Padley and Hagel and Anor

[2013] FCCA 1897

FEDERAL CIRCUIT COURT OF AUSTRALIA

PADLEY & HAGEL & ANOR [2013] FCCA 1897

Catchwords:
FAMILY LAW – Application by third party creditor to set aside a binding financial agreement – proceeded by consent as between applicant and first respondent and undefended as to second respondent – s.79 orders as between the respondents – undefended as to second respondent.

Legislation:

Family Law Act 1975

Federal Circuit Act 1999

Federal Circuit Court Rules 2001

Warby & Warby [2002] FLC 93-091

Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR

Applicant: MR PADLEY

First Respondent: MS HAGEL

Second Respondent: MR HAGEL

File Number: HBC 565 of 2012

Judgment of: Judge McGuire

Hearing date: 28 October 2013

Date of Last Submission: 28 October 2013

Delivered at: Hobart

Delivered on: 28 October 2013

REPRESENTATION

Counsel for the Applicant: Mr Gunson

Solicitors for the Applicant: Chris Boland

Counsel for the First Respondent: Mr Foster

Solicitors for the First Respondent: Murdoch Clarke

Solicitor for Second Respondent: Unrepresented – no appearance

ORDERS

1. That the Binding Financial Agreement dated 3^rd April 2012 between the first respondent and the second respondent be and is hereby set aside pursuant to Section 90K(1)(aa) in that the Binding Financial Agreement was entered into by the second respondent for purposes that included the purpose of defeating the applicant being a creditor of the second respondent or with reckless disregard of the interests of the applicant.

2. That the first respondent shall be solely responsible for all payments which are due or which may become due to the (omitted) Bank pursuant to the said mortgage loans and for all municipal rates and other outgoings which are due or which may become due in relation to Property I, in the State of Tasmania being more particularly described in folio of the register volume (omitted) folio (omitted) (hereinafter referred to as Property I) including any costs and expenses associated with or relating to the current residential tenancy agreement.

3. That upon the transfer of Property I to the first respondent as required by order 11 hereof, Property I shall be marketed and sold forthwith and for the purposes of the marketing and sale of Property I:

   (a)The identity of the selling agent, marketing price, selling price and all other matters of and incidental to the marketing and selling of Property I, shall be as may be agreed from time to time by the first respondent and the applicant and in the event of dispute as may be determined by the court.

   (b)The court notes that it is the intention and the wish of the first respondent and the applicant that the sale of Property I shall be completed on or before the 30^th June 2014.

   (c)For 60 days the property shall be offered at $500,000.00 and in the event that the property is not sold within 60 days of listing the applicant and the first respondent shall use their best endeavours to agree an alternate sale process including, if applicable, an alternate sale price.

   (d)That in the event that the current residential tenancy agreement terminates or otherwise comes to an end the first respondent is restrained from entering into a fresh residential tenancy agreement or otherwise letting the property without the consent of the applicant, provided that if the applicant does not consent to the letting of the premises or entering into a fresh residential tenancy agreement the applicant and the first respondent shall be equally responsible for payment of all outgoings, including mortgage repayments, in respect of the property.

   (e)That the first respondent does all things necessary to ensure that the current residential is terminated at the expiry of that residential tenancy agreement and that it is not renewed or extended without the consent of the applicant.

4. That pending the completion of the sale of Property I the first respondent is restrained from encumbering, disposing, offering as security or otherwise diminishing the equity in, Property I.

5. That upon the completion of the sale of Property I the net proceeds of sale (being the gross sale proceeds less all marketing and selling costs and disbursements and the amounts due to the (omitted) Bank of Australia pursuant to the mortgages referred to above) shall be divided equally between the first respondent and the applicant and the sum so paid to the applicant shall be applied in reduction of the judgment debt provided for by order 9 hereof.

6. That upon the transfer to the first respondent of the title to Property I the applicant may lodge a caveat with the Recorder of Titles in order to record and better secure his entitlement pursuant to these orders.

7. That pending completion of the sale of Property I the first respondent shall be entitled to all rents and profits which she may apply to off-set her obligation pursuant to these orders to pay outgoings and mortgage instalments to the (omitted) Bank in relation to Property I.

8. That there be liberty to apply on short notice to His Honour, Judge McGuire, or to such other Judge of the Court as may be directed from time to time, in relation to any aspect of the marketing and sale of Property I and that such application may be made by written request to the court and determined on short written submissions from each of the parties supported, where necessary, by a short affidavit.

