SALTZER & PACEK
[2020] FCCA 854
•16 April 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SALTZER & PACEK | [2020] FCCA 854 |
| Catchwords: FAMILY LAW – Property – injunction – applicant seeks to prevent completion of contract of sale of former matrimonial home – where parties transferred joint interest in property to the respondent as sole proprietor – where evidence demonstrates that parties were agreed in sale, appointment of agent, commission and advertising budget – where applicant lodges and then removes caveat – where parties’ agreement not disclosed in applicant’s primary affidavit – where applicant fails to establish sufficiently arguable case – where applicant’s capacity to fund any purchase not established – where rights of purchaser under uncompleted contract of sale intervene – where purchaser not joined to application – where balance of convenience does not favour grant of injunction – application refused. |
| Cases cited: Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 |
| Applicant: | MR SALTZER |
| Respondent: | MS PACEK |
| File Number: | MLC 2954 of 2020 |
| Judgment of: | Judge A. Kelly |
| Hearing date: | 14 April 2020 |
| Date of Last Submission: | 14 April 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 16 April 2020 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Ms Fisken |
| Solicitors for the Respondent: | Mr Cornelius |
ORDERS
The respondent wife do all things and sign all documents as may be necessary to effect completion of the contract of sale dated 19 February 2020 (contract of sale) of the property situate at M Street, Suburb N, in the State of Victoria (property), the settlement of which is scheduled to occur on 20 April 2020.
The respondent provide the applicant as soon as is reasonably practicable with a copy of the statement of adjustments relating to settlement upon the sale of the property.
Upon completion of the sale of the property, the proceeds of sale be distributed as follows:
(a)to pay the costs, commissions and expenses of sale;
(b)the balance remaining be held on trust for the parties by Domantay Legal in a controlled monies interest-bearing account until further order or as may be agreed by the parties in writing.
The applicant be restrained whether by himself, his servants, his agents or howsoever otherwise from interfering or taking any step to interfere with completion of the sale of the property including, without limitation, by making any attempt, directly or indirectly, to communicate with the purchaser under the contract of sale.
Direct that a copy of this Order be served by the respondent upon the purchaser of the property.
The respondent’s costs of and incidental to this application be reserved.
Liberty is reserved to apply on short notice.
By consent, pursuant to ss.67-68 of the Federal Circuit Court of Australia Act 1999 (Cth), the Court directs that the parties be allowed to appear and to make submissions before the Court via audio link.
IT IS NOTED that publication of this judgment under the pseudonym Saltzer & Pacek is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 2954 of 2020
| MR SALTZER |
Applicant
And
| MS PACEK |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain why orders have been made refusing an interim application made by the applicant husband for an injunction to restrain completion of a contract of sale relating to the parties’ former matrimonial home in M Street, Suburb N (M Street, Suburb N property).
In substance, I have concluded that the applicant has not demonstrated he has a sufficiently arguable case for the grant of an injunction and that the balance of convenience does not favour such relief. It is fundamental to the law that legally binding and concluded contracts should be upheld and enforced according to their terms. In Tanwar Enterprises Pty Ltd v Cauchi,[1] Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ confirmed that while an enforceable contact of sale is on foot, a breach or threatened breach by the vendor will be restrained. By extension, the court will strive to uphold the parties’ contract. In the present case, there is nothing in the conduct of the vendor or the purchaser which supports a conclusion that completion of the contract should be restrained. The applicant’s conduct does not support a contrary conclusion.
[1] (2003) 217 CLR 315, [57].
Background
Although the matter arises in circumstances of some urgency, it is necessary to set out a little of the background. From the outset, it should be recognised that a feature of the case is that the applicant is illiterate. While this has not prevented him from establishing an apparently successful business enterprise, as observed in the course of the hearing, the applicant impressed me as an intelligent man but one who presently struggles to deal with his affairs in circumstances where the lawyer with whom he has apparently held a long-standing and trusted relationship cannot act for him in this proceeding. As he sought to explain his present position, he has had difficulty in finding a lawyer who will listen patiently to his instructions and understand the issues arising.
There is no doubt that the parties’ financial affairs are such that each of them requires the provision of independent, competent legal and accounting advice. On one view, the applicant has now appointed three firms of lawyers and terminated the retainer of his accountant. He would be well advised to settle upon his advisors and consider their advice.
