Thurston and Loomis and Anor

[2016] FamCA 305

FAMILY COURT OF AUSTRALIA

THURSTON & LOOMIS & ANOR [2016] FamCA 305

FAMILY LAW – INJUNCTION – Whether the husband should be restrained from refinancing a debt owed by the Second Respondent company – Where the debt is secured by mortgage over real property owned by the company – Where there are extant orders allowing the refinancing of the debt – Where the extant orders prohibit increasing the company’s capital debt – Where the husband has previously refinanced the debt owed by the company allowing the company to access additional funds in the amount of GBP35,590.   

Family Law Act 1975 (Cth)

APPLICANT: Ms Thurston

FIRST RESPONDENT: Mr Loomis

SECOND RESPONDENT: L Ltd

FILE NUMBER: BRC 1010 of 2012

DATE DELIVERED: 5 May 2016

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 27 April 2016

REPRESENTATION

THE APPLICANT: In Person

THE FIRST RESPONDENT: In Person

THE SECOND RESPONDENT: Mr Loomis

Orders

1. That until further order, Mr Loomis and L Ltd shall, as provided for in the order of Judge Howard of the Federal Magistrates Court (as the Federal Circuit Court was then called) of 25 June 2012, be permitted to renegotiate and/or refinance the debt secured by mortgage over the real property situated at I Street, Town J, County K  (“the Town J property”) if necessary to obtain more favourable terms, but, to be clear, the debt owed by L Ltd to the mortgagee shall not be increased beyond the amount of the debt actually owing at the time of any such future refinancing.

2. That until further order, Mr Loomis and L Ltd shall provide Ms Thurston with at least three clear weeks’ notice in writing of any intention to enter into any new lease with any of the existing tenants of the Town J property or with any proposed new tenants of that property with such written notice to include the name or names of the proposed lessees and the proposed terms as to the rental period and rental charges to be provided for in the new lease and L Ltd is restrained from entering into any such new lease if that three clear weeks’ notice in writing has not been given to Ms Thurston.

3. That all other interim applications of Ms Thurston contained in her Application in a Case filed 29 March 2016 are dismissed.

4. That all of the remaining applications contained in the Response to an Application in a Case filed by Mr Loomis and L Ltd on 14 April 2016 not already dealt with by order are dismissed.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC1010/2012

Ms Thurston

Applicant

And

Mr Loomis

First Respondent

And

L Ltd

Second Respondent

REASONS FOR JUDGMENT

1. On 27 April, 2016, Mr Loomis and Ms Thurston were before me yet again in their ongoing property adjustment orders dispute.  For determination this time, are competing applications by them for further interim orders whilst my judgment in the substantive proceedings remains reserved, the trial having concluded in December 2015.

2. Ms Thurston asked the Court for a vexatious proceedings order prohibiting Mr Loomis and the two respondent companies that he represents, from instituting proceedings against her or a number of other named persons and companies. That was opposed and Mr Loomis and L Ltd (“L Ltd”) sought a similar order as against Ms Thurston.

3. In the end, after some discussion about this matter, each of the parties consented to an order that none of them could bring any further applications pending the delivery of my judgment in the substantive proceedings without first obtaining my leave, or the leave of another Judge of the Court in my absence.

The balance of Ms Thurston’s application

1. Ms Thurston also sought other orders. They were as follows:

   1.No funds to be distributed to either party until all cost applications are completed.

   2.That L Ltd and its directors are not to refinance the property known as I Street, Town J before final orders are made by this court.

   3.L Ltd is not to renegotiate or renew any lease for any of the units and or flats of [I Street, Town J] without the agreement and knowledge of the applicant and or approval of the court.

   4.No payments should be made to any creditors other than mortgage, rates and insurancec. (sic) without the consent or (sic) the court or the applicant mother.  The mother is able to communicate with the company accountant [HW] in the UK regarding all company transactions.

   5.[L Ltd] 2015 accounts should be made avaialbe (sic) to the applicant mother.

Mr Loomis’s Application in Response

1. In a Response, Mr Loomis and L Ltd sought to have Ms Thurston’ application dismissed and also some other orders made. The orders they sought were as follows:

   1.That the Application in a case by the Applicant Wife is Summarily Dismissed.

   2.That the court exercise its discretion not to hear any further applications from the Applicant Wife until the Contempt Applications filed by the Husband are heard and she has purged the various contempt’s (sic) detailed in the Husband’s Application.

   3.That the Application by the Wife is declared as Vexatious.

   4.That the second respondent is paid an amount of $ (sic) $75,000 from  monies held in trust in order to meet the demand of pressing creditors.

   5.In the alternate to Order number 4 that Contempt Application in respect of Order Number 8 of the 25^th June 2012 is heard and determined and the Wife ordered to pay the determined amount of contempt into trust, from which $75,000 is paid to the Second Respondent.

   6.That the Respondent Wife pay the costs of the Second Respondent of this application and incidental to this application, with costs to include all costs of defending this application.

   7.That in the event that the Applicant Wife seeks to dismiss order number 4 above she be responsible for all losses and or damages incurred by the Second Respondent.

2. After the parenting orders proceedings between Mr Loomis and Ms Thurston in the Federal Circuit Court were determined by Judge Howard last year, Ms Thurston apparently made an application for an order that Mr Loomis pay her costs of and incidental to those proceedings. Mr Loomis cross-applied.

3. It is not in dispute that the Mr Loomis has appealed against Judge Howard’s final parenting Order.

4. Ms Thurston deposes to the fact that Judge Howard determined that he would not decide her costs application before the determination of Mr Loomis’s appeal against his parenting Order. In contrast, Mr Loomis deposed that Judge Howard determined not to decide the costs application until after I have handed down my property adjustment Orders in the proceedings in this Court.

5. I have seen a sealed copy of Judge Howard’s Order of 17 March 2016. Mr Loomis is correct. Judge Howard adjourned the costs applications in the parenting proceedings to a date to be fixed pending the delivery of my judgment in the property adjustment proceedings.

6. I heard from the parties that the appeal against the parenting Order is not likely to be heard until February 2017. It could be that my final property adjustment Orders are made before then, but I cannot be certain at this point in time. As I told the parties at the hearing, and as I have told them before, it is most likely I will be making some interim orders in the property adjustment proceedings in any event, given my satisfaction that there has been substantial non-compliance by the parties with superannuation regulatory provisions in respect of the conduct by them relating to their self-managed superannuation fund. I expect to make those orders soon.

7. As a consequence of those interim orders, it might be that all of the money currently being held on trust for the parties by Mr Loomis’ former solicitor, approximating some $647,800 will be determined to be held as superannuation interests of the parties. Furthermore, as I pointed out during the hearing, Ms Thurston has asked the Court for orders that all of the remaining funds and property of the parties or either of them is to be determined to be hers and if that is found to be the case, then there will be no funds going to Mr Loomis from which any costs order made against him could be satisfied.

8. I do not express any view at this point as to the likely Orders I will make on a final basis. I can say though, I will not make any orders for any of the money to be paid out of the money held in trust for the parties, without giving the parties (and the intervenor, ML Lawyers) notice of an intention to do so and a right to be heard at that time. Should Ms Thurston or Mr Loomis wish to make any further applications or submissions at that time, about costs or any other aspect of the matter pertaining to the proper disposition of those funds having regard to my judgment at that time, I will give them that opportunity to be heard

9. Accordingly, I do not consider it necessary to make the first of the orders now sought by Ms Thurston.

10. Ms Thurston also now seeks injunctions from the Court in respect of L Ltd and its real property at I Street, Town J in the United Kingdom. The first one of the injunctions she seeks is to restrain the company from refinancing the debt that the company owes that is secured by mortgage over the said property.

11. Of relevance is the fact that on the application of Ms Thurston when she was legally represented by Mr ML, solicitor, on 25 June 2012,  and with the consent of Mr Loomis, Judge Howard granted the following injunction:

    1.That until further Order, the Applicant [Mr Loomis] is restrained, and an injunction is hereby granted restraining him from causing or permitting [L Ltd], to sell, mortgage, encumber or otherwise deal with the property known as [I Street, Town J County K], England save and except that the Applicant shall be entitled to renegotiate the mortgage over [I Street, Town J County K] provided the Applicant does not increase the capital debt owed pursuant to the mortgage, and he will provide the Respondent with copies of all documents relating to the re financing.

12. It is reasonably clear on a reading of that order that Mr Loomis must have informed Judge Howard (he was represented by counsel on the day that order was made) that L Ltd either wanted to refinance the existing mortgage debt or was being required to by its financier. Judge Howard’s order allowed for L Ltd to be able to refinance the debt, but expressly restricted the company’s right to “increase the capital debt owed pursuant to the mortgage”.

13. After the property adjustment proceedings had been transferred to this Court in 2014, and whilst I was judge-managing the matter towards trial, without notice to Ms Thurston or to this Court, L Ltd refinanced its mortgage debt. Evidence supports a finding that the refinance was effected on 22 October, 2014. At that time L Ltd was indebted to The Co-operative Bank. Evidence adduced by Mr Loomis certainly supports a finding that The Co-operative Bank required the refinancing in 2014. Although it seemed to take a long time to effect the refinancing, the amount owing to that bank that was paid out on the refinance was just under GBP187,000. The amount borrowed by L Ltd to effect the refinance from Cambridge and Counties Bank was GBP230,000 (including an arrangement fee of GBP250 and a completion fee of GBP4,100). Accordingly, the evidence establishes that L Ltd obtained for its own use at that time a further amount of GBP35,590 being the difference between the borrowing and the amount of the debt paid out by the refinancing.

14. Mr Loomis has always maintained that he did not act contrary to the June 2012 injunction of Judge Howard because he did not cause L Ltd to “increase the capital debt owed pursuant to the mortgage”. His argument is that the amount of the capital debt owed just at the time of Judge Howard’s order was GBP238,500 and that he was only restricted from causing L Ltd from increasing the capital debt beyond that amount. Although the capital debt was clearly reduced to GBP187,000 by the time L Ltd  refinanced, Mr Loomis and L Ltd clearly argue that refinancing the capital debt to any amount that did not exceed GBP238,500 was permitted by the injunction.

15. My preliminary view of that argument is that it is without merit and that the injunction actually restrained him from causing L Ltd from refinancing the capital debt beyond what it was at the time of any refinance. Accordingly, L Ltd had access to GBP35,590 at the time of the refinance that it should not have had access to. It is also apparent from the evidence that such amount was apparently limited by the lending to valuation ratio permitting no more than GBP230,000 being able to be borrowed.

16. I am not determining any contravention application against Mr Loomis in respect of that matter at this point in time, in any event, and just how my preliminary view about that impacts upon my final property adjustment judgment, if at all, remains to be determined. However, my view about that is of relevance to the determination of Ms Thurston’s current application.

17. Judge Howard’s June 2012 injunction remains in place. The injunction is still extant. I have told the parties, particularly Mr Loomis, many times over the last two years that the injunction is still extant. I have told them that Mr Loomis’ continued compliance with that Order is still required.   Mr Loomis has informed the Court repeatedly that he understands that and has no intention of acting contrary to it.

18. However, Mr Loomis has clearly demonstrated what his view of the limits of the existing injunction is. He clearly believes that L Ltd can refinance up to GBP238,500. He says as much in his affidavit filed 13 April, 2016.

19. It is against that fact that I now consider the application.

20. The evidence establishes that from November 2014 monthly interest accretions on the debt have been GBP1,494 and that monthly repayments of interest and capital by L Ltd have been GBP1,874. Accordingly, the capital amount owing has been reducing at GBP380 per month. As at 21 August 2015 it was GBP226,199. Nine more monthly reductions of GBP380 would see the capital amount owed at GBP222,779 leaving GBP16,000 available for L Ltd if it refinanced again up to GBP238,500.

21. Mr Loomis asserts in his affidavit evidence that fees and charges would preclude any viable refinance back to the GBP238,500 level (which as I have said, he clearly believes is permissible under the current injunction). However, during his oral submissions and in his written submissions handed to the Court on 27 April, 2016, Mr Loomis was at pains to assert that the refinance that was effected with Cambridge and Counties Bank was on “punitive terms” with a significantly higher interest rate and he gave the clear impression that he did not want L Ltd to be restricted from refinancing again if it could do so for more favourable terms.

22. The valuation of the building that was in evidence for the trial, done by a single expert, valued the property at GBP435,000. At that value, L Ltd’s equity in the property is approximately GBP213,000. Ms Thurston effectively wants that equity preserved pending the determination of my final property adjustment orders. She told the Court that she did not make the application at the end of the trial because she expected my judgment to be delivered sooner than this point in time. She is concerned that without the further protection of a more restrictive injunction preventing refinancing, L Ltd might refinance, just as it did before, reducing the equity that will be subject to the property adjustment at the end of the day.

23. Mr Loomis argued that there are a number of reasons why the Court would not grant the injunction sought. He opposed the application quite vociferously and his arguments, in my judgment, carried the inference that he definitely wanted to keep open the prospect of L Ltd being able to refinance if it could.

24. I am not persuaded by Ms Thurston that L Ltd should now not be permitted to refinance its debt if it can find more favourable financing terms. However, I am satisfied that any refinancing by the company before final judgment is delivered should not be done in a way that permits the company to access any additional equity that has become available by reduction of the debt owed since Judge Howard’s June 2012 injunction. In the circumstances, I consider that any debt refinancing L Ltd seeks to put in place pending delivery of my final judgment should only be done within the level of the actual debt owed at the time of the refinancing. In other words, I do not consider that L Ltd should be permitted to access any more equity in the property before the delivery of my final judgment. That is what, on my interpretation of Judge Howard’s June 2012 injunction, I consider Judge Howard also intended. That Mr Loomis nevertheless acted contrary to that without seeking the permission of Ms Thurston or the Court evidences, in my view, the need for further clarity in the form of an order. I will provide that in the Orders I will make.

25. Ms Thurston also seeks an injunction restraining L Ltd from renegotiating or renewing any lease for any of the units or flats at the English property without the agreement or approval of the Court.

26. Ms Thurston gives evidence that there are four leases in place which are due to expire in September, November, December of this year and in March of next year. One lease relating to the residential units on the second floor is with a housing association that provides affordable accommodation to people. It has been a long-term lease at peppercorn rental as the association paid for the construction costs relating to the five second floor flats. It is due to expire in November this year. Mr Loomis says nothing of any future prospects or intentions in respect of these flats in his affidavit.

27. Another is with a hairdresser in one of the shops on the ground floor. It is due to expire in September this year. Mr Loomis says the tenant is going to enter into a new lease on similar terms on expiry of the existing lease.

28. Another lease is with tenants who run a Cash Converters pawn shop business in one of the shops on the ground floor. That lease is not due to expire until March 2017. Mr Loomis says that the tenant company has “not expressed any interest in renewing their lease on expiry”.

29. The fourth tenant mentioned by Ms Thurston whose lease was to expire in December this year, was, according to Mr Loomis, a real estate business that went “into liquidation”. He said nothing more in his affidavit of evidence responding to the application.

30. Ms Thurston adduced into evidence a street level photo of the building downloaded from the internet that showed a sandwich shop as the third shop on the ground floor level. She asserted Mr Loomis had disclosed nothing of that. However, that is not correct.

31. At trial, Mr Loomis did give evidence about the sandwich shop and its owners and the fact that the real estate tenant had gone into liquidation. He gave evidence that the owners of the sandwich shop are on a month to month tenancy with a rental of GBP900 per month.

32. Ms Thurston submitted that the state of the leases on the various units in the building directly impact on the value of the building and that allowing Mr Loomis and L Ltd unrestrained capacity to negotiate and enter into new leases before final judgment is delivered in the substantive proceedings could directly affect the amount of equity in the building available to be subject to property adjustment orders.

33. Mr Loomis argued that Ms Thurston does not come to the Court with clean hands and that his and L Ltd’s right to manage their own business affairs should not be subject to control by Ms Thurston, even at this point in the proceedings.

1. Mr Loomis points to the fact that Ms Thurston has admitted that she contravened an order of the Court earlier in the proceedings in respect of the deposit of funds from the sale of a property into trust to be preserved pending finalisation of the matter.  That is one of the facts upon which he bases his “unclean hands” submission. The other allegations he makes, however, are all matters of disputed fact yet to be determined.

2. I am satisfied that Ms Thurston’ submission has some merit. The value of the property could be significantly affected by the terms of any lease entered into by L Ltd upon the expiry of the existing ones. I do not consider Ms Thurston’s admitted contravention of an earlier order to be good reason not to grant the injunction she now seeks. As I said at the hearing of this application, how I deal with that issue in my determination of the just and equitable property adjustment orders yet to be made remains to be seen and a contravention application brought by Mr Loomis in respect of that is yet to be heard.

3. I consider it sufficient for Mr Loomis and L Ltd to give Ms Thurston three clear weeks’ notice in writing of any intention for L Ltd to enter into new leases, the name of the proposed lessee and the proposed terms of any such proposed new leases such that Ms Thurston has time to bring any further application considered necessary if she contends that the intended lease is potentially prejudicial to her interests in these proceedings. I do not consider such a requirement to be so prejudicial to Mr Loomis’s and/or L Ltd’s interests that it should not be ordered.

4. Ms Thurston also seeks an injunction restraining L Ltd from making payments out of the net income that L Ltd earns from the rental of the various units in the building to any creditors other than the mortgagee, the local authority to whom rates are paid and for building insurance. Her submission is that any other income should be retained, presumably also to be available to be made subject to orders of the Court at the end of the proceedings. However, Ms Thurston also referenced the fact that the father has not been paying child support in her submissions and I am satisfied that this is more likely to be Ms Thurston’ primary motivation for seeking to restrain L Ltd from spending its income other than on those limited outgoings.

5. Mr Loomis and L Ltd assert that L Ltd has other creditors. In evidence, Mr Loomis deposes to owing the accountants, HW, money for its accounting services, to owing Her Majesty’s Revenue and Customs for unpaid tax and to owing money to the Nautilus Trust Company Limited for services rendered to L Ltd in connection with its registration and administration. In short, Mr Loomis and L Ltd submit that it ought to be able to continue to make payments, such as to these creditors, in the ordinary course of its business and that restraint from being able to do so increases the real risk of action being taken against it by a creditor to seek enforcement of outstanding debts.

6. I accept that submission by Mr Loomis and L Ltd. I am not persuaded that L Ltd should not be able to keep trading, using its income to pay creditors whilst my judgment remains reserved. I will not make this order sought by Ms Thurston.

7. Finally, in respect of Ms Thurston’ application, she asks for an order that L Ltd’s “accounts”, which I understand to mean its financial statements for the 2015 year, be made available to her. At the hearing, when I asked her to tell me why she should have access to those when the final hearing in this matter has concluded and judgment is reserved, Ms Thurston could make no persuasive submission.  In any event, there is no evidence that they have been completed at this point. I am not convinced that there is merit in making this order sought and I will not do so.

The Applications of Mr Loomis and L Ltd

1. Mr Loomis and L Ltd sought an order that $75,000 from the money held in RO Lawyers Trust account for the parties be paid to L Ltd for it to meet “the demands of pressing creditors”.

2. In his affidavit evidence, Mr Loomis attaches a document that appears to record transactions in respect of Nautilus Trust Company Limited from 2013 to April 2016. The balance said to be owing is 17,439, which I must infer is British Pounds.  Mr Loomis said nothing more about this in his affidavit, other than making the assertion that unless they are paid they might take some form of action. He did assert from the bar table, at the hearing, that this creditor does have something to do with the registration and administration of L Ltd, but there is no other evidence explaining the charges of 2,087 in October 2015, 2,795 in December 2015 and 2,509 in January 2016.

3. Mr Loomis also exhibits a copy of a letter from HM Revenue and Customs addressed to L Ltd dated 8 April 2016 seeking payment of GBP5,316.71 or warning of enforcement action.  Nothing more is said by Mr Loomis about that.

4. Mr Loomis did not give evidence as to how much is said to be owing to HW and exhibits no document evidencing the amount that HW are pressing for payment. One could reasonably expect that if they are owed money that they would be, though.

5. However, as I have already said, there is absolutely no guarantee that any of the money currently held in RO Lawyers Trust Account for the parties is going to be ordered to be paid to Mr Loomis or to L Ltd in the property adjustment proceedings, particularly when the self-managed superannuation fund must firstly be brought back into order. Of course, after that, Mr Loomis will probably have an interest in the superannuation monies that remain, but none of that is clear yet. Nor is it clear that I would not split all of his superannuation interest to Ms Thurston.

6. I am not persuaded that money from the monies held in trust should at this moment be paid to L Ltd to be paid to any of its creditors. There is over GBP200,000 equity in the building owned by L Ltd on the evidence that was adduced at the trial. If the situation becomes dire for L Ltd, the building may have to be sold for the creditors to be paid. Of course, that will require an application to be brought by Mr Loomis and L Ltd, seeking such an order from the Court, having regard to the interim injunction in place. I will not make the order sought by Mr Loomis and L Ltd for disbursement of any of the money held in trust at this point in time.

7. Mr Loomis and L Ltd have asked for an alternative order that a contempt application brought by Mr Loomis against Ms Thurston in respect of the alleged breach of another June 2012 interim injunction be heard and determined  “and the Wife ordered to pay the determined amount of contempt into trust, from which $75,000 is paid to the Second Respondent [L Ltd]”.

8. The order alleged to have been breached relates to three working acoustic wave therapy machines and one machine that was in need of repair that were in the possession of Ms Thurston leading up to the trial. The order required those machines to be sold and the “the expenses and profits of the machines” to be shared equally by the parties with the “profits held in trust” until the liability to the supplier was discharged.

9. Mr Loomis alleges that Ms Thurston sold the machines and has not complied with the balance of that order. Evidence was adduced about the issue at the trial. It is but one of the many issues yet to be determined by me in my overall determination of the property adjustment proceedings. I do not yet know how that will be determined. There is no certainty that there will be $75,000 available to be paid to L Ltd as a result of the determination of that issue or that if there was that the payment would be made.

10. As to the contempt application, I have told Mr Loomis that his contempt and contravention applications will be dealt with when the substantive proceedings have been finalised by judgment.

11. I will not be making the order now immediately sought by Mr Loomis and L Ltd for immediate hearing and determination of that contempt application. Mr Loomis and L Ltd will, as I have said, have to deal with the demands of creditors as best it can until my judgment is delivered. If sale of L Ltd’s UK property is required, application for an order approving that can be made.

12. I will make the orders set out at the commencement of these written reasons.

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 5 May 2016.

Associate: 

Date:  5 May 2016