Shafton and Shafton and Anor - [2013] FMCAfam 203

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SHAFTON & SHAFTON & ANOR

[2013] FMCAfam 203

FAMILY LAW – Property – application by the wife to vary final property orders – wife pressing for immediate orders that a trustee for sale be appointed for two properties and that the properties be auctioned – whether the wife’s application is simply an application for enforcement requiring a change to machinery orders or whether it would lead to a substantial change in the parties entitlements and should be treated as a s.79A application – whether the wife’s application is premature.

Family Law Act 1975, s.79A

Shafton & Shafton[2011]FMCAfam46
Shafton & Shafton [2012]FMCAfam339

Applicant:

MS SHAFTON

First Respondent:

MR SHAFTON

Second Respondent:

PROPERTY D PTY LIMITED

File Number:

NCC 1006 of 2009

Judgment of:

Terry FM

Hearing date:

25 February 2013

Date of Last Submission:

25 February 2013

Delivered at:

Newcastle

Delivered on:

12 March 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

That the wife’s application filed on 1 February 2013 is adjourned to 9.30am on 26 March 2013 for further consideration.

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

FEDERAL MAGISTRATES
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

Ms Shafton (“the wife”) has applied to vary final property orders.
She seeks to vary a sale order so that instead of two properties being listed for sale with an agent agreed between the parties for a price either agreed between the parties or fixed by a valuer a trustee for sale be appointed and given the power to list the properties for auction and to determine the reserve price.
The wife’s counsel urged me to make these orders on 25 February 2013, the second mention date of the wife’s application.
The wife also seeks orders that pending the sale of the properties the husband make the mortgage repayments in respect of the mortgage secured over her home and that he be responsible for any additional interest incurred as a result of his default in making payments to her.[1] The wife’s counsel did not press me to make these orders on 25 February 2013 but the wife’s application for these orders remains on foot.
[1] Wife’s amended Initiating Application filed 15 February 2013 orders 2.2(e) and 3
Mr Shafton (“the husband”) has filed a response seeking the dismissal of the wife’s application. His counsel strongly opposed any orders being made on 25 February 2013.

