OBERTI & OBERTI
[2018] FamCA 851
•28 September 2018
FAMILY COURT OF AUSTRALIA
| OBERTI & OBERTI | [2018] FamCA 851 |
| FAMILY LAW – PROPERTY – Interim – Whether to Sell or lease properties owned by the parties – Distribution of funds – Where the parties have significant mortgages attached to the properties – Where each party deposes to have no income – Whether just and equitable. |
| Dinci & Smith [2012] FamCA 840 Marchant & Marchant [2012] FamCAFC 181 Strahan v Strahan (Interim Property Orders) (2009) 241 FLR 1 |
| Family Law Act 1975 (Cth) |
| APPLICANT: | Ms Oberti |
| RESPONDENT: | Mr Oberti |
| FILE NUMBER: | SYC | 1498 | of | 2017 |
| DATE DELIVERED: | 28 September 2018 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 31 July 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Fowler |
| SOLICITOR FOR THE APPLICANT: | One Group Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Stubbs |
| SOLICITOR FOR THE RESPONDENT: | Harris Friedman Lawyers |
ORDERS PENDING FURTHER ORDER
Both parties are to join in the sale of their Suburb B properties owned by then so as to achieve a sale at an agreed sale price through an agreed real estate agent.
Upon sales of the Suburb B properties being completed the parties are to cause all of the available sale proceeds to be applied as follows:
(a)To meet sale expenses including real estate agents commission, if any, and legal costs of the sale;
(b)To reduce or discharge the joint debt due to C Bank secured against the title to the Suburb B properties or any other property owned by the parties;
(c)To pay any sum remaining to the joint account created by order (4) hereof.
The wife, subject to order (4) hereof, cause the parties’ funds currently standing to the credit of the wife’s brother’s bank account, into which the wife deposited funds drawn by her from their C Bank loan accounts at the time of separation, to be paid as follows:
(i)To each of the parties a sum of $50,000. The characterisation of that payment to be determined by the trial judge.
(ii)To such other purpose as the parties may agree in writing from time to time.
Having made the payments required by order (3) hereof, the wife is to cause the balance of the parties’ funds identified in order (3) hereof, to be paid to a bank account established by her, in a bank of her choice, where such account is to stand in the joint names of the parties and with the stipulation that no withdrawal can be made from the account without each party’s signature on any required withdrawal document. The wife is not required to comply with this order until there has been an agreement reached with the husband about the amount to be paid to her from the account on a weekly basis as required by order (5) hereof.
The parties are to cause to be paid to the wife a weekly sum from the account established by order (3) hereof, such sum is to be agreed to by the parties and to be sufficient to meet the reasonable living expenses for the wife and the children. The characterisation of that payment to be determined by the trial judge.
In the event of the parties being unable to agree on the sum to be paid to wife on a weekly basis pursuant to order (5) hereof then either may apply to the court on short notice for a determination of the dispute with each party being at risk as to costs.
Before any further listing of the matter to determine a dispute between them each party is to exchange an offer of compromise in writing and be in a position to produce same for the purpose of the court determining any application for costs.
In the event of any dispute arising about the sale of the Suburb B properties, as required by these orders, either party may apply to the court for any order which may be required to enable a speedy sale of the properties, including an application for the appointment of either party, or another, as trustee for sale. Each party is at risk as to costs in relation to any such listing.
Otherwise each party has leave to relist the matter at any time prior to final hearing in the event of an order being required. Any such listing will be at each party’s risk as to costs.
Otherwise each party’s application for orders as contained in exhibits W1 and H1 is dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Oberti & Oberti has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: SYC 1498 of 2017
| Ms Oberti |
Applicant
And
| Mr Oberti |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the court is an Application in a Case filed by the applicant wife, Ms Oberti, on 8 March 2018, seeking interim property orders. The application is opposed by the husband, Mr Oberti. He filed a Response to the Application in a Case on 24 April 2018.
On 31 July 2018, when the matter was before me, the parties reached the following consent orders, which were marked as Exhibit “A” and made by me at the hearing:
Consent orders
1.That pending further order, the parties are hereby injuncted from withdrawing any funds from the [C Bank] Portfolio Loans #16 and #67 (Loan Accounts) and from the account to be established pursuant to Order 10.
2.That within 24 hours, each party is to sign all documents and do all things necessary to direct [C Bank] Limited to cause the Loan Accounts to require the signature of both parties to withdraw or transfer monies from the Loan Accounts.
3.That the wife have exclusive occupation of the property known as D Street, Suburb E in the state of New South Wales being the whole of the land in folio identifier … (Matrimonial Property).
4.That within 14 days the wife shall provide to the husband the names of 3 real estate valuers and within 7 days of the provision of the said 3 real estate valuers, the husband shall choose one of the real estate valuers and advise in writing which one he has nominated. In the event that the husband fails to nominate a valuer in the time period then the wife shall choose a valuer from one of the named valuers and that valuer shall be the single expert.
