Shafton and Shafton and Anor
[2013] FCCA 958
•2 August 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SHAFTON & SHAFTON & ANOR | [2013] FCCA 958 |
| Catchwords: FAMILY LAW – Property – enforcement – where the husband is required to sell two properties as a result of his default in making a payment to the wife – where the properties remain unsold eight months after the default – where the wife seeks the appointment of a trustee for sale – where the husband opposes the application and seeks to retain control of the sale – nature of the order – power of the court to make the order – whether s.80 of the Family Law Act can be called in aid – whether the court should in the exercise of its discretion make the order. |
| Legislation: Evidence Act 1995 (Cth), s.131 |
| Chernischoff & Chernischoff [1980] FLC 90-848 Kaljo & Kaljo (1978) FLC 90-445 Molier & Van Wyk (1980) FLC 90-911 Perot & Perot [2012] FamCA 958 Ravasini & Ravasini (1982) 8 FamLR 903 Shafton & Shafton [2011] FMCAfam 46 Shafton & Shafton (No.2) [2012] FMCAfam 369 Yunghanns & Yunghanns (1999) FLC92-386 |
| Applicant: | MS SHAFTON |
| First Respondent: | MR SHAFTON |
| Second Respondent: | PROPERTY D PTY LIMITED |
| File Number: | NCC 1006 of 2009 |
| Judgment of: | Judge Terry |
| Hearing date: | 11 June 2013 |
| Date of Last Submission: | 11 June 2013 |
| Delivered at: | Newcastle |
| Delivered on: | 2 August 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr Levick |
| Solicitors for the Applicant: | Turnbull Hill |
| Counsel for the Respondent: | Mr Harper |
| Solicitors for the Respondent: | McDonald Johnson |
ORDERS
Mr S of (omitted) Insolvency Practitioners (herein referred to as “the Trustee”) is appointed trustee for sale of the properties known as Property C being the whole of the land in folio identifier (omitted) and (omitted) being the whole of the land in folio identifier (omitted) (“the properties”) to implement the sale referred to in Order 12 of the Orders made on 12 September 2012.
The husband and (omitted) Pty Limited are restrained and an injunction is granted restraining them from doing any act or thing in connection with the sale of the properties save in response to a request in writing from the Trustee.
The parties and the Trustee each have liberty to apply on seven days notice to the other parties or the Trustee as the case may be for orders concerning:
(i)procedural matters concerning the exercise of the Trustee’s powers;
(ii)fixing of the Trustee’s remuneration;
(iii)any other consequential matters.
The wife’s amended initiating application filed on 15 February 2013 is otherwise adjourned to 9.30am on 9 October 2013 for further consideration.
IT IS NOTED that publication of this judgment under the pseudonym Shafton & Shafton & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 1006 of 2009
| MS SHAFTON |
Applicant
And
| MR SHAFTON |
First Respondent
| PROPERTY D PTY LIMITED |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 12 September 2012 final property orders were made which required the husband to pay the wife $1.17m in three instalments.
The husband failed to pay the second instalment which was due on 12 November 2012 and as a result he is obliged by the orders to sell two properties and use the proceeds of sale to pay the wife the balance of her entitlement.
The properties remain unsold eight months after the default and the wife has applied for the appointment of a trustee for sale of the properties. The application is opposed by the husband who wishes to keep control of the sale process.
The evidence
The wife relied on her amended Initiating Application filed on 15 February 2013, her affidavit filed on 4 June 2013, the affidavit of her solicitor Mr Gilbertson filed on 15 February 2013 and the affidavit of Mr P, a real estate agent, filed on 4 June 2013.
The wife also called Mr T, the valuer who valued the properties in January 2013, and Mr D, the real estate agent with whom the husband listed the properties for sale in February 2013, to give oral evidence. Neither Mr T nor Mr D were willing to sign affidavits. Mr T listened to the evidence of Mr D and was afterwards recalled to give further evidence.
At the commencement of the hearing Counsel for the husband advised that he took objection to a large amount of the material in the affidavits of the wife and Mr P on the basis that it was hearsay, opinion, irrelevant or in the nature of submissions. He did not in the end press the court to rule on each objection individually however and indicated that he was content for the court to be mindful of the need to disregard objectionable material.
In hindsight, given the highly contentious nature of this application, it would have been preferable to rule on the objections, but I am confident that my decision is not based on any material to which objection could successfully have been taken.
The husband relied on his Response filed on 25 February 2013 and his affidavits filed on 25 February 2013 and 4 June 2013. He was not required for cross-examination.
Neither the wife, the husband nor the wife’s witnesses who were on affidavit were required for cross-examination. Mr T and Mr D were both cross-examined.
Background
The husband (an (occupation omitted)) and wife (a retired (occupation omitted)) separated in 2007. After negotiations in late 2008/early 2009 they reached agreement about a property settlement and on 28 April 2009 final orders were made by consent.
The orders were complex and were followed by three years of dispute and litigation in this court.[1]
[1] I do not intend to go over that tortuous history yet again. It is referred to in Shafton & Shafton (No.2) [2012] FMCAfam 369 and Shafton & Shafton [2011] FMCAfam 46.
