Watts & Evans

[2022] FedCFamC1F 1063

Federal Circuit and Family Court of Australia

(DIVISION 1)

Watts & Evans [2022] FedCFamC1F 1063

File number(s):	PAC 275 of 2021
Judgment of:	HARPER J
Date of judgment:	9 December 2022
Catchwords:	FAMILY LAW – INTERIM PROPERTY – Litigation funding – Property pool in the region of $20 million – Wife seeks $350,000 – Husband’s proposal of $100,000 would simply go to discharging wife’s existing liabilities to former lawyers – Orders made for wife to receive $350,000 – Characterisation left to trial judge – Orders previously made for sale of commercial properties – Where sale process has failed – Fresh orders made requiring sale by public auction.
Division:	Division 1 First Instance
Number of paragraphs:	25
Date of hearing:	9 December 2022
Place:	Sydney
Solicitor for the Applicant:	Marsdens Law Group
The Respondent:	Litigant in person

ORDERS

PAC 275 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR WATTS

Applicant

AND:

MS EVANS

Respondent

order made by:	HARPER J
DATE OF ORDER:	9 DECEMBER 2022

THE COURT ORDERS THAT:

1.The Respondent Husband ("the husband") shall do all things necessary to cause B Pty Ltd to pay to him a dividend using whatever franking credits may be available to him  and/or B Pty Ltd according to law, so that he retains, after allowance for any tax impost, an amount of $350,000.

2.The husband shall pay, from the dividend, to the Applicant Wife ("the wife") the amount of $350,000 for the purpose of meeting legal costs in these proceedings, which such payment to be characterised by the trial judge.

3.The payment of $350,000 shall be made within 14 days of the date of these orders.

4.Order 1 made on 11 February 2022 be discharged, and replaced with the following:

(a)By no later than 4.00pm on 15 January 2023, the husband shall do all acts and things and execute all documents necessary to cause C Pty Ltd to sell the commercial properties by public auction for the best price reasonably obtainable in the following manner:

(b)Do all things and sign all documents to list the commercial properties for sale with D Real Estate, including executing a selling agency agreement with D Real Estate which names C Pty Ltd, the husband, and the wife as parties thereto;

(c)The husband shall instruct the commercial agents to supply to the wife all information reasonably required by the wife in relation to the said sales by public auction, and shall execute any necessary authority in writing to the commercial agents for that purpose;

(d)The reserve price for the purposes of the sale by auction shall be such price as is mutually agreed by the parties, or in the absence of agreement, in accordance with the recommendations of the commercial agents;

(e)The parties shall instruct E Solicitors to have conduct of the sale on behalf of all parties as conveyancing solicitors;

(f)The husband, as director of C Pty Ltd, shall take all necessary steps and cooperate with the selling agent for the purposes of sale by auction, and follow all reasonable requests or instructions of the commercial agents to bring the sale by auction to finality;

(g)The husband, as director of C Pty Ltd, shall execute, upon sale, any necessary contract of sale in the form prepared by E Solicitors;

(h)Other than in accordance with these orders, neither party may confer on any agent without the consent of the other party, any right to any sole or joint agency agreement in respect of the commercial properties, or to any commission;

(i)The parties shall each cooperate in every way with the commercial agents including (without limiting the generality of the foregoing):

(i)Make the key available to the commercial agents.

(ii)Follow the advice of the commercial agents as to the conduct of the sales.

(iii)Allow inspection of the commercial properties at all reasonable times requested by the commercial agents.

(iv)Doing or saying nothing to the commercial agents that will prevent a sale being effected.

(v)Ensuring the commercial properties, including the grounds, are in a neat and clean condition at the time of inspection by the commercial agents and prospective buyers.

(vi)Signing all documents requested by the commercial agents in relation to the listing for sale of the commercial properties except a contract or agreement for sale which has not been authorised by the parties' lawyers.

5.Order 2 made on 11 February 2022 be discharged, and replaced with the following:

(a)In the event any and all of the commercial properties are sold at auction, and the auction does not reach the reserve price, the husband shall instruct the commercial agents to negotiate with the highest bidder, and any other interested persons, to effect a sale of the commercial properties in consultation with such parties who are in attendance at the auction, at a price which is not more than 10 percent below the reserve price, or at such other price as the parties agree upon in writing.

(b)Notwithstanding the terms of these orders requiring sale by auction, the parties may at any time by agreement in writing authorise C Pty Ltd to sell the properties or any of them by private treaty at a price agreed between the parties.

6.Order 3 made on 11 February 2022 be renumbered as Order 3A.

7.The matter be stood over to 3 March 2023 at 10.00am for Mention.

8.References in Order 3A made on 11 February 2022 to "[F Lawyers]" be amended to substitute "Marsdens Law Group".

9.Leave be granted to the wife to issue up to three (3) additional subpoenas.

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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

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

EX TEMPORE REASONS FOR JUDGMENT

HARPER J:

1. There was listed before the Court on 9 December 2022 an Amended Application in a Proceeding filed by the Applicant Husband (“the husband”) on 12 August 2022, a Further Amended Initiating Application filed by the Respondent Wife (“the wife”) on 10 February 2022, seeking a range of interlocutory orders, and a Response to the Amended Application in a Proceeding filed on 26 October 2022. The parties filed case outlines in relation to their respective contentions, although the issues for determination were limited by Order 3 made on 28 October 2022. 

2. I have had regard to the material identified by the respective parties in their case outlines and the material which the parties have taken me to in their respective submissions.

