TIMMINS & TIMMINS

[2015] FCCA 2835

FEDERAL CIRCUIT COURT OF AUSTRALIA

TIMMINS & TIMMINS [2015] FCCA 2835

Catchwords:
FAMILY LAW – Binding property orders in 2013 – neither party complying with terms of agreement regarding refinancing – parties failing to consider position of original mortgagee – agreement clearly wholly overtaken by events – court altering extant orders pursuant to s.79A of the Family Law Act 1975. 

Legislation:

Family Law Act 1975, s.79A

Applicant: MS TIMMINS

Respondent: MR TIMMINS

File Number: MLC 4570 of 2012

Judgment of: Judge Burchardt

Hearing date: 9 September 2015

Date of Last Submission: 9 September 2015

Delivered at: Melbourne

Delivered on: 15 September 2015

REPRESENTATION

Counsel for the Applicant: Ms Wakelin-Le Brun

Solicitors for the Applicant: Le Brun Glezakos

Counsel for the Respondent: Ms Dellidis

Solicitors for the Respondent: Aberdeen Lawyers

ORDERS

1. That the Respondent husband retain the property situate at Property B, being the land more particularly described in Certificate of Title Volume (omitted) Folio (omitted) (“the Property B”), registered in his sole name. 

2. That within sixty (60) days of the making of these orders (“the date”) the Respondent husband pay to the Applicant wife the sum of $95,571 (“the payment”) with such sum to be made payable to Le Brun Glezakos Lawyers or otherwise as they may direct on behalf of the Applicant wife. 

3. That contemporaneously with the payment, the Respondent wife at her expense remove any caveat or cause any caveat to be removed that has been registered by her or her legal practitioner on her behalf. 

4. The Respondent husband have the sole right to occupy the Property B property and during such right of occupation the Respondent husband shall pay all instalments pursuant to the mortgage and all rates, taxes and like apportionable outgoings of the Property B property as they fall due. 

5. That in the event the whole of the payment has not been made by the date then the parties will sign all such documents and do all such things necessary to list the Property B property for sale within thirty (30) days after the due date for the payment on the following terms:

   (a)With a Real Estate Agent to be agreed between the parties in writing and failing agreement as nominated by the President of the Real Estate Institute of Victoria;

   (b)At a sale price as agreed between the parties in writing, and failing agreement at a listing price which reflects the current market value of the property and as nominated by the Real Estate Agent who has the conduct of the sale;

6. That the proceeds of sale of the Property B property be applied as follows:

   (a)Firstly, to pay all costs, commission and expenses of the sale;

   (b)Secondly to discharge the existing mortgage to (omitted) Bank and (omitted) Bank and any other encumbrances affecting the Property B property;

   (c)Thirdly to pay so much of the payment as is then outstanding to the Applicant wife together with interest thereon at the rate of 8% per annum adjusted monthly from the date of payment.

   (d)Finally, the balance (if any) then remaining to the Respondent husband. 

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 4570 of 2012

MS TIMMINS

Applicant

And

MR TIMMINS

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. These Reasons for Judgment are being given orally because that is far quicker than having them transcribed.  They will of course be typed up and edited only to the extent necessary to remove the sort of infelicities of expression that do arise when you give oral judgments.  The urgency arises from what I was informed about the respondent husband’s possible capacity to purchase out an interest.

2. The parties commenced litigation in respect of property and parenting issues in 2012.  Relevantly for these purposes they entered into final property orders by consent on 31 May 2013.  This was of course a concluded bargain between the parties to resolve the property dispute.  For various reasons neither party fulfilled their obligations under the agreement and the issue now before the Court is what should happen as a result.

3. A Contravention Application filed by the wife on 28 November 2013 was withdrawn in January 2014.  I will return to that later.  I note that in essence the Contravention Application was more of an Enforcement Application.

4. On 18 February 2015 the wife filed an Application.  It seeks the sale of the husband’s property in Property B and distribution of proceeds essentially in accordance with the 31 May 2013 orders.

5. A Response filed on 27 July 2015 essentially seeks that the husband pay the wife $35,000 and that the Application be otherwise dismissed.

