Vance & Vance

[2021] FamCA 359

FAMILY COURT OF AUSTRALIA

Vance & Vance [2021] FamCA 359

File number(s):	BRC 17331 of 2020
Judgment of:	CAREW J
Date of judgment:	2 June 2021
Catchwords:	FAMILY LAW – PROPERTY – Whether the husband should be required to cause a company controlled by him to pay rent and arrears for premises occupied by it – Where a lease was entered into requiring the company to pay rent – Where the company has historically paid rent – Where the husband is to cause the company to pay rent as and from the date of the order in accordance with the lease – Where the question of payment of arrears be determined at trial.
Number of paragraphs:	36
Date of hearing:	31 May 2021
Place:	Brisbane
Counsel for the Applicant:	Mr Hackett
Solicitor for the Applicant:	Stone Group Lawyers
Counsel for the First Respondent:	Mr Jordan
Solicitor for the First Respondent:	Frigo Adamson Legal Group
Counsel for the Second Respondent:	Mr Jordan
Solicitor for the Second Respondent:	Frigo Adamson Legal Group

ORDERS

BRC 17331 of 2020
BETWEEN:	MS VANCE Applicant Wife
AND:	MR VANCE First Respondent Husband
B Pty Ltd ACN … Second Respondent

ORDER MADE BY:	CAREW J
DATE OF ORDER:	2 JUNE 2021

THE COURT ORDERS THAT:

1.As and from the date of this order, the first respondent husband, in his capacity as Director of B Pty Ltd shall cause the second respondent to pay rent as and when it falls due to C Pty Ltd as trustee for the Vance Family Trust in accordance with the lease dated on or about 10 March 2020 for the premises at D Street, Suburb F in the state of Queensland.

2.Paragraph 3(b) of the applicant wife’s Application in a Case filed 8 December 2020 as amended by leave on 31 May 2021 be dismissed.

NOTATION:

A.It is noted that the balance of the Application in a Case filed 8 December 2020 as amended by leave on 31 May 2021 and the Response filed 11 February 2021 as amended by leave on 31 May 2021 were finalised by consent and an order made on that date.

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

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 17.02 Family Law Rules 2004 (Cth).

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

REASONS FOR JUDGMENT

CAREW J:

1. Ms Vance (“the wife”) and Mr Vance (“the husband”) are in dispute about how their property should be divided after a 16 year marriage which ended in 2010. Despite their separation, they have managed to continue to operate their common business interests and reached heads of agreement to extricate themselves from an ongoing financial relationship after a mediation early last year. Unfortunately, disputes arose about the final terms which they have been unable to resolve.

2. The competing interim applications were largely resolved by consent on 31 May 2021.

3. Only one issue remains unresolved on an interim basis: whether or not the husband should be required to cause a company controlled by him, namely B Pty Ltd (the second respondent), to pay rent for premises occupied by it. The premises are owned by C Pty Ltd as trustee for the Vance Family Trust (“the family trust”). The wife contends that rent arrears are currently $140,992.50 and a quarterly rental payment of $24,750 is due shortly.

4. For the reasons which follow, I propose to order the husband to cause the second respondent to pay rent for the premises but not the arrears at this time. To understand the context of the dispute it will be helpful to firstly provide some background.

   BACKGROUND

5. The wife and husband commenced cohabitation in 1990 and married in 1994. They separated in 2010. They have two adult children. The wife is 56 years of age and has experienced some recent health issues. The husband is 62 years of age and in good health.

6. The property of the parties or either of them is estimated to be worth about $12,000,000. The husband continues to the live in the former matrimonial home and the wife rents other accommodation.

7. Currently, the wife operates a solar business via G Pty Ltd and the husband operates a contracting business via B Pty Ltd.

8. The husband’s business, B Pty Ltd, operates from premises owned by the family trust. The wife’s business, G Pty Ltd, operates from premises owned by the self-managed Vance Super Fund at H Street Suburb J, in the State of Queensland.

9. On 18 February 2020 the wife and husband signed Heads of Agreement (“the agreement”) after participating in a mediation. Relevantly for present purposes, pursuant to the agreement, the wife was to retain G Pty Ltd and the family trust. The husband was to retain B Pty Ltd and set up a new self-managed superannuation fund in order to acquire D Street, Suburb F, in the State of Queensland (“D Street”), for $1,100,000 from the family trust.