3. As the argument evolved, it became tolerably clear that the issues in dispute were, first, whether an order should be made in the nature of litigation funding in favour of the wife in an amount up to $350,000 and, second, whether orders made on 11 February 2022 concerning the sale of a number of commercial properties should be discharged or varied. These properties are:

   (a)G Street, Suburb H;

   (b)J Street, Suburb K; and

   (c)L Street, Suburb M.

4. Orders made by consent on 11 February 2022 had made provision for the sale of those properties, but, for reasons that I do not need to describe in detail, that process has foundered. 

5. I do note, however, that each of the parties accuses the other of being the ultimate impediment to the successful sale of those properties. During submissions, the wife contended that there has been a failure to disclose by the husband and that he has engaged in a course of conduct designed to cause her to remain subject to various onerous liabilities.

6. She also contends that by reason of the failure of the sale of a property called P Street, Suburb H, she is unable to raise sufficient funds to purchase G Street, Suburb H, because she continues to be subject to the onerous liabilities I referred to earlier.

7. I observe that it was clear on the face of the 11 February orders that the properties, which are owned by the parties and their associated corporate interests, were intended to be sold, although the sale of the P Street property was stated to be subject to an indeterminate timing and to be determined by the Court on 1 April 2022.

8. That did not happen on 1 April 2022, and it was the husband’s evidence that since that time, he has undergone significant surgery for medical conditions and he currently resides in the P Street property such that the timing of its sale is now contingent, at least to some extent, upon his health.

9. The parties have access to a property pool, either themselves or through their corporate or trust interests, which was valued in the region of some $20 million, subject of course to a number of significant liabilities.

10. The husband candidly conceded that there would have to be an adjustment of the property interests on a final basis in favour of the wife, although until certain usual steps by way of disclosure, valuation, expert evidence concerning the corporate interests, and the nature of tax liabilities both accrued and future are determined, it is very difficult to be more precise at this stage. 

11. There was clear evidence, and it seemed to be common ground, that a number of Division 7A loans had been made to the husband, at least, and that these were associated with two companies, B Pty Ltd (“B Pty Ltd”) and C Pty Ltd, although the precise nature of how those loans were arranged is not entirely clear. However, it is unnecessary to explore this in detail for the purpose of this judgment.

12. I am satisfied on the basis of the reasons so far given that it is appropriate to make an order in the nature of litigation funding in favour of the wife.

13. It was the husband’s position that such an order should be limited to an amount of $100,000, and the order should be expressed for such payment to be made through B Pty Ltd in order for him to be put in a position to take advantage of taxation benefits such as franking credits.

14. It was also his contention in relation to the whole issue of litigation funding that whilst in principle it might be appropriate for the wife to receive such funding, the manner in which it takes place requires careful consideration of the taxation consequences which would arise by the manner in which any such litigation funding is paid. I accept that much is true.

15. He also conceded, however, that the wife already owes slightly in excess of $100,000 to lawyers she has previously instructed in these proceedings or in relation to them.

16. Consequently, an amount of $100,000 would simply go to discharging existing liabilities to the wife’s former legal representatives.

17. Taking all these matters into account, I am satisfied that the amount contended by the wife, that is, $350,000, especially in light of the substantial asset pool which these parties appear to enjoy, is an appropriate amount.

18. The husband formulated an order specifying that any such payment should come from B Pty Ltd and that the payment should be specified to be for the purpose of instructing and retaining legal representatives.

19. The husband also contended that the payment should be characterised as partial property settlement, whereas the wife contended it should be characterised as a payment for costs pursuant to s 117 of the Family Law Act 1975 (Cth). In my view, it is preferable to specify that the characterisation of the payment should be made by the ultimate trial judge, be that myself or another judicial officer.

20. Whilst it is true, as was submitted by the husband, that this will then potentially lead to some debate about whether the amount is included in a final balance sheet by way of add back and debates in that regard, I do not consider that to be a sufficient reason for not leaving the characterisation to the trial judge in circumstances where the proceedings will concern a large and complex property pool. 

21. That then leaves for consideration what is to happen in relation to the commercial properties.  In light of the fact that there has been one failed attempt to sell them, it seems to me that a further order should be made requiring their sale by public auction with any reserve to be set by the recommendation of the real estate agent engaged for the purpose of the sale. During the course of the hearing, I read out to the parties a form of order which I proposed to achieve that outcome, and subject to two matters, the parties, as I understood it, acceded to that form of wording.

22. The two matters that require further comment are, first, that the form of Order 2 that I articulated orally to the parties referred, at one point, to “10 percent below the selling price”. After hearing the submissions of the husband, I agree that the wording should be changed to “10 percent below the reserve price.” The second matter is that the wife sought a form of notation, the import of which I did not fully understand. But, ultimately, she agreed that if there was a notation that she wished to retain G Street, Suburb H and she contends she is unable to purchase that property by reason of the fact the P Street property has not yet sold, it would adequately protect her position on an interlocutory basis. 

23. I should note, finally, that the wife contended that there was adequate money to meet her litigation funding payment from monies drawn down from a jointly held redraw facility by the husband shortly before, or at the time of, separation. She also contended that that money was paid into his personal account, and from there, used to purchase a property at N Street, which was subsequently sold and the proceeds of sale placed into a trust. 

24. I was taken to bank statements and expert evidence which have been filed by both parties in relation to this. The expert evidence disagreed about the tax consequences of having resort to any fund held in that trust for the purpose of making a litigation funding payment.

25. At an interlocutory hearing, where the evidence is far from complete, and there is no common ground about the taxation position, I am unable to form a view as to whether the wife’s contentions in that regard are correct at this stage. In any event, in light of the order I have made in respect of litigation funding, it is unnecessary to do so.

I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Harper delivered on 9 December 2022.

Associate:

Dated:       9 January 2023