The parties who are now both in their late fifties were married in 2009. According to the initiating application, the applicant contends that the parties separated on 25 December 2017 and that the parties have lived separately under the one roof from that time. Both parties have children from other relationships but no children of this relationship.
The parties are presently co-directors and co-shareholders in a large number of entities. The financial affairs of those entities appears to have been structured by a long-standing accountant, Mr G. Over several years the parties have successfully acquired significant property much of which is encumbered by debt. It is unnecessary for the purposes of the present application to examine this aspect of their affairs in particular detail. Suffice to say, from the applicant’s perspective, on the advice of Mr G, the parties’ affairs were structured so as to quarantine all of the assets in the name of the respondent and to locate all of the liability with the applicant. While this was explained by the applicant as being due to a need to protect the parties’ financial position, particularly in light of an anticipated venture with certain Country O participants, it has been made more difficult by the way in which the parties’ net property interests might now be adjusted.
On the applicant’s case, he has worked extraordinarily hard to build up a successful business. He also acknowledges that until separation the respondent made her own contributions, including working part-time in the business. By his account, the parties have accumulated gross assets in excess of $8.6M and liabilities of $6.0M. By his primary affidavit, each of the parties would be entitled to an individual share of about $1.3M. Now is not the occasion to delve into the difficulties which have attended their relationship or those which relate to financial disclosure. However, it is necessary to record that many of the matters addressed below were not disclosed by the applicant’s primary affidavit. For completeness, the applicant maintains that the respondent’s affidavits likewise are subject to criticism for want of proper disclosure.
The parties purchased the M Street, Suburb N property in 2005. At the time of purchase, the M Street, Suburb N property comprised vacant land. In due course they constructed a home upon the property and commenced occupation in 2009. The total cost of purchase and construction was ~$764,000. From the time of purchase they were registered as joint proprietors. However, at least on the applicant’s case, some twelve months after separation, the parties executed a transfer of land whereby they severed their joint tenancy and the property was transferred to the respondent.
On about 15 November 2018, the respondent was registered as sole proprietor of the property. She was then the legal owner of that land.
On the respondent’s case, separation occurred in August 2019 and as she contends, the parties then agreed to a sale of the M Street, Suburb N property.
For the purposes of such sale the respondent engaged a selling agent. I am satisfied that the applicant agreed to that appointment.
On 20 November 2019, the solicitors then acting for the applicant wrote to the respondent’s lawyers addressing in some detail resolution of the parties’ property interests including in relation to the M Street, Suburb N property. Relevantly, the opening paragraph of their letter stated that the applicant instructed the applicant was prepared to proceed with the sale of the M Street, Suburb N property and also agreed to: the appointment of a designated agent; setting the agent’s commission; a marketing budget; and, a reserve price. In addition, by this correspondence, the applicant also proposed that the parties should agree on the valuation, and progressive sale, of several other properties, doing so on the express proviso that, on an interim basis, the net proceeds of those other sales would also be held on trust.
On 3 December 2019, the same firm of lawyers who had written to the respondent’s lawyers on 20 November 2019, again wrote noting the parties had agreed to sell the M Street, Suburb N property and instructing the respondent’s apparent position was that the property could not be placed on the market at that time on the stated basis that “the window for a sale has passed”. Importantly, the applicant’s lawyers responded stating that the applicant considered “the sale of the home must proceed with priority.” There was no suggestion of any objection to a sale.
I am satisfied that the parties were agreed the sale of the property would proceed and that the net proceeds of sale would be held on trust until the disbursement of those funds had been agreed or resolved.
At some point, the parties sought to enlist the assistance of Mr G, including as mediator, so as to finally resolve all matters between them. However, it appears the applicant’s relations with Mr G deteriorated to the point where on 31 January 2020, and after a relationship of twenty-one years, the applicant advised him that their professional relationship was at an end. He also explained that he would be taking full control of all his assets and making his own decisions “on that basis only”. The applicant apparently felt that he had been taken advantage of and that the difficulties attending the parties’ relations meant that he could no longer attend his own office. In addition, he complained of a lack of full and frank financial disclosure on the part of both Mr G and the respondent. It was in this context that the applicant expressed, in regrettable terms, a desire to “burn it all” and to “bury the asset settlement negotiations in Court if required, even if it means I get nothing out of it.” There is further evidence that the applicant has repeated statements of this kind during March 2020.