6. The first issue not addressed in substance by either side is the nature of the dispute and the Court’s power to decide it. In my view, although neither party has referred to it this is clearly a s.79A case. Section 79A(1) relevantly reads:

   “(1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:

   (a)     there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or

   (b)     in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or

   (c) a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order.”

   That is not all of the subsection, but it is the relevant parts. In my view, s.79A(1)(a), (b) and (c) are all potentially engaged by this Application. The Court therefore may, if it considers it appropriate, make another order.

7. This brings us to the original orders themselves.  They are not easy to construe.  The parties intended to divide the two properties that they then owned.  The wife was to get Property T and the husband was to get Property B.  The extant mortgage then of some $558,000 was to be split as to $200,000 to the wife and $358,000 to the husband.  It is the default position that is complex.  If one looks at Orders 1 to 3, which effect the wife’s obligations to refinance the mortgage, what is immediately apparent is that no consideration was given to the position of the mortgagee.

8. Orders 4, 5 and 6 were responsibilities imposed upon the husband to refinance.  And once again no consideration was given to the likely position of the mortgagee.  So in other words, while the parties undertook to split the mortgage between them the Orders did not have a mechanism in it that, in my view, adequately contemplated what the position of the mortgagee might be.  Then there is Order 9.  If Property B was sold – and it was then valued at $570,000 according to the husband’s trial affidavit filed 8 April 2013 with a mortgage of $558,943.07 – there would indeed have been no surplus.

9. The wife’s figures for the valuation of the Property B property at the time were lower, but the same negative net equity result would have emerged.  So what the husband would have got under Order 9 was $200,000 paid to him by the wife, or in default of such payment 58 per cent of the value of the Property T property.  In other words, $350,000, according to the values attributed in the husband’s affidavit material, and a net payment of $203,000 to him.  In other words, the net effect of defaults would be that the wife would obtain $150,000 and the husband $200,000 either by refinance of the Property T property by the wife, or its sale.  The 58 per cent was clearly designed to give him the $200,000 figure.

10. What actually happened, however, was that neither side complied.  Neither exercised the limited liberty to apply contained in the Orders.  Rather, the wife filed a Contravention Application on 28 November 2013.  This alleged a failure on the husband’s part to comply with the obligation to refinance Property B or to sell it.  The wife’s affidavit filed 28 November 2013 makes a number of assertions.  At paragraph 8 she deposed that she was not able to pay the mortgage from around about April 2013.

11. At paragraph 9 she deposed to having approval from (omitted) Bank for an advance of $248,000 in about July 2013.  But the original mortgagee (omitted) Bank would not agree because they wanted the whole of the mortgage paid out.  This of course was wholly unsurprising.  At paragraph 14 the wife deposed that the husband was not employed and was not able to refinance in any event.  At paragraph 18 she deposed that the husband was asserting that the wife was in breach of the Orders having not paid the mortgage since April 2013 and this was asserted by the husband to be preventing him from being able to refinance either. 

12. It should be noted that all of these assertions were made by the parties long past 30 July 2013; the 60^th day for refinance limited by the original agreement. 

13. The wife next filed an affidavit on 18 February 2015.  At paragraph 11 she deposed that her Contravention Application had been withdrawn because the husband had said he would cooperate from then on.  At paragraph 13 she deposed that she was still in the Property T property and that the children were living with the parties on a week about arrangement.

14. The affidavit repeats the history asserted as to the (omitted) Bank potential advance in 2013.  She goes on to depose at paragraph 24 to a writ issued by the bank – the original mortgagee – and judgment being entered for $576,726.13 together with interest and costs on that writ.  At paragraph 28 the wife asserts that the loan arrears as at 28 August 2014 were $37,709.  At paragraph 29 she deposes that the settlement on the Property T property will produce a total of $342,000 on 6 March 2015.

15. It should be noted that caveats have been filed right, left and centre by all parties, including one by the wife’s solicitors. 

16. An affidavit by a solicitor on behalf of the wife, Mr Falzon, was filed on 17 March 2015.  It annexes as annexure JJF2 a document showing that the debt as of 25 February 2015 was $623,349.25.  The net proceeds from the sale of the Property T property are likely to be very close to $320,000.  It is clear that all payments made to the mortgage from 2013 onwards were paid by the husband who has paid $450 per fortnight. 