Background

The husband and wife separated in 2007. After negotiations in early 2009 they agreed on a property settlement and final orders were made by consent on 28 April 2009.
The orders required the husband to pay the wife $2.166m, with $1m to be paid by no later than 19 January 2011 and the remaining $1.66m by no later than 19 January 2012.
They required the husband to transfer to the wife his interest in the former matrimonial home at Property B (“the home”) and the wife to transfer to the husband her interest in a number of companies and trusts.
The home was mortgaged to secure loans from (bank omitted) totalling $1,223,320.50. One of the loans, in the amount of $549,945.71, had been taken out for the purposes of development projects the husband was engaged in, and the orders envisaged one of the companies, (omitted) Pty Ltd, refinancing that loan. The wife was required to repay the balance of $673,374.80 when she received the first instalment from the husband.
The orders contained complex provisions about the husband’s obligations pending payment of the instalments and about the wife’s right to security, and the husband and wife quickly fell into disagreement about the interpretation of the orders. This led to an enforcement application by the wife in 2010 concerning the payment of monthly amounts to her which was contested by the husband[2] and an application by the husband in 2012 concerning removal of caveats which was contested by the wife.[3]
[2] Shafton & Shafton [2011]FMCAfam46
[3] Shafton & Shafton [2012]FMCAfam339
The husband failed to pay the first instalment due on 19 January 2011 and later in 2011 the wife served him with a Bankruptcy Notice. The husband filed an application for a stay of the Bankruptcy Notice and he also filed an application pursuant to s.79A of the Family Law Act seeking to have the 28 April 2009 orders set aside and fresh orders made.
The husband said that he had been unable to pay the wife because he had never been able to get the development projects off the ground and that this was either wholly or partly due to acts or omissions by the wife. The wife vigorously denied any wrongdoing and vigorously denied that any ground in s.79A was enlivened.
The hearing of the s.79A application commenced on 11 September 2012 but on 12 September 2012 the parties settled and new orders were made by consent.
The new orders provided for the 28 April 2009 orders to be set aside and for 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 2 November 2012 and $500,000.00 by no later than 12 May 2013.
They provided that in the event of a default in payment Property D and Property C (“the properties”) were to be sold and the net proceeds used to pay the balance due to the wife. Property D Pty Limited as trustee for the Property D Unit Trust, the owner of these properties, was joined as a party to the proceedings.
(omitted) Pty Limited was also joined as a party and orders were made that (omitted) Pty Limited release the wife from any claims it may have had against her and the wife release (omitted) Pty Limited from any claims the wife may have had against it.
The orders recognised that the husband would need to borrow to pay the instalments and he was given the right to grant a first mortgage over the properties in fixed amounts as security for these borrowings. The wife was to be given a second mortgage once the first mortgage was registered.
The orders also provided for the husband to transfer to the wife his interest in the former matrimonial home at Property B by 3 October 2012 and for the wife to be solely responsible for the payment of mortgage instalments for the mortgages secured over the home.
The husband paid the first instalment of $200,000.00 by 3 October 2012 as required and the wife paid this amount straight off the Property B mortgage, leaving a balance of $470,000.00 outstanding. A first mortgage over the properties was granted to (omitted) Pty Limited and a second mortgage in favour of the wife was then registered.
The husband failed to pay the second instalment of $470,000.00 due on 12 November 2012 and this triggered the sale provisions in 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 [sic] such outstanding sums 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 2DR.
On 12 November 2012 the husband’s solicitors wrote to the wife’s solicitors advising her that the husband was unable to pay the second instalment by the due date and asking whether she would like the properties listed for sale or whether she would be willing to give him an extension of time if he paid monthly interest in advance. After several days the wife replied that she wanted the properties sold and proposed that Mr D of (omitted) be appointed as agent.[4]
[4] The wife in her affidavit complained that the husband did not provide sufficient information to allow her to assess his alternative proposal but nothing now turns on this
The husband agreed to the appointment of Mr D and proposed a listing price of $2.2million but the wife would not agree to this. She said that she had spoken to Mr D who had informed her that he thought the properties might fetch about $400,000.00 each and she proposed a listing price of $1 million.
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.
The President nominated Mr H of (omitted) Valuers. The husband was not happy with the amount Mr H proposed to charge and on 11 January 2013 he suggested to the wife that Mr T be asked to do the valuation. The wife agreed to Mr T being engaged for this purpose and 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.[5] 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.
[5] A copy of the letter is annexure R to the husband’s affidavit filed 25 February 2013.
In the meantime the properties were still not listed for sale.
In December 2012 the wife received a letter from Kemp Strang Solicitors for the (bank omitted) 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 saying that it would do no good.
The wife’s evidence was that on 29 January 2013 she was contacted by an employee of (bank omitted) Mortgage Collections who told her that the bank had rejected a proposal from the husband and that they were proceeding with the default.
On 1 February 2013 the wife filed an application in which she sought the following orders:
·    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).
·    The properties be sold by public auction to take place within 8 weeks of the date of the orders.
·    The reserve price be as agreed or failing agreement as nominated by Mr D of (omitted).
·    The wife be appointed trustee for sale of the properties.
·    Until completion of the sale of the properties the husband be responsible for making the mortgage repayments in respect of the Property B property.
·    The husbands pay the wife’s costs on an indemnity basis.
The application was given a return date of 8 February 2013.
On 6 February 2013 the wife’s solicitor said as follows in a letter to the husband’s solicitors:
To ensure that there is no misunderstanding our client is prepared to have the property 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.
On 7 February 2013 Mr T provided his valuation to the husband. 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)
The matter came before me on 8 February 2013. The wife was represented by counsel and the husband by a solicitor. It was stood down after some preliminary discussion and when it was called back on I was advised that the property was to be forthwith listed with Mr D of (omitted).
The wife’s counsel indicated however that the wife wished to press her application to have the orders varied to provide for the properties to be auctioned because she had been advised by (bank omitted) in a letter dated 8 February 2013 that unless she obtained this order the bank reserved its right to commence proceedings in the Supreme Court to obtain possession of Property B.
Mr T’s valuation was provided to the wife on 8 February 2013.
I adjourned the matter to 25 February 2013 and made orders concerning the husband filing documents.
On 12 February 2013 the husband signed a listings agreement with Mr D. The listings form states that the recommended method of sale is “Expressions of Interest” and the price at which the property is to be offered is “Expressions of Interest.”
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 Mr S of (omitted) be appointed trustee for sale of the properties, that the Trustee be permitted to do all acts and things to sell the properties by public auction and that the trustee be given authority to sign documents determining the reserve price for the auction or the listing price from time to time.
In the alternative the wife sought orders that the properties be auctioned by Mr D of (omitted) 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.