The applicant’s attitude toward the sale appeared to change such that on 14 January 2020 he transmitted an email to the designated selling agent making complaints and criticisms in relation to the manner of marketing and purporting to disclaim any liability for advertising costs.
On 28 January 2020, the applicant lodged a caveat over the M Street, Suburb N property, doing so without notice to the respondent.
I accept that on 18 February 2020, the selling agent attended the parties’ business premises where she spoke, individually, with each of them and communicated details of two offers that had been received in relation to the property, both of which were in writing. I am satisfied that the selling agent brought copies of those written offers with her and that they were shown to each of the parties. So far as is material, one offer was for $905,500 with a thirty day settlement and the second was for $950,000 but was qualified as being subject to finance. While the evidence indicates the applicant was prepared to accept the lower offer, the respondent adopted a different stance and instructed the agent to pursue negotiations with the party prepared to pay $950,000. The agent did so.
In the result, the selling agent secured an unconditional offer of $950,000 with settlement on sixty day terms. The offer was accepted.
On 17 February 2020, a purchaser for the property executed a contract of sale doing so in his own name, alternatively, “and/or nominee”. The respondent executed that contract on 19 February 2020. The purchaser has paid a 10% deposit on an agreed purchase price of $950,000 with settlement due to occur on 20 April 2020. Notably, the purchaser’s address was identified on the contract.
Matters were further complicated when, on about 19 February 2020, the applicant communicated with the selling agent advising that he had previously made an offer to purchase the property for $950,000 which offer he purported to renew. It appears that this email communication is at least part of the catalyst for the present application. Although it may become a matter for trial, the respondent contends it is not the fact that the applicant had previously made any such offer. In this regard, there is clear evidence from the selling agent that at no stage has the applicant ever communicated to her an offer of the kind suggested. Equally, there is evidence from the respondent who denies the applicant ever made any such offer to her or to her lawyers. I accept her denial.
Against that background, there was some force in the respondent’s submissions that the applicant was running hot and cold in relation to the sale of the M Street, Suburb N property and now wanted it for himself.
In a series of email communications between the solicitor, conveyancer and real estate agent acting in connection with the sale of the M Street, Suburb N property, discussions were held in relation to completion, including the possibility that the sale would complete earlier than the scheduled date. In those communications, it was recorded that unless the caveat lodged by the applicant was removed, the respondent, as vendor, would bring a proceeding in the Supreme Court of Victoria for its removal. In these emails it also emerged that by 8 April 2020 the caveat had been removed.
The contract of sale was produced to the applicant by way of exhibit to an affidavit made by the respondent on 30 March 2020 (which affidavit was served on that date). On the respondent’s case, the applicant then attended at the home of the purchaser the following day. While the applicant initially suggested he had not seen the contract, this is inherently improbable. As counsel for the respondent observed, the only probable means by which the applicant came to know of the purchaser’s address was from the contract of sale. At all events, the applicant conceived that the solution to the present impasse could be achieved by procuring the agreement of the purchaser to nominate him pursuant to the nominee clause as the purchaser under that contract. He also appears to have offered to indemnify the purchaser for any damages arising from termination of the contract.
Further, despite the various communications referred to in the evidence, I am not satisfied the purchaser has agreed to nominate the applicant under the contract to complete that contract.
The respondent tendered in evidence an email dated 31 March 2020 in which the purchaser’s conveyancer stated that although he did not wish to antagonise the applicant, he wished to have no further contact with him and would not be nominating the applicant as purchaser under the contract for the sale of the M Street, Suburb N property. I accept that evidence.
The respondent also produced in evidence a medical report dated 11 April 2020 which recorded that a practitioner had been consulted by the respondent on 4 April 2020 in relation to injuries received on the evening of 3 April 2020 when assaulted by the applicant. I have considered the matters contained in that report. It appears both parties had been interviewed and fingerprinted by police and that the subject incident had been recorded on CCTV installed at the parties’ home.