The husband filed a s.79A application in 2011 and it was listed for hearing on 10, 11 and 12 September 2012. The hearing began but during the course of it the parties settled and on 12 September 2012 new orders were made by consent.
The new orders provided inter alia for:
·the 28 April 2009 orders to be set aside;
·the husband to pay the wife $1.17 million in three instalments: $200,000.00 by no later than 3 October 2012, $500,000.00 less holding costs of up to $30,000.00 by no later than 12 November 2012 and $500,000.00 by no later than 12 May 2013;
·the husband to transfer to the wife by 3 October 2012 his interest in the former matrimonial home at Property B;
·the wife to be solely responsible for the debt of $670,000.00 secured over the Property B property by mortgage in favour of (omitted) Bank;
·the husband to sell Property D and Property C (“the properties”) and use the sale proceeds to pay the wife the balance due to her plus interest if he defaulted in paying any of the instalments.
The properties are owned by Property B Pty Limited as trustee for the (omitted) Unit Trust and (omitted) was joined as a party at the time the orders were made.
The husband/Property D were given the right to grant a first mortgage over the properties in fixed amounts as security for borrowings made in order to pay the instalments and the wife was to be given a second mortgage over the properties once the first mortgage was registered.
The husband and (omitted) Pty Ltd as well as the wife are liable for the debt to the (omitted) Bank which is secured over the Property B property and (omitted) Pty Ltd was joined as a party when the orders were made. The orders provide for (omitted) to release the wife from any claims it may have had against her and that the wife release (omitted) from any claims she may have had against it.
The husband paid the wife the first instalment which was due on 3 October 2012 and the wife paid the entire amount to the bank, reducing the debt to $470,000.00. Contemporaneously with this the husband granted a first mortgage over the properties to (omitted) Pty Ltd and a second mortgage was then registered in favour of the wife.
The husband failed to pay the second instalment which was due on 12 November 2012 and this triggered the operation of Order 12.
Order 12 provides as follows:
In the event that the husband defaults in any payments pursuant to orders 5, 6 and 7 hereof then within seven (7) days of such default the husband and Property D shall do all such acts and things and sign all documents as shall be necessary to list the security properties for sale and sell with an agent agreed between the wife, Property D and the husband and in default of agreement for more than three (3) days with an agent appointed by the president for the time being of the Real Estate Institute of New South Wales at a price agreed between the wife, Property D and the husband and in default of agreement as to listing price and/or sale price for more than three (3) days at a price determined by the licensed commercial valuer nominated by the President for the time being of the Australian Valuers Institute and upon completion of the sale of the security properties the proceeds of sale shall be distributed as follows:
(i)in payment of costs of sale including legal costs and agent’s fees including advertising;
(ii)in discharge of the first mortgage permitted under order 9 hereof;
(iii)in payment to the wife with such outstanding sums [sic] together with interest thereon as calculated pursuant to the Family Law Rules from the date of default until the date of payment such payment to discharge the second mortgage of the wife;
(iv)in payment of the balance to Property D.
On 12 November 2012 the husband’s solicitors wrote to the wife’s solicitors advising that the husband was unable to pay the second instalment and asking whether the wife would like the properties listed for sale or whether she would be willing to give the husband an extension of time if he paid monthly interest in advance.
After several days the wife’s solicitors replied that the wife wanted the properties sold and proposed that Mr D of (omitted) be appointed as agent.
The husband agreed to the appointment of Mr D and proposed a listing price of $2.2m. The wife after speaking to Mr D proposed a listing price of $1m.
At or about the same time the wife’s solicitors wrote to the President of the Australian Valuers Institute requesting the appointment of a valuer to determine the listing price.
In December 2012 the wife received a letter from Kemp Strang, Solicitors for the (omitted) Bank, enclosing a Default Notice and the husband and (omitted) Pty Ltd also received Default Notices. The husband proposed that the parties arrange a meeting with the bank but the wife declined to take part maintaining that it would do no good.
In response to the letter from the wife’s solicitors the President of the Australian Valuers Institute nominated Mr H of (omitted) Valuers to value the properties for the purpose of fixing a listing price. The husband was not happy with the amount Mr H proposed to charge and on 11 January 2013 he suggested that Mr T be asked to do the valuation. Mr T had valued the properties previously.
The impression created by the wife’s affidavit filed on 4 June 2013 was that she never agreed to Mr T doing the valuation but if this is the impression the wife intended to create her recollection is at fault. In a letter which her solicitors sent to the husband’s solicitors dated 6 February 2013 they said as follows:
To ensure that there is no misunderstanding our client is prepared to have the property [sic] listed for sale at a price determined by Mr T. We note that in our letter of 17 January 2013 we advised that our client was prepared to have Mr T value the property [sic].
On 21 January 2013 the husband sent a letter to Mr T asking him to do a valuation for the purpose of fixing a listing price. The husband paid Mr T’s fee, noting in correspondence that the orders were silent as to who was to pay for the valuation if it was required.
Subsequently the wife received a further Default Notice from (omitted) Bank.