10. The agreement has been partially performed in that the wife is now in control of G Pty Ltd and the husband and wife caused $800,000 of the husband’s member benefits in their joint self-managed superannuation fund, namely Vance Super Fund to be paid to the family trust, towards the purchase of D Street. The wife has utilised those funds for various purposes including paying debts, operating G Pty Ltd, living expenses and personal legal fees.

11. Under the agreement, D Street was to be owned by the husband’s new self-managed superannuation fund, namely, Vance Super Fund. The purchase of D Street has not been completed as the mortgage has not been released. The balance owing on the mortgage is about $400,000. Each party blames the other for this state of affairs.

12. The balance of the husband’s member benefits in the Vance Super Fund of about $450,000 was rolled out into the Vance Super Fund.

13. Pertinent to the dispute about rent: the electrical business has paid rent to the family trust for its occupation of D Street since 2005, and most recently signed a lease commencing on 10 March 2020 for an annual rent of $90,000. On 30 March 2020 rent of $24,750 was paid pursuant to an automatic direct debit and on 30 June 2020 a further rent payment in that sum was made. The husband contends that he was unaware of these automatic payments at the time. The husband subsequently cancelled the automatic direct debit and withdrew $49,500 from the family trust bank account over the period 27 to 29 July 2020.  

14. Subsequent to the agreement, the wife sought to impose restraints of trade and other conditions on the husband that did not form part of the agreement. The parties continued to negotiate but on 21 September 2020 the husband gave notice that he regarded the wife’s failure to enter into a binding financial agreement as envisaged by the agreement signed on 18 February 2020 as a repudiation of the agreement and as such, he terminated the agreement.  

15. B Pty Ltd has continued to operate its business from D Street and has paid no rent since 30 June 2020 (which, as mentioned earlier, was subsequently reversed by the husband).

16. The wife and husband remain directors of C Pty Ltd (the trustee of the family trust) and they both remain beneficiaries of the Vance Family Trust.

    THE WIFE’S SUBMISSIONS

17. The wife argues that the objective intentions of the parties rather than their subjective intentions are relevant to the interpretation of their obligations in contract law. In this case the wife relies upon the following documents to support her claim for payment of rent:

    (1)The agreement and in particular, clause 28 which relevantly provides that the parties “hereby agree to conduct B Pty Ltd and G Pty Ltd as they have since at least 2011, until all of the provisions in this Agreement have been performed”;   

    (2)The lease entered into on or about 10 March 2020 between the family trust and B Pty Ltd which requires the payment of annual rent for D Street of $90,000;

    (3)The contract for the sale of D Street to B Pty Ltd entered into on or about 13 March 2020 which contains no special provision relieving the husband from his obligation to pay rent; and

    (4)The exchange of correspondence between solicitors at the relevant time which does not support the husband’s contention that B Pty Ltd need not pay rent in accordance with the lease.

18. It is common ground that B Pty Ltd has paid rent for D Street since 2005. A direct debit was in place causing quarterly rental payments in arrears to be paid until cancelled by the husband. The husband unilaterally reversed rental payments made for the March and June 2020 quarters. The entries on the bank statement recording the transactions refer to “rent refund”. The wife submits that nowhere in the agreement or the lease or contract of sale is there any mention of the husband being entitled to a rent refund.

19. It is also common ground that prior to the signing of the contract for the sale of D Street on or about 13 March 2020 the husband obtained advice that in order to obtain an exemption from GST, the purchase would have to be a “going concern” which required rent to be paid. The parties could not locate the original lease so entered into a new lease from 10 March 2020 for a term of three years.

20. The wife submits that the husband’s reliance on clause 27 of the agreement cannot be interpreted to relieve him of his obligation to pay rent, it being an unremarkable clause providing for unpaid present entitlements and loan accounts at the time of final settlement to lie where they fall. Up until settlement, clause 28 requires the parties to conduct their businesses as they have done to that point, which included the payment of rent for D Street.