On the respondent’s case, following the incident on 3 April 2020, an application was made by Victoria police on behalf of the respondent for a family violence intervention order which, relevantly, operates to exclude him from the M Street, Suburb N property.
On Easter Thursday, 9 April 2020 at 6:21pm, the applicant lodged a loan application with P Bank seeking finance of $500,000 on a proposed purchase of the M Street, Suburb N property. According to the loan application, the purchase price was $725,000 and curiously, the anticipated settlement date was 28 September 2018. The loan application appears to have been completed on the applicant’s behalf. A complication emerging from the loan application is that several of the parties’ entities appear to be nominated as providing security for the loan. Otherwise, there is no cogent evidence of the applicant’s capacity to complete any purchase the M Street, Suburb N property at this time.
Also produced in evidence was a property appraisal relating to the M Street, Suburb N property conducted on 13 April 2020 which provided an indicative value of the property of $900,000.
Procedural history
On 29 January 2020, the applicant filed an application for divorce which is scheduled to take place on 5 May 2020.
On 19 March 2020, the applicant’s former solicitors filed an initiating application. The final relief sought by the applicant was that the M Street, Suburb N property be transferred to him, at his expense, and that the respondent relinquish all of her right, title and interest in that property. The applicant sought urgent interim relief including an order to restrain the parties from “selling, encumbering or disposing of the interests of the parties or either of them in any property held in their names or on their behalf.” A further order was sought that the “Respondent be specifically restrained from selling” the M Street, Suburb N property and to notify “the proposed purchasers” that “the property has been removed from the market, that the contract of sale (House Contract) has been withdrawn and the deposit be refunded in full” together with an order that the respondent indemnify him with respect to any and all claims regarding the House Contract. Aside from this relief, the initiating application set out in no less than twenty paragraphs the total interim and procedural orders that were then being sought.
On 18 March 2020, the applicant’s former solicitor wrote a letter in support of her request that the matter be dealt with urgently and in which, in summary, it was asserted that the respondent had engaged in conduct which entailed the reckless disposal of matrimonial assets (including the M Street, Suburb N property) without the applicant’s consent and had otherwise caused disruption to business operations, thereby affecting cash flow and business valuations. Further assertions were made of a failure by the respondent to provide relevant financial documents.
On 23 March 2020, the respondent filed her Response. She too sought that the matter be given urgent consideration (confirming this in a letter). By her Response, orders were sought that each party retain 50% of their net non-superannuation assets. In addition, interim relief was sought for orders: to restrain the applicant’s lawyers from continuing to act; for the removal of a caveat over, and vacant possession of, the M Street, Suburb N property; for the disposition of the net proceeds of sale of that property, including that the net proceeds be placed in an interest-bearing account on trust for the parties pending further order or written agreement. Other interim relief was sought to restrain each of the parties in their respective dealings as directors or shareholders of certain entities and in their dealings with a joint expert (J Group), or any additional expert who was engaged to value the parties’ business interests.
The matter was listed for a hearing on 23 March 2020 to be conducted by a registrar of the court. On that date, each of the parties was represented by their respective lawyer. Orders were made, by consent, that the applicant’s then solicitor be restrained from continuing to act. Further orders were made to restrain each of the parties from disposing of or transferring or authoring any of their current office-holdings, shareholdings or positions in some ten entities that were listed. Further orders were made, by consent, to restrain either party from terminating the engagement of Mr G as accountant of their entities and, providing for: each of them to be paid a gross salary of $2500 per week; payment, and reimbursement, of business expenses and claims; communications with the joint expert, J Group, with an apparent view of determining their interests in certain property.
In addition, directions were made (again, by consent), that the further hearing of the respondent’s application for interim relief as set out in her Response at [2]-[5] to this court and that neither party be permitted to rely upon any affidavit filed after 30 March 2020. Regrettably, each of the parties chose to ignore that direction.
Otherwise, the registrar adjourned the matter for an interim hearing before me on 14 April 2020, and made directions regulating the filing of submissions and otherwise adjourning the matter for a further directions hearing before the registrar on 27 April 2020.
On 27 March 2020, the applicant appointed a new firm of lawyers who advised that they would not be in a position to respond immediately to the material which had been filed to that point. As an extension of time was sought for a hearing, arrangements were made to accommodate that request. However, it appears those lawyers are now no longer acting in this matter. I was further informed by the applicant that he has appointed another firm of lawyers (and forensic accountants) to act on his behalf.
