Prentice and Maheris (No. 2)

[2008] FamCA 1045

FAMILY COURT OF AUSTRALIA

PRENTICE & MAHERIS (NO. 2) [2008] FamCA 1045

FAMILY LAW – ADJOURNMENT – Interim property and financial proceedings adjourned to be re-heard when proper valuation evidence is available

Family Law Act 1975 (Cth)

APPLICANT: Ms Maheris

RESPONDENT: Mr Prentice

FILE NUMBER: MLC 11939 of 2007

DATE DELIVERED: 28 NOVEMBER 2008

PLACE DELIVERED: MELBOURNE

PLACE HEARD: MELBOURNE

JUDGMENT OF: YOUNG J

HEARING DATE: 28 NOVEMBER 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR STRUM

SOLICITOR FOR THE APPLICANT: TAUSSIG CHERRIE & ASSOCIATES

COUNSEL FOR THE RESPONDENT: MR THOMPSON

SOLICITOR FOR THE RESPONDENT: KENNA TEASDALE

Orders

IT IS ORDERED BY CONSENT:

1. THAT the further hearing of all extant interim financial applications (including as may be hereafter amended pursuant to these orders) be adjourned to 7 January 2009 at 10.00 a.m. and for a one (1) day hearing before the Honourable Justice Young subject to any part-heard applications.

2. THAT on or before 17 December 2008, each party file and serve:

   a.all Amended Applications in a case/Response to an Application in a case;

   b.all affidavits in support thereof to be relied upon at the said adjourned hearing;

   c.a Financial Statement.

3. THAT V Real Estate Valuers, be jointly appointed as a single expert to value the real properties situate at:

   a.K property (also known as …A and …B K Street in K); and

   b.B Street, P property,

   and advise as to the reasonable costs, expenses and commissions of any sale, such valuations to be provided to Mr M for the purposes of paragraph 4 hereof.

4. THAT Mr M of M Forensic Accountants, be jointly appointed as a single expert to calculate the likely capital gains tax payable in the event of sale of each of the real properties referred to in paragraph 3 hereof.

IT IS ORDERED, NOT BY CONSENT

1. THAT in the first instance, the parties be jointly liable for the single experts’ fees (with liberty to apply in relation thereto at trial) and paid from the monies standing to the credit of the parties with T Company.

IT IS ORDERED, BY CONSENT

1. THAT for the purpose of the singe experts’ reports:

   a.the parties make available all such documents as may be requested by the single experts of them;

   b.the parties make the aforesaid real properties available for inspection by V Valuers and neither party be in attendance;

IT IS ORDERED, NOT BY CONSENT

1. THAT each party’s solicitor be entitled to provide a short form letter to each of the single experts drawing his attention to any desired matters relevant to valuations and copies to be provided to the other party.

IT IS ORDERED BY CONSENT

1. THAT paragraph 5 of the Orders made 27 October 2008 (property orders) remain in full force and effect pending the adjourned date or further order.

2. THAT paragraph 4 of the said orders be discharged.

3. THAT the husband and the wife forthwith sign all such documents and do all such acts and things as may be required to:

   a.open an account in their joint names and to be operated jointly be them with the Commonwealth Bank of Australia (hereinafter referred to as the “CBA rental account”);

   b.irrevocably authorise and direct R Agent, being the managing agents of the aforesaid P property, to deposit all rental payable to the husband and the wife (net only of commission) into the CBA rental account pending the adjourned date or further order;

   c.irrevocably authorise and direct the Commonwealth Bank of Australia to withdraw from the CBA rental account all period repayments of principal and interest in respect of Commonwealth Bank of Australia account numbers:

   i.…06;

   ii.…01;

   iii.…61,

   pending the adjourned date or further order

4. THAT the time for compliance by the husband with paragraph 6 of the Orders made 27 October 2008 be extended to 5 December 2008 at or before 4.00 p.m. 

5. THAT after provision for the single experts’ costs, the balance of the monies standing to the credit of the parties with T Company be deposited into the CBA rental account and applied to arrears of principal and interest and the categorisation thereof be determined by the Trial Judge.

6. THAT costs of this day be reserved to the adjourned date.

IT IS CERTIFIED

1. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for the husband and wife.