On 1 February 2013 the wife filed an application in which she sought the following orders:
i) Within 7 days of the making of the orders the parties do all acts and things to list the properties for sale with Mr D of (omitted).
ii) The properties be sold by public auction to take place within 8 weeks of the date of the orders.
iii) The reserve price be as agreed or failing agreement as nominated by Mr D of (omitted).
iv) The wife be appointed trustee for sale of the properties.
v) Until completion of the sale of the properties the husband be responsible for making the mortgage repayments in respect of the Property B property.
vi) The husbands pay the wife’s costs on an indemnity basis.
The wife’s application was given a return date of 8 February 2013.
On 7 February 2013 Mr T provided his valuation to the husband and in it he said as follows:
Highest and best use – As is – in one line – for a proposed sale.
We are of the opinion having regard to the Fee Simple in Possession a Current Market Value for the Purposes of the Family Court – of Lots (omitted) and (omitted) in Deposited Plan (omitted) – Property D and Property C, assigned as VACANT COMMERCIAL LAND as at 7 February 2013 would be:
ONE MILLION EIGHT HUNDRED AND FIFTY THOUSAND DOLLARS ($1,850,000.00)
(my emphasis)
Mr T’s valuation was provided to the wife on 8 February 2013.
At the mention before me on 8 February 2013 the wife was represented by counsel and the husband by a solicitor. The matter was stood down after some preliminary discussion and when it was called back on I was advised that the parties had agreed that the properties would be forthwith listed for sale with Mr D.
The wife’s counsel said that the wife nevertheless wished to press her application for the properties to be auctioned.
I adjourned the matter to 25 February 2013 for further consideration and made an order for the husband to file a response and supporting affidavit.
On 12 February 2013 the husband listed the properties for sale with Mr D but he did not do so in accordance with Order 12. Order 12 requires the properties to be listed for a fixed price but on the listings form signed by the husband the words “Expressions of Interest” appear next to the question which asks for the price at which the properties are to be offered.
Mr D proceeded to advertise the properties for sale by expressions of interest.
After the mention on 8 February 2013 the wife sought a meeting with Mr T but was unable to organise one and on 15 February 2013 she filed an amended initiating application in which she sought orders that:
i) Mr S of (omitted) be appointed trustee for sale of the properties;
ii) the Trustee be permitted to do all acts and things to sell the properties by public auction;
iii) the Trustee be given authority to sign documents determining the reserve price for the auction or the listing price from time to time.
iv) in the alternative that the properties be auctioned by Mr D with the auction to be held within 8 weeks and with the reserve price to be agreed by the parties or nominated by Mr D.
On 25 February 2013 the wife’s counsel urged me to make these orders without further delay and he particularly emphasised the wife’s wish for the properties to be auctioned. The husband’s counsel opposed the making of any orders and it is relevant to repeat here the submissions he made about why the court should not make the orders sought by the wife:
i) Order 12 did not provide for the properties to be auctioned and given the nature of the properties an auction would create a real prospect of the properties being sold at a fire sale price. The court was therefore being asked not simply to vary machinery orders but to make orders which might affect the substantive rights of the other parties to the orders.
ii) In the light of the potentially grave consequences of making the orders sought by the wife her application should not be determined hastily on the basis of each party making submissions. The wife should be put to proof of contentions such as that the husband was attempting to delay the sale, that the value fixed by Mr T was aberrant, that Mr T had not in fact provided advice about a listings price and that the bank were likely to sell Property B unless the wife obtained an order for an auction.
iii) The interests of (omitted) Pty Ltd as first mortgagee of the properties could be affected by the proposed variation to sale order and before any decision was made it was necessary for (omitted) Pty Ltd to be joined as a party.
On 11 March 2013 I handed down a decision in which I set out my reasons for declining to immediately make the orders sought by the wife[2]. I adjourned the matter to 26 March 2013 for further consideration and on 26 March 2013 I listed the wife’s application for hearing on 11 June 2013.
[2] Shafton & Shafton [2013]FMCAfam203
On 10 and 12 April 2013 the wife tried to obtain information from Mr D about the outcome of the expressions of interest campaign but Mr D refused to take her calls. During oral evidence Mr D confirmed that after “the early days” he had refused to speak to the wife and when asked why he said as follows:
I had a meeting with Mr Shafton and – well, I had a couple of meetings with Mr Shafton and many discussions, but at this particular meeting, Mr Shafton told me very clearly that I was his client, acting for Property D Proprietary Limited, and that any negotiations or discussions were to go through Mr Shafton and not through anyone else.
Between 15 April 2013 and 7 May 2013 the husband sent the wife a number of letters which the wife annexed to her 4 June 2013 affidavit.
The husband’s counsel submitted that the letters were inadmissible pursuant to s.131 of the Evidence Act which provides that:
(1) Evidence is not to be adduced of:
(a)a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.
The husband’s counsel also objected to the letters being received into evidence on the basis of relevance.
A regrettable result (for which I blame myself) of the approach taken to objections is that I did not hear any argument about whether or not the husband’s objections concerning the letters should be upheld. The wife’s counsel made his final submissions on the basis that the letters were “in” and the husband’s counsel made reference to the objections during his final submissions.