AND THE COURT ORDERS:

As between the applicant and the second respondent:

1. That the applicant recover against the second respondent the sum of $200,000.

2. That the second respondent pay the applicant’s costs of and incidental to this proceeding.

As between the first respondent and the second respondent:

1. That the second respondent shall forthwith transfer to the first respondent all his right, title and interest in the former matrimonial home situated at Property I, in Tasmania being more particularly described in folio of the register volume (omitted) folio (omitted) subject to the existing mortgage loans from the (omitted) Bank of Australia which are secured over the title to Property I. 

2. That the first respondent shall be solely entitled to her Honda (model omitted) motor vehicle.

3. That the second respondent and the first respondent shall do all such things and sign all such documents as are necessary to wind up (omitted) Pty Ltd.

4. That the second respondent shall be solely entitled to all savings and investments held by him and to all chattels in his possession. 

5. That the first respondent shall be solely entitled to all chattels in her possession, to all savings and investments held by her and to all benefits arising from superannuation held by or for her.

6. That each of the first respondent and the second respondent shall be solely responsible for all debts and liabilities of that party and neither party shall obtain credit in the name of the other party.

As between the applicant, the first respondent and the second respondent:

1. That the initiating application and the first respondent’s amended response be otherwise dismissed.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT HOBART

HBC 565 of 2012

MR PADLEY

Applicant

And

MS HAGEL

First Respondent

And

MR HAGEL

Second Respondent

REASONS FOR JUDGMENT

1. These are proceedings concerning property settlement and the setting aside of a binding financial agreement.

2. The applicant is Mr Padley. He seeks an Order setting aside a binding financial agreement between the first and second named respondent made 3 April 2012. He does so on the basis of an alleged unsecured debt owing to him from the respondents or, more particularly, the second respondent husband, Mr Hagel.

3. The matter came on in Hobart on 28 October 2013. At that time the applicant and the respondent wife appeared and were represented by Counsel. The second named respondent husband did not appear and has filed no documents save a Notice of Address for Service. Being satisfied of service Initiating proceedings and notice of hearing on Mr Hagel the matter proceeded undefended in respect of him.

4. To their credit, Mr Padley and Ms Hagel reached agreement and entered into consent Orders. Some Orders were made by consent and other Orders made undefended in respect of the husband. I now provide short written reasons to be taken out and retained on the Court file.

5. The respondents’ commenced cohabitation in 1984 and were married in 1987. They have one child born 1991 who is no longer dependent.

6. In 1993 the husband was convicted of illegally obtaining a financial advantage. He was sentenced to 9 months imprisonment. He was declared bankrupt.

7. The respondents’ separated on the 27 January 2012. They entered into a Binding Financial Agreement on 3 April 2012.

8. The respondents own a property Property I, in the State of Tasmania.  It is now clear that the title is registered solely in the name of the second respondent.

9. The second respondent held himself out as a property developer and more recently a director of a company (omitted) Pty Ltd.

10. The applicant, Mr Padley and Mr Hagel had previously enjoyed business dealings.

11. In or about February 2009 Mr Padley loaned Mr Hagel a sum of approximately $80,000 on agreement that principal and interest of twenty per cent would repaid within 12 months. The loan was not repaid.

12. Between February 2009 and July 2010, and during the duration of the aforementioned loan, Mr Hagel approached Mr Padley for further capital intended for a property development project in Queensland. A further sum of $100,000 was advanced. It was agreed that these monies would be secured by way of mortgage over the property at Property I. The (omitted) Bank held a first mortgage over that property.

13. The whereabouts of the second respondent are unknown. The applicant says that the proposed Queensland development did not go ahead. Mr Padley has not been repaid any monies advanced to Mr Hagel.

14. The applicant commenced proceedings in the Supreme Court of Tasmania for primary relief and for injunctive Orders. Those Injunctive Orders were made in the Supreme Court of Tasmania on an exparte basis on 20 June 2012 restraining the registration of any memorandum of transfer in respect of the property at Property I, and a further Order freezing assets of the respondents including any dealings with the property at Property I, bank accounts of the respondents with the (omitted) Bank, (omitted) Pty Ltd, (omitted) Ltd, (omitted) Ltd and any assets held by Hagel Family Trust.

15. In these proceedings now before me, the applicant relies on his Affidavit filed 25 July 2012 which effectively deposes as to the above factual history.

16. The first respondent wife relies on an Affidavit filed 29 October 2012. She says that she had equity in a home of approximately $30,000 at the commencement of cohabitation. She refers to her husband’s gambling and financial difficulties and his bankruptcy together with he being sentenced to a term of imprisonment.

17. The first respondent says that she had no knowledge of the dealings between Mr Padley and her husband and that this was consistent with Mr Hagel keeping his personal financial dealings secret from her throughout the marriage.  She says she had no knowledge of the loans from Mr Padley until she was served with the Supreme Court Writ in June 2012.

