TREVI & TREVI

[2015] FamCA 123

FAMILY COURT OF AUSTRALIA

TREVI & TREVI [2015] FamCA 123

FAMILY LAW – PROPERTY – Application for removal of caveats – consideration of nature of caveatable interest – consideration of nature of claim on which the substantive application is brought – orders made for removal of caveats and associated costs – restraining order.

Family Law Act 1975 (Cth), ss. 31, 78, 79, 114.

Auricchio & Auricchio and Ors (No 2) [2014] FamCA 240
Australian Eagle Insurance Co Ltd v Parry (1992) ANZ ConvR 166
Dembitzer vMills (1980) NSWLR 697
In the Marriage of Stevens (1991) 15 Fam LR 51

APPLICANT: Mr Trevi

RESPONDENT: Ms Trevi

FILE NUMBER: MLC 8475 of 2014

DATE DELIVERED: 2 March 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Thornton J

HEARING DATE: 13 February 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms M. Smallwood

SOLICITOR FOR THE APPLICANT: King & Wood Mallesons

COUNSEL FOR THE RESPONDENT: Mr R. Weil

SOLICITOR FOR THE RESPONDENT: Kennedy Partners

Orders

1. The respondent wife shall forthwith take all necessary steps to cause the relevant Registrar of Titles to remove the caveats from the titles of the following properties:

   (a)       1 Street, Suburb A, Victoria;

   (b)       2 Street, Suburb A, Victoria;

   (c)       3 Street, Suburb A, Victoria; and

   (d)       C Street, Suburb D, Queensland.

2. Paragraph 1 of the wife’s Response to an Application in a Case filed 13 February 2015 is dismissed.

3. The wife shall meet any necessary costs associated with the removal of the caveats.

4. Until further order, the respondent wife be restrained from lodging any further caveats on the titles pertaining to the properties referred to in paragraph 1 of these orders.

5. The applications sought in paragraph 3 of the husband’s Application in a Case and paragraphs 2 to 13 of the wife’s Response to the husband’s Application in a Case be adjourned for management as to listing by the Registrar docketed with the management of the file.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Trevi & Trevi 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 MELBOURNE

FILE NUMBER: MLC 8475  of 2014

Mr Trevi

Applicant

And

Ms Trevi

Respondent

REASONS FOR JUDGMENT 

Introduction

1. This is an Application in a Case brought by the husband seeking that the wife remove caveats from three titles of properties in Suburb A, Victoria, registered in the name of the husband.  Those properties are 1 and 2 B Street, Suburb A (“the property in which the husband lives”) and 3 Street, Suburb A (“the tenanted Suburb A property”).  The property at 2 B Street is a small accessory block on a separate title but is also occupied by the husband.  The husband also sought that the wife remove a caveat on a property registered in his name, at C Street, Suburb D, in Queensland (“the Queensland property”), because at the time of filing the application he was uncertain whether a caveat had been lodged on that property.

2. Counsel for the wife did not disclose whether any caveat had been lodged on the Queensland property and the evidence before me was unclear on this point. 

3. The husband also sought that the wife meet any necessary costs associated with the removal of the caveats and that until further order, the wife be restrained from lodging any further caveat on the titles of those four properties.

4. The husband also sought the costs of and incidental to this application for the removal of the caveats.  However there were no submissions made by either party on the question of these costs.

5. In her Response to the Application in a Case, for which leave to be filed was given by a Registrar only the morning of the hearing, the wife sought that the husbands’ application be dismissed.  In the alternative the wife sought that the husband’s application be adjourned to a further hearing at least 14 days after the husband’s compliance with other orders sought.

6. The wife also sought a number of other orders.  Those applications by the wife were not listed to be determined before me and are to be heard on a date to be fixed by the Registrar.

7. The hearing proceeded by way of submissions only and the affidavit evidence remains untested.  The parties had each filed an affidavit in support of their applications.

The substantive applications

1. The wife’s Initiating Application filed 19 September 2014 sought the following final orders:

   1.That there be such orders as to property settlement and/or periodic or lump sum spousal maintenance as this Court may deem appropriate.