The contents of the letters are such that an argument might well be open that they are not an attempt by the husband to negotiate a settlement but rather they are an attempt by him to frighten and intimidate the wife into doing what he wanted. However out of an abundance of caution I intend to disregard all of the letters save those dated 7 May 2013 which comprise a letter headed “Damages to (omitted) Pty Ltd” followed by another letter proposing a radical change to the property settlement orders.[3]
[3] Annexure N to the wife’s affidavit filed on 4 June 2013
The 7 May 2013 letters are nothing more than an attempt by the husband to first frighten by threats of financial loss and then coerce the wife into agreeing to vary the orders as proposed by the husband. I do not accept that these letters represent a genuine attempt by the husband to negotiate a settlement.
During this period the husband also sent letter to the parties’ adult children, the wife’s sister and the (omitted) Bank which are similar in tone and content.
The husband’s counsel objected to these letters being admitted on basis of relevance but I do not accept the submission that these letters or the 7 May 2013 letters are irrelevant.
The letters forcefully assert that the wife is the person in default under the 12 September 2012 orders and claim that she is exposing herself to a potentially massive damages claim and significant financial loss unless she agrees to settle with the husband on his terms. The husband makes no mention in the letters of his own breach of the orders.
The letters are relevant for what they reveal about the husband’s attitude to the wife and to the orders and they are also relevant to the issue of whether the husband can be relied upon to comply with Order 12 in the future if I decline to appoint a trustee for sale.
If nothing else they amply explain why the wife would not want to take on the role of trustee for sale of the properties herself.
On 30 April 2013 the wife’s solicitors wrote to the husband’s solicitors requesting information about the expressions of interest campaign. They did not receive a response and at their request the matter was relisted before me on 14 May 2013.
The wife’s counsel asked me to make an order that the husband provide the wife with details about any negotiations which were occurring concerning the sale of the properties. The husband’s solicitor agreed that there was an interested purchaser but refused to reveal the purchasers name.
On 15 May 2013 the husband provided the wife with an incomplete copy of a contract for the sale. The purchaser’s name was redacted and the sale price was shown as $2.2m. The contract contained a provision making it conditional on the issue by the council of a Development Approval for a 15 storey plus basement car park mixed use building by 12 months from the date of the contract. If the condition precedent was not fulfilled then neither party would be under any obligation to the other in respect of the contract.
On 16 May 2013 on the wife’s application I made an order restraining the husband from exchanging that contract. That order was initially made until 11 June 2013 but on 11 June 2013 it was extended to be until further order.
The hearing on 11 June 2013
In her amended application on 15 February 2013 the wife sought a number of orders including an order for the appointment of a trustee for sale but on 25 February 2013 the most forceful submission made on her behalf was that an order should be made for the properties to be auctioned.
At the commencement of the hearing on 11 June 2013 the wife’s counsel confirmed that the only order the wife currently sought was for the appointment of a trustee for sale and the husband’s counsel confirmed that he understood this.
In her 4 June 2013 affidavit the wife included a large amount of historical information which was unhelpful. She gave evidence about her attempts to speak to Mr D and annexed copies of the letters sent by the husband referred to earlier.
The wife said that she was making monthly payments of interest of $2,400.00 on the (bank omitted) mortgage but that the mortgage had expired and had to either be paid out or refinanced. She asserted that she was not in a position to refinance the mortgage.
I do not intend to have regard to anything in Mr P’s affidavits given that objection was taken to them in whole and that I do not consider that the contents of them will assist me.
Mr T gave evidence about the value of the properties. He is an experienced valuer and no challenge was made to his expertise.
Referring to his valuation dated 7 February 2013 Mr T said as follows:
I was asked to undertake a valuation assessment on the basis of listing price and/or slash sale price, which I interpreted as market value.
Mr T confirmed that his opinion in February 2013 was that the market value of the properties was in the range $1.65m to $1.87m and he fixed $1.85m as the market value.
Mr T said that it was his opinion that an auction might achieve an outcome within the range he estimated.
Mr T said that he had not valued the properties on the basis that the proposed sale was a forced sale. He said that discounting the market value by 15% to 20% might give a likely figure for the results of a forced sale but he said that he would have to consider the issue carefully before giving a concluded opinion about the likely outcome if a forced sale occurred.
Mr T was asked whether he felt that an offer of $1.55m which it emerged had been made for the properties following Mr D’s advertising campaign should have been accepted and he said that he did not as it fell outside his market value range.
Mr T was recalled after hearing Mr D give evidence and confirmed that he had not prepared his valuation on the basis that the properties would be sold with a development application approved. He said that his valuation was market value as is and indeed he said as such in his valuation.
Mr T confirmed that the properties were unusual in (omitted) in that they were theoretically capable of supporting a 15 storey development. He agreed that the depth of purchasers for such properties in the climate where it was difficult to obtain finance was quite thin.
Mr D was asked about the information he sought from the husband for the purposes of marketing the properties and the following exchange occurred:
Mr Levick: You also sought “your proposed schemes in a PDF format”. What did you mean by that?