5. Upon nomination pursuant to order 4, the parties shall instruct the nominated valuer as a single expert pursuant to Division 15.5.2 of the Family Law Rules to prepare a valuation.
a. The Matrimonial Property;
b. The property known as [F Street, Suburb G] in the state of New South Wales; and
c. The properties known as [H Street Suburb B] in the state of New South Wales being the whole of the land in folio identifier … ([Suburb B] Properties) in the event that an order is not made for their sale.
6.That within 7 days, the husband is to provide the wife’s solicitor the following documents in relation to [J] Pty Ltd CAN … and [K] Pty Ltd CAN … (the Companies).
a. Financial Statements including balance sheets and profit and loss statements for the last 3 financial years;
b. The most recently available depreciation schedule;
c. The Income Tax Returns and Assessment for the last 3 financial years;
d. Business Activity Statements since the date of the last available Income Tax Return for the Companies; and
e. Any contract for sale of business, transfers, all correspondence and any other relevant documents relating to the resignation and/or sale by the husband of his interest in ]K] Pty Ltd CAN … referred to in paragraph 4 of the Affidavit of the husband filed 7 May 2018.
7.That within 14 days of receiving the husband’s financial disclosure referred to in Order 6 above, the wife shall advise the husband’s solicitors whether she requires either of the companies to be valued in which event, the wife will simultaneously provide the names of 3 business valuers and within 7 days of the provision of the said business valuers, the husband shall choose one of the business valuers and advise in writing which one he has nominated. In the event that the husband fails to nominate a business valuer in the time period then the wife shall choose a valuer from one of the named business valuers and that valuer shall be the single expert.
8.Upon nomination pursuant to order 7, the parties shall instruct the nominated business valuer as a single expert pursuant to Division 15.5.2 of the Family Law Rules to prepare a business valuation of [J] Pty Ltd CAN … and [K] Pty Ltd CAN ...
9.The parties shall meet the costs of the valuations obtained pursuant to Order 4 and 5 equally.
10.That within 7 days the parties do all things required to establish an account in the joint names of the parties with [C Bank] Ltd for the purpose of receiving any money ordered to be paid in by this Court, and to direct [C Bank] to transfer periodically from that account the minimum payments required to me made to the Loan Accounts, with such account to require the signatures of both parties for all transactions.
The applicant wife sought the following orders at the hearing, by a minute of order which was marked as exhibit W1:
1.The wife is appointed trustee to lease the [Suburb G] Property at market value rent and the rent received from the [Suburb G] Property shall vest in the wife as trustee for the wife to pay such rent as follows:
i.Payment of real estate/managing agent’s commission;
ii.Payment of council rates, water rates and land tax; and
iii.The balance to be paid into the parties Loan Accounts.
2.The wife is appointed trustee for the sale of the properties known as [H Street, Suburb B] in the State of New South Wales being the whole of the land in folio identifier … and [H Street, Suburb B] in the state of New South Wales being the whole of the land in folio identifier … (Suburb B Properties) at the best reasonable price obtainable for such purpose, and the said proceeds of the [Suburb B] Property shall vest in the wife as trustee for sale and that upon the sale, the wife distribute the proceeds of sale in the following order and priority:
i.Payment of real estate agent’s commission and legal fees associated with the sale of the [Suburb B] Properties;
ii.Payment of any outstanding water rates, council rates and land tax;
iii.Payment of any capital gains tax owing in respect of the [Suburb B] Properties; and
iv.The balance to be paid into the parties C Bank Portfolio Loans … and … (Loan Accounts).
3.That pending sale of the [Suburb B] Properties in accordance with Order 2, the parties do all things necessary to cause all rental income from these properties to be paid into the parties Loan Accounts.
4.In the event that the Court does not make order 2 then the parties do all things necessary to cause all rental income from the [Suburb B] Properties to be paid into the parties Loan Accounts and to cause those properties to be continued to rented out at the best rent reasonable obtainable.
5.That within 14 days from the date of these orders, the wife is to cause the monies held in the Commonwealth Bank Account of [Mr L] being account #76, to be paid as follows:
i.$100,000.00 to the Wife, to be categorised by the trial Judge;
ii.$70,000.00 to the Wife for legal costs to be paid directly into her solicitor’s trust account;
iii.$70,000 to the Husband for legal costs to be paid directly into his solicitors trust account; and
iv.The balance into an account to be established by the parties in their joint names for the purposes of meeting periodic payments required to be made at the minimum rate on the Loan Accounts.
6.Each party do all acts and things and sign all necessary documents in a timely manner to give effect to these Orders.
7.That if either party refuses or neglects to sign any document required to be signed to comply with these orders then the Register of this Court is appointed pursuant to s106A to execute any document in the name of such party and to do any act required or contemplated by these Orders.
8.That the parties do all acts and things and sign all documents required to cause the following outgoings to be paid from the account referred to in order 5(iv) as and when they fall due:
i.Rates and levies payable on the [Suburb B] properties; and
ii.Rates and insurance premiums payable on the property at [D Street, Suburb E].
The husband sought the following orders at the hearing, pursuant to his minute of order which was marked as Exhibit H1.
ORDERS SOUGHT BY THE RESPONDENT HUSBAND
1.Subject to these orders and pending further order, the parties are hereby injuncted from withdrawing any funds from the parties’ Loan Accounts.