2. RESERVE Liberty to apply on short notice.

3. THAT the extempore reasons for judgment be transcribed, be placed upon the Court file and be made available to the parties.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 11939 of 2007

MS MAHERIS

Applicant

And

MR PRENTICE

Respondent

REASONS FOR JUDGMENT

1. The matter of Prentice and Maheris is before me pending various consent orders and other orders being announced.  I will in due course give extempore reasons in support of the further and more substantial orders I make today.

2. This short extempore reason is directed to paragraphs 5 and 11 of the orders that are before me in draft form and the parties, through their respective counsel, Mr Strum for the wife, Mr Thompson for the husband, seek a direction as to the financing of the single expert report of a valuation of two properties in P and in K and otherwise the costs of ascertaining any potential capital gains tax.

3. The parties collectively have available a sum of approximately $8,500 invested with T Company.  I make no finding as to the origin of those moneys but are merely dealing with the question of the applicability thereof, pending further hearing.  Additionally, and in their joint names, there is a Viridian line of credit established with the Commonwealth Bank.  There is some controversy as to the commencement and to the drawing down upon that line of credit, but those matters are not the subject of this interim ruling. 

4. The primary issue pending the rehearing of the competing applications for sale of a parcel of real property or other orders as outlined by counsel is to determine the manner of paying the costs of single expert valuations as described above. 

5. On behalf of the wife, Mr Strum has submitted to the court that the expenses should be paid from the available cash moneys in T Company, with any balance of T Company moneys then directed to the Commonwealth Bank in reduction of mortgage debt.

6. On behalf of the husband, Mr Thompson has outlined his client's request to the court that the single expert witnesses be funded by a drawdown on the line of credit, thus preserving the T Company moneys to meet the reduction in arrears or other payments of the Commonwealth Bank mortgage.

7. The essence of Mr Strum's submission is that the matter returns to court shortly.  There should not be incurrence of a further extended debt and available moneys should pay the immediate debts. 

8. The response to that argument, as submitted by Mr Thompson, is that there are insufficient moneys to pay both the further expenses necessitated by appropriate valuations and to meet the Commonwealth Bank mortgage arrears of debt.  That is clearly the case as to there being such insufficient moneys.  The preference to the line of credit raises perhaps a further issue, though it of course can be adjusted on a further hearing.

9. I balance the submissions of both counsel.  I record that it does seem in this matter that there will be continuing financial disputes and probably procedural disputes as to how financial issues and contribution issues can and should be determined.  This ruling is limited to the specific source of funding and I propose to order that the T Company moneys be first available to pay out the single expert witnesses, both as to payment for tax ruling advice and for valuation.  There does seem a substantial logic in first expending that which is there, knowing that on the adjourned hearing date, this other line of credit is available, if required, to draw down any other expense.  That will no doubt raise other issues, as to draw from one bank account to pay another account may defy logic. 

10. However, time will tell.  I make no further ruling, but certainly at the moment the T Company moneys will first pay Mr M in respect of his valuation, and the firm V Valuers in respect of each of their valuations, and any balance must be paid to the Commonwealth Bank in reduction of arrears of mortgage debt pursuant to the three loans. 

DISCUSSION

FURTHER JUDGMENT

1. The proceedings in the matter of Prentice & Maheris were listed before me this day.  Mr Strum of counsel appeared for the wife, Mr Thompson of counsel appeared for the husband.  Both parties were in court, as were their instructing solicitors.  I record that the husband has recently engaged the firm Kenna Teasdale to act on his behalf in these proceedings.  At previous times past, he has acted for himself or otherwise has engaged a different firm of solicitors.

2. The matter was before me on 27 October 2008 at which time the husband was then in person and Mr Strum held the brief on behalf of the wife.  My orders of that day are before the court and accompanying those orders were limited extempore reasons explaining the background to those orders. 

3. The intent of the court was this day to determine on an interim basis certain financial applications.  I have had identified to me the particular documents that counsel for the parties had intended to rely on this day.  For the wife, her application was filed 26 September 2008 and orders were sought in that document dealing with the disposal of rental income and payment of mortgage and other procedural orders.  Her subsequent response to the husband's application merely sought the dismissal of orders that the husband sought.  In support of her applications, the wife filed two affidavits on 26 September 2008 and 28 October 2008 and for the benefit of submissions received this morning, Mr Strum has taken me to those documents.