Mr D: There were various schemes that MR SHAFTON had – first had approval for on the site – development approval. And schemes that he had been working on that weren’t in a development approved format. Mr Shafton was forthcoming with what I had asked for in hard copy, but not in PDF.
Mr Levick: And what was the purpose of obtaining that document?
Mr D:That was just to help me with my negotiations with prospective purposes.
I asked Mr D about whether he could have scanned the hard copy and he said as follows:
I could have. However, Mr Shafton asked me not to, and the reason for that was he said, “When we have the appropriate buyer and negotiations progress further, then we can scan and send them or copy them or I will provide you with another hard copy and we can actually hand them to them.
Mr D was asked about his marketing strategy and said as follows:
I had two blocks of commercially zoned land, which were capable of a lot more development than what would meet the eye as a lay person would turn up and look at two blocks of land. So my advice was to maximise the sale price on these blocks, you need to achieve development approval and to give yourself every opportunity of getting the maximum development on the site. If you were to sell the land just as they were, there would be quite a difference in sale price. And I pointed that out to both parties early days.
Mr D said that he was aware of Mr T’s valuation but that he had never listed the property for sale for $1.85m. He said as follows:
Well, we went expressions of interest so that we didn’t have to discuss price. It was more about trying to engage with buyers and talking about what sort of development they could get on it and what they could then realise by way of profits and work back to a sale price.
Mr D said that after the properties were advertised for sale by expressions of interest he received two written proposals, one for $500,000.00 unconditional with settlement within 42 days and the other for $1.55m conditional on development approval being obtained with settlement within 42 days after this occurred.
A third verbal offer for an unconditional sale for $600,000.00 was received.
Mr D said that there was now a purchaser who was willing to exchange contracts to purchase the property for $2.2m conditional on being given 12 months to obtain development approval. This price represented a premium of $350,000.00 over Mr T’s valuation which the purchaser was willing to pay in exchange for being given a lengthy period to obtain development approval.
Mr D said that the purchaser seemed keen and had made two applications for finance and had asked to see the current development proposals in order to consider if he was willing for the husband to put them to the council on his behalf.
Mr D said that he was not authorised by the husband to reveal the name of the purchaser but upon being questioned said that he was 58, was in construction and had done some development work. He said that the pool of people likely to be interested in the properties was not large.
Mr D agreed that he could sell the properties by going to the market and selling them as is but that his instructions from the husband were to obtain the best possible price and that the best price would only be achieved if a prospective purchaser was given the opportunity to obtain a development approval. In his words:
My job is to get the highest price I can, and if the owner chooses to go the long route and allow a purchaser to get development approval to achieve more money, then I’m in for the long haul too.
Mr D said that in his opinion if the properties went to the market for an unconditional sale the amount received could well be less than $1m and possibly as low as $500,000.00.
It was abundantly clear from the material in the husband’s affidavit filed on 4 June 2013 that he had usurped to himself the right to make a decision about any offers received as a result of the expressions of interest campaign even though the wife had a right to a say as to the sale price and obviously a right to ensure that the terms of Order 12 were complied with.
The husband did not attempt to hide this and attached to his affidavit a letter he sent to Mr D dated 27 April 2013 in which he said as follows:
I refer to our meeting on Friday 5 April 2013.
Further to your request, I advise my response to the offer
by [name removed] to buy Property D and 2 Property C for the sum of 1.55m.1.The above two lots are the only lots for sale. Your firm is not authorised to engage in discussions regarding any other allotments.
2.The price I would accept for Property D and Property C is either:
a. 1.85m with unconditional settlement within 60 days, or
b. 1.85m with unconditional settlement within 9 months, plus 5% interest on the settlement period beyond 60 days.
c.2.2m Conditional upon the purchaser receiving a development approval within 9 months, and settlement occurring within 9 months.
3.Alternatives “b” and “c” above would require the concurrence of the Federal Magistrates Court, before any “handshake” would be available for me to formally propose.
The husband confirmed that a contract had been issued for sale of the properties for $2.2m conditional on development approval being obtained within 12 months. He said that after the mention on 16 May 2013 he had made Mr D aware of the order restraining him from exchanging the contract.
Submissions
The wife’s counsel submitted that this was a very simple and straightforward case. The wife was entitled to her money. The husband had defaulted in payment of the second instalment and had failed to take the necessary steps to sell the properties in accordance with Order 12.
Only the appointment of a trustee for sale would ensure that the sale occurred in a timely fashion. The wife did not wish to be the trustee and a reputable independent person was prepared to take the role and should be appointed.
The husband’s counsel submitted that the court should not make the order for the following reasons:
i) The wife had not identified a legal basis for the making of the order.
ii) The husband had complied with Order 12 and the appointment of a trustee for sale was unnecessary. If the properties were taking time to sell it was because of the nature of the properties.
iii) If the Trustee put the properties to auction or tried to sell them quickly the properties might sell for considerably less than market value. This would affect the husband’s substantive rights under the orders which was impermissible.
iv) The wife had provided no evidence about her financial circumstances other than to assert (without foundation) that the (omitted) Bank were threatening to sell Property B unless she obtained her money quickly. This was relevant to whether the court should in the exercise of its discretion make the order the wife sought.
v) The wife had still not applied to join (omitted) Pty Ltd as a party and no order should be made until that company was given the right to be heard;
vi) There was no evidence from the proposed Trustee about the remuneration he proposed to charge.