21. To the extent that the husband relies on the wife’s withdrawal of a requirement to include a special condition in the contract for sale in the following terms:

    The parties agree that should the tenant under the Commercial Tenancy Agreement be in breach of its obligations to pay rent or outgoings as at the settlement date, the Purchase Price will be adjusted in the Seller's favour in the amount of overdue rent and outgoings, and the Seller assigns all rights and interests in any outstanding amount to the Buyer to recover for its own benefit.

    the wife argues that the condition was not pressed in circumstances where the buyer (Vance Holdings Pty Ltd as trustee for the Vance Super Fund) was not the tenant (B Pty Ltd) and would not be responsible for rent arrears. Further, at the time the contract was signed, the wife knew that the rent was up to date and being paid pursuant to an automatic direct debit. The husband at no time informed the wife of his intention to cease paying the rent or to cancel the direct debit.

22. The wife submits that the Court would reject the husband’s claim that he would not have entered into the contract to purchase D Street if he had to pay rent and describes such a contention as “nonsense”. It is argued that there was an independent agreement by the husband to purchase for the valuation price and that the husband is simply attempting to avoid his obligations to pay rent and thereby starve G Pty Ltd of funds to meet its expenses.

23. As to the husband’s contention that the settlement has not progressed because of the wife’s failure to provide clear title, the wife submits that as the husband and wife jointly control the family trust, the husband equally with the wife had the capacity to cause payments to be made to the bank to release the mortgage on D Street. Further, when the bank indicated they would release D Street if other properties remained as security, the husband refused to sign the necessary documents to enable that to occur.

    THE HUSBAND’S SUBMISSIONS

24. The husband argues that the effect of the negotiations entered into prior to the signing of the contract for sale of D Street was that the husband, or any entity retained by him, would not be required to account to the wife, or any entity retained by her, for rent payable by B Pty Ltd to the family trust. Further, the husband contends that the effect of the negotiations was confirmed by the wife’s solicitor in an email on 12 March 2020 in which it was stated: “We confirm our client is withdrawing its request for a (sic) overdue rent adjustment at the settlement of the contract”.

25. The husband contends that had he been required to pay rent he would not have entered into the contract to buy D Street. He submits that his understanding of the effect of the negotiations is consistent with clause 27 of the agreement entered into on 18 February 2020.

26. The husband argues that the sale of D Street has not been completed through a failure of the wife to make appropriate arrangements to provide security to the bank for the remaining $400,000 debt secured on D Street and that she could have used part of the $800,000 already paid towards the purchase, but chose not to. According to the husband, it was never envisaged that he would have an ongoing obligation to pay rent for a purchase that was supposed to have been completed within three months of the contract for sale.

    DISCUSSION

27. The only issue for my determination is whether B Pty Ltd should pay arrears and ongoing rent to the family trust pending finalisation of the parties’ property settlement.

28. The uncontroverted facts include the following:

    (a)B Pty Ltd paid rent to the family trust for its occupation of D Street from 2005 until 30 June 2020;

    (b)The agreement signed by the parties on 18 February 2020 included the following two clauses:

    It is agreed:

    …

    27.[The husband and wife], on their own behalves, and on behalf of any entity they retain pursuant to this Agreement to address all inter -party loans or liabilities as follows:

    (a)Any loan or liability owing by [the wife] or an entity retained by [the wife] to either [the husband] or an entity retained by [the husband] is hereby assigned by [the wife] or the entity retained by her to [the husband] or his nominee;

    (b) Any loan or liability owing by [the husband] or an entity retained by [the husband] to either [the wife] or an entity retained by [the wife] is hereby assigned by [the husband] or the entity retained by him to [the wife] or her nominee.

    28.[The husband and wife] hereby agree to conduct B Pty Ltd and G Pty Ltd as they have since at least 2011, until all of the provisions in this Agreement have been performed

    …

    (c)The husband obtained advice that in order to obtain a GST exemption on the purchase of D Street, there needed to be rent paid and a lease as evidence of it being the sale of a “going concern”;

    (d)On or about 10 or 13 March 2020 a lease for D Street was entered into requiring payment of an annual rent of $90,000 in circumstances where the original lease could not be located;

    (e)On 11 March 2020 at 10.51am the wife sought the addition of a special clause in the contract for the sale of D Street as follows:

    The parties agree that should the tenant under the Commercial Tenancy Agreement be in breach of its obligations to pay rent or outgoings as at the settlement date, the Purchase Price will be adjusted in the Seller's favour in the amount of overdue rent and outgoings, and the Seller assigns all rights and interests in any outstanding amount to the Buyer to recover for its own benefit.