2.That within 24 hours, each party is to sign all documents and do all things necessary to direct [C Bank] Limited to cause the parties’ Loan Accounts to require the signature of both parties to withdraw or transfer monies from the Loan Accounts.
3.Within 14 days from the date of these orders, the wife is to cause the monies held in the Commonwealth Bank Account of [Mr L] being account #76, to be paid into the parties’ Loan Accounts.
4.Within 7 days from the date of compliance with Order 3, both parties do all acts and things and sign all documents including directions to pay required, to pay the following sums from the parties’ Loan Accounts:
4.1$100,000 to the Applicant, to be paid into the Trust Account of One Group Legal Pty Limited; and
4.2$100,000 to the Respondent, to be paid into the Trust Account of Harris Freidman Lawyers.
5.That the payments pursuant to Order 4 be categorized by the trial Judge at the final hearing.
6.That the wife have exclusive occupation of the property known as [D Street, Suburb E] in the State of New South Wales being the whole of the land in folio identified … (Matrimonial Property).
7.That pending further Order, the husband be solely entitled to receive all rental income for the properties situated at and known as –
7.1[F Street, Suburb G] in the State of New South Wales being the whole of the land in folio identifier 6/209834 ([Suburb G] Property); and
7.2[H Street, Suburb B] in the State of New South Wales being the whole of the land in folio identifier … and [H Street, Suburb B] in the state of New South Wales being the whole of the land in folio identifier … (Suburb B Properties).
8.That the monies received by the husband pursuant to Order 7 be categorized by the trial Judge at the final hearing.
9.That within 14 days the wife provide to the husband the names of 3 real estate valuers and within 7 days of the provision of the said names, the husband choose one of the real estate valuers and advise in writing which one he has chosen. In the event that the husband fails to choose a valuer in the time period then the wife choose a valuer from one of the named valuers and that valuer shall be the single expert.
10.Upon the nomination pursuant to Order 9, the parties jointly instruct the nominated valuer to prepare a valuation of:
10.1the Matrimonial Property;
10.2the [Suburb G] Property; and
10.3The [Suburb B] Properties.
11.That within 14 days the wife shall provide to the husband the names of 3 business valuers and within 7 days of the names the husband choose one of the business valuers and advise in writing which one he has chosen. In the event that the husband fails to choose a business valuer in the time period then the wife shall choose a valuer from one of the named business valuers and that valuer shall be the single expert.
12.Upon the nomination pursuant to Order 11, the parties jointly instruct the nominated business valuer to prepare a business valuation of:
12.1J Pty Ltd ACN …; and
12.2K Pty Ltd ACN ….
13.The parties meet the costs of the valuations obtained pursuant to Orders 10 and 12 equally.
Orders 1, 6, 9, 10, 11, 12, and 13 of Exhibit H1 were made by consent on the day of the hearing.
Issues for Determination
The issues to be determined are as follows:
a)The sale or leasing of F Street, Suburb G;
b)The sale or leasing of the 2 Suburb B home units;
c)The application of the money (about $382,000 left of $600,000) held in an account in the name of the wife’s brother, Mr L.
Background
The husband was born in 1965 and is 53 years of age. The wife was born in 1974 and is 44 years of age. The parties married in 1995 and separation occurred in June 2016. There are four children of the marriage. They are aged 18, 16, 12 and 8.
In 2003 the parties acquired the former matrimonial home at D Street, Suburb E.
In June 2008 the properties at H Street, Suburb B were acquired. These are units numbered 1 and 2.
In 2011 the property at F Street, Suburb G was acquired.
On 18 July 2016 (the day after separation) the wife withdrew $300,000 from the parties’ joint C Bank Portfolio Loan account (number #67) and deposited the funds into another C Bank Portfolio Loan account (number #16). On the same day the wife withdrew $600,000 from C Bank account number #16 and deposited to an account in her brothers’ name.
Evidence
Wife
The applicant relied on the following evidence:
a.An affidavit filed by her on 8 March 2018.
b.A Financial Statement filed by her on 22 May 2018.
In her affidavit filed 8 March 2018, the wife set out the following evidence.
The wife provided an overview of her husband's business practices. These included
a.J Pty Ltd (‘J Business’) which, to the best of her knowledge, was solely operated by her husband without the assistance of employees. It was established in 2003; and
b.K Pty Ltd (‘K Business’), established in 2010 with a business partner. Husband ceased being director in 2016, but to the best of her knowledge he remained as a shareholder. The wife said that she was uncertain if the husband had sold his interest in the company. She did not believe the company had any employees.
The wife stated that she owned four properties with her husband, namely:
a.D Street, Suburb E NSW (former matrimonial home);
b.F Street, Suburb G NSW (‘Suburb G Property’);
c.H Street, Suburb B NSW; and
d.H Street, Suburb B NSW ((c) and (d) collectively referred to as ‘Suburb B properties’) (all properties collectively referred to as (‘the properties’)
The wife said that the former matrimonial home was purchased in 2003, and she currently resided in the property with the children. The husband does not live in this property.
