Warner and Warner

[2012] FamCA 228

FAMILY COURT OF AUSTRALIA

WARNER & WARNER [2012] FamCA 228

FAMILY LAW – PROPERTY – where the wife sought an urgent private sale of the matrimonial home to prevent a forced sale – where the husband asserted financial non disclosure by the wife – no sale ordered – final property hearing expedited

Family Law Act 1975 (Cth)

Harris (1993) FLC 92-469

APPLICANT: Ms Warner

RESPONDENT: Mr Warner

FILE NUMBER: SYC 5933 of 2011

DATE DELIVERED: 16 April 2012

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 15 December 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Greenwood

SOLICITOR FOR THE APPLICANT: KDB Holmes Solicitors

COUNSEL FOR THE RESPONDENT: Mr Kenny

SOLICITOR FOR THE RESPONDENT: Campbell Paton & Taylor

Orders

1. Orders 1 to 3 as sought by the wife in her Application in a Case filed 27 September 2011 be dismissed.

2. The final hearing of the application for alteration of property interests between the parties and any other financial matters be expedited.

3. The parties proceed as soon as possible to attend a conciliation conference with the Docket Registrar.

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5933 of 2011

Ms Warner

Applicant

And

Mr Warner

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. The wife seeks a sale, on an interim basis, of the former matrimonial home, “Y”. The wife asserts that unless that order is made, the lending institution that holds a mortgage over the property will foreclose on that mortgage and there will be a forced sale.

2. The husband opposes the sale on an interim basis, saying that it is part of his application for final property orders that he retain that property as part of the overall alteration of property interests between the parties. The husband asserts that there is no threat of an imminent forced sale and that the wife has failed to provide timely financial disclosure of her financial circumstances. The husband raises questions about assets and entitlements the wife may have flowing from her involvement in trusts and entities associated with her family.

APPLICATIONS

1. The wife seeks orders in accordance with interim orders 1 to 3 of her Initiating Application filed 27 September 2011. These seek that the property known as “Y” in Town G be sold as soon as practicable and for the best available price. Order 2 sets out the machinery orders to direct the sale and order 3 seeks leave to apply in respect of further terms and conditions of the sale.

2. Order 4 as sought by the wife, regarding how the proceeds of sale would be distributed, was not pursued by counsel for the wife, who suggested this be open to discussion between the parties.

3. The husband seeks that the wife’s application be dismissed, or in the alternative that the hearing be adjourned until 1 month after the wife gives adequate financial disclosure regarding a number of entities, identified in order 1 sought by the husband.

DOCUMENTS RELIED UPON

1. The applicant wife relies upon the following:

   6.1.Wife’s Initiating Application filed 27 September 2011;

   6.2.Wife’s Affidavit filed 27 September 2011 (excepting paragraphs 31 to 40 and 55 to 79);

   6.3.Wife’s Financial Statement filed 27 September 2011;

   6.4.Affidavit of Mr M filed in Court 15 December 2011;

   6.5.Affidavit of Mr K filed 12 October 2011; and

   6.6.Wife’s tender bundle (exhibit 2).

2. The respondent husband relies upon the following:

   7.1.Husband’s response filed 16 November 2011;

   7.2.Husband’s affidavit  flied 18 November 2011;

   7.3.Husband’s Financial Statement filed 16 November 2011; and

   7.4.Affidavit of Mr P filed 18 November 2011.

SHORT CHRONOLOGY REGARDING LOAN FACILITY

1. The husband and wife are aged 44 and 40 respectively and were cohabiting for 15 years. In that time they had three children. The parties have three major assets in their property pool:

   8.1.The former matrimonial home “Y” worth $1.5 million;

   8.2.A business “Business S”; and

   8.3.The property in Town A on which the business is located.

2. The parties have, inter alia, a $720,000 commercial bill facility which the wife asserts must be repaid under threat of a default sale.

3. It is relevant to note that the Westpac commercial bill facility actually expired on 30 January 2011 (which is now over a year ago). It is also relevant to note that the wife’s father has given the bank a guarantee in respect of this debt.

