “believed” Macquarie Bank security value.  In any event the figure that he puts as a separate value for AP2 of $2,500,000 equates to about 26 per cent of the pro rata englobo valuation as opposed to BP1 AND BP2 which on a similar comparison equate to 60 per cent and 55 per cent respectively.  It was submitted that this inconsistent approach is without explanation.  It was submitted that the values said to be sourced from the L valuation are not correct and the Husband’s assessment should be regarded as having absolutely no probative value for present purposes.

8. There are other valuation issues.  On behalf of the Wife it was submitted that if the B Commercial facility was to be taken up it will involve the necessity of a very substantial valuation.  B Commercial propose that for the $10,000,000 facility their principal lender would be content with an update of the L valuation.  It was submitted that for them to take this position there are two fundamental assumptions that they have obviously erroneously taken on board.  The first is that the L valuation was a valuation commissioned by the parties that they would be entitled to have updated.  It was a valuation obtained by the Investors in the Supreme Court proceedings.  It was submitted that it is somewhat naïve to expect that the valuer would take on liability issues to the Husband and the Wife and the mortgagee on the basis of doing a simple update of another valuation they had undertaken for another client.  Next, the assumption is that the L valuation will provide an englobo value of the security properties that B Commercial proposes to take.  The approval of 20 February 2007 lists on the third page the securities they propose to take.  These security properties do not coincide with the properties that were the subject of the englobo valuation of L.  The L valuation included AP3 and ARP neither of which are part of the security that the Balmain Commercial lender will be taking.  The property at ARP is a property that neither of the parties own, but was intended to be available as part of the conglomerate for redevelopment.  The ARP property will not and cannot be offered as security by the Husband and the Wife.  In conclusion, it was submitted that the valuation of the proposed security properties on an englobo basis will be very different to the exercise that L have undertake and undoubtedly be expensive and its preparation will be time consuming.  In reply it was simply said that the B Commercial facility does not involve a substantial valuation.  It was then said that the revised offer of 20 February 2007 indicates that B Commercial will commission a valuation report but the offer of 7 February 2007 contemplates that the L valuation is acceptable notwithstanding that the security is different from the properties valued.  I am struggling with what this means.  According to the terms of the revised offer B Commercial “shall commission a Valuation Report to determine the value of the security properties”.

9. On behalf of the Wife it was submitted that the parties may succeed in achieving the $3,100,000 facility on the security of AP2 and should Macquarie Bank in the future refinancing require more security they will have AP3 available.  It was submitted that it is notable that at least as part of the englobo valuation the L valuation ascribes a value to AP2 of $9,566,577 which gives at least a suggestion that it may be ample to support a facility of $3,100,000.  The difficulty with this approach is that I assume that B Commercial have withdrawn there first offer of $3,100,000 on the security of AP2 and that subject to any enforceable obligation(s) what the Wife seeks can no longer be achieved.

10. In conclusion, I am not prepared to make any findings in relation to the valuation of the various properties on either an englobo basis or otherwise.  There are valuation issues that will have to be addressed at the final hearing.  As well, I do not know what values the proposed lenders would accept as security for any facility.

11. There were then submissions in relation to the benefit to the parties of the exclusion of AP3 from any security.  On behalf of the Husband it was submitted that the benefit to the parties of keeping AP3 out of the security, is that it provides a “back up” for contingencies which may arise and are at this point unforeseen.  Under the Macquarie Bank loan agreement funds may only be drawn for the particular purposes permitted by Macquarie Bank, whereas the B Commercial loan is for more general purposes.  The Wife contended that the restriction to drawing down for particular purposes affords her a measure of protection.  The Husband contended that the B Commercial loan is in joint names and would require the consent of both parties to draw it down.  Given the issues that have arisen from time to time I have no doubt that pending the completion of the property settlement applications any approach that avoids the parties having to reach an agreement should be avoided and thus I prefer the controlled approach of Macquarie Bank.

12. There were then submissions made about the financial advantages of one facility over the other.  Despite the Wife’s objections the approval has been sought over a two and a half year term and I accept that this carries economic consequences  The Husband contended that if the parties accepted the B Commercial proposal instead of the Macquarie Bank proposal they will save about $60,000.  On behalf of the Wife it was submitted that the capitalised interest provision on the substantive part of the facility is $1,930,000 and thus being drawn against the capital advance is at least 18 months of interest that the Wife does not wish to be committed to.  Next, in the event that the facility was paid out after 12 months, at the conclusion of the Family Law proceedings, penalty interest would be incurred as a break fee equating to 45 day’s interest.  This is a sum of about $100,000.