The wife deposed that the Suburb G property was purchased in 2011 with the intention that the J Business could operate out of a factory built by the husband and wife. There was never a mortgage secured against the property. She said that prior to separation, the parties would receive $4,200.00 a month in rent from the two companies owned by the husband. That rental was paid directly into the loan account. She said that no payments had been made following separation.
She said that she had no knowledge of any lease with tenants at the [Suburb G] property, nor was aware of any tenancy agreement between the parties and either of the businesses.
The wife stated that she had attended at the Suburb G property on a number of occasions post separation and she did not think there was any occupant of the property.
The wife provided a market rent appraisal from M Agents, which estimated the current market rental value of the Suburb G property as between $1,200.00 and $1,300.00 per week.
In June 2008, the parties purchased the Suburb B properties, with the intention to rent these out to tenants. The wife said the rent was approximately $750.00 per week combined, which was deposited to the loan account.
Following the separation, the wife recounted a conversation with C Bank, where she was informed the parties were in arrears on payment of mortgage instalments. She said that prior to receiving that advice, she was unaware of any changes to the mortgage repayments. She sought a meeting with N Agents who acted as managing agents of the Suburb B Properties. She was informed that following instructions from the husband, N Agents changed the rental payment account, without notice to her.
Two weeks later, N Agents ceased acting as the managing agents of the Suburb B properties. The wife said that was at the insistence of the agent.
While the wife acknowledged she was unaware of where the rental money was being paid, she had reason to suspect the husband had been collecting the rent and sending money overseas. She did not elaborate on the basis for that view.
On 18 July 2016, the wife withdrew $600,000.00 from the joint Portfolio loan accounts and deposited the funds into her brother, Mr L’s account (“Mr L’s account”). The wife said the transfer was due to the following circumstances:
a.The husband told her he planned to travel and reside in Country O;
b.The wife feared the husband would withdraw the money first, before travelling overseas. She stated that he had made comments that lead her to this conclusion;
c.The husband travelled to Country O following the separation, and was – to her knowledge – remarried and residing there;
d.If the husband had withdrawn the money and travelled overseas, it would have been very hard for the wife to get the funds back;
e.She had no access to funds to make mortgage repayments;
f.She had no access to funds to pay for her and the children’s living expenses;
g.She had no access to funds to pay the rates, levies and taxes for the other properties; and
h.She received advice that she was allowed to do so.
The wife deposed that funds from the $600,000 have been used to pay the following:
a.Mortgage repayments;
b.Rates and levies for the properties;
c.Insurance for the properties;
d.Children’s schooling expenses;
e.Legal fees; and
f.Registration costs of motor vehicles.
The wife said that any money withdrawn from Mr L’s account (removed from the loan accounts) has been used towards additional living expenses that could not be covered by a Centrelink benefit of $748.21.00 she received weekly. She said the husband has not paid any child support since the separation, and yet had collected the rent from the Suburb B properties to the approximate amount of $750.00 each week.
The wife deposed that she had sole care of the children, and paid for medical expenses including psychologists, neurologists, ophthalmologists and endocrinologists.
Husband
The husband relied on the following evidence:
a)An affidavit filed by the husband on 7 May 2018;
b)The Financial Statement of the husband filed 24 April 2018.
The husband denied a number of the facts outlined by the wife. He said he had not received a lump sum payment from the K business, nor was he the sole employee of the J business. He noted that he employed individuals in both full and part-time roles, as well as contractors.
He said the J business ceased paying rent in 2016 as he travelled to Country O for two years with the wife and family, while the K business ceased paying rent in August of the same year. They ceased paying rent as they had vacated the property.
The husband deposed that the J business was now operating again, with the premises only being closed during hours where the husband was on the road doing service calls and providing quotes. He informed the court that the Suburb G property, from where the business was operated, was now also his place of residence. He emphasised to the court that evicting the J business from the property would prevent him from continuing to operate his business and attempting to earn an income.
The husband said he left the former matrimonial home with police escort, following a complaint by the wife. It was during this time that the funds were removed from the loan account. He was uncertain as to how the wife thought the mortgage would be paid with no funds in the account.
The husband could not comment on the conversations with N Agents, but annexed to his affidavit an email from the rental agents, which informed him that the wife had requested the rental income be redirected. He said that following his return to Australia from Country O (where he had been assisting his mother following a surgical procedure), he was informed by the rental agents that Mr L had gone to the office and threatened the agent in order to direct the money into Ms Oberti’s account. The husband said that the agent did that, only to have it rejected because of restrictions imposed by the bank account.
The husband denied having sent money overseas, and emphasised the rental income was the only income he received.
He rejected the reasoning put forward by the wife as to transferring the funds out of the joint loan account. He deposed that
a)He never intended to reside in Country O. He and the wife had mutually agreed to travel to Country O for a period of two years;
b)He had never sent money overseas, nor told the wife that he intended to do so;
c)He did not reside in Country O and had not remarried;
d)He has no intention to remarry;
e)The wife had not paid the mortgage. The money had come from the joint loan accounts, taken without consultation. He submits that payment of the mortgage could have been arranged without the withdrawal of funds.
f)The husband seeks evidence of the advice given to the wife that removal of the funds was allowed in the circumstances.
