Pearce and Pearce and Anor

[2019] FamCA 969

FAMILY COURT OF AUSTRALIA

PEARCE & PEARCE AND ANOR [2019] FamCA 969

FAMILY LAW – PROPERTY – interim hearing – Sale of family home prior to final hearing – Claim by third party intervenor for repayment of a purported loan – Where the former matrimonial home represents the only available asset that could satisfy the claim brought by the intervenor – Distribution of proceeds of sale – Fund established to protect claim by intervenor – Orders made to effect the sale.

APPLICANT: Ms Pearce

RESPONDENT: Mr Pearce

INTERVENOR: Ms R Pearce

FILE NUMBER: SYC 2654 of 2017

DATE DELIVERED: 29 November 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Ryan J

HEARING DATE: 28 November 2019

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Barkus Doolan

COUNSEL FOR THE RESPONDENT: Mr Scarlett

SOLICITOR FOR THE RESPONDENT: Hudson Law Pty Ltd

COUNSEL FOR THE INTERVENOR: Mr White

SOLICITOR FOR THE INTERVENOR: Watts McCray

Orders

IT IS ORDERED BY CONSENT:

1. That leave be granted to the wife to re-open her case and adduce fresh evidence.

2. That within twenty-eight (28) days of the date of these Orders, the husband is to vacate the property situate at and known as Q Street, Suburb P in the State of New South Wales being the whole of the property comprised in Certificate of Title folio identifier ... (“Q Street property”), leaving all fixtures and fittings at the said property, including but not limited to all wardrobes, cupboards and outdoor sink.

3. That within twenty-eight (28) days of the date of these Orders, the husband and wife shall do all acts and things and sign all documents as are necessary to effect the sale of the Q Street property for the best price reasonably obtainable.

4. On settlement of the sale of the Q Street property, the proceeds of sale be paid in the following manner and priority:

   (a)all costs and expenses of sale including legal costs and disbursements, agents’ commission, advertising expenses, valuers’ fees, and auction expenses (including repayment of any such expenses as have been paid by either or both of the parties);

   (b)the amount required to discharge the loan from the National Australia Bank (“NAB”) secured against the Q Street property; and

   (c)the amounts required to pay all municipal and water rates outstanding with respect to the Q Street property.

5. In the event either party refuses or neglects to execute any deed, document or instrument necessary to give effect to all or any of these Orders then the Registrar of this Court shall be appointed pursuant to section 106A of the Family Law Act 1975 (Cth) to execute such deed, document or instrument in the name of the said party and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.

PENDING FURTHER ORDER, IT IS FURTHER ORDERED:

1. That subject to Order 4 above, on settlement of the sale of the Q Street property, the proceeds of sale be paid in the following manner and property:

   (a)the amount of $1,035,000 to paid to an interest-bearing account in the joint names of the husband and the wife to secure the intervenor’s claim and expected costs (party/party) in these proceedings and the husband and the wife are restrained from drawing upon the said account without the prior written consent of each of the husband, wife and intervenor or an order of this Court;

   (b)the amount of $100,000 to the wife to meet the obligation in Order 32(d) made on 17 April 2019;

   (c)the amount of $50,000 to be deposited to the trust account of Barkus Doolan Family Lawyers to meet the payment of the single experts’ fees as provided for in Order 21 made on 30 August 2019;

   (d)the amount of $50,000 to each of the husband and the wife to meet the payments as provided for in Order 21 made on 30 August 2019; and

   (e)the balance shall be deposited into an interest-bearing account in the joint names of the husband and the wife and the parties shall be restrained by injunction from drawing upon the said account without the prior written consent of the other party or an order of this Court and after having given the intervenor twenty-one (21) days written notice.

2. Until such time as the husband vacates the Q Street property, the husband shall be responsible for meeting the loan repayments to NAB for the mortgage/s secured in relation to that property and its council rates, water rates and strata levies.

3. Subject to these Orders, the wife’s Further Amended Application in a Case filed 5 November 2019, the husband’s Response to that Application filed on 27 November 2019 and the intervenor’s Response to that Application filed on 15 November 2019 be dismissed.

4. The costs of these Applications be reserved to the trial.

5. The parties have leave to approach the Docket Registrar to obtain a Mention date in late February 2020.

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 Pearce & Pearce and Anor 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 SYDNEY

FILE NUMBER: SYC 2654 of 2017

Ms Pearce

Applicant

And

Mr Pearce

Respondent

And

Ms R Pearce

Intervenor

EX TEMPORE REASONS FOR JUDGMENT

1. These reasons are given in an application filed on 5 November 2019 by Ms Pearce (“the wife”) for the sale of the family home at Q Street, Suburb P (“the family home”) and allied relief.  This is the second such application and it is made by way of an amendment to the wife’s application that the property be leased.

2. The application is made in the context of contested proceedings for the settlement of property between the wife and Mr Pearce (“the husband”).  The contest concerns how the parties’ interests should be adjusted.  This issue is complicated by a number of matters, in particular:

   ·The magnitude of the parties’ joint borrowings compared to their available assets;

   ·Their failure to fully service those joint borrowings when they fall due; and

   ·A claim by the husband’s mother, Ms R Pearce (“the intervenor”), for repayment of a putative loan in the amount of $951,244.90 plus interest and costs.