   2.That the wife be excused from particularising the orders sought by her pending discovery being completed and valuations being obtained.

   3.Such further and other orders as the Court deems appropriate.

2. There is no other claim made. There is no application for relief pursuant to a declaration of interests in property by the wife and she has not sought to invoke any head of power under s 78 of the Family Law Act1975 (Cth) (“the Act”). Nor is there any reliance on the accrued jurisdiction of the Court.

3. The husband’s Response filed 31 October 2014 sought the following final orders:

   1.That there be such orders as to property settlement as this court may deem appropriate, in the event that the Court first determines that it be just and equitable that there be any such order.

   2.That the Applicant’s application for spousal maintenance be dismissed.

   3.Such further or other orders as the Court deems appropriate.

4. During submissions in the hearing, counsel for the husband stated that the husband’s estimate of the parties’ net asset pool is about $10 million.  Counsel for the wife submitted that the wife’s estimate of the parties’ net asset pool is between $11 and $12 million.

Background

1. By agreement between the parties, the former matrimonial home at E Street, Suburb F (“E Street”), registered in joint names, was sold for $10,799,000 and settled on 12 December 2014.

2. On 12 December 2014, Registrar Riddiford made interim orders with the consent of the parties.  Amongst other orders, the orders provided that the wife be paid an amount of $2,616,400 by way of interim property distribution, which has been applied to the purchase of a property for the wife at G Street, Suburb H (“G Street”).  The wife currently resides in that property. The deposit for the purchase of that property was also paid to the wife from the proceeds of sale of E Street.

3. The consent orders also provided for the proceeds of sale of E Street to be applied to payments for the conveyancer, the real estate agent, the discharge of all debts within a National Australia Bank Limited portfolio facility and credit card account being $4,563,000, a further payment of $31,600 to the wife with the balance to be divided equally between the parties.  Notations made on those orders are as follows:

   (1)The husband and wife both agree to the above orders without admission that the 50 per cent distribution to each of them of the balance of the monies in any way represents an appropriate division of the assets of the parties.

   (2)The wife asserts that each party shall be at liberty to argue at the trial of these proceedings as to the characterisation of the payments made [from the proceeds of the sale of the former matrimonial home].  The husband does not agree to this assertion.

4. The husband is 52 years of age and is a professional.  The wife is 50 years of age and engaged in home duties. 

5. The parties were married in 1989 and have three sons aged 21, 20 and 15 years.  The parties separated in mid-2008 and at that time were living at E Street. 

6. Before the application for property settlement was filed by the wife, the parties agreed to sell E Street.  Prior to the settlement of the sale, the wife entered into a contract to purchase G Street as her home.  The settlement of that purchase was scheduled for the same day as the settlement of E Street. 

7. After payment of the sums agreed by way of the consent orders, the balance of the proceeds of the sale of E Street, of $1,624,345, was shared equally between the parties.  Accordingly, together with the other payments, the wife received a total of $3,460,172 from the sale of E Street.

8. The husband deposed that on or about 5 January 2015 he received notification that the wife had lodged caveats over the two Suburb A properties on 12 December 2014.  The husband deposed that during negotiations leading to the interim settlement, no mention had been made of any concerns by the wife regarding dealings with those properties or of any intention to lodge caveats. 

9. The husband deposed that his solicitors wrote to the solicitors for the wife seeking removal of the caveats on 23 December 2014.  The husband has deposed that his solicitors received no response but after making a telephone call they were told by the solicitors for the wife that “steps were underway to also have a caveat lodged on” behalf of the wife over the Queensland property.

10. The husband deposed that he has pursued a consistent investment and tax management strategy of borrowing substantial amounts of money to the limit that could be serviced by his income and applying the borrowed funds to acquire residential property for rental purposes.  He deposed that this strategy was pursued so that interest payments and rental property holding costs and expenses, including depreciation, could be “negatively geared” against his income. 