The husband noted that, as the funds - which supported the children for everyday and medical expenses, as well as upkeep of the properties - had come from the joint account, this had amounted to a joint financial contribution.
He said that he had not spent time with the children due to the terms of an AVO that the wife issued against him following their separation two years ago.
Balance Sheet
The husband tendered a draft Balance sheet dated 31 July 2018, which was marked as Exhibit H3. The Court was informed that it was a joint document prepared for a Conciliation Conference.
| Assets | |||||
| Ownership | Description | Wife's value ($) | Husband's value($) | ||
| 1 | Joint | D Street, Suburb E NSW … | 1,475,000 | 2,070,000 | |
| 2 | Joint | F Street, Suburb G NSW … | 1,107,500 | 905,000 | |
| 3 | Joint | H Street, Suburb B NSW … | 557,500 | 607,500 | |
| 4 | Joint | H Street, Suburb B NSW … | 567,500 | 607,500 | |
| 5 | Wife | German motor vehicle … | 17,000 | 20,000 | |
| 6 | Husband | Japanese motor vehicle … | 10,000 | 8,000 | |
| 7 | Wife | Household contents | 5,000 | 20,000 | |
| 8 | Wife | Wife's jewellery | 15,000 | 130,000 | |
| 9 | Husband | J Pty Ltd | NK | Nil | |
| 10 | Joint | Monies held | 494,410.63 | NK | |
| Liabilities | |||||
| 11 | Joint | C Bank Portfolio Loan #16 | 299,832 | 299,832 | |
| 12 | Joint | C Bank Portfolio Loan #67 | 992,372 | 992,372 | |
| Total | 1,292,204 | 1,929,204 | |||
| Superannuation | |||||
| Ownership | Description | Type of Interest | Wife's value ($) | Husband's value($) | |
| 13 | Wife | P & Q Super | Accumulation | 24,385 | 24,385 |
| 14 | Husband | R Super | 55,000 | 55,000 | |
| Financial Resources | |||||
| 15 | Husband | Monies received by the husband from sale of business K Pty Ltd | 60,000 | nil | |
Submissions
Wife
The wife made oral submissions.
In relation to the husband’s balance sheet marked as Exhibit H3, The wife conceded (relevantly) that:
a)The 2 Suburb B Properties are each valued at $540,000- $550,000;
b)Item 10, the money held by the wife’s brother, stands at $382,000;
c)The combined amount owing on the portfolio loan accounts is $1.3 million;
d)The Capital Gains Tax which will be owing on the sale of the two Suburb B properties (based on a sale of $550,000 each) has been estimated $148,050 at its highest (based on the highest marginal tax rate).
In relation to why the court should make the orders, the wife set out the following. The portfolio loans are secured over the four properties. The Suburb E property is the former matrimonial home, the Suburb G property is industrial, and the Suburb B properties currently provide (collectively) about $750 in revenue per week, which is received by the husband.
The wife retains $382,000 from the $600,000 she withdrew against the loan accounts. She submitted that the C Bank Portfolio Loans ($5650 per month), council rates, water rates and land tax for all the properties, as well as outgoings for herself have been drawn against the account. The wife is in weekly receipt of $303 New Start Allowance and $362 Family Tax Benefit. The wife submits that she does not receive child support. The wife said she was not certain whether there had been an application for child support.
In relation to why the [Suburb G] property should be leased, the wife submitted that prior to separation, the husband operated two companies from the premises, being J Pty Ltd CAN … and K Pty Ltd CAN …. Each of those businesses paid rent, which was applied to the loan accounts, of $4200 per month. The rental income from the Suburb B properties was also applied to the loan accounts. The wife submitted that she was meeting that payment now from the capital fund.
In relation to the sale of the two Suburb B properties, the wife submits that neither party seeks to retain the properties. The husband seeks to transfer them to the wife, and the wife submits that she does not want them. The wife submits that the court should not transfer them to the wife as the husband seeks $450,000 to be transferred to him simultaneously with the transfer of property. She submitted that the sale of the properties would reduce the loan accounts significantly, whereas retaining them would require the continuation of interest only repayments on the loan from the $600,000 which the wife removed from the loan accounts.
In relation to the $382,000 to be distributed, the wife submitted that she seeks $100,000 of that money to support herself and the children. The wife set out her income and submitted that her expenditure outweighs her income.
The wife submitted that each of the parties should be paid a further $70,000 towards their legal fees.
Husband
The husband relied on the submissions set out in his case outline, and on further oral submissions made.
The husband submitted that the wife did not identify the grounds on which the wife sought the interim property division. He submits that the orders may be sought pursuant to s 72 of the Family law Act. Husband further submitted pursuant that section, that he is unable to support the wife and that the wife has been able to support herself with the funds she withdrew from the loan accounts.
The husband submits that if the wife seeks the orders pursuant to s 74 of the Act, such application may be properly given, but would be dealt with by the orders the husband consented to.
The husband further submitted that if the wife sought the orders pursuant to s 77 of the Act, the husband submits that the wife does not stand in immediate need of financial assistance, and that her financial needs will be met by the orders the husband consents to.