17. The husband filed a further affidavit on 27 July 2015.  He deposed to the marriage taking place on 27 November 2005 and separation on

    
    

    14 May 2012.  He deposed to the two properties at paragraph 5.  And at paragraph 6 he deposed to the fact that there was a single mortgage with (omitted) Bank for $558,000 over both properties, which was due to be split according to the agreement by 31 July 2013 as to $200,000 to the wife and $358,000 to himself.

18. Annexure T-2 is a letter from the wife’s solicitors to the husband’s solicitors dated 3 June 2013 noting that approval had been received for refinance of $200,000.  The letter also suggested that it was better that the parties refinance at the same time.  This suggestion reflects a fundamental misunderstanding that appears to me to have affected both parties.  It was always clear, or should have been, that the parties would have to refinance cooperatively and contemporaneously because the original mortgagee was always highly unlikely to allow one party to refinance alone.  And indeed that is the position the original mortgagee took.

19. At paragraph 10 of the affidavit the husband deposed that the wife had failed to pay her share of the mortgage.  And at paragraph 11 he deposed that this led to an increase in the loan of $23,750 plus $12,000 per annum for late fees.  At paragraph 12 he deposed to resulting arrears in the payment of the mortgage.  And at paragraph 13 the foreclosure by the bank with additional legal costs and enforcement costs amounting in total to an increase of some $80,000.  At paragraph 16 the affidavit deposes to arrears of $17,296.61 accrued by 11 October 2013.  And at paragraph 22 the husband deposes the withdrawal of the Contravention Application on the basis that the parties would thereafter cooperate.

20. Annexure T-10 is a letter from the wife to the mortgagee dated

    
    

    20 February 2014 in which she disclosed she intended to sell the property but to pay only $200,000 and arrears.  At paragraphs 37 to 39 the husband deposed to having obtained financial approval, that the wife failed to sell the Property T property so the approval lapsed.  He then deposed to the sale of Property T and the net proceeds being $324,868.  At paragraph 48 we learn that his loan is now some $301,000.  And at paragraph 49 it is asserted that the costs allegedly occurred because of the wife’s conduct amount in total to $92,755.15.

21. It is worth noting what those sums actually are asserted to be.  It is said that the Bank’s Legal Fees applied to the loan are $15,944.02.  The Bank’s Enforcement Fees applied to the loan at $12,203.66.  The Rates of the Property T property unpaid by the applicant were $5,330.20.  And the total mortgage loan arrears applied to the loan attributable to the applicant’s non-payment of her portion of the repayment is $47,277.27.  And Legal Fees incurred by the husband to prevent the bank foreclosing on the Property B property were $12,000.

22. At paragraph 52 it is deposed that the wife’s 42 per cent share of Property T is $136,444.95.  Taking off the $92,755.15 would lead to a payment of $43,689.80 to the wife.  At paragraph 56 the husband says he did not contravene the Orders because he now has finance approval.  This assertion is once again misconceived.  The husband simply never refinanced by the due date of 30 July 2013. 

23. This brings me to the matters asserted at Court.

RECORDED  :  NOT TRANSCRIBED

1. Having thus reviewed the affidavit material, I will review the parties’ submissions and evidence from my notes.  Such reviews tend to have something of a stream of consciousness quality, but it is part of the way I have to deal with matter to get the judgment done in a particularly rapid way.  Counsel for the wife indicated the background facts to the matter in circumstances which, in my view, do not take the matter much further.  I note that the substantial submission made in opening was that at the time of the approval by (omitted) Bank in July 2013 the wife was asserted to be able to pay.  It was essentially put that the effect of the failure of the husband to co-operate in her refinancing had effectively sabotaged her capacity to both refinance and pay interest as required.

2. The applicant wife was called and adopted her affidavit as true and correct.  She was then cross-examined.  She confirmed that the net sale proceeds from the Property T property were $324,000.  She confirmed that $200,000 was her share of the debt.  The total sale price was $346,000, although she had previously tried to sell it for $230,000.  She conceded that on sale the mortgage was $624,000.  She also conceded that sums deducted from the sale price included two years of rates and even an electricity bill.  She conceded that the husband pays $450 toward the mortgage and that she had only made one payment of $900.  She said she was happy to pay the arrears then extant when she applied for finance and she was not aware that the husband had now refinanced.  She asserted she had not read the husband’s affidavit.

