STAVROU & STAVROU

[2020] FamCA 249

FAMILY COURT OF AUSTRALIA

STAVROU & STAVROU [2020] FamCA 249

FAMILY LAW – PROPERTY – Where application for interim property orders – Where consideration of applicable principles – Where not appropriate to make interim orders as to property adjustment – Where otherwise appropriate to make orders as to the release of funds frozen at bank – Where appropriate to make orders reserving the characterisation of the wife’s mortgage redraw to final hearing.

Family Law Act 1975 (Cth) ss 75, 79, 114

Harris & Harris (1993) FLC 92-378
Strahan & Strahan [2009] FamCAFC 166

APPLICANT: Mr Stavrou

RESPONDENT: Mrs Stavrou

FILE NUMBER: PAC 3161 of 2019

DATE DELIVERED: 17 April 2020

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 24 February 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Rosic

SOLICITOR FOR THE APPLICANT: Reimers Legal

COUNSEL FOR THE RESPONDENT: Mr Campton SC

SOLICITOR FOR THE RESPONDENT: Adams & Partners Lawyers

Orders Pending further order

1. That the husband and wife within seven days from this date do all things necessary to authorise and direct that funds held by the husband or any nominees on his behalf at bank and presently frozen be released and paid as to the sum of $150,000 to the wife or as she may otherwise direct in writing.

2. That husband and wife within seven days from this date do all things necessary to authorise and direct that funds held by the wife at bank and presently frozen be released and paid to the wife or as she may otherwise direct in writing.

3. That in the event that the wife vacates the home at Suburb A then as and from the date of her providing vacant possession to the husband he shall:

   (a)Pay to the wife the sum of $2,704 per calendar month with the first payment to be made one month from date of the wife providing vacant possession;

   (b)Indemnify the wife from all or any liability for mortgage payments and property outgoings; and

   (c)Provide promptly to the wife copies of statements and/or bank statements evidencing receipt by him of rental payments.

4. That characterisation of funds withdrawn from the Suburb A property mortgage by the wife be reserved to final trial.

5. Liberty to apply as to implementation of enforcement of these orders.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Stavrou & Stavrou has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 3161  of 2019

Mr Stavrou

Applicant

And

Ms Stavrou

Respondent

REASONS FOR JUDGMENT

1. In July 2019 the applicant husband commenced proceedings in the Federal Circuit Court of Australia for both parenting and property settlement orders.

2. The parties commenced cohabitation in about October 2011 and were married in … 2013. They separated some five years later in November 2018.

3. There are two children of the parties’ relationship, X now aged six and Y now aged two. 

4. The respondent mother filed a Response to the husband’s application in September 2019. She also sought orders in relation to parenting and property adjustment.

5. On 18 September 2019 interim parenting orders were made by consent and pending determination of the parties’ pending interim applications for parenting orders and without prejudice to orders that may be made. These interim orders provided, in summary, that the children live with the mother and that the father have defined time with the children that comprised some mid‑week time and weekend time. It was noted in the orders that the father shall be substantially present when the children are spending time with him, that the parties shall limit the amount of soft drink the children consume and the parties shall ensure the children watch only age-appropriate television movies and shows. Both parties were restrained from the denigration of the other in the presence of the children or permitting other persons to do so in the presence of the children.

6. On 11 November 2019 orders were made as to the disclosure and discovery of documents by each of the parties.

7. On 11 February 2020 in the Federal Circuit Court of Australia certain orders were made in relation to a subpoena objection. Otherwise, it was ordered that proceedings be transferred to this Court on a date to be fixed. It was noted by the Federal Circuit Court that this was the second time that the applications for interim relief by the parties had been listed for hearing and had not been reached. The orders requested that urgent attention be given to the matter by a registrar of this Court with a view to the matter being listed before the next available judicial duty list as to the outstanding interim applications. As to why the matter should be given such priority over and above other matters presently before this Court is not clear. 

8. The proceedings were listed promptly before a registrar of this Court on 14 February 2020. In relation to parenting matters the parties were ordered to attend Child Responsive Program interviews on 14 April 2020 with a view to a report being available for consideration by the parties and the Court thereafter. Otherwise, it was noted that interim financial issues were outstanding.

9. Interim financial issues were promptly listed before the Court for determination on 24 February 2020. On that day orders were made for the filing and service of supplementary written submissions by both parties and that upon completion of submissions judgment would be reserved to chambers. Final submissions were received on 24 March 2020 and judgment was reserved on that date. 

Interim Financial Issues

1. The wife sought interim financial orders in her Response filed 16 September 2019. In summary, the wife at interim hearing sought:

   a)An order for sale of the former matrimonial home at Suburb A (“the Suburb A property”) and that she receive a payment from the net proceeds of sale of $1.5 million with the remainder of the funds to be held in a controlled monies account in the joint names of the parties; 

   b)In the alternative, the wife sought an order that the husband pay to her the sum of $1.5 million and upon payment of such sum and concurrently with a discharge of the mortgage presently secured over the property the wife transfer her interest in the property to the husband; 

   c)Further that upon transfer of the property to the husband he have exclusive occupation thereof, he pay outgoings and mortgage payments, he be restrained from further encumbering the property in a sum any greater than the present outstanding mortgage balance and that in default of the husband complying with these conditions the property be sold and the net proceeds of sale be held in a controlled monies account in the joint names of the parties; and

   d)That with the sum of $1.5 million the wife be able to purchase a property for the accommodation of herself and the children within 15 kilometres of the eldest child’s current school and that subsequent to purchase the wife be restrained from selling or encumbering the property.

2. At the interim hearing the wife relied upon the following documents:

   a)Her Financial Statement filed 16 September 2019;

   b)Her affidavit filed 16 September 2019; and

   c)Her affidavit filed 7 February 2020.

3. The husband for his part sought an order that the wife’s application for interim property relief be dismissed and that in the event that she vacated the property he be at liberty to rent the property and apply the rental income to mortgage payments and outgoings. 

4. At the interim hearing the husband relied upon the following documents:

   a)With leave his affidavit filed 21 February 2020;

   b)The affidavit of the paternal grandmother Ms B Stavrou filed 6 February 2020; and

   c)His Financial Statement filed 5 July 2019.

The wife’s evidence

1. The wife is presently 32 years of age and the husband 35.

2. The wife asserts that she was during the relationship the primary carer of the parties’ children. She says that the husband was somewhat less than an engaged parent with the parties’ young children.

3. The parties separated in November 2018 following an incident where the wife alleges that the husband inappropriately administered physical discipline to the child X. During the ensuing argument the wife asserts that she was struck by the husband with a blow causing her to fall against a stairway bannister. The police were involved and an Apprehended Domestic Violence Order (“ADVO”) was made against the husband.

4. The parties put in place informal parenting arrangements until such time as the orders were made as referred to above.

5. The tenor of the wife’s affidavit evidence is that the parties remain in significant conflict with such conflict also involving the extended paternal family. This has been exacerbated by the paternal family including the husband moving in next door at Suburb A in July 2019 which the wife asserts is not “practical”. The wife asserts the presence of CCTV focused on her home and perceives she and her friends are under observation. She further asserts that the husband has opened her garage door on occasions. She believes that the husband without cause requested the police attend her home to do a “welfare check”. It was submitted on behalf of the wife at interim hearing that such a living situation is “intolerable” and supported the making of orders as sought by her.

6. Otherwise, the wife complains that the husband has not paid his share of mortgage payments on the home for the last few months.

7. As to financial matters, the wife says that at the commencement of cohabitation she had no assets of significance all liabilities. She asserts that the husband held certain property, the details of which she could not recall.

8. Subsequent to the commencement of cohabitation, the parties resided in the husband’s rented property at Suburb C with their incomes meeting household expenses and mortgage payments. The husband has throughout been employed in the paternal family business.

9. The wife graduated from university in 2010 and commenced employment as anallied health professional.

10. Subsequently, and in March 2012, the parties purchased vacant land at Suburb A. The wife asserts that the Suburb A purchase was assisted by funds gifted by the husband’s parents.

11. In late 2012 the parties signed a contract for the construction of a home on the vacant land at Suburb A with the costs of construction primarily funded by a bank loan. The husband serviced the bank loan from his income and the wife’s income funded other household expenses.

12. The wife acknowledges that throughout cohabitation she and the husband were gifted monies from the paternal grandmother with those funds being used to assist mortgage repayments and other expenses. The issue of whether these advances were gifts or loans will no doubt be agitated at final hearing.

13. In 2012 the wife started her own business “D Business”. The wife’s business rented premises from the paternal grandparents. The wife asserts income of about $177,000 per annum before tax (Exh “D”) for the year ended June 2018 derived from her E Trust through which her business operates. No updated tax return was provided.

14. It appears that the wife’s business was successful in that following a conversation with the husband in January 2018 the wife transferred to the home mortgage offset account the sum of $300,000 from her business account. She asserts an understanding that she could redraw funds in the event that monies were needed for her business. She says that she had subsequently transferred $81,000 from the home mortgage account back to her business.

15. The day after the parties’ separation, the husband withdrew the sum of $150,000 from the home loan offset account without the wife’s knowledge or consent. Those available funds represented monies that were funds deposited from the wife’s business. Thereafter the wife withdrew from the mortgage offset account the balance of funds that had been deposited by her of about $134,285.

16. The wife says that at the commencement of cohabitation the husband was managing a franchise at the Suburb F shopping centre with the business being owned by one of the paternal grandparents’ corporate entities and/or trusts.  The wife says that subsequent to the death of the paternal grandfather in 2018 the husband has become more and more involved in the running of the family business asserting in some documents that he was the owner/operator of the businesses operating at Suburb G, Suburb F and the Suburb F shopping centre.

17. The wife says that the paternal family has sold the franchises with the proceeds of sale being invested in other business ventures. The husband, she says, represented that the sale proceeds were $21 million.

18. The parties’ asset pool for the purposes of property settlement is not the subject of agreement. The wife, for her part, asserts that the assets of the parties comprise the following:

    Assets:

    Joint               The home at Suburb A  $3,000,000

    Wife               Interest in the E Trust

    Wife               CBA savings account  $   188,907

    Husband        Interest in the H Trust

    Husband        Interest in the J Trust

    Husband        Interest in Stavrou Investment Trust

    Husband        CBA Savings Account …40  $     6,634

    Husband        CBA Savings Account …70  $     2,177

    Liabilities:

    Joint               Mortgage Suburb A   $1,040,000

    Superannuation:

    Husband        Super Fund 1   $   159,128

    Wife               Super Fund 2  $     11,907

19. It appears that the wife’s funds at bank are presently frozen by the bank.

The husband’s evidence

1. At cohabitation the husband asserts that he owned investment properties at Suburb K and Suburb L that were rented. The husband also owned a property at Suburb C purchased in 2007 and sold in August 2010 at a loss after funds were repaid to M Pty Ltd.

2. The Suburb K property was purchased for $340,000 in 2003. The husband asserts that purchase monies were funded by way of a mortgage over the property and funds advanced to him by M Pty Ltd trustee of the J Trust. The Suburb K property was sold in July 2014 for $588,000 and it realised $240,850 with those funds repaid to M Pty Ltd. Yet the financial statements for the J Trust as at June 2012 disclose no such liability and, indeed, reveal a trust distribution to the husband of about $35,000 that year. No such liability is revealed in the Stavrou Investments Trust as at June 2012: Exh “H”.

3. The property at Suburb L was purchased in 2010 for $548,000. They were sold realising $45,905 in late 2013. The husband asserted that funds were paid to service a “break fee” of about $36,000 on discharge of the loan secured over the property.

4. The husband asserts that his parents “lent” the parties the deposit and stamp duty for the purchase of the Suburb A land. The land was purchased for $634,000 plus stamp duty of about $24,000. The husband asserts that M Pty Ltd advance a total of $57,000 to the purchase.

5. A home loan was obtained to fund part of the construction of a home at a cost of about $786,000. The husband asserts that other funds were provided by his parents or their entities including an outstanding loan from his mother of $50,000. The parties moved from their rented property to his parents’ home for a period while the home was being constructed.

6. The husband is now living in his mother’s home next door to the matrimonial home. His mother owned the land prior to separation and subsequently constructed a home on the property. The home is also occupied by his sister and her three children.  

7. The husband is presently employed as a business manager at Suburb N working for M Pty Ltd. The company is the Trustee of the J Family Trust (Exh “F”) established in July 1998. The discretionary trust is one of the paternal family entities.

8. He asserts a gross income from salary of about $85,000 per annum and net salary of about $64,000 per annum. His sister and mother, it appears, coincidentally draw exactly the same income from the family businesses.

9. He was charged with assault following the incident at separation. The charge and the ADVO application were both dismissed after hearing on 18 March 2019.

10. The husband asserts that the wife’s business now operates from three sites at Suburb O, Suburb P and Suburb C.

11. The franchises operated through a discretionary family trust were sold by his mother for, he says, “a substantial sum of money”.

12. He agrees that he withdrew $150,000 from the parties’ mortgage offset account at separation and that the funds were those of the wife’s business. She, he says, has withdrawn the balance of her business funds. The husband gives no evidence as to the disposition of those funds by him and as at July 2019 they are not reflected in his Financial Statement. Yet at hearing his counsel conceded that the husband had about $166,000 at bank presently frozen by the bank.

13. He seeks to retain the home as part of property settlement.

14. He asserts that the wife can rent elsewhere and in that event he will rent the property out and apply the rent to the mortgage payments.

15. As to the asset pool he asserts the Suburb A property has a value of about $2.5 million.

16. The husband asserts in his primary affidavit joint debts to his mother of $84,355, M Pty Ltd (Trustee of the J Trust) of $114,224 (see above) and the discretionary Stavrou Investments Trust (another paternal family entity) of $91,386. Exhibit “H” reveals that as at June 2017 the husband was owed unpaid distributions from the Stavrou Investments Trust of $58,150 and those funds were paid to offset his loan account in full as at June 2018 with the funds paid “for Mr Stavrou’s costs” (Exh “I”).  As at June 2018 Exhibit “H” reveals a debt to the J Trust of only $64,098. The reality of his asserted liabilities will be a matter for final hearing.

17. The issue of liabilities is further complicated by the husband’s mother asserting money owed to her or her entities in fact total about $871,000 (MFI “1”).

Interim Property

1. The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.

2. In Strahan (supra), the Full Court said:

   132.In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

3. Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice.

4. Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth) (“the Act”). It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.

1. A detailed inquiry is not required, but there must be some assessment of s 79 factors.

2. In Strahan the Full Court went on to say:

   137.Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that ... the applicant ... will be likely receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought ... then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

   138.The legislation does not prescribe what the Full Court in Zschokke at 83,218 described as “preconditions” and nor would we seek to exhaustively prescribe matters that may be relevant to take into account in the exercise of the discretion under s 80(1)(h) of the Act. As to the three “criteria” identified by the Full Court in Zschokke, we accept that an inability on the part of an applicant for an interim property order to defray the costs of litigation to meet his or her litigation costs would be a relevant matter to take into account at the procedural or first stage. Senior counsel for the Wife submitted that it may be relevant at the substantive or second phase in reviewing the “necessarily limited and impressionistic budget for costs” to ensure that the application is bona fide. We are of the view that it may be that any issue about the bona fides of an application is relevant at the procedural phase in the context of considering if in the interests of justice it is appropriate to make an order before the final hearing.

   139.We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.

   140.As to the other matters being a position of relative financial strength on the part of the respondent to an application and the capacity of the respondent to meet his or her own litigation costs, there is no doubt that the financial circumstances of both parties are relevant at the substantive stage and may also be relevant at the procedural stage. Senior counsel for the Wife submitted that all of the matters discussed by the Full Court in Zschokke are self-evident and we accept that this is so in relation to at least two of the matters being the need for funds and the financial circumstances of both parties.

   141.As to the various matters discussed by Brereton J in Paris King Investments which we have discussed above, we do not propose to deal with all of what his Honour said, however we make the following observations about some of the matters. Obviously the applicant should have “at least an arguable case for substantive relief which deserves to be heard”. Further, in determining at the procedural stage whether to exercise the jurisdiction there may need to be evidence of the applicant’s “likely costs of the litigation” given that the need for funds to defray litigation costs and expenses is the circumstance propounded as to why it is appropriate that an order be made. We also accept that “it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis.

3. It is important to have regard to an overall caution. In Harris & Harris (1993) FLC 92-378, the Full Court said:

   As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings.

4. In Strahan (supra), the Full Court said at [132]:

   … regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

5. It is now well settled that in property cases the Court must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing and then determine whether it is just and equitable to make a property settlement order. Such a consideration should not be guided by an assumption that the parties’ rights to, or interests in, property are, or should be, different from those that then exist. The question is whether those rights and interests should be altered.

6. Both parties seek disparate property orders in relation to the major asset of the marriage that stands in joint names. It is appropriate that the jurisdiction under s 79 is enlivened.

7. The property pool of the parties is subject to great uncertainty, indeed, the primary known asset being the Suburb A property is sought to be retained by the husband. Whether he can do so after a final hearing will need to be tested.

8. An order for sale would frustrate the final orders sought by him.

9. There is little evidence that would assist the Court at present in holistically assessing the parties’ contributions or determining relevant s 75(2) factors. Thus any interim property order would require inappropriate speculation.

10. In the circumstances of this matter, it would be inappropriate to make an interim property order as sought by the wife for the sale of the Suburb A property or for the payment of $1.5 million to her from the husband as sought by her in the alternative.

11. Yet the husband asserts no opposition to the wife vacating the home at Suburb A and, indeed, offers her financial support do so.

12. Otherwise, he is possessed of funds that are the property of the wife’s business. There is no reason why she should not be paid back those funds. From the $300,000 deposited from her business into the mortgage offset account the husband withdrew $150,000 the day after separation, after the wife withdrew in August 2018 $80,000 and then a further $54,285 in November 2018.

13. Counsel for the husband conceded at hearing that the wife should be entitled to access the funds withdrawn by her. There is no injunction preventing her from doing so save the unilateral actions of her bank.

14. The Court has wide powers in s 114 of the Act as to injunctions such as are appropriate.

15. In the event that the wife elects to move from the home at Suburb A, then the husband shall be entitled to rent the said property and indemnify the wife from any liability in regard to mortgage payments. As proposed by him in final written submissions he will be required to pay to the wife the sum of $2,704 per calendar month in consideration of him being able to have sole use of the property and tenanting it pending further order.

16. Otherwise, the husband should account to the wife for the $150,000 of her business funds retained by him and the characterisation of funds drawn from the home mortgage by the wife should be reserved to final trial.

17. Orders will be made accordingly.

I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 17 April 2020.

Associate: 

Date:  17 April 2020