4. The husband says that in June 2011 he was informed by Westpac that they were satisfied with his income stream and they were not concerned that there was no formal arrangement in place regarding the loan.

5. The husband said that in August 2011 the wife’s father informed him that he was no longer willing to be guarantor for the loan. It is unclear to me as to the basis upon which the wife’s father would be able to withdraw a guarantee that he has given the bank in respect of this debt.

6. The wife was notified by letter dated 29 August 2011 that the bank was not prepared to extend the commercial bill facility, “Following a review of the Company’s recent financials” which revealed “the business profits do not appear to support serviceability”. Westpac demanded repayment by 30 November 2011 and advised this would be followed by enforcement measures.

7. The wife said her solicitors wrote to the husband on 8 September 2011 and did not receive a reply.

8. Mr P, the parties’ accountant, says in his evidence that he was advised on 2 November 2011 by telephone from Mr B at Westpac that the bank would not take action on the loan as the wife’s father was a valued bank customer and preferred the parties work through their options privately to resolve the matter.

9. On 14 November 2011 Mr P was contacted by email by Mr B with the advice that “there will be advices forwarded to the [Warners] in coming days along the lines of our “wait & see” strategy. Our expectation and the common sense approach is for them to sort this out between themselves, quickly.”

10. The wife tendered an email of 2 December 2011 from Mr B from Westpac, who explained “the phrase “wait & see strategy” was only “wait & see” until the Court matter is resolved quickly. To be to the satisfaction of the bank, the matter needs to be resolved on the basis that there is agreement between the parties to significant debt reduction from asset sale/s in the short term”.

11. On 13 December 2011 the wife’s lawyers wrote to Mr B, referring to the above correspondence and advising that the wife has no means of repaying the facility aside from asset sales, a move which the husband opposes, and which is now being adjudicated by the Court. The wife’s lawyers conveyed that they were unsure as to the meaning of the “wait & see” strategy.

12. On 14 December 2011 Mr B emailed the wife’s lawyers, explaining that “the phrase “wait & see” related to waiting for the decision of the Court, now on 15/12/2011” and advising “To be to the satisfaction of the bank as regards the expired facility, there needs to be a written agreement between parties, within days, to immediately proceed with asset sale/s”.

13. It is the husband’s case that the wife may have failed to disclose in these proceedings substantial financial resources over which she has control. It seems to be the husband’s case that the statement of the wife in the letter from the wife’s solicitors to Mr B dated 13 December 2011, that “our client has no means of payment of this loan facility” is not a statement which the husband accepts based on current disclosure made by the wife.

14. Part of the evidence the husband relies upon to assert the wife has not provided full and frank disclosure, comes from the parties’ accountant Mr P, who has now provided an affidavit for the husband in these proceedings. He prepared a set of accounts for the June 2011 financial year for the Ms Warner Family Trust which contained entries for which the husband had no knowledge. Upon receiving a complaint from the husband the accountant then amended those accounts, and these are the basis upon which a valuation of the business is made.

15. The husband does not necessarily accept the Financial Report of the Ms Warner Family Trust (which is the owner of the business). He asserts there are inconsistencies in the records. The relevant entries are in annexure A and B to the affidavit of Mr M filed 15 December 2011. An entry at note 9 on the balance sheet (annexure A to the affidavit) would indicate that there has been an increase in the trust’s financial liabilities due to a secured loan from J Pty Ltd of $2,341,460. It seems common ground that J Pty Ltd is an entity controlled by the wife’s father. On the same set of accounts there is a new asset which is at note 4 described as units in the T Unit Trust worth $2,225,704. Upon the husband asserting to his own accountant that he knows nothing about these entries in the financial records, both were removed from the financial records which are at annexure B. Also removed from annexure A is an interest expense of $115,756 in the profit and loss statement. That interest is payable on the first set of accounts to J Pty Ltd and it would be reasonable to infer that rather than any interest being paid, it was originally recorded as being capitalised and added to the asserted liability. The husband says he is entitled to know what the J Pty Ltd loan or the Unit Trust asset is all about. There is some merit to this submission.