3. She confirmed separation took place in May 2012 and the children live on a week-about arrangement.  She also confirmed that the arrears in May 2013 arising from her non-payment of the mortgage was $7,000 and said that she was able to repay these because she obtained approval for $248,000.  She said she did not pay anything on the mortgage because she was in a difficult financial situation.  She was ready to work full-time but had extra expenses, including paying Child Support to the husband.  She took some unpaid leave for a while, and the real difficulty was that the original mortgagee was not prepared to separate the loan.

4. It was put to her that the husband was unable to refinance because she had not repaid, but she said that that was not what the bank told her.  The bank told her that the husband was not working, so the loan would not be split.  She said she had spoken with the husband before the Contravention Application and he wanted more time to sort his affairs out.  She said if the original loan had been approved she would have paid the loan and arrears but she was depressed at the time and let it go. 

5. When challenged about the possible sale for $230,000, she confirmed that this was to be to Mr J, who was a friend, who would thereafter rent the property to her.  This, however, did not occur, because the husband would not sign the discharge form.  The sale price of $230,000 to Mr J was plainly a sale at an undervalue.  The bank said it was below value and being sold to a friend.  The wife had not defended the writ, and the bank obtained judgment on 7 August 2014.  When challenged with the proposition that the husband had finance approval for $430,000 on the basis that she would be paying $230,000, she did not know that this was the case.

6. She said the discharge form was not signed.  She referred to the caveat lodged by her own lawyers and one lodged by those of the husband.  She said the caveat her lawyers had filed was over Property B.  In

   
   

   re-examination the wife confirmed that she had three months unpaid leave in about June to July 2013.  She was relying on the loan to come through, but when it failed to do so she mismanaged her affairs.

7. The respondent husband was called and adopted his affidavit as true and correct.  He was then extensively cross-examined.  He recalled that both parties had to sign in 2013 for the wife to achieve refinance and decided not to.  He was not aware that the wife was struggling financially at the time, although he confirmed that she did have to pay him Child Support.  It was a complicated process, and he decided not to sign.  He said he also had some arrears.  He was unable to say how much these might have amounted to at the time of separation.  He confirmed that both parties had to do their best to comply with the original Orders, but the document the wife wanted him to sign did not cover the arrears or her lawyers’ fees.

8. He confirmed that there was a caveat over the Property T property by his own lawyers and he knew that she could not refinance.  He tried to talk to the wife about making repayments, but this had not succeeded.  When cross-examined about the wife’s endeavour to sell to Mr J, he was aware of this.  He saw the transfer of land but did not sign it.  This would give total authority over his place to her.  He accepted he had some responsibility for the way events had fallen out but repeated that if the wife had paid her mortgage they would both have kept their properties.

9. The submissions of the counsel for the husband suggested that the husband’s failure to sign the loan or transfer protected the intent of the original Orders.  The husband had to defend the Supreme Court proceeding and had incurred legal fees.  Essentially counsel went through the figures that I have already discussed and referred to the bank’s legal costs of about $15,000 and an overall figure of $28,000 and submitted that those plus the $12,000 the husband had spend in legal fees in the Supreme Court should be subtracted.  The total amount of such payments incurred as a result of the wife’s default was said to be $80,000, to which $12,000 should be added, legal fees of the husband, thus leaving $32,000 from the net sale proceeds of Property T for the wife.  Submitted that the husband should pay her $35,000 accordingly.

1. Counsel for the wife’s submissions can be paraphrased briefly also.  She submitted that the whole problem occurred when the husband refused to sign and this had a tumbling effect on the wife, who had taken time off work for three months through depression in 2013 to 2014.  It was submitted that it was unfair for her to bear the whole burden, and it was sought that the wife obtain $177,500.  This effectively represented what I might describe as a nice, round figure upon the sale of the Property B property.  The methodology was difficult to sustain.

2. I would make the following points.  First, it has all gone wrong.  The original Orders had a built-in problem, namely the secured interest of the then mortgagee.  It always required very close and extensive

   
   

   co-operation between the parties, and this clearly never occurred.  Although the wife was in arrears from April 2013 onwards, she moved quickly and had finance available to discharge the arrears and the $200,000 she was contracted to by early June 2013.  The husband clearly did not have finance by 30 July 2013, and I note and give emphasis to the fact that the wife was asserting in her affidavit material to third parties that the husband could not refinance because he did not have employment.