In relation to spouse maintenance, the husband submits that he wife does not characterise the funds she seeks in that manner in her application. However, he submits that if she does seek funds pursuant so characterised, then the husband submits that the wife has not adequately addressed any of the s 75(2) considerations in her affidavit evidence, and that the court cannot presume any such evidence.
In relation to the husband’s orders sought in his Response to Initiating Application, the husband disagrees with the wife’s submission that the Suburb B properties should be sold because the husband does not seek to keep them. He submits that the transfer of those properties as a final order is dependent on the wife refinancing the mortgage and paying a lump sum to the husband.
The husband submits that orders should not be made on an interim basis which may interfere with the subsequent exercise of the court’s power under s 79 of the Act. It is submitted that the court cannot know what orders might be made at the final hearing.
In his oral submissions, counsel for the husband submitted that there were three issues only for determination:
a)The sale/rental of the Suburb G property;
b)The sale/rental of the Suburb B properties;
c)The payments to each party from the remainder of the $600,000 transferred by the wife to her brother.
The husband submitted that the orders that the wife is seeking have been changing. He submitted that her application had been that all four properties be sold, which she now does not propose.
The husband submits that his proposal for final orders is that the wife retain the former matrimonial home and the Suburb B properties, and that he retains the Suburb G property.
In relation to the Suburb B properties, it was submitted that the sale of the Suburb B properties would not extinguish the loan accounts. The husband submitted that even at its highest, the wife’s case was that there would still remain more than $300,000 owing should the both of the Suburb B properties be sold. It was further submitted that such a sale would be irreversible. The husband submitted that the income from the Suburb B properties is the husband’s only income at the present time.
In relation to the Suburb G property, the husband submits that he currently resides in that property, notwithstanding his statement otherwise on his Financial Statement. He also submitted that his business runs from that premises. He submitted that in circumstances where the wife was seeking to sell the Suburb B properties and remove his only source of income, it was unfair that his business should also be removed from the Suburb G property and thereby not permitted to trade.
I asked the husband’s counsel whether I should require the husband to file an up-to-date Financial Statement. He said that it was in the Court’s power, but that he would not seek it.
In relation to the funds removed from the mortgage account, the husband submits that the wife is currently using those joint funds to support herself and the children, and therefore the husband is currently making significant contributions by way of child support. In relation to the distribution of the remaining funds, he submitted that the wife’s case in relation to the funds has been fluctuating. He submitted that the court needs to walk a fine line to avoid future litigation in circumstances where too much money has been expended. He submitted that $100,000 to each party was appropriate.
Determination
The proceeding in this court was commenced by an application filed by the wife on 9 March 2017. Given the delays in this court in being able to hear contested cases, the parties can anticipate that their case will not be able to be heard until later in the 2019 year. That being the case, these parties must face the financial consequence to them which is inescapable, that they will not be able to service their debt unless something significant changes in their financial circumstances. The wife’s proposal appears to be the only viable option and will place the parties in the same financial circumstances, if the husband’s income does not improve.
The Law
The wife’s application is clearly an application for interim property orders.
It has been established in this Court that the process for determining whether an interim property order should be made is to apply a two-step test.
The first step is that it must be established that s 80(1)(h) Family Law Act 1975 (Cth) (“FLA”) was enlivened to allow an interim property settlement under s 79 FLA. In relation to how this test is to be applied, the Full Court in Strahan v Strahan (Interim Property Orders) (2009) 241 FLR 1 (Boland, Thackray and O'Ryan JJ) set out at [132] of the reasons (overturning Harris and Harris (1993) FLC 92-378 in relation to “compelling circumstances”):
In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power.
The Full Court further stated:
92. In Zschokke the Full Court at 83,215 identified further matters to be taken into account in relation to an order under s 79 and s 80 (1)(h) of the Act. The Full Court said that “[i]t would seem an essential part of such an order that the advance of funds be a matter which the trial Judge must take into account, or at least have regard to, in the determination of the final property settlement” (emphasis added). At 83,220 the Full Court said: “it must … be an integral part of any order under s 80(1)(h) for an advance of funds from the party in possession of the bulk of the party’s assets [sic] to the other party, that such advance can then be taken into account in the property settlement, that is, it must be capable of satisfying part of the other party’s entitlement” (emphasis added). At 83,221 the Full Court again identified as a matter for consideration “whether [the applicant] will ultimately be entitled to sufficient funds by way of property settlement to meet a requirement … that the amount [under the] order could be taken into account in the eventual property settlement order”.
93. In Zschokke the Full Court at 83,220 was of the view that in that case there were “real uncertainties concerning the outcome of the wife’s property settlement claim” and considered that the order could not be made pursuant to the provisions of s 80(1)(h) of the Act “for the reason that the eventual property settlement entitlement of the wife may well not be large enough to permit the monies advanced under the s.80(1)(h) order to be satisfactorily or justly taken into account in the final settlement”. This of course follows from what, at 83,216, the Full Court had said about a brief consideration of the matters in s 79(4) and that if it seemed that the applicant for the interim order “will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made (cf Wilson and Poletti)”.