3. Notwithstanding some difficulties in doing so, the husband, the wife and the intervenor now agree that the family home should be sold and orders to this effect will be made by consent.  There is disagreement about the distribution of the proceeds of sale and servicing joint borrowings pending that sale.  Various minor matters must also be determined.  Asset protection orders have been made during the life of the proceedings, some by agreement and two properties have already been sold, namely, S Street, Suburb P, and T Street, Suburb P (“T Street”). 

4. It needs to be understood that the orders made in relation to the application of the sale proceeds of T Street, anticipated a better selling price and/or accommodation by the mortgagee bank than has been achieved.  As to the latter, based on information relayed through the wife, the parties hoped that the mortgagee bank would accept $1,200,000 from the sale proceeds of T Street.  In the event the bank did not and settlement of the sale of that property will shortly be completed, with the bank taking approximately $1,550,000.  This means that there will be insufficient funds to satisfy earlier orders, for example, as to the costs of expert reports and payments to the husband and the wife.  This, in turn, affects the distribution of the proceeds of the sale of the family home.  In this respect, there is a dispute as to the preservation of a fund which would be sufficient to satisfy the intervenor’s claim in priority to previously ordered, but outstanding, payments to the husband and the wife. 

5. The main reason for this disagreement about the distribution of the proceeds of sale of the family home, is the concern that it may not sell for as much as the parties previously believed it was worth.  Certainly, T Street sold for some hundreds of thousands of dollars less than the husband and the wife thought it was worth. 

6. Anyway, it is common ground that after payment to the mortgagee bank from the proceeds of sale of T Street, the husband and the wife will still owe the bank something like an additional $1,650,000.  There is no evidence of the value of the family home, however, the husband obtained a market appraisal two days ago which came in at $2,800,000 to $3,000,000.  The wife thinks that the property is worth in the vicinity of $3,500,000.  If she is correct, there will easily be sufficient funds to pay out the bank, selling costs, secure the intervenor’s claim and to distribute funds as previously ordered.  On the other hand, if the husband’s figures hold true, there may well be insufficient funds to satisfy those various claims and expenses. 

7. In my reasons for judgment, given on 17 April 2019, on these matters, I said:

   25.There seems to be no dispute that including a further payment made in late 2015, prior to separation the [intervenor] advanced to the parties somewhere in the order of $950,000, the vast majority (if not all) of which was applied to the acquisition of real estate.  Although the wife contends that these advances were gifts, loan agreements executed by the husband and [the intervenor] are in evidence which suggest the funds were advanced by way of loan.  Given that evidence, steps should not be taken at this stage which have the potential to jeopardise repayment of the putative loan.

   …

   84.It will be apparent, that the sale of T Street may not free up sufficient funds to enable the wife to receive any part thereof.  However, because there is a possibility it may do so, the orders for sale will accommodate distribution of the net equity after the payment of the selling costs and discharge of the mortgage and rates, of the amount of $100,000 to the wife.

8. Other than the family home, there are no other valuable and easily accessible assets which could satisfy a successful claim by the intervenor.  In my view, it is just and convenient and, also necessary, to secure the amount sought by the intervenor.  Given the uncertainty about the price at which the family home will sell, this security should take priority over payment of distributions previously ordered.  The intervenor also seeks to secure her costs, calculated on an indemnity basis at some $130,000.  Indemnity costs are rarely ordered and it seems to me that although it is appropriate to secure a potential adverse costs order, the amount that should be protected is no more than $65,000.  This is broad brush assessment of the intervenors potential party/party costs.

9. As to the outstanding orders, I do not accept the husband’s submission that the provision made for payment of expert’s fees is excessive and his application to vary that order to something like $20,000 will be dismissed.

10. Nor am I satisfied that it would be appropriate to order that once the husband vacates the family home that he should continue to carry its expenses.  The parties are jointly responsible for the mortgages secured against the property and there is no just reason why, once the husband vacates, as the wife wants him to, that he should be solely responsible for that property’s outgoings.  The effect of this is that there is a real possibility that no ongoing payments will be made to the mortgagee or in relation to costs, such as council rates and strata levies.  The husband and wife are already in default in strata levies and there is a real risk that the mortgage will be in default.  This is unfortunate but reflects the reality of the husband and wife’s financial circumstances, as presently understood. 

11. The husband is in the final stage of vacating the family home and he will be fully out within the next seven days.  The writ of possession sought by the wife in relation to that property is unnecessary and this aspect of her application will be refused.

12. The husband seeks that from the sale proceeds of the family home, he be reimbursed for payment of a judgment debt.  As I understand it, the debt relates to a claim by the body corporate for unpaid strata levies, but perhaps judgment has not been entered but irrespective of whether judgment has been entered, this is an issue that should await the final hearing and the husband’s application for that order will be refused.  

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 29 November 2019.

Associate:

Date:  13 December 2019