16. The husband’s evidence is that after numerous requests for information, to which there was no response, a large number of documents were received. The husband asserts on a first scan of those documents it seems the wife may have significant interest in various entities. 

17. Counsel for the wife indicated this was not the case and on 21 November 2011 it was agreed that the parties would confer about the documents and that the wife would provide any further material which the husband requested so that he could get a better understanding of the financial position of the wife. I adjourned the matter, without complaint, until 15 December 2011 and made a direction that any information the husband seeks be requested by 1 December 2011 and provided by 12 December 2011. I have no evidence as to what information was sought, or provided, about the wife’s current financial circumstances.

18. I infer the bank had been fairly lackadaisical and somewhat inconsistent in pursuing a refinance of the bill facility because of their connection to the wife’s father. The wife says her father has withdrawn his willingness to underwrite the debt of the parties (although I am unclear as to what ability he has to do that) and the bank is therefore at a point, as evidenced in the tender bundle outlined above, where it wishes the parties to agree upon an asset sale.

19. Counsel for the husband says that the bank is not anywhere near the stage of issuing s 57(2)(b) notices under the Real Property Act 1900 (NSW). The correspondence from the bank would indicate that they may be close to considering it and are waiting for the outcome of these proceedings.

20. Counsel for the husband made the point that under s 57, one month’s notice has to be given before any sale is commenced by way of mortgagee sale (for definition of ‘month’ see Acts Interpretation Act 1901 (Cth) sections 22(1)(b) and (g)). That ignores the fact that if I made the order for sale today giving the parties a chance to have an orderly sale, it would take some time before a purchaser is found and the settlement achieved in the ordinary course. On the bank’s correspondence, if a sale is ordered then the bank would probably wait to allow the parties to sell the property in an orderly way.

21. In regards to monies available to the business, the wife said she was informed by the husband’s solicitors that at 30 June 2009 it had a trading loss of $16,821.39 and at 30 June 2010 it had a trading loss of $61,199.56. In Mr M’s affidavit (the wife’s father’s accountant), he made the assessment that the trading loss for the 2009 financial year was actually $33,170 and the 2010 financial year trading loss was $111,199. He also calculated that the trading loss for 30 June 2011 at $131,308. He said this indicated the business trading is deteriorating every year.

22. Counsel for the husband made a general submission that this business had been supporting the parties over the years and I should not read too much into the profit and loss statements that have been prepared. The profit and loss statements have been prepared by an accountant that has given evidence on behalf of the husband in this case. They do show losses. The husband has failed to demonstrate to me what information he would take to a lending institution that would convince them that they would lend to them $780,000 absent the establishment that the wife has access to considerable financial resources which she has not yet properly disclosed or absent the continuing patronage and guarantees provided by the wife’s father.

23. It is relevant to reiterate that on 29 August 2011 the bank itself made an assessment that the business profits “do not appear to support serviceability”.

CONCLUSION

1. Making an interim property order is an imprecise exercise and needs to be approached conservatively. In Harris (1993) FLC 92-469, the Full Court gave as an example a circumstance where an interim order for asset sale might be made if it was necessary to avoid the value of an asset being eroded or lost.

2. Given the concerns that the husband has raised on a prima facie level in relation to the level of the wife’s financial disclosure at this point in time, I could not, taking a conservative approach, conclude that a sale of Y would be an inevitable outcome of a contested final property hearing. That is of course not to say that that will not be the final result.

3. What I believe is appropriate is that I dismiss the wife’s current application for an immediate sale of Y but expedite the final hearing of the matter so all matters which the husband has raised arising from documents that the wife has now provided him can be ventilated as soon as possible.

4. I note from the court file that an order was made on 1 March 2012 adjourning a conciliation conference which was scheduled to have taken place on 1 March 2012 because the parties were not ready. The matter has been further listed for mention in chambers before a Registrar on 18 April 2012.

5. I intend to make an order expediting the final hearing. The conciliation conference can still take place at a time agreed upon between the Docket Registrar and the parties.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 16 April 2012.

Associate: 

Date:  16.4.2012