3. The parties blame each other, but both were clearly in default by

   
   

   30 July 2013.  It should be noted that even if this was the husband’s fault – and I note that the wife says he would not have been able to refinance in any event – the fact is that the default was expressly contemplated by the original Orders.  The wife should have moved to sell Property B on 1 August 2013.  The issues the parties raise about the wife’s capacity to repay – and she has conceded she mismanaged substantially – the husband’s failure to refinance by July 2013, the husband’s failure to sign the transfer when the wife sought to sell the property to a friend at an undervalue and all these other issues they have raised are all irrelevant, save as to how I should now sort out what remains.

4. The real reason the Orders were not complied with is because both parties failed to refinance by the end of July 2013.  That leads to the question, “What is a just and equitable outcome?”  First, the wife has lived rent and rate free for years.  The $47,000 increase in the mortgage is clearly her responsibility.  The husband said he missed a small number of payments, but these are trivial.  The documents filed show his regular repayments.  The wife admits she mismanaged her affairs.  She also ran up rates bills of $5,330, and the total of these amounts incurred as a result of her defaults is $52,300. 

5. Second, the husband should never have defended the writ.  Both parties should have gone to the bank for orderly sales at proper market value.  There never was a defence.  The wife’s attempt to sell for $230,000 is open to criticism but did not happen, in any event.  At least she made some effort to sell.  The husband should wear his own $12,000 legal expenses.  As I say, there was never a defence.  The bank’s fees and enforcement fees should be apportioned equally.  The evidence is sparse, but as I say, neither party should have resisted the mortgagee.  In other words, of the $28,000 total approximately, each should be responsible for $14,000, rounded off.  It should be noted that all that occurred was that the bank took the step that one or other of these parties or both should have taken themselves much earlier.

6. The result is this.  The wife says that Property B is worth $600,000.  It is not clear if this is disputed.  If so, the mortgage is now $301,000, so the equity in it is $299,000.  The original Orders would pay Capital Gains Tax, about which no information is available, and then split the remains 50-50.  But the wife would have to pay the husband $200,000.  This methodology is clearly no longer appropriate or practicable.  The whole thing has been overtaken by events.

7. I go back to the beginning.  The net effect of defaults as things stood in 2013 would give the wife $150,000 and the husband $200,000.  There is now, however, only $300,000, not $350,000, in equity.  The equivalent share applying at that proportion to the amount that is now available would give the wife $128,571, not $150,000.  From that there should be deducted $52,300 notionally and $14,000 for bank fees.  But the wife has already paid those in the settlement price of the property.  She has also, in fact, already paid the rates.  This being so, the $128,571 should be reduced by the $47,000 attributable to the wife’s failure to pay the interest.  That will produce a figure of $81,571.

8. In my view, on those figures the wife would obtain $81,571 and the husband would retain the balance of the equity in the property.  However, the wife has already paid the $14,000 to the bank that the husband was required to pay in my division of the bank’s legal fees.  She should receive that also.  So in my view, the figure to the wife should be the combined total of $81,571 plus $14,000, which is a total of $95,571.  The balance, of course, will go to the husband, and that is just over $200,000.

9. This is in one sense a windfall.  He would have received a far lower figure as the notional proportion of $200,000 times 300 over 350 is multiplied out.  But the increase has arisen because Property B has gone up.  Property B has gone up in value because the husband has paid the mortgage.  In my view, it is just and equitable that he gets that benefit.  So the net result of all this is that the husband is to pay the wife the sum of $95,571.

10. I caused the parties to be notified that I would require representation today, because I am aware that the husband has refinance available until the end of the month.  I was informed of this at trial.  I had proposed to sort out the mechanics of how this opportunity would be made available to the husband through counsel being present today.  It would appear that the wife’s solicitors have simply taken it upon themselves not to attend.  I am in receipt, as we speak, of an email from them saying “Can we have the matter stood down until 10:00 am when counsel is able to attend Court”.  That is utterly unsatisfactory.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Associate: 

Date: 22 October 2015