13. It was submitted that the funds proposed will, as a consequence of the terms of the advance, be inadequate because if the parties were to receive $10,370,000 being capitalised interest of $2,100,000; $6,040,000 to refinance Macquarie Bank; $1,600,000 to pay out the Investors and $630,000 to pay legal costs then there will be a shortfall of $370,000.  The shortfall arises before any provision is made for a holding cost budget in relation to the development.  It was accepted that it is implicit in the submissions that if Macquarie Bank were to match the B Commercial proposal pursuant to their Right of First Refusal it would not meet the parties’ needs.

14. So far as the Wife is concerned she seeks to give effect to orders already made by consent on 12 September 2006 and varied on 23 October 2006.  The parties should then deal with Macquarie Bank in relation to the refinancing of the facility in April as they have in the past.  It was submitted that it is neither timely nor otherwise appropriate to me, on an urgent basis, to reconsider the entire bona fides of the approach to which the parties agreed back in September.

15. The Wife’s position is that the $3,100,000 facility, which is the only facility that the parties have jointly applied for, and for which they have already paid an application fee of $5,500, should proceed on the basis that, as indicated by B Commercial it ought within a short time provide funding not only to satisfy the obligation to the Investors, but also ensure the continuation of the necessary legal work to have the case prepared and thus ensure that the hearing dates are held.  This will leave the parties to deal with Macquarie Bank as they have in the past.  The Husband has in the past not only been happy with the Macquarie Bank facility but has actively sought, by application to this court, its continuance.  As I have already said, the difficulty with this approach is that I assume that B Commercial have withdrawn there first offer of $3,100,000 on the security of AP2 and subject to any enforceable obligation(s) what the Wife seeks can no longer be achieved.

16. The situation is very unsatisfactory.  I made orders by consent that have not been complied with.  The Wife did all that she was required to do and given the joint application of the parties, and the initial representations of B Commercial, she was entitled to expect that the orders would be complied with.  However, that may not have been the Husband’s intention given what he said about the orders of 22 December 2006 and what was stated on his behalf in the letter of 7 February 2007 that he never regarded that agreed orders for borrowing inhibited his ability to commercially achieve the best outcome.

17. I accept that the B Commercial proposal of $10,000,000 is not consistent with the wishes of the Wife, nor achieves the obligations of the parties pursuant to the orders.  It has never been part of an application that the Wife consented to. 

18. I have come to the conclusion that the applications of both parties will be dismissed.  I accept that there is no cogent reason that emerges from the material that should cause the me to exercise a discretion to depart from that which the parties have previously agreed and embodied in consent orders. 

19. That means that given the absence of agreement as to another “institution” the parties are obliged pursuant to the terms of the previous orders to make an application to Macquarie Bank for amounts to satisfy the requirements of the orders of 12 September 2006 and 24 October 2006.  Then they will shortly have to deal with Macquarie Bank in relation to the facility that falls due in April 2007.  I assume that they will do what they have done in the past namely seek a variation of the Macquarie Bank facility.  The parties are in a position to offer significant security to Macquarie Bank give the availability of AP2 and AP3.

20. As I earlier recorded, on behalf of the Wife it was submitted that the orders made on 12 September 2006 and varied by consent on 23 October 2006 are interim orders pursuant to s 79 Family Law Act 1975 (Cth). It was submitted that the adjustment of interests is made plain by the provision and release of $400,000 to each party. Once it is accepted that the orders comprise partial orders pursuant to s 79 then there is an issue as to a jurisdictional basis for the Husband’s present application which comprises an application for variation. It was submitted that it is trite that such an order can only be varied pursuant to s 79A, or on appeal and that no ground is sought to be made or established to satisfy any of the threshold limbs posed by s 79A. These submissions were not replied to by the Husband. The submissions are important and may have some merit. However, as it transpires I do not have to deal with the issues raised.

21. On behalf of the Husband it was submitted that given the delay he seeks that the timetable for the filing of affidavits and expert evidence be extended from 28 February 2007 until 30 April 2007.  On behalf of the Wife it was submitted that the Husband, is already asserting that he cannot, by reason of the lack of funding for his lawyers, comply with the existing directions.  On behalf of the Wife it was submitted that the Husband’s own actions, namely the failure/refusal to proceed with that which he previously agreed to do in obtaining the funding for $3,100,000 is what keeps his lawyers out of funds.  He suggests as a ‘bandaid’ that Macquarie Bank may now release $220,000.  The willingness of Macquarie Bank to do so is not demonstrated.  They may do so, but, in any event that sum is no panacea.  In all the circumstances, on the evidence presently available to me, I am not prepared to vary the existing orders. 

I certify that the preceding 111 paragraphs are
a true copy of the reasons for judgment
of the Honourable Justice O’Ryan

………………………………………………………..
Acting Associate: 
Date: 6 March 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as NORTH & NORTH