The parties’ arguments

The wife’s counsel said that the dispute over the sale of the properties was “all about the price”. He submitted that Mr T had not provided a valuation designed to fix a listings price and moreover had valued the properties as if development applications were in place, which they were not.
He submitted that the husband had not been co-operative when the wife tried to arrange a meeting with Mr T to discuss the matter and that the only way to end the impasse about the listings price and obtain a quick sale was to appoint a trustee for sale who had the power to determine a reserve price and a sale price and to go to auction.
He submitted that unless this occurred there would be a considerable delay in the sale of the properties and the wife would be at risk of losing her home.
The wife’s counsel submitted that all the court was being asked to do was vary machinery orders and that the court could do this in the exercise of its implied powers.
The wife’s counsel did not press for orders to be made concerning the husband paying the mortgage on the wife’s home pending the sale of the properties or being responsible for interest incurred after 15 November 2012 but neither did he abandon those claims, and the wife would have to call s.79A of the Family Law Act in aid to obtain such orders.
The husband’s counsel submitted that the court ought not to make the orders sought by the wife at present and submitted as follows:
i)The existing sale order did not provide for an auction, and given the nature of the properties to force them to auction in 8 weeks would create a real prospect of them 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 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 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 Limited as first mortgagee of the properties could be affected by the proposed variation of sale order and before any decision was made it was necessary for (omitted) Pty Limited to be joined as a party.

Discussion

It is abundantly clear to me that I should not rush into making the variation to the orders the wife seeks.
There has certainly been a delay in listing the properties for sale but there is nothing on the face of the evidence available to date to suggest a deliberate campaign by the husband to delay the sale. He promptly proposed a sale on the day of the second default.
In due course I will need to consider whether the delay in the properties being listed for a fixed price has been caused solely by the husband. The wife agreed to the appointment of Mr T in January 2013 and he has provided a valuation. As at 25 February 2013 the wife was unwilling to accept that he had provided an opinion about a listing price and unwilling to accept that his valuation was realistic. I cannot determine on the current state of the evidence whether these are valid positions for the wife to take.
I accept that the wife is fearful that the bank may move on her home if the properties are not sold speedily, but there is no admissible evidence at present that this is about to happen. The letter from the bank which the wife attached to her affidavit simply stated that if this court did not order an auction of the properties then the bank reserved its rights.
It will be a matter for argument at an enforcement hearing whether the wife’s situation with the bank is sufficient to justify the variation of the orders she proposes. It could be argued that the possibility that the commercial properties might take time to sell was entirely foreseeable in September 2012, and that there is some significance in the fact that the orders do not make provision for an auction. The extent if any to which the wife has it in her hands to overt disaster by negotiating with the bank will also need to be considered.
There is considerable force in the submissions by the husband’s counsel that (omitted) Pty Limited should be joined before the orders are varied and that a hearing should occur at which evidence can be tested before the court determines whether the application concerning the Trustee for sale and the auction is indeed simply an application to vary machinery orders or is in truth a s.79A application, and whether if it is simply an enforcement application the court should in the exercise of its discretion vary the orders as proposed.
The orders sought by the wife concerning the husband’s responsibility for her mortgage certainly seem to be orders which could only be made pursuant to the powers in s.79A of the Family Law Act.
The properties have been listed for sale by expressions of interest and this closes on 15 March 2013, not too far into the future. I intend to adjourn the wife’s application to 9.30am on 26 March 2013 for further consideration.
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 fifty-four (54) paragraphs are a true copy of the reasons for judgment of Terry FM

Date: 12 March 2013