Discussion
The wife’s counsel submitted that the wife’s application was an application for enforcement. The husband’s counsel, for purposes of his own, would not exactly concede this but in my view it is the only way the wife’s application can be characterised. The purpose of the wife’s application is to ensure that the properties are sold so that she receives the money to which she is entitled. It is an enforcement application.
The husband’s counsel submitted that if that was the case the application was deficient because the wife had not followed the correct procedures, presumably a reference to Division 25B.2 of the Federal Circuit Court Rules which deals with the enforcement of obligations in family law matters in this court.
There would be merit in this submission if the wife was seeking an order which it was within the power of the court to make pursuant to Division 25B.2, although the court can in the interests of justice dispense with the compliance with any rules at any time. However the order the wife sought is not available to her pursuant to Division 25B.2 of the Federal Circuit Court Rules.
It is a shame that Division 25B.2 does not fit the facts of this case, because r.25B.1(13)(d) usefully provides that one of the orders the court can make is:
(d) an order in aid of the enforcement of an obligation.
However r.25B.07(1) itemises the obligations which can be enforced under Division 25B and it provides as follows:
25B.07 Enforceable obligations
(1)The following obligations may be enforced under this Division:
(a)An obligation to pay money;
(b)An obligation to sign a document under section 106A of the Family Law Act (see Subdivision 25B.2.7);
(c)An order entitling a person to the possession of real property (see Subdivision 25B.2.7);
(d)An order entitling a person to the transfer or delivery of personal property (see Subdivision 25B.2.7P.
The obligation the wife seeks to enforce is not any of the above.
If the Rules concerning enforcement cannot assist the wife then what is the court’s power to make the order the wife seeks?
It is certainly an order which has been made in other cases in similar circumstances, as the husband’s counsel conceded. An example is the 2012 Family Court case of Perot & Perot.[4] In that case final orders had been made by consent on 12 June 2012 requiring the husband to pay the wife a sum of money by 24 July 2012 and requiring him if he did not do so to sell a certain property.
[4] Perot & Perot [2012] FamCA958
The husband failed to pay by the due date and without reference to the wife listed the property for sale for a price which was about $125,000.00 higher than a previously agreed value. Unsurprisingly it attracted no interest and on 14 November 2012 the wife filed an application seeking to be appointed trustee for sale. It was her case that the husband had listed the property at a high price to ensure that it did not sell while he tried to get a subdivision application approved.
Watts J acceded to the wife’s request and appointed her trustee for sale of the property although subject to some conditions. The husband in that case was self-represented and there is no indication in the judgment that the issue the court’s power to make the order for the appointment of a trustee for sale was argued.
In her amended application filed on 15 February 2013 the wife asked the court to make the order pursuant to s. 80(e) & (k) of the Family Law Act. They provide as follows:
s.80 General powers of court
(1) The court in exercising its powers under this Part may do any or all of the following:
…………….
(e) appoint or remove trustees
(k) make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice;
It is plain on the face of s.80 however, and this has been reiterated in many decided cases, that the powers in s.80 can only be exercised in the course of the court making orders under Part V111 of the Family Law Act, the Part which allows the court to make orders for property settlement and maintenance.
The husband’s counsel submitted that the wife’s application was not an application under Part V111 and therefore she could not rely on s.80 as a source of power to make the order for the appointment of a trustee.
There are single judge decisions from the early years of the Family Court in which s.80 is relied on as the source of power to make orders to deal with enforcement problems. In Chernischoff & Chernischoff[5] for example the wife sought an order for the sale of a property consequent upon the husband’s failure to pay maintenance. Asche J found that the enforcement rules in place at the time did not allow such an order to be made and that the sequestration powers which were available would not provide the wife with an adequate remedy.
[5] Chernischoff & Chernischoff [1980] FLC 90-848
Asche J referred to Wood & Wood, an unreported decision of Fogarty J in which Fogarty J said as follows:
Although this particular case is a fairly unique example of the problems that an intransigent litigant can produce simply because the provisions for enforcement of this court are unsatisfactory, it is not so unique that it has not occurred on other occasions. Indeed, my own experience is that one of the most difficult areas and one of the most unsatisfying areas of enforcement are the enforcement of basic lump sum orders.
Fogarty J held that s.80(1)(c) could be called in aid to provide the wife with a remedy, and after referring to this decision Asche J decided that he also was entitled to rely on s.80(1)(c) as giving him power to make the orders sought by the wife.
There is nothing in the judgment to suggest that the issue of whether s.80 could be so used was argued.