4. On behalf of the husband, reliance was placed on his application in a case filed 1 October 2008.  That document was prepared and filed personally by the husband.  Leaving aside all children's issues which are not before me today, he sought therein an order for the commercial property at P, to be immediately sold and subject to the payment of Commonwealth Bank mortgages, not identified in that application, for the net proceeds to be then invested pending further order of the court.  I observe that was the first application before the court where either party had sought the sale of real property.

5. Subsequently, and in response to the wife's application in a case, orders were sought for that document to be dismissed but it was reiterated that the husband sought the sale of P property. 

6. There are two affidavits filed by the husband. They were filed 1 October 2008 and 16 October 2008 and they have been identified as setting out the basis of the financial and property facts in this case and they were documents to which Mr Thompson had or more particularly would have continued to identify and rely upon had his submissions continued before me this day.

7. I do not propose to set out now the acquisition history of those properties or the way in which the parties have managed their Commonwealth Bank liabilities.  They are matters that will be before the court and subject to further submissions on the adjourned hearing date.

8. There were a number of other documents tendered to the court today.  On behalf of the husband, Mr Thompson submitted the list of documents relied upon and the orders sought by the husband.  I pause to reflect on the orders sought, in that they establish what the husband proposed today was the sale of P property, and from such proceeds of sale to pay agents and conveyancing costs, to discharge three liabilities to the Commonwealth Bank of approximately $966,000 and otherwise to pay a Citibank account of $29,000 and the balance of moneys thereafter received to be divided between the husband and wife.

9. In the alternative to the division of the proceeds, a Barro order, security for costs, was sought in the sum of $50,000 with the balance of moneys otherwise held on account of the parties pending further order.  I propose for completeness to have the list of documents document marked as exhibit H6 and the further orders sought marked a exhibit H7.  The other document that Mr Thompson tendered which has been marked exhibit H3 is a calculation of potential capital gains tax if the property at K was to be sold.  That tax was estimated for the 2007-2008 year and subject to sale, at a price of $1,100,000, to be $178,530.

10. I entertained no argument about the document.  Mr Strum indicated to the court that it was prepared by a person who had previously filed an affidavit on behalf of the husband.  He purported therefore to flag an objection to the independence of the document.  That will be overcome by the form of orders and with Mr M, chartered accountant, now to produce and expert single witness valuation of potential capital gains tax.

11. The wife's case and orders sought, somewhat different from the formal application before the court, though in accord with what was outlined to the court on the earlier hearing date, was for the sale of the property at K.  That property is registered in the husband's name.  It has a particular history of acquisition identified in the husband's affidavit.  I make no further comment or finding in that regard. 

12. I record that P property is registered in the names of the husband and wife as joint registered proprietors.  It was acquired in about May 2007.  It is a commercial arm's length rented property where the five-year first term of the lease is current and my understanding is that there are three further five-year option terms available.  Again, if there is any error in that overview, it can be corrected in the further affidavit to be filed by each of the husband and wife.  The rental of that property is approximately $68,000 per annum.  The rental currently is paid to the husband and there are some issues put before the court as to whether all or part of that rental has been paid to the Commonwealth Bank in reduction of the three principal mortgage liabilities.

13. In that regard, Mr Strum submitted to the court a document marked as exhibit “W1”, which is intended to be a summary of rent received from the P property and Commonwealth Bank mortgage loans paid from those moneys.  I make no observation as to the accuracy or otherwise of the document.  It has not been the subject of cross‑examination challenge.  When prepared, there was a shortfall of payments made of some $6,000 but that was paid shortly prior to hearing by the husband.  It is said that the current arrears to the Commonwealth Bank pursuant to the totality of the three loans is approximately $5,082 as of today.

14. Again, I make no finding but these matters will be updated by the subsequent evidence and when this matter is next before me on 7 January 2009, I will have very specific evidence as to the value of both properties, the mortgage debt then outstanding on the P property and an accounting for all rental incomes received from both properties.