11. The husband deposed that the Queensland property and the tenanted property in Suburb A are “fully tenanted investment properties registered in my name”, which were utilised as part of this strategy until the discharge of the mortgage debt on 12 December 2014 as part of the interim settlement.  The husband deposed that the tenanted Suburb A property acquired in mid-1996 is valued at an estimated $1,000,000.  It is his expectation that the Queensland property acquired in early 2008 for $2,080,000 “is likely to be about the same value” and has not substantially changed, although it has not been assessed by a valuer.

12. The husband deposed that the second property in Suburb A was previously a tenanted investment property as part of the aforementioned strategy until May 2014 when he moved into the property with his second son, L.  He deposed that in September 2014, the other two sons, K and J, also moved into that property with him.  He has been informed that the bank’s current valuation for that property inclusive of a small accessory block on a separate title is $2,300,000.  The wife deposed that the estimated value of that property is between $2.3 and $3.3 million.

13. The husband deposed that on 15 January 2015, he contracted to purchase a block of apartments in Suburb I for $4.1 million and at the time was unaware whether the wife had lodged or intended to lodge a caveat over the Queensland property.  The husband deposed that this purchase is scheduled to settle “within 30 days of final registration of the relevant plan of subdivision.”[1]

    [1] Affidavit of the husband filed 28 January 2015 at [14].

14. The husband also deposed that he was informed on 15 January 2015 by the vendor’s agent that the final registration:

    … could occur any day now because the building has been completed and the Plan of Subdivision has been approved by the Council for registration.  Therefore, I expect that I will be required to settle this acquisition by the end of February 2015.  Funding arrangements will have to be in place, with my bank, well prior to that.[2]

    [2] Ibid.

15. The husband deposed that he proposes to maximise the taxation benefit of this investment by borrowing 100 per cent of the purchase price and that his bank manager has informed him that the bank will lend him 80 per cent on the security of a mortgage over the Suburb I property but that, in order for him to borrow 100 per cent, the bank requires a mortgage over the Suburb A property in which he lives.  This is disputed by the wife who has deposed that, until the husband complies with further discovery of documents, she “cannot admit that the purchase of Suburb I is prevented by my caveats”, nor that the husband may suffer an increased tax burden.

16. The husband deposed that the caveat lodged by the wife over that Suburb A property in which he lives prevents this and that he will suffer loss by way of increased tax burden if he is unable to pursue his investment strategy.  The husband also deposed that he would suffer even greater loss by way of “damages exposure“ to the vendor if he is unable to settle the transaction.  The husband also complains that caveats lodged in relation to the tenanted Suburb A property and the Queensland property would restrict his ability to pursue the investment and tax management strategy. 

17. The husband continues to pay all of the holding and management costs in relation to the three properties.

18. The husband deposed that the wife has made no direct financial contribution to any investments that have been the subject over the past 14 years of the investment strategy.  The wife disputes the husband’s case that she has not made any direct financial contributions to the property of the marriage and refers to a “series of sums totalling $200,000” by way of inheritance in around 1992, which were contributed by her to mortgage repayments and joint savings.

19. The two Suburb A properties and the Queensland property are all registered in the name of the husband and are unencumbered.  The husband asserts that the wife has made no financial contribution to the acquisition of the properties, maintenance, expenses or outgoings and that all payments for interest and other expenses have been funded from his income.

20. The husband deposed that he has undertaken substantial renovation works to enhance the value of the two Suburb A properties.  The husband deposed that after taking over the Suburb A property that he now lives in, it was necessary to complete renovations to the interior to make it habitable.  The wife deposed that this renovation was undertaken post separation using joint funds of $250,000.

21. The husband further deposed that he also needs to borrow against the Suburb A property in which he lives in order to fund an extension of the accommodation and build a garage on the property.  The husband deposed that the caveat lodged by the wife will prevent further borrowing against that property. 

Submissions

1. Counsel for the husband submitted that the solicitors for the wife had indicated that they were in the process of taking steps to lodge a caveat on the Queensland property.  Accordingly the application was couched in the terms of seeking that caveats on the three properties be lifted.

2. Counsel for the wife submitted that since separation and using joint funds, the husband paid out all debts and encumbrances on those three properties, which had been purchased during the course of the marriage as investment properties. 

3. Counsel for the husband submitted that the wife has no caveatable interest in the properties because her Initiating Application is based upon a s 79 property settlement under the Act and the wife has no proprietary right in those properties. Counsel for the husband submitted that the wife’s description to the Registrar of Titles, in support of her caveat, of her interest as stemming from an “implied or resulting or constructive trust” was misdescribed.

4. Counsel for the husband submitted that a statement of claim was required to prove a resulting or constructive trust or an equitable or beneficial interest. Counsel for the husband asserted that the wife had failed to lodge a statement of claim and in addition to that, the wife’s Initiating Application does not mention any implied or resulting or constructive trust. It was asserted that, once s 79 of the Act is agitated in the Initiating Application, this precludes the wife from claiming an implied or resulting or constructive trust. Counsel for the husband submitted that the wife should have sought injunctive relief rather than lodging the caveats.

5. The only authority relied upon by counsel for the husband was the decision of Forrest J in Auricchio & Auricchio and Ors (No 2) [2014] FamCA 240 (“Auricchio”).  In particular, counsel for the husband relied on paragraph 36 of that judgment which was critical of the wife for failing to file an amended application with an attached pleaded case in the form of a statement of claim in circumstances where she had entered into a contract to purchase a development site which involved a second respondent.  In that case, the wife was aware of the contract for the purchase of the development site by the second respondent and signed the contract, even though she was not a director of the second respondent.  This contract had been entered into whilst the parties were married and before separation. 

6. The distinction between this case and Aurrichio on the facts is that a third party was involved in Aurrichio and the application before the Court by the husband was brought pursuant to s 127 of the Land Title Act 1994 (Qld), which brought into question the accrued jurisdiction of the Family Court under s 31(1)(a) of the Act. That has no application in this case because here, there is no application by the husband for removal of the caveat pursuant to Victorian State legislation.

7. It is not necessary for me to consider the submission on behalf of the husband in respect of accrued jurisdiction and the lack of a statement of claim because in this case the husband has not made any application under the law of a State. 

8. I have power under s 114(3) of the Act to make an order granting an injunction by interlocutory order in any case in which it appears to the Court to be just or convenient to do so, and either unconditionally or upon such terms and conditions as the Court considers appropriate. There is sufficient power under s 114(3) of the Act to make the orders sought by the husband provided the requirements are met.

9. The husband did not consult the wife about the purchase of the Suburb I property and complains that he will suffer an increased tax burden if his investment strategy cannot be pursued.  This has not been quantified and is  untested evidence.  Counsel for the wife submitted, that there is no detailed evidence of the urgency of the husband’s circumstances and relied upon the 30 day settlement period asserting that this was not an urgent situation.  

10. Counsel for the wife also relied upon that part of  s 13(c) of the Contract of Sale for the Suburb I property which provides:

    If settlement does not occur within 90 days of the Day of Sale, the Purchaser may at any time after that date (but not before the Plan of Subdivision is registered) rescind this contract by written notice to the Vendor in which case the Deposit and all other monies paid by the Purchaser under this Contract must be refunded in full within 7 days.

11. At paragraph 98 of the wife’s affidavit, she deposed to total losses incurred by the husband’s investment strategies exceeding $1.8 million.  The wife deposed that after separation and before E Street was sold, the husband purchased an expensive property at a cost of $2.81 million, which he improved and then sold “leaving a shortfall of $441,255.90”.  She also deposed to the husband having purchased shares using borrowed money which were ultimately sold resulting in a “substantial shortfall” which she deposed was $367,362.40. 

12. At paragraph 100 of the wife’s affidavit, she deposed to net assets of between $10 and $11 million and she is concerned to protect her substantial further entitlements.  She deposed that the Queensland property and the tenanted property in Suburb A will need to be sold in order to effect a just and equitable property settlement.  The wife does not consent to the Suburb A properties being encumbered.  The wife also seeks to obtain further information about the extent of the husband’s interest in his business partnership which will be an issue in the trial.