In the 1978 case of Kaljo & Kaljo there is a reference to s.80 in the context of enforcement of property orders. The Full Court had before it an appeal by the husband from orders made on application by the wife to vary property orders which the wife argued had become unworkable because of an increase in property values of properties in Sydney. In the course of their judgment the Full Court said as follows:
The power to modify the machinery provisions of an order can be brought into play under the liberty to apply though the actual orders would be made under s.80. (It seems that an application could be made for modification of the machinery provisions even though no liberty to apply had been reserved expressly.) [6]
[6] Kaljo & Kaljo (1978) FLC 90-445
In the 1980 case of Molier & Van Wyk[7] the Full Court had before it an appeal by the husband from a decision of a trial judge to vary final orders to include a provision that a home be sold in the event that the husband failed to pay the wife a sum of money.
[7] Molier & Van Wyk (1980)FLC90-911
The Full Court said as follows:
The heads under which it is submitted that the Court may have [the power to make such an order] are as follows:
· Under s.78;
· Under its general enforcement powers
· Under its general powers to give effect to its orders
· Under an inherent power
The Full Court held that s.78 was not available and that there was nothing in the enforcement powers which would assist the wife. They went on to consider s.80 and said as follows:
The order for sale now appealed against could not depend on s.80 as its source of power unless at the same time the court was acting under one of [the other sections in Part V111.][8]
[8] Molier & Van Wyk (1980) FLC90-911
The Full Court ultimately dismissed the husband’s appeal and held that the trial judge had validly made the order for sale, saying as follows:
It is an order which can properly be made under s.79 under the express liberty to apply contained in the order or under the general liberty to apply available in respect of property orders. There is, in any event, in our view inherent power in this court to make the original order effective in accordance with the substance and intention of the order.
In various commentaries on the Family Law Act Molier & Van Wyk is relied on as authority both for the proposition that the Family Court has an implied power to make its orders effective and to support a reading of s.80 which would allow it to be called in aid when additional orders are required to enforce an order made under s.79.
However in the 1999 case Yunghanns and Yunghanns the Full Court, while making no decision about the use which could be made of s.80 in enforcement proceedings, made the following observation which strikes a chord:
Section 80 is not an independent source of jurisdiction, but only a section empowering the court to make ancillary orders of various kinds (including, no doubt, injunctions) “in exercising its powers under this Part” (ie “Part VIII — Property, Spousal Maintenance and Maintenance Agreements”): In the Marriage of Davidson (1994) 17 Fam LR 656 ; FLC 92–469. It is a moot point whether in proceedings to enforce an order made under Part VIII the court is “exercising its powers under this Part” or rather exercising its powers under Part XIII (“enforcement of decrees”). Be that as it may, even if s 80 is available as a source of power in proceedings for enforcement of an order made under Part VIII, its availability in this case again depends upon the proceedings truly being of that character, and as that was the very issue to be determined it begs the question to refer to s 80 as a source of jurisdiction, or even power, to make the orders sought.[9]
[9] Yunghanns & Yunghanns (1999)FLC 92-836
There must be doubt about whether s.80 can be relied on as a source of power to make the order sought by the wife in the case before me when final orders have been made under s.79, the courts power to make orders pursuant to Part V111 is exhausted in the absence of a s.79A application and the appointment of a trustee for sale is sought for the purposes enforcement.
However Molier & Van Wyk is authority for the proposition that the Family Court has an implied power to alter the machinery or consequential provisions of orders to ensure that orders are carried into effect, in other words for the purposes of enforcement, and this has been relied on in many subsequent cases. In Ravasini & Ravasini for example the Full Court said as follows:
The court has the power to enforce the order and to modify the machinery provisions of the order to effect enforcement provided that by doing so it does not affect the substantive rights of the parties. That power can also be used to spell out the effect of the order where that is not clear.
I am satisfied that this Court, like the Family Court, has an implied power to make its orders effective, and I am further satisfied that the appointment of a trustee for sale in circumstances where there is an order for sale but the person required by the order to sell the property is not getting on with it can be characterised as an order required to make the orders of this court effective.
The husband submitted that he was getting on with the sale and was complying with Order 12 but I am frankly baffled by this submission. The husband has never complied with Order 12 and there was nothing to suggest that left to his own devices he would do so in the future.
Order 12 provides for the properties to be listed for sale within 7 days of the husband’s default. I accept that it was always likely that the husband would be unable to comply with this time frame as it did not allow much time for the parties to obtain a valuation if they disagreed about the listing price. However after the valuation was obtained the husband listed the properties for sale not at a fixed price as required by the orders but for sale by expressions of interest, and he did this without any consultation with the wife.
Faced with this fait accompli the wife did not interfere and an ‘expressions of interest’ advertising campaign was conducted. When offers were received however the husband acted as if it was his right alone to decide whether to accept the offers.
He instructed Mr D not to communicate with the wife and he would not reveal until the matter was re-listed in court that he was negotiating with a prospective purchaser. He had the effrontery to announce in his trial affidavit that:
a contract of sale has been issued at a price of $2.2m and annexed and marked with the letter “J” is a true copy of a letter dated 15 May 2013 which I caused my solicitors to send to Greg Levick who I know to act for the wife in this matter. Attached to this letter is a copy of the contract which has issued. [my emphasis]
The husband not only failed to consult the wife about the selling price, he wants to push through a sale subject to a condition about the obtaining of development approval which will leave the wife without any certainty about when she might receive her money except that it will not be within the next 12 months.