…
136. As to the third matter identified at 79,930 by the Full Court in Harris, in discussion before us it was described as the “adjustment issue” or “claw-back issue”. It was submitted by senior counsel for the Wife that it is relevant to consider whether an order would give the applicant “more than they would be indubitably entitled to on a final hearing” or alternatively “would it give them so much that it could not be adjusted on a final hearing?” As we have observed the Full Court in Zschokke at 83,220-221 stressed the importance of consideration of the “adjustment issue” if the power in s 80(1)(h) of the Act is being exercised. We accept the submission and observe that this matter is relevant because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order. As Bryant CJ and Coleman J observed in Gabel v Yardley at [69] and [72] the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal. As Finn J said at [126] the interim order must be “capable of alteration at any time prior to, or as part of, the final exercise of the s 79 power”.
The second step (again following the caselaw set out in Harris and later confirmed in Strahan) is to apply the provisions of ss 79(2) and 79(4) FLA as one would in a usual s 79 matter. It is not required that the assessment must be detailed, as the nature of the enquiry is generally imprecise, but there must be some regard to the matters that would be considered in a s 79 application. In Marchant & Marchant [2012] FamCAFC 181 the Full Court (May, Ainslie-Wallace and Kent JJ) considered an appeal against interim property orders. Their Honours set out a summary of the principles arising from Strahan at [24]–[28]:
24. In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”), the Full Court (Boland, Thackray and O’Ryan JJ) undertook a comprehensive review of the authorities and identified relevant principles and guidelines to be followed in respect of interim property orders pursuant to ss 79 and 80(1)(h) of the Act.
25. It follows from the joint judgment of Boland and O’Ryan JJ in Strahan that there are two stages to the hearing of such an application and that the first question on an application for such an order is whether the Court should exercise its discretion to entertain the application. Whilst it is not necessary for an applicant to establish compelling circumstances for that question to receive an affirmative answer, it is necessary to establish that it would be appropriate for the Court to exercise the power and the, “…overarching consideration…” as to appropriateness is the interests of justice. Recognising that in the context of s 79 proceedings, the interests of justice will usually be best served by one single and final determination of property orders, it will not be appropriate to exercise the power merely because, on such a final determination, the applicant would receive the interim property sought or in excess of that sought.
26. We think it is important to highlight that whilst the discussion of the first question in the joint judgment in Strahan includes examples, including by reference to other cases, where the appropriateness criteria would be met, there was no attempt to define or exhaustively identify those circumstances or categories of cases meeting that criteria. That is understandable, given the discretionary nature of the adjudication involved and the wide range and variety of circumstances presented from case to case, so that any such attempt would likely prove to be futile. Nevertheless, the joint judgment in Strahan emphasised both the importance of the interests of justice normally being served by a single and final determination of s 79 orders and that establishing only that the applicant’s ultimate entitlement would cover or exceed the interim claim was not sufficient, on its own, to establish that the application ought be entertained.
27. It also follows from Strahan that if the first question is answered affirmatively, and the second or substantive stage is reached, because the jurisdiction under s 79 of the Act is being exercised, the provisions of that section must be considered and applied, but with limitations given that it is not the final hearing ([135]). As their Honours Boland and O’Ryan JJ noted at [136], because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate, provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order, the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal, and must be capable of alteration at any time prior to, or as part of, a final exercise of the s 79 power.
28. However, if it is established that it is likely that the applicant would only be receiving what he or she was entitled to receive when the power was exhausted, that would be sufficient to enable the order sought to be made. (emphasis added)
In Dinci & Smith [2012] FamCA 840 Murphy J considered an application for partial property settlement by a party (the husband) pending the determination of final property proceedings. After identifying that the principles to be applied to such applications were outlined in Zschokke and Strahan, his Honour made the following additional comments at [23]–[25]:
23. The exercise of discretion in cases of this type is informed by the need to effect justice between parties to litigation by ensuring, to the extent, that it is possible, “a level playing field”. But, those proceedings, and that aim, are also judged by reference to a principle which indicates that a decision made on an interim basis in respect of the payment of legal costs and expenses, should not usurp the ultimate determination of the court, and, in particular, orders that effect ultimate justice and equality.
24. It is for these reasons, principally, that the question of “reversibility” or “clawback”, as it has been called in the cases, is such an important matter in respect of the exercise of the discretion under consideration.
25. Other important considerations in the exercise of the discretion include whether there is a relative position of financial strength on the part of one party when compared to the other. Secondly, whether there is a capacity on the part of the person from whom the order is sought to meet any such payment, and, thirdly, the impact that any such interim order might have on orders which are ultimately sought by each of the parties at the ultimate trial.
Sale of the Suburb B Properties
In this case the wife as a final order seeks the sale of the Suburb B properties. Her Initiating Application in fact seeks the sale of all pieces of real estate owned by the parties.
The husband in his Response to Initiating Application seeks final orders for the Suburb B properties to be transferred to the wife. His response seeks both the former matrimonial home and the Suburb B properties to be transferred to the wife and that she pay him $450,000.
The husband argues that if the Suburb B properties are sold then he will not be able to achieve the order he seeks and it will mean his orders could not be achieved. That argument, with respect, lacks insight into the way in which the court must approach a property case brought under s 79 of the Act.