On the same date, 27 March 2020, the respondent made an affidavit in support of an originating motion filed in the Supreme Court of Victoria seeking an order for the removal of the caveat. As noted above, the caveat was removed on about 8 April 2020.
Given the present COVID-19 pandemic, the hearing of the application before me was conducted by video and audio link. With the consent of the parties, orders were made to facilitate a hearing by those means.
Consideration
From the applicant’s perspective the only issue arising for consideration before me was whether an injunction should be granted to restrain completion of the sale of the M Street, Suburb N property. From the respondent’s perspective, she sought orders to facilitate completion of the sale, contending that the applicant had secured an urgent hearing of the application in circumstances where he had not disclosed, as the evidence now shows, that he had, in substance and effect, consented to the sale.
Understandably, the respondent relied upon those considerations, including non-disclosure of material facts, as powerful factors which would militate against the grant of relief.
While the applicant contends that he wishes to purchase the property, his desire to do so is to be seen in the context that it was originally jointly owned by the parties and (at least on his case), some twelve months after separation he transferred his interest in that property to the respondent. In addition, the evidence demonstrates he has been actively informed of, and consented to, many of the steps which culminated in the sale. I am quite prepared to treat the letters sent by his former solicitor recording his instructions as having been sent with his knowledge and approval.[2]
[2] Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634, 659, [36] (Mason J).
While the applicant has asserted he now wishes to purchase the property, I am satisfied that the applicant consented to the sale and was aware of the negotiations which ultimately culminated in execution of the contract. In addition, the position of third parties must be considered. Having entered into and executed a contract for the sale of the property, the purchaser now has an equitable interest in the M Street, Suburb N property. The court is not free to disregard that interest, particularly where the evidence indicates the purchaser fully intends to complete the contract: Ascot Investments Pty Ltd v Harper.[3] Despite fair warning given to the applicant, no steps have been taken to join the purchaser to the proceeding in order that his interest might be represented. Viewed in isolation or cumulatively, those factors also militate in favour of the conclusion that the court cannot grant the relief sought.
[3](1981) 148 CLR 337, [9] (Barwick CJ), [19]-[21] (Gibbs J, Stephen, Mason, Aickin and Wilson JJ agreeing), (Murphy J diss’).
For the foregoing reasons, I am not satisfied that the applicant has demonstrated that he has a sufficiently arguable case to support his claim for an injunction. It remains to consider the balance of convenience.
In addition, while the applicant maintains that he has the ability to purchase the property, I am less than satisfied he is able to do so. There is substance in the respondent’s submissions that, the applicant and his former lawyers have, for some time, made vague, unparticularised and incomplete assertions respecting his ability to finance a purchase. Moreover, on the evidence of the respondent (supported by the parties’ long-term accountant), there is very real reason to conclude that neither party has the ability to purchase the property for $950,000. The lodging of a loan application on 9 April 2020 does not advance the matter.
For those reasons, the application should be refused. The respondent is entitled to substantially the relief sought. I have made such orders as I consider are required to address the position at present.
Conclusion
While the applicant supports the making of orders for mediation, from my review of the matter, it would be premature for mediation to occur. More preparation is required for mediation to be of any particular use at this stage. There is some evidence that the parties also have other litigation to address in relation to one or more of their corporate entities. In addition, some forensic accounting, which the applicant seeks to undertake, may need to be undertaken. At a point the parties will and should recognise that there may not be as much to dispute as they had first thought. They would be well advised not to diminish their asset pool by pursuing avenues which are not of any particular use.
I note the respondent’s evidence that supports a conclusion she will have incurred costs exceeding $25,000 as a result of the matters described above. There may be considerable force in the submission that the applicant should bear those costs or a part of them. Given the urgent circumstances in which the application was made, it is necessary to reserve those costs until a more fulsome investigation of the facts has been undertaken.
Should it be necessary for the respondent to seek further relief from the court in order to achieve completion of the sale without further objection or interference by the applicant, it may be entirely appropriate for orders to be made, including orders dealing with the question of costs.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge A. Kelly
Associate:
Date: 16 April 2020
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