    (f)On 11 March 2020 at 4.36pm the wife’s solicitor indicated the wife’s agreement to remove the special condition on the following basis:

    In respect of the outgoings and rent payments that may be due by the tenant at settlement, our client is agreeable in principle to my proposed clause being removed on the basis that the parties agree that any amount outstanding between the tenant and K Company at settlement is adjusted between the parties (or their nominee) under the BFA but is otherwise recoverable by the trust.

    (g)On 11 March 2020 at 5.48pm the husband’s solicitor email included the following:

    In relation to the payment of any outstanding rent/outgoings associated with the D St property at settlement. Please provide details of the exact terms of the (sic) your client's proposal on this issue so that I can obtain instructions. However, as we discussed, my client has questioned the need for either party to become indebted to the other (through entities they will take though the BFA or otherwise). The mediation was conducted with the intention that liabilities between the parties were to be, in effect, disregarded to enable the parties to focus on the assets available for distribution. Clause 27 of the Heads of Agreement was incorporated into the agreement to give effect to that intention. If it is now your client's position that there needs to be a special condition or some other collateral agreement that provides that my client (through B Pty Ltd) is to be liable to your client (through K Company) for rent/outgoings for D St (for the period prior to the contract settling), then in our view that appears to fly in the face of the parties' previous intentions and the way they have structured their business dealings post mediation. In this regard, we are instructed that B Pty Ltd has not been charging rent (as it has done in the past) for the space the Business utilises at B Pty Ltd premises, nor has there been any charges levied against Business for the use of vehicles etc owned by B Pty Ltd.

    (h)On 12 March 2020 at 1.28pm the wife’s solicitor stated the following:

    We confirm our client is withdrawing its request for an overdue rent adjustment at the settlement of the contract…

    (i)On or about 13 March 2020 a contract was signed for the sale of D Street annexing a copy of the lease; and

    (j)Rent was paid by automatic direct debit on 30 March and 30 June 2020.

29. The wife deposes that at the time she agreed to withdraw her request for the additional clause, the rent was up to date and ongoing rent was payable under the automatic direct debit. It was only after the contract and lease were signed and rent paid for the March and June 2020 quarters, that the rent payments were reversed by the husband.

30. I note that although the lease contains the following special condition:

    This agreement is subject to and conditional upon Vance Holdings Pty Ltd … (''the Buyer") completing the purchase of the property form the lessor within three months of the date of this agreement. In the event this condition is not satisfied:

    (a)the lessor may terminate this commercial tenancy agreement by notice in writing to the tenant provided that the lessor is not in default under the contract for the sale/purchase of the Property; or

    (b)the tenant party may terminate this commercial tenancy agreement by notice in writing to the lessor provided that the Buyer is not in default under the contract for the sale/purchase of the Property.

    neither party has sought to terminate the lease.

31. In my view, it is significant that B Pty Ltd has historically paid rent to the family trust and that the husband saw an advantage in continuing to pay rent in order to obtain an exemption from GST. If the contract for sale of D Street is completed the same issue will arise. Further, the husband signed the lease and the contract after the agreement dated 18 February 2020 which included clause 27, upon which he subsequently relied to support an argument that B Pty Ltd was not required to pay rent.

32. It is also significant that neither party has given notice to terminate the lease.

33. While the husband may have formed a view that the wife’s solicitor’s email dated 12 March 2020 at 1.28pm confirmed his subjective intention that B Pty Ltd was not required to pay rent, it is not as though adjustments cannot be made at trial, if ultimately it is determined that such a course is just and equitable.

1. It is common ground that the contract for sale of D Street was anticipated to be completed promptly. The reason it has not is the subject of dispute between the parties and, if necessary, that factual dispute will be determined at trial.

2. In the circumstances, while B Pty Ltd prima facie remains bound by the terms of the lease, I do not propose to order the payment of arrears at this time. That will be a matter for trial. However, I do propose to order that the husband cause B Pty Ltd to pay rent as and from the date of the order in accordance with the lease.

   MISCELLANEOUS

3. Although the wife sought an additional order for the husband to cause the payment of rent to Vance Super Fund for the property at H Street, Suburb J, in the State of Queensland, in the absence of any submissions, I propose to dismiss that part of her application.   

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew.

Associate:

Dated:       2 June 2021