1. Nowhere in her affidavit does the wife assert that she has an equitable interest in the Suburb A properties or the Queensland property. This was only asserted by her counsel in submissions. There is no claim asserting an equitable interest made by the wife in her Initiating Application which refers to s 79 of the Act. The effect of the submission for the wife was that an equitable interest “may” be claimed in those properties when there is compliance with an application for discovery.

Conclusion

1. The affidavit evidence is untested at this stage.  The question to be agitated in the substantive action will concern each party’s entitlement to any alteration of the interests in the property of the marriage.  The Court will need to determine whether it is just and equitable to make any alteration to the existing property of the marriage.

2. The wife deposed that she is wary of the potential losses that might be incurred by the husband’s financial and tax management strategies.  In the circumstances here, there is clearly a lack of trust on the part of both parties. 

3. The wife’s assertions about the husband’s losses remain untested evidence.  Counsel for the wife submitted that without further information about the husband’s financial circumstances by way of discovery, the concern of the wife is that the husband is purchasing property to avoid paying spousal maintenance or her just property settlement.

4. The submission made by counsel for the wife about a lack of urgency is not to the point. 

5. It is common ground that the wife has asserted to the Registrar of Titles in support of her caveats an “implied or resulting or constructive trust,” however there is no claim made by the wife in this jurisdiction to support such an assertion. 

6. A claim under s 79 of the Act is not a caveatable interest.[3]

   [3] See Dembitzer vMills (1980) NSWLR 697; In the Marriage of Stevens (1991) 15 Fam LR 51; Australian Eagle Insurance Co Ltd v Parry (1992) ANZ ConvR 166.

7. At this interim stage, without further discovery, the wife’s case is that joint funds have been applied by the husband to discharge the mortgages on the Suburb A properties, the Queensland property and to improve the Suburb A property in which the husband lives. 

8. The husband’s affidavit does not disclose the source of the funding for the renovations to the Suburb A property in which he lives.

9. This is a matter for further argument in the trial on the substantive application.

10. The onus is on the husband to satisfy me that it is proper to make a mandatory injunction requiring the wife to remove the caveats on the Suburb A and Queensland properties and to restrain her from lodging a caveat on the Queensland property.

11. In so far as the wife’s application is concerned, it is impossible to identify the relief she seeks by reference to her interim application.  The wife asserts that the husband has unilaterally entered into a contract for the purchase of the Suburb I property proposing to use one of the investment properties as part security for a loan.  She is concerned that he is accepting a new liability and may dispose of an interest in land to defeat her claim.  She requires that the caveats remain so that the Registrar of Titles has notice of her claim and can properly be given notice of any attempts to dispose of the property.

12. I am satisfied that the wife has not claimed an equitable interest in the investment properties, apart from a conditional assertion by her counsel in submissions.  It is unknown whether the wife will ever make or pursue such a claim and she has not advanced any claim to an equitable interest in any of these properties.  Thus, at least at this stage, the wife has not established a   caveatable interest in the Suburb A or Queensland properties.

13. I am satisfied that it is just and appropriate to exercise my discretion pursuant to s 114(3) of the Act to require the wife to remove the caveats and to restrain her from lodging any further caveats over those properties. I propose to grant the husband’s application for the interim orders sought in paragraphs 1 and 2 of the husband’s Application in a Case. Paragraph 1 of the wife’s Response to an Application in a Case will be dismissed.

14. The wife is to take all necessary steps to cause the relevant Registrar of Titles to remove the caveats from the titles of the properties located at 1 B Street Suburb A, Victoria, 2 B Street Suburb A, Victoria, 3 B Street, Suburb A, Victoria and C Street, Suburb D, Queensland.

15. The wife is to meet any necessary costs associated with the removal of the caveats.

16. Until further order, the wife is restrained from lodging any further caveats on the titles pertaining to those properties.

17. There were no submissions made on the costs of this application.

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Thornton delivered on 2 March 2015.

Associate: 

Date:  2 March 2015