18. The first respondent deposes that she and Mr Hagel separated in January 2012. She says that she assumed that they were joint proprietors of the former matrimonial home but that she found it was registered solely in the husband’s name. She says that the assets of she and her husband at that time comprised solely of the former matrimonial home at a value of $480,000 secured by (omitted) Bank loans totalling approximately $350,000. She agrees that she and the husband entered into a Binding Financial Agreement which saw Mr Hagel transfer his right, title and interest in the former matrimonial home to the wife. She maintains that such a settlement was just and equitable given the husband’s previous unproductive financial dealings, his sentence to a term of imprisonment and his bankruptcy. She says that she was the main financial contributor during the marriage and the primary homemaker and parent.

19. The Binding Financial Agreement executed 3 April 2012 appears to be valid in the sense that each party received independent legal advice although it is now clear that it does not deal with all of the property or liabilities of the respondent. Significantly, that document does not mention the loans made by Mr Padley to Mr Hagel or the unregistered mortgage.

20. The applicant, Mr Padley, now asks me to set aside the Binding Financial Agreement as a third party creditor. That application is undefended in respect of the second respondent, Mr Hagel. The first respondent, Ms Hagel consents to that Order given the factual platform set out above.

21. I am then asked on the application of Ms Hagel to make final Orders under s.79 of the Family Law Act 1975 (“the Act”) in the same terms as the prior Binding Financial Agreement. Given that factual history, I am satisfied that it is appropriate to make such Orders and that they are just and equitable as between the respondents given the contributions of the parties and the relevant s.75(2) factors. I repeat as follows:

    a)The relationship was of some 8 years duration;

    b)There was one child of the relationship who is no longer dependent;

    c)The wife entered the relationship with equity in a home of approximately $30,000;

    d)The husband had minimal or no assets;

    e)The unchallenged evidence is that the husband had a gambling problem and suffered financial difficulties for the family without contribution by the wife;

    f)The husband served a term of imprisonment in relation to financial mismanagement;

    g)The wife was the major financial provider during the marriage;

    h)The wife was the major contributor by way of parent and homemaker;

    i)The only assets of the parties are the wife’s motor vehicle ($8000) and the equity in the former matrimonial home (approximately $100,000);

    j)The debt to Mr Padley effectively adds a further liability of $200,000.

    k)The wife works and supports herself;

    l)The whereabouts of the husband are unknown but he is assumed to be in Queensland

    m)The evidence of Mr Padley is that the husband has had the benefit of substantial funds from investors in respect of a proposed property development.

22. The Orders I am asked to make under s.79 of the Act differ in one important way from the former financial agreement. That is, the applicant’s Civil suit against the respondents has been compromised as between the applicant and Ms Hagel in that it is agreed that the property Property I, will be sold and:

    That upon the completion of the sale of the Property I, the net proceeds of sale (being the gross sale proceeds less all marketing and selling costs and disbursements and the amounts due to the (omitted) Bank of Australia pursuant to the mortgages referred to above) shall be divided equally between the first respondent and the applicant and the sum so paid to the applicant shall be applied in a reduction of the judgment debt provided for by order 9 hereof

1. Order 9 provides:

That the applicant recover against the second respondent the sum of $200,000.

1. I am able to make and in so doing finally determine the applicant’s civil suit by reason of my accrued jurisdiction[1] and my power to make Orders under Section 79 of the Act binding a third party.[2] I am satisfied that the issue of the debt of $200,000 raised by Mr Padley is so inherently connected to the alteration of the interests of the first and second named respondents pursuant to s.79 of the Act that the accrued jurisdiction should be enlivened. The Court in Warby (supra) noted and cited Barwick CJ in Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd[3]:

   It is a settled doctrine in Australia that when a Court which can exercise federal jurisdiction has its jurisdiction attracted in relation to a matter, that jurisdiction extends to the resolution of the whole matter. This accrued federal jurisdiction is not limited to matters incidental to that aspect of the matter which has in the first place attracted federal jurisdiction. It extends, in my opinion, to the resolution of the whole matter between the parties. This accrued jurisdiction carries with it the authority to make such remedial orders as are necessary or convenient for or in consequence of that resolution. For this purpose the exercising federal jurisdiction may enforce rights which derive from a non-federal source. This exercise of this jurisdiction which for want of a better term I shall call “accrued” jurisdiction, is discretionary and not mandatory, thought it will be obligatory to exercise the federal jurisdiction which has been attracted in relation to the matter.

   [1] Warby & Warby [2002] FLC 93-091

   [2] Section 90 AE of the Family Law Act 1975

   [3] (1981) 148 CLR

2. A copy of these reasons will be taken out and placed on the Court file.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge McGuire

Date: 28 October 2013