Order 12 requires the properties to be sold for a price agreed between the parties and makes no reference to the properties being sold with development approval. Mr T valued the properties “as is” ie without development approval.
It was the husband’s case that if purchasers were allowed time to obtain development approval and given the right to terminate the contract if they were unsuccessful the price obtained for the properties would be maximised. That may be so but the purpose of the sale clause is not to maximise the sale price for the husband’s benefit but to provide the wife with her money within a reasonable period of time in the face of the husband’s default.
In Perot & Perot Watts J took into account that the husband hoped that subdivision approval could be obtained for the land in question before it was sold. Watts J appointed the wife trustee for sale but drafted the orders in a way which gave the husband a further period to try to get the subdivision approved before the wife sold the property.[10]
[10] Perot & Perot [2012] FamCA958
Watts J did not explain in his judgment his reason for imposing these conditions. He had had the carriage of the matter prior to considering the wife’s application and it may be that given the facts of that particular case the order is explicable. However it is important to note that Watts J gave the husband only a limited window of opportunity to get the subdivision off the ground and pointed out that the wife was entitled to receive her money within a reasonable timeframe.
The husband in the case before me made no application for the appointment of a trustee for sale to be subject to any conditions.
The husband has made no reasonable attempt to comply with his obligations pursuant to Order 12 and shows no sign of being willing to do so in the future. He sent unpleasant bullying threatening letters in April and May 2013 the wife, her adult children and her sister asserting that it is the wife who is in default of the orders and asking her to agree to yet another change to the settlement overall or else face financial ruin.
It is imperative that the sale is taken out of the husband’s hands so that it proceeds in an orderly fashion.
The mere appointment of a trustee for sale will not affect anyone’s substantive rights, because the trustee’s role will be to sell the properties in the way the husband should have. Order 12 provide for the parties to seek the opinion of a valuer about the selling price if they cannot agree about it and the parties have not yet attempted to make use of that part of the order. It could be that it will be possible to sell the properties using the procedure in Order 12 and if that occurs the husband cannot complain no matter what the outcome in dollar terms that his substantive rights have been impinged upon.
If Order 12 does prove unworkable of course then a further application will need to be made to the court and the husband can raise in opposition to any orders sought by the wife any arguments he wants to raise about the possible effect of those proposals on his substantive rights.
The husband’s counsel complained that the wife did not provide information about her financial circumstances or admissible evidence about the intention of the (omitted) Bank but this does not matter. The wife is owed $970,000.00. Rich or poor she is entitled to her money. Whether the (omitted) Bank are about to sell up Property B or are prepared to wait she is entitled to her money. I do not consider it relevant that the wife did not provide detailed information about her financial circumstances or evidence about the intentions of (omitted) Bank on which I can place weight.
The husband complained in correspondence that the wife was in default of her obligation to pay the debt to (omitted) Bank secured over the Property B property and the wife admitted that at present she was making interest only payments.
The husband’s counsel did not seek to make anything of this in submissions and in the circumstances of this case the fact that the wife is not complying with an order herself is not a reason for refusing in the exercise of my discretion to grant the order for the appointment of a trustee sought by the wife.
The husband’s counsel submitted that the wife should have joined (omitted) Pty Ltd because its interests might be affected by the order she seeks.
I do not accept this. (omitted) Pty Ltd is owed $200,000.00. It is reasonable to assume that it lent the money to the husband in full knowledge of the existence of Order 12. It cannot complain if Order 12 is carried into effect, and there is absolutely nothing in the evidence to suggest that it would miss out on its money no matter how the properties were sold.
I agree with the submission by the wife’s counsel that it was not necessary for (omitted) Pty Ltd to be joined as a party.
The issue of the Trustee’s remuneration will need to be addressed in due course but I do not consider that the absence of information about this should prevent me making the order sought by the wife. It is understandable that the wife does not wish to act as trustee, and the proposed trustee is a professional person whose remuneration can be fixed by the court when an application is made.
Orders
I intend to order the appointment of a Trustee for sale and to give the Trustee and the parties liberty to apply for orders concerning the Trustee’s remuneration and any consequential or procedural matters which may arise.
The husband and Property D are restrained by the 12 September 2012 orders from further encumbering the properties and I intend to make an order that they be restrained from doing any act or thing in connection with the sale of the properties unless requested in writing by the Trustee to do so.
The appointment of the Trustee does not exhaust the wife’s application and I intend to list the matter for further consideration on 9 October 2013.
For all of the above reasons the orders of the court will be as set out at the beginning of this judgment.
I certify that the preceding one hundred and thirty-eight (138) paragraphs are a true copy of the reasons for judgment of Judge Terry
Date: 2 August 2013
Key Legal Topics
Areas of Law
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Insolvency
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Equity & Trusts
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Civil Procedure
Legal Concepts
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Injunction
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Jurisdiction
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Remedies
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Procedural Fairness
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Costs
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