The process the court must undertake to determine a dispute about distribution of property following the breakdown of a marriage is specified in Part VIII of the Act. Sections 79 and 80 are the sections of the Act which require the greatest attention in that determination. The court is required, inter alia, to determine what the property of the parties is. In practical terms that requires the court to determine what equity the parties have in the assets which are included in a trial balance sheet. In most cases it is that equity which is then distributed to the parties in a manner which the court determines id just and equitable.
In this case the equity the parties have in the potential property to be distributed between them will not be changed by the sale of the Suburb B properties if all of the funds are applied to reduce/discharge debt charged against the remaining property (i.e. The portfolio loans with C Bank).
If the parties do not sell the Suburb B properties then their debt will increase as the payments on the loans are made in circumstances where neither has demonstrated an ability to earn income from other sources to support themselves and to meet the loan repayments. In this case, it seems reasonable sensible and fiscally responsible to have the properties at Suburb B sold. I propose to so order.
Renting of the [Suburb G] Property
At the time of the hearing the husband was overseas and his solicitor informed the Court he would be back in Australia in October 2018. His solicitor also informed the Court that the husband was proposing to live in and work from the property at Suburb G.
Given that I have determined it is appropriate to grant the order sought by the wife for the sale of the Suburb B property I consider it would be inappropriate at this time to order the Suburb G property be leased.
The husband has argued that without the income from the Suburb B properties he will have no income. If that in fact be the case, then he will be in the same position as the wife who also has no income and does not receive any child support.
Given that I propose to order that each receive an initial payment of $50,000 from the available fund and then each receive what might be agreed to once the Suburb B sales have completed and the position in relation to debt can be seen, the husband will have a fund from which to support himself while he seeks employment or re-establishes his businesses.
Division of the Capital sum
As stated above there remains about $382,000 in the fund which stands in the wife’s brother’s bank account. The wife seeks that the fund be applied by payment of $100,000 to herself and $70,000 further to each of the parties to meet legal costs.
The husband seeks a payment of $100,000 to each.
The fund is reducing at the moment by the payment of the portfolio loans to C Bank. The payments are $5,650 per month. There are other expenses to be paid such as rates, taxes and land tax. There are ordinary maintenance expenses to be paid. If all of the fund available is disbursed then there will be no fund from which to make the payments. To date the wife has made the payments and met the expenses from the fund.
As I propose to order the sale of the Suburb B properties, I consider the course of action, which will reduce the prospect of the parties requiring further adjudication by the court, is to distribute some funds to them at this time and make provision for a further division once the Suburb B properties have been sold. I propose to order a distribution of $50,000 to each party forthwith.
The wife seeks an order that the balance be paid into an account to be established by the parties in their joint names for the purposes of meeting periodic payments required to be made at the minimum rate on the Loan Accounts. That I consider an appropriate order to make and the parties can then, by agreement, make further distributions to themselves after the Suburb B sale is completed and the parties know what their liability will be to the C Bank.
Orders to be made
As stated above I propose to make an order for the sale of the Suburb B property.
The wife seeks an order that she be made trustee for sale of the Suburb B properties. In the absence of a substantial reason to the contrary the court would normally be reluctant to make such an order. Now both parties are legally represented which lessens the prospect of one party acting in a manner to frustrate the sale or to divert the proceeds of sale to another.
One reason for the wife to be appointed as trustee for sale would be if the husband failed to return to Australia from Country O where he has advised the Court, through his lawyer, he is currently holidaying. He has said he will be back in Australia in October this year.
I propose to allow the husband to participate in the sale, however, should it be established that he has been obstructive or unco-operative with the sale process I will grant leave to the wife to apply to be appointed as trustee for sale with the husband being at risk as to costs should the court make that order. Although it appears unlikely that the wife might be obstructing the sale, in the event she was found to be doing so than the husband could apply to the court and the wife would be at risk as to costs as well.
The payment of the parties’ funds currently in the bank account standing in the wife’s name will be the subject of an order. As stated I will order that each receive an initial payment of $50,000. The wife will also need a weekly sum from that fund to meet her reasonable expenses and those of the children. In the event that the husband is unable to earn income upon his return to Australia he might also need funds for support. It will not be appropriate for the court to order the disposition of the balance of the fund until such time as the sale of the Suburb B property is completed, however, the parties may be able to agree to such matters.
There will be an order requiring the wife to deposit to a joint account in the parties’ names, the balance of the parties funds standing to the credit of an account held in her brother’s name. She will not have to undertake compliance with that order until there has been agreement about the amount to be paid to her weekly from that balance.
The parties will have to negotiate a reasonable weekly payment to the wife and to the husband if necessary. If they cannot agree then the court will have to determine that dispute, however, the parties must know that court time is a precious resource and they will each be at risk as to costs if the court determines either has taken what the court regards as a reasonable position.
The balance of the orders sought by each should be dismissed.
Each party will have leave to relist the matter should that be necessary prior to the final hearing at their own risk as to costs.
I certify that the preceding ninety-two (92) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 28 September 2018.
Associate:
Date: 28 September 2018
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