15. As I have before me interim consent orders, I have abbreviated the extent of evidence that I received and other matters dealt with in the lengthy affidavits of both parties.  Mr Strum completed his submission.  I paused this case during and perhaps near to the commencement of Mr Thompson's submission.  The reason that I determined this matter was not prepared to the extent that would satisfy the court of the state of evidence hinged around the formality of orders sought before the court but primarily upon the valuation difference in property appraisals.

16. I had at the earlier hearing and perhaps in a modest endeavour to limit expenditure indicated to the parties that appraisals of valuation could be obtained.  I have now what I regard as a wholly unsatisfactory outcome as to valuation.  In respect of the K property, the wife on an appraisal from Ray White and with a disclosure of a family relationship that would be inappropriate in the context of accepting final evidence, valued K property at between $1.5 million and $1.7 million.  In contrast, the husband, relying on an appraisal from C Realty, indicated the appraisal value was $1.1 million.  Therein lies a difference of between $400,000 and $600,000 and even on an appraisal, no real estate agent experienced in the buying and selling of properties could or should be so far apart from his colleague.  The difference is simply enormous.

17. On the P property, the wife's appraisal of value was between $1.5 million and $1.6 million.  The husband's appraisal of value obtained from the firm currently managing the lease of the property was in the sum of $1,120,000 and thus in respect of this property, the difference was a mere $380,000-$480,000.  Given the rental is known, $68,000 per annum, and the expenses are known, it is difficult to understand how on a yield basis there could be the discrepancy between appraisal valuations that was put to the court.

18. I carefully make no conclusion.  A proper independent single expert valuation has been agreed between the parties.  I have permitted the solicitors to prepare, and not the clients, a modest letter of instructions to the single expert to identify particular issues or aspects of each property.  I will review those letters on the adjourned hearing date if there is any concern taken as to their content or influence.  Ultimately, this matter is and should remain for the single expert.

19. Perhaps one of the curious aspects of the case and probably consistent with the approach of the husband and wife is that the wife is on the high side of both properties, the husband on the low side.  I read no necessary significance into that but it does have a consistent theme. 

20. I record the husband's primary position is to retain K property but to sell P property.  The wife's submissions to the court were of course the reverse: to sell K property, as it has no real income attached to the property but to retain what was said to be the valuable commercial rent-producing property of at least equal and, of course on behalf of the wife, greater value.  Again, all those matters are before a future hearing and I have an open mind on the outcome.  It was the preparation of document and availability of evidence that was of the significant concern that I voiced to counsel and why the case was stopped mid-argument.

21. I record that I will not and do not regard this matter as part-heard.  The matter will be adjourned for a one-day hearing only.  The hearing will be on submissions.  Both parties now have the right to produce one inclusive and comprehensive affidavit.  It does not have to be lengthy and be accompanied by a bundle of exhibits, but I propose to leave to the experienced solicitors in this matter who will draft the document that discretion.  What I insist on on the further hearing is the precise application and orders sought.  There will be no leeway in amending the application for orders sought. 

22. I will require up-to-date payout figures pursuant to the three Commonwealth Bank mortgages and any other liability to be established by document.  I will of course have the valuations from a single expert and a calculation of potential capital gains tax on the basis of the valued sum of K property.  All of those matters and facts will expedite the hearing and the delivery of interim judgment.

23. I have already delivered a ruling on one matter of disagreement between counsel in the preparation of consent orders and that ruling will be separately prepared and distributed to parties.  I will retain on file the various exhibits pending the adjourned hearing date.  I record the child's issue is a separate issue, listed for hearing before Mushin J.   A report from Dr L has been ordered and Mr Thompson has given an assurance to the court that the payment of the husband's one-half share, said to be $660, will has been paid this day, so that that report will be available to the solicitors to better advise and for the court to better determine any matter of and concerning the child, who I note celebrated his ninth birthday just a few days ago.

1. For those very brief reasons delivered wholly extempore and reserving all issues before me to 7 January 2009, subject to the part-heard only case which commences on 5 January 2009 before me, I will herein determine this matter on that day or as soon as practicable thereafter.  I am indebted to counsel and solicitors for their out-of-court preparation of a document pursuant to my direction for request.  I will indicate that upon receipt by email from Mr Strum's solicitor and subject to my reading of the document, I will pronounce those orders on Monday.

I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young

………………………………………………………..
Associate: