Woollard & Woollard & Thomas
[2005] FMCAfam 135
•30 March 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WOOLLARD & WOOLLARD & THOMAS | [2005] FMCAfam 135 |
| FAMILY LAW – Property – adjustment of property interests – setting aside a disposition of real estate – where a disposition of real estate is alleged to have been made to defeat and anticipates order under the Family Law Act 1975 (Cth) – requirements to satisfy a court that a disposition of property should be restrained or set aside – meaning of bona fide purchaser under s.106B of the Family Law Act. COSTS – Circumstances justifying order. |
| Family Law Act 1975 (Cth) ss.75; 78; 79; 106B; 117 |
| Gelley & Gelley (No.2) (1992) 15 Fam LR 483; FLC 92-291 Halabi and Artillaga (1993) 17 Fam LR 675; (1994) FLC 92-470 Heath & Heath; Westpac Banking Corporation Intervening (1983) 9 Fam LR 97; FLC 91-362 Ferraro & Ferraro (1992) 16 Fam LR 1; (1993) FLC 92-335 McLay & McLay (1996) 20 Fam LR 239; FLC 92-667 Lee Steere & Lee Steere (1985) 10 Fam LR 431; FLC 91-626 Pastrikos & Pastrikos (1979) LR 497; (1980) FLC 90-897 Russell & Russell (1999) FLC 92-877 JEL & DDF (2000) 28 Fam LR 1; FLC 93-075 Phillips & Phillips (2002) 29 Fam LR 128; FLC 93-104 Williams & Williams (1984) 9 Fam LR 789; FLC 91-451 |
| Applicant: | DEBORAH ANN WOOLLARD |
| First Respondent: | DAVID JOHN WOOLLARD |
| Second Respondent: | CLIVE JOHN THOMAS |
| Third Respondent: | KAREN DONNA THOMAS |
| File Number: | PAM 4580 of 2002 |
| Judgment of: | Scarlett FM |
| Hearing dates: | 20 & 21 May, 11 July & 25 November 2003 |
| Date of Last Submission: | 29 March 2005 |
| Delivered at: | Sydney |
| Delivered on: | 30 March 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr Kenny |
| Solicitors for the Applicant: | Lamrocks |
| Counsel for the Respondent: | Ms Haughton |
| Solicitors for the Respondent: | Ian Bullock Partners |
| Counsel for the Second & Third Respondents: | Ms Snelling |
| Solicitors for the Second & Third Respondents: | Taylor & Scott |
ORDERS
That the disposition of the First Respondent husband to the Second and Third Respondents of the real property at 26 Willow Tree Avenue,
Emu Plains in the State of New South Wales being the whole of the land in Folio Identifier 54/204976 evidenced by Transfer registered in the Land & Property Information NSW Office as Transfer 896536M be set aside.
That any consideration paid by the Second and Third Respondents to the husband in accordance with the above disposition be repaid to the Second and Third Respondents by the husband, together with the sum of $872.75.
That following the setting aside of the disposition under Order 1 above the husband must within seven (7) days from the date of these Orders sign all documents and instruments and do all things necessary to list the above property at 26 Willow Tree Avenue Emu Plains for sale at a listing price agreed between the parties, with a real estate agent agreed between them.
Following the sale of the property referred to in Order 3, the parties are to distribute the proceeds of sale as follows:
(a)in adjustment of rates on settlement;
(b)in payment of real estate agent’s commission on the sale;
(c)in payment of legal and all other proper costs of the sale;
(d)in payment to the Perpetual Trustees Australia Limited of the sum necessary to discharge the first registered mortgage encumbering the said property;
(e)in repayment of the sum owing to the Second and Third Respondents including the sum of $872.73 for outstanding water and Local Government rates; and
(f)as to the outstanding balance to the wife.
That in the event that the property is not sold within six (6) months from the date of these Orders then the husband must sign all documents and instruments and do all things necessary to list the property for sale by public auction with an auctioneer agreed upon between the parties at a reserve price agreed upon between the parties and then proceed to a sale at a price agreed between them.
The parties are to be equally responsible for all costs and expenses of the auction referred to in Order 5 prior to the auction sale and following the sale the parties must apply the proceeds of sale in the manner provided by Order 4.
That in the event that the property does not sell by public auction as provided by Order 5 then within seven (7) days the parties must resubmit the property for sale by private treaty in the manner provided by Order 3.
That in the event that the parties are unable to reach agreement in relation to the appointment of an auctioneer, a real estate agent, a listing price, a reserve price or a sale price whether a sale by public auction or by private treaty then the parties must appoint the President for the time being of the Real Estate Institute of New South Wales or his or her nominee to determine such disputed matter or matters and the parties must thereafter act in accordance with that determination and the parties will be equally responsible for the costs and expenses of the President or his or her nominee in making such determination or determinations.
That upon the sale of the property the wife must provide at settlement of the sale a Withdrawal of Caveat in relation to any caveat that she has had registered on the title to the property.
That within a reasonable time after delivery by the wife to the husband of the necessary documentation the husband must sign all documents and instruments and do all things necessary to transfer to the wife the whole of his right title and interest in the parties’ Holden Commodore station wagon.
That the First Respondent husband is declared to be the sole owner of his business known and trading as “Cash for Cars”.
That pursuant to Section 78 of the Family Law Act the husband is the sole owner in law and in equity as between himself and the wife of all items of personal property, financial assets and financial resources currently in his power, possession or control including his interest in the MTAA Superannuation Fund.
That pursuant to Section 78 of the Family Law Act the wife is the sole owner in law and in equity as between herself and the husband of all items of personal property, financial assets and financial resources currently in her power, possession and control other than as specifically dealt with elsewhere in these orders including but not limited to all furniture, furnishings and household goods currently contained in the property at 26 Willow Tree Avenue Emu Plains.
That in the event that either party refuses or neglects or otherwise fails to comply with any of these orders in relation to the execution of any deed, document or instrument within fourteen (14) days of being called upon to do so the Registrar or any Deputy Registrar of the Federal Magistrates Court of Australia is appointed pursuant to section 106A of the Family Law Act to execute such deed, document or instrument in the name of the party who has refused, neglected or otherwise failed to do so and the Registrar or Deputy Registrar is further appointed to do all acts and things necessary to give validity to the said deed, document or instrument.
The First Respondent husband is to pay the Applicant’s costs of these proceedings fixed in the sum of $20,505.00.
The application is removed from the list of cases awaiting finalisation.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM 4580 of 2002
| DEBORAH ANN WOOLLARD |
Applicant
And
| DAVID JOHN WOOLLARD |
First Respondent
And
| CLIVE JOHN THOMAS |
Second Respondent
And
| KAREN DONNA THOMAS |
Third Respondent
REASONS FOR JUDGMENT
Applicant
This is an application by the wife for orders under s.106B of the Family Law Act to set aside the disposal of the former matrimonial home at Emu Plains, New South Wales, by the husband, who is the first respondent, to the second and third respondents, who purchased the property.
The wife also seeks orders by way of a property settlement.
The respondents oppose these orders. In his amended response, the first respondent seeks orders to this effect:
a)that the wife’s application be dismissed;
b)that within 7 days the husband and wife should sign all documents necessary to cause the wife’s solicitors to release the proceeds of sale of the property to her;
c)that the parties be declared to be solely entitled to the items of personalty and cash currently in their possession;
d)that the husband be declared to be the sole and absolute owner of his business Cash for Cars.
The second and third respondents filed a joint response seeking orders that the application should be dismissed and the applicant should pay their costs.
Background
The parties were married on 14th February 1987 and separated on
1st April 2002. They have since divorced.
The parties commenced to live together in about 1982, according to the wife and in the middle of 1984 according to the husband.
There are two children of the marriage. Their son RJW was born on
1 July 1987. Their daughter BLW was born on 25th April 1993. Both children live with the mother.
The wife deposed in her affidavit of 12th May 2003 that the husband’s daughter from a previous relationship, J, born on 7th January 1981, lived with the parties for two lengthy periods of time. The first was from when she was one year old until she was 5 years of age. The second time was from the age of 15 to the age of 20.
In 1987 the parties purchased a house at 14 Harvest Drive Werrington, New South Wales. The wife deposed that she believed that the husband was the sole registered proprietor. 14 harvest Drive Werrington was sold in 1997. The parties moved to 26 Willow Tree Avenue,
Emu Plains. The husband was the sole registered proprietor.
The parties separated in April 2002. There was a sum of $135,906.91 owing on the mortgage over the home and a number of other debts in the husband’s name. The wife deposed that those other debts amounted to $48,403.09 at the time the parties separated.
Between April and July 2002 the parties had discussions about settlement of property matters between them. On 8th August 2002 the husband exchanged contracts to sell the former matrimonial home to the second and third respondents for $250,000.00.
On 12th August 2002 the wife lodged a caveat on the title to the home. On 14th August the husband attended the home with a form of withdrawal of caveat. The following day, the husband and wife commenced a series of negotiations about property settlement through the wife’s solicitors, Lamrocks.
Over the next month, negotiations continued. Terms of Settlement were prepared. On 16th September, the husband attended the former matrimonial home with the following documents:
a)Application for consent orders signed by the wife;
b)Terms of Settlement signed by the wife;
c)Undertaking by the husband about Child Support;
d)Real estate documents, including a market appraisal showing the market value of the house to be between $330,000.00 and $350,000; and
e)Withdrawal of caveat.
The wife signed the withdrawal of caveat. The husband lodged that document the following morning. That afternoon, the sale of the house settled.
On 23rd September the wife re-lodged a caveat on the title. On
12th November 2002 the wife commenced these proceedings in the Family Court.
Issues
These proceedings concern a claim by the wife that the Court should set aside the sale of the former matrimonial home to the second and third respondents on the basis that the disposition was made to defeat an existing or anticipated order in the proceedings and, irrespective of the intention, the disposition is likely to defeat an order. The wife seeks orders that the second and third respondents should be reimbursed the purchase price that they paid and that the balance of the money should be paid to her. She also seeks an order that the three respondents should pay her costs.
The wife claims that there are no other matrimonial assets to satisfy any anticipated order in her favour in these proceedings. She also claims that the second and third respondents are not bona fide purchasers for value without notice. Accordingly, she would submit that the second and third respondents are not entitled to the protection of s.106B (3) of the Act.
It is the wife’s claim that the second and third respondent had knowledge of relevant features, sufficient to deprive them of the protection of being classified as bona fide purchasers without notice. The wife claims that the second and third respondents were aware that:
a)the parties’ marriage had broken down;
b)the wife had lodged a caveat on the title; and
c)The wife still occupied the property.
Evidence
The proceedings took four days to hear the evidence alone. The parties were directed to file written submissions. The application was originally listed for one day, on the advice of the solicitors for the applicant and the second and third respondents. On 9th May 2003, the legal representatives for all parties mentioned the matter and told the Court it needed two days to hear, so a further hearing day was allocated. Eventually, the evidence, including lengthy cross-examination, took four days.
It is quite clear that these proceedings should have remained in the Family Court. It is not the task of the Federal Magistrates Court to entertain applications that will take four or five days to hear. The Court does not have the time available to allocate four days in a row for a hearing, so, in this case the Court had to hear the matter over an extended period, which is highly unsatisfactory. If the matter had remained in the Family Court and if the lawyers concerned had made an accurate estimation of the time involved, the Family Court could have allocated a week for the hearing.
The applicant wife gave evidence by affidavit and was subjected to cross-examination by counsel for the first respondent husband,
Ms Haughton, and counsel for the second and third respondents,
Ms Snelling. Her evidence continued until 12.09 pm on 21st May, the second day of the hearing.
The husband gave evidence by affidavit. He was cross-examined by
Mr Kenny of counsel, for the wife. That cross-examination completed the second hearing day, and the matter was adjourned to 11th July.
Ms Snelling did not cross-examine the husband.
The Second respondent, Clive John Thomas gave evidence by affidavit. He was cross-examined at some length by Mr Kenny.
Ms Haughton did not wish to cross-examine Mr Thomas.
Ross Graham Auckett, a Consultant Valuer, gave evidence for the wife. Annexed to his affidavit of 13th November 2002 was a valuation report relating to the former matrimonial home. Mr Auckett valued the property at $350,000.00. He was cross-examined by Ms Snelling for the second and third respondents. His cross-examination had not finished at the end of the day, and the matter was adjourned until
25th November.
When the matter came back to Court on 25th November, the landscape had changed slightly in that the respondents were no longer represented by solicitors, but their barristers retained their briefs. Mr Auckett’s cross-examination was concluded that morning.
Grahame William Brook, a Registered Valuer, gave evidence by affidavit on behalf of the second and third respondents. He deposed that he had valued the former matrimonial home on 9th December 2002. He put the market value at $285,000.00. He was cross-examined at some length by Mr Kenny.
Christopher John McMurray, a registered practising valuer, gave evidence on behalf of the husband. In his affidavit sworn 5th May 2003 he deposed that he had valued the former matrimonial home after inspecting it on 28th April 2003. He placed a value of $240,000.00 on the property as at April 2002 and $260,000.00 as at August 2002.He was cross-examined by Mr Kenny. The evidence concluded at 3.55 pm on 25th November 2003.
The Relevant Law
(a) Section 106B – transactions to defeat claims
I will consider the requirements of s.106B of the Family Law Act first. The section relates to transactions to defeat claims. The section is expressed in these terms:
106B (1) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2) The court may order that any money or real or personal property dealt with by any such instrument or disposition may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3) The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4) A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of an incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4A) In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1)
(5) In this section:
Disposition includes a sale and a gift.
In order to satisfy the Court that a sale or other disposition should be set aside or restrained, the applicant must be able to demonstrate that the requirements in Gelley & Gelley (No. 2) (1992) 15 Fam LR 483; FLC 92-291 have been met. The requirements are:
·There are on foot proceedings under the Act, or completed proceedings the orders from which still have force and effect.
·The instrument or disposition has been made, or is proposed to be made.
·The instrument or disposition is any one of a series of transactions by which that disposition is carried out.
·The instrument or disposition is intended to defeat the order, existing or anticipated, and has that effect, or, irrespective of intention, is likely to defeat such order.
·The order defeated, or likely to be defeated, must be existing, or anticipated; it is not an anticipated claim.
·Insofar as the order to be anticipated, it is one anticipated by the reasonable disponer at the time of the disposition, properly considering all the circumstances of the case.
·The effect of the instrument or disposition is that the disponer lacks the capacity to satisfy the orders unless the instrument or disposition be set aside.
·The onus of proof, on the civil standard, is upon the applicant.
In his submission on behalf of the applicant, Mr Kenny of counsel stated that there is more than one line of authority on how to interpret
s.106B(1) with regard to the relationship between an intention to defeat an order and the likelihood of the defeat of that order. He referred the Court to the comments of Nicholson CJ in Halabi and Artillaga (1993) 17 Fam LR 675; (1994) FLC 92-470:
In In the Marriage of Gelley (No. 2), Treyvaud J rejected the proposition that the making of the instrument with the intention of defeating an order alone is sufficient for the section to operate. His Honour was of the view, like Nygh J, that a causal connection must be shown between the making of the instrument in question and the likely defeat of the order. His Honour also rejected arguments to the effect that if the making of the instrument significantly reduced the amount available for consideration by the court then that should be interpreted as having the effect of defeating an anticipated order.[1]
[1] (1993) 17 Fam LR 675 at 680
Nicholson CJ went on to say:
For my part, I have some difficulty in accepting a proposition that where an instrument is made with the intention of defeating an anticipated order, it cannot be set aside unless it is shown that it was likely to do so…It seems to me that the section clearly contemplates two possibilities, one being that the instrument was made with the intention of defeating an order, and the second being that, regardless of the intention with which it was made, it did have the effect of being likely to defeat an anticipated order. I consider that if the necessary intention has been demonstrated there is nothing in the section which imposes the further requirement that the instrument is likely to defeat such an order.[2]
[2] ibid.
Mr Kenny submits that the view of Nicholson CJ is to be preferred over that of Treyvaud J when considering the elements of intention and likelihood in subsection 106B (1). With respect, I agree with that submission.
Subsection 106B(3) requires the court to have regard to the interests of, and make any order proper for the protection of, a bona fide purchaser or other person interested.
In order to decide whether a purchaser comes within the definition of a bona fide purchaser, it is helpful to look at the decision of Nygh J in Heath & Heath; Westpac Banking Corporation Intervening (1983)
9 Fam LR 97; FLC 91-362. In that case, the question was whether a mortgagee under an unregistered second mortgage was a bona fide purchaser for the purpose of what was then s. 85 of the Act
The short facts are that the wife sought to set aside an unregistered second mortgage which the Bank had taken as security for an advance to the husband for “divorce settlement” purposes. The husband, in whose name the property was registered, had given an undertaking not to encumber the property further. The effect of the second mortgage would be to extinguish any remaining equity in the property.
Nygh J held that the disposition was likely to defeat an anticipated order under s.79 and fell within the scope of s.85(1) subject to the considerations set out in subsection (3). The mortgagee bank came within the definition of a “purchaser for valuable consideration”. The next question was what degree of notice would deprive the bank of the character of a “bona fide purchaser”. Nygh J held that an objective test was to be applied.
“Hence the test of bona fides is whether the Bank at the time of making the instrument[3]was aware or should be aware by making due enquiry that the disposition would defeat the claim of
Mrs Heath”.[4]
[3] i.e. the mortgage document
[4] 9 Fam LR 97 at 106
Nygh J went to say:
“It is conceded that the Bank at that time was not aware of the undertaking given to the court on behalf of Mr Heath, not was it actually aware of the existence of the caveat. But the caveat was on the title, Mr Heath was aware of it and tried to have it removed…
It was argued for the Bank that it could not have been aware actually or constructively of any possible defeat of the wife’s claim because the mortgage was given to enable the husband to settle with the wife and not to defeat her rights. …What a party decides to accept in settlement is not necessarily an indication of the extent to which a party may be entitled to a property settlement. Frequently, it is a lesser amount accepted to avoid further litigation. The Bank had, in my view, constructive notice that if the mortgage was given by the husband and the property claim not settled, the wife’s claim under s.79 would have been defeated by the transaction”[5].
[5] ibid.
It seems clear that to be a “bona fide purchaser” a party must comply with two conditions:
a)one who acquires an interest for a valuable consideration;
b)one who had no notice, either actual or constructive, of what Nygh J described in Heath (supra) as “the disabling condition”.
(b) Section 79 – Property proceedings
In determining an application under s.79 of the Family Law Act, the court should follow a three-stage process (see Ferraro & Ferraro (1992) 16 Fam LR 1; (1993) FLC 92-335; McLay & McLay (1996)
20 Fam LR 239; FLC 92-667.
The three-stage process is as follows:
a)Identification of the parties’ property, liabilities and financial resources.
b)Evaluation of the parties’ contributions, financial and non-financial, direct and indirect (see Lee Steere & Lee Steere (1985) 10 Fam LR 431; FLC 91-626).
c)Evaluation of the parties’ financial resources, means and needs, and other relevant subsection 75(2) factors (see Pastrikos & Pastrikos (1979) 6 Fam LR 497; (1980) FLC 90-897).
The Court must be satisfied that any order to be made under s.79 is just and equitable (s.79(2)).
Sub-section 79(2) provides that the Court should not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. The Full Court of the Family Court regards this as a fourth step in property proceedings.
The Court must be satisfied that it is the order to be made that is just and equitable, not just the underlying percentage division of the net value of the parties’ assets (Russell & Russell (1999) FLC 92-877).
The application of percentages does not necessarily result in a just and equitable result (JEL & DDF (2000) 28 Fam LR 1; FLC 93-075).
A just and equitable outcome has to be considered not in percentage terms, but rather in terms of the assets that the parties would ultimately hold (Phillips & Phillips (2002) 29 Fam LR 128; FLC 93-104).
The parties’ submissions
All of the parties made written submissions. Mr Kenny of counsel provided an extensive written submission on behalf of the applicant wife, although it was submitted behind schedule. Both the respondent husband and the second respondent, Mr Thomas, were no longer legally represented after the final day of evidence, so they drafted their own submissions. Those documents were also behind time.
The applicant’s submissions
On behalf of the applicant wife, Mr Kenny of counsel submitted that she had shown that all the requirements in Gelley & Gelley (supra) had been met.
The property adjustment proceedings between the parties still have force and effect. The disposition had already been made, being the sale of the former matrimonial home. Contracts were exchanged on
8th August 2002 and the sale was completed on 17th September of that year. A sale is “an instrument or disposition” under s. 106B.
Mr Kenny relied on the decision of Nicholson CJ in Halabi & Artillaga (supra) to submit that:
a)the first respondent husband sold the former matrimonial home with the intention of defeating the property adjustment order as between the parties; or, in the alternative
b)that regardless of the husband’s intention when selling the former matrimonial home, that sale had the effect of being likely to defeat an anticipated order.
Mr Kenny submitted that the husband sold the former matrimonial home with the intention of defeating the property adjustment order as between the parties. There are, he submitted, several alleged facts warranting a finding of an intention on the husband’s part to defeat the pending property order. These include:
a)
the husband deliberately neglected to tell the wife’s solicitor,
Mr Morley, about the exchange of contracts after it had occurred;[6]
b)the husband deliberately neglected to tell the wife about the exchange of contracts after it had occurred;[7]
c)the agreement with the second respondent, Mr Thomas, to settle the sale only 8 or 10 days after exchange of contracts related to a needlessly short time period;[8]
d)the husband put pressure on the wife to withdraw her caveat in order to secure a quick settlement of the sale of the property;[9]
e)the husband intentionally used his relationship with the second respondent to defeat the order for property adjustment;[10] and
f)the husband took documents to a real estate agent and then to the wife, although there was a settlement date and exchange of contracts had already taken place.[11][i]
[6] Transcript 21st May 2003, page 90
[7] Ibid
[8] Transcript 21st May 2003, page 91 line 25 et seq.
[9] Transcript 21st May 2003, page 113
[10] Transcript 21st May 2003, page 108
[11] Transcript 21st May 2003, page 119.
The submission concerned the failure by the husband to tell either
Mr Morley or the wife about the exchange of contracts that had already taken place between himself and Mr Thomas. Mr Kenny submitted that the husband concealed information about the exchange of contracts in a deliberate attempt to reduce the likelihood of the wife becoming aware of her legal rights and remedies with regard to the property before the sale was completed. He further submitted that this concealment is one of many allegations of fact that comprise an overall pattern of behaviour on the husband’s part to complete the sale as soon as possible, in order to defeat any future order for property adjustment.
Mr Kenny also submitted that 8 to 10 days is an unusually short time period for settlement[ii] in the absence of urgent factors. This was evidence of an intention to defeat an order for property adjustment before the wife had a chance to exercise her rights in relation to the property.
It was further submitted that the husband’s responses during
cross-examination (at page 113 of the transcript of 21st May) show that he was aware that the wife’s caveat could, to quote Mr Kenny, interfere with the smooth sale of the house. It could delay settlement for a long time. Mr Kenny submitted that the husband “panicked a bit” (to use the husband’s own words) about the caveat, showing that he was anxious about the wife’s attempt to secure her interest in the property.
Mr Kenny went on to submit that on 14th August 2002 the husband approached the wife with a number of documents, purportedly relating to the potential sale of the home, without disclosing to her that the sale had already been effected by the exchange of contracts. He submitted that it was the husband’s intention to speak to the wife alone, in the absence of a solicitor or any other person, in order to obtain the wife’s signature on the withdrawal of caveat form.
Mr Kenny also submitted that the relationship between the husband and Mr Thomas raised some serious doubt about whether the sale of the former matrimonial home was at arms’ length. Mr Thomas had been known to the husband for about twenty years.
The husband’s actions in taking documents to a real estate agent and then to the wife show, it is submitted, the husband’s intention to create an impression in the wife’s mind that the agreement was going to go through according to the terms of settlement between the parties.
Mr Kenny submits that the husband at that point had no intention of going through with the arrangement in the terms of settlement and every intention of going through with the rushed sale of the property at a reduced price, which would defeat the property order that the wife anticipated.
Mr Kenny submitted that, regardless of the husband’s intention when selling the former matrimonial home, the sale had the effect of being likely to defeat an anticipated order (see Halabi & Artillaga (supra)). The “rushed and deliberate disposition”[12] of the former matrimonial home, the parties’ main asset, at a reduced price to a close friend was likely to defeat the anticipated order between the parties. This would be likely whether the husband intended it or not. Mr Kenny pointed out that the husband would lack the ability to fulfil the terms of the property settlement once the sale had been completed.
[12] Written Submissions on behalf of the Applicant Wife, page 8
Mr Kenny submitted on behalf of the wife that, at the time at which the former matrimonial home was sold to Mr Thomas, terms of settlement had already been drawn up and there was thus an anticipated order.
A reasonable person in the position of the husband would have anticipated that an order for adjustment of property would be made. He had seen and agreed to the terms of settlement and was aware that the former matrimonial home was the parties’ primary asset. That the husband concealed his negotiations with Mr Thomas and concealed the exchange of contracts indicates that he was well aware that an order would be made according to the terms of settlement. A reasonable disposer[13] would have anticipated that an order would be made according to the terms of settlement.
[13] The Macquarie Dictionary, Third Edition, suggests that ‘disposer’ is an appropriate synonym.
It is also submitted that the former matrimonial home formed a major part of the matrimonial assets. Having disposed of the home, the husband now lacks the capacity to fulfil the terms of settlement and cannot satisfy the anticipated order for property adjustment unless the Court sets aside the disposition of the property.
Counsel for the applicant acknowledges that the onus of proof is on the applicant. He submits that she has discharged that onus, taking into consideration the transcripts of the proceedings and, in particular, the evidence outlined in the written submissions.
Turning to the question of whether Mr and Mrs Thomas, the second and third respondents, are bona fide purchasers within the context of
s.106B, Mr Kenny submits that they are not or at least that Mr Thomas is not. Accordingly, he submits that Mr and Mrs Thomas should be regarded as ‘other persons interested’ as referred to in s.106B (3).
He relies on the decision in Heath (supra) to determine Mr Thomas’ status.
Mr Kenny submits that it is clear that the payment by Mr and Mrs Thomas of the sum of $250,000.00 for the former matrimonial home constitutes the acquisition of an interest for valuable consideration, notwithstanding the wife’s evidence (from Mr Auckett) that the property was worth between $330,000.00 and $350,000.00.
Thus, the first part of the definition of bona fide purchaser is met, namely that Mr and Mrs Thomas were to acquire an interest in the property for valuable consideration.
What Mr Kenny submits, however, is that the mere fact that Mr and Mrs Thomas were not given express notice of the terms of settlement between the husband and the wife, or of the wife’s caveat prior to exchange does not automatically establish their bona fides. Mr and
Mrs Thomas ought to have known, he submits, that the sale of the property to them would defeat the wife’s claim. Mr Thomas and the husband had known each other for twenty years. Rather than make due inquiry, Mr and Mrs Thomas did nothing to ensure that the husband would be able to meet the wife’s claim. At no point in the transcript, it is submitted, did Mr Thomas assert that he made active inquiries as to the effect of his purchase on the husband and wife’s terms of settlement. His attitude toward the sale did not change, even upon hearing that the wife had lodged a caveat over the property.[14]
[14] Transcript 11th July 2003 page 55, line 36 et seq.
Whilst submitting that Mr and Mrs Thomas cannot be regarded as bona fide purchasers without notice, nevertheless they are ‘other persons interested’ for the purposes of s.106B(3). As purchasers for value, they have acquired an interest that should be determined by the Court.
Mr Kenny submitted that in considering the interests of the second and third respondents, the Court has a broad discretion under s.106B (3) in determining what orders to make. He quoted Nygh J in Heath “that the Court has a discretion as to the degree of protection to be offered even in the case of a bona fide purchaser”[15] and suggested that His Honour was recommending that an “other person interested” is to be given less protection than a bona fide purchaser.
[15] FLC 91-362 at 78,429
On behalf of the wife, it is submitted that there is no reason why the second and third respondents should not be fully compensated for the $250,000.00 that they paid for the former matrimonial home, so long as that property is returned to the pool of assets.
Mr Kenny also looked at a costs order under s.106B (4). He submitted that there is insufficient evidence to support the proposition that
Mr Thomas was acting in collusion with the husband in order to defeat the property order. He contends that Mr Thomas had constructive notice of the husband’s intention to defeat the property orders.
He therefore submitted that the second and third respondents, Mr and Mrs Thomas, ought not to have to pay the costs of any other party to the proceedings.
The First Respondent’s submissions
The first respondent husband was no longer represented by a lawyer after the final day of evidence. He prepared his own submission, typed entirely in Upper Case, which was dated 19 February 2004.
Not surprisingly, the husband’s submission does not address any aspects of the relevant law at all. Paragraphs 1 to 62 of his submission contain a recital and a reiteration of the facts that he has alleged in the hearing. In paragraphs 63 to 66 he refers to children’s issues which are not relevant to these proceedings. In paragraphs 67 to 72, the final paragraph, he makes a number of statements about the property proceedings.
Unfortunately, the husband has used his submission to make allegations about some of the lawyers involved in the case. He described the first solicitor who acted for him, to whom I will refer as J, as “Rude and arrogant” and having “an attitude problem” with him. He said that he observed J “whispering to solicitor Mr Dillon Morley (the wife’s solicitor) on a number of occasions.”
To my mind, whatever complaints the husband may have about that solicitor, they are of no relevance to these proceedings.
The husband alleges that the wife’s solicitor “appeared in an unlisted mention” on 5th May 2003. I am not aware of the purpose of that allegation, nor do I recall anything untoward about the wife’s solicitor’s behaviour in court on any occasion.
The husband alleges that on 25th November 2003, after the conclusion of the evidence, his own counsel said to him “Mr Thomas’s counsel have (sic) just f*****d[16] up the case”. He said that he was then approached by Mr Clive Thomas. “We had a conversation regarding the Wood valuation that was presented in court. He said ‘What do you know about the valuation that was put in court’. I said ‘The only person that had the KD Wood valuation at the time is solicitor Mr J[17] from (firm name deleted).
[16] expletive deleted
[17] Name deleted
As far as that point is concerned, the transcript of 25th November 2003 shows that Mr Grahame Brook, registered valuer, gave evidence on behalf of the second and third respondents. He told Mr Kenny in
cross-examination that the valuation of K.D. Wood Valuations dated
3rd June 2002 was one of the documents with which he was briefed in his original instructions from the Thomas’ solicitors when asked to prefer a valuation. He told the court that he was not influenced by anybody else’s opinion when preparing his valuation, and he did not rely on that document at any stage.
Mr Kenny tendered the report, which was admitted without objection from the second and third respondents’ counsel.
Whether or not the husband’s counsel told the husband that Mr and Mrs Thomas’ counsel had “f*****d up the case”, in my view there is nothing significant in the admission of that document into evidence. In any event, it is clear that the Thomas’ solicitors had a copy of that valuation in their possession when they instructed Mr Brook to prepare his valuation, so it is difficult to see how Mr Thomas could have been surprised about the document.
I am not satisfied that the actions of Mr and Mrs Thomas’ counsel did any significant harm to the husband’s case.
If the husband’s counsel did in fact say what the husband alleges she said to him, I should disabuse the husband of the belief that his case was going well until the afternoon of the final day of evidence. It was well and truly beyond repair by the time he left the witness box at the end of his cross-examination.
The Second and Third Respondents’ Submission
The Second Respondent, Mr Thomas, filed a written submission on behalf of his wife and himself. This document was also typed entirely in Upper Case. He, too, made no submissions as to the law to be applied which again is not surprising. He contented himself with a reiteration of the facts that he considered to be important to the case.
On page 4 of his submission, Mr Thomas referred to the caveat lodged by the applicant. He stated:
(22) I am aware that on the 23 September 2002 6 days after settlement at 11.56 pm a caveat was lodged on the property by Lamrocks Solicitors of Penrith showing the caveator as Deborah Ann Woollard and at (I) Schedule 1 claims “An equitable interest in the property by reason of contribution to the purchase price on an equal basis with the registered proprietor with his knowledge and consent.
A copy of Notice of Caveat dated 24 Sept and Caveat Form sent by Land and Property Information is in my affidavit.
(23) On about 27 September 2002 due to false premises on the lodgement of caveat form, as it was false that Mrs Deborah Woollard who was named as the caveator did not contribute to the purchase price of the property in any way, let alone on an equal basis and definitely not with my knowledge. I instructed solicitors Sutton & Byrne to request a “Withdrawal of Caveat” from Lamrock Solicitors and Attorneys in relation to the property.
Mr Thomas was critical of the valuation by Mr Auckett, pointing out what he said were major discrepancies in it.
Mr Thomas referred to some correspondence between his solicitor at the time and Mr Grahame Brook, and between his counsel and his solicitor. As these documents were not tendered in evidence I cannot consider them.
I note that at paragraph (37) of his submission Mr Thomas says that on two occasions his barrister “made statements regarding this case being too complicated for Magistrate Scarlet (sic) and he would be sure to set the sale aside. My wife was present those times once before court hearing of 11 July 2003 (and) the afternoon of 25 November 2003 court hearing. My wife was present.
I am not sure why Mr Thomas chose to place this alleged conversation in his submission. If it is intended to influence me in any way in order to decide the case, it will fail. Courts decide the cases before them on the evidence, not on critical remarks allegedly made about the judicial officer presiding allegedly made by one of the lawyers involved.
At paragraph (41) of his submission Mr Thomas makes a mysterious allegation:
A copy of facsimile sent to Mr Wilson and Ms Snelling[18] tampering or knowledge of tampering of evidence to be produced in court is in my possession.
[18] Mr and Mrs Thomas’ solicitor and barrister at the time
This allegation apparently refers to a valuation from K.D. Wood which was produced by Mr Brook in cross-examination, a valuation that
Mr Thomas says he believes is damaging to his case (at paragraph 43 of his submission). He then proceeds to make an analysis of that document and its covering letter, which leads to his claim that is “clearly a good example of a poorly tampered with document”.
At paragraphs 42 and 45 Mr Thomas seeks to disclose details of settlement negotiations. I have disregarded these matters.
Annexed to Mr Thomas’ submission and referred to at the end of paragraph 43 are copies of a pest control report which Mr Thomas claims was omitted from the evidence. I can only take into account evidence presented at the hearing. I cannot give any consideration to any other material that Mr Thomas chooses to attach to his submission.
The balance of Mr Thomas’ submission concerns complaints about his legal advisers, which are of no concern to me. If Mr Thomas wishes to complain about his legal advisers, he should take the matter up with the appropriate professional body.
Mr Thomas’ submission contains further paragraphs on page 12, in a different format and different typeface. The submission includes these sensational allegations:
I have come to a conclusion, that I have conclusive evidence against legal parties in these proceedings.
These will include withholding evidence, tampering with evidence, altering documents, signing false statements knowingly, contempt of court, conspiring to prevert (sic) the course of justice, breach of copyright laws, falsifying and removal of dates, and others as I have been told that I can only include in my summation what is in evidence currently in court.
At the top of page 13 Mr Thomas says:
I had no alternative but to contact the Federal Police and other authorities.
Some time later, Mr Thomas forwarded to me a large bound volume which appeared to contain allegations about the matters of wrong doing to which he referred in his submission. I did not consider it appropriate to consider the contents of that document for the purpose of this decision. I arranged for my associate to forward the volume to the Registrar of the Court in Melbourne.
On the last page of the submission, Mr Thomas annexes a document headed “Schedule of Monies paid by 2nd and 3rd Respondent for purpose of purchase of the subject property”. The document claims the sum of $263,202.43, which includes the original purchase price of $250,000.00, conveyancing costs, stamp duty, rates and land tax.
He also claims a further $19,494.00 for loss of rental income and $700.00 for water usage.
Mr Thomas signed his submission. The 3rd Respondent, Mrs Thomas, has not signed the submission and there is no evidence that she had any part in its preparation.
Conclusions
On considering the evidence, I am satisfied that the sale must be set aside. Whilst the valuation evidence took a considerable amount of hearing time, I am not satisfied that the property was sold to Mr and Mrs Thomas at a price vastly under its market value. Mr Auckett valued the property at $350,000.00. Mr Brook valued the property at $285,000.00, although Mr Thomas in his submission seems to have taken some trouble to discredit the evidence of his own witness.
Mr McMurray came in with the lowest valuation, namely $260,000.00 at August 2002.
In my view, Mr and Mrs Thomas got a bargain when they purchased the property for $250,000.00. It would appear that if the property had been placed with several agents that a purchaser may well have been found at a better price than $250,000.00. The evidence does not permit me to make any finding that there was some other undisclosed transaction between Mr Thomas and Mr Woollard, and it would appear that Mr Woollard’s bargaining skills with motor cars do not extend to real estate.
In my view, the evidence shows that the requirements in
Gelley & Gelleyhave been met. Before going through the various requirements, I should point out that I had the experience of hearing Mrs Woollard, Mr Woollard and Mr Thomas give evidence during the proceedings.
None of the three parties was particularly impressive as a witness.
Mrs Woollard was confused, irritatingly vague and appeared to be quite naïve. I formed the impression that she was a person who had had little experience of commercial transactions involving real estate and possessed little knowledge in that area. She appeared to be the type of person who would need to rely heavily on her solicitor.
Mr Woollard did not present well in the witness box. He appeared to be glib and overly confident. A significant amount of his evidence about the sale of the house and the reasons why he did not tell the wife’s solicitor, Mr Morley, about the sale appeared to me to be quite unbelievable, at times preposterous. He presented as a person who was convinced that he was always right, and the wife’s solicitors were merely getting in the way. I formed a negative view of his trustworthiness.
Mr Thomas appeared as a confident, self-made man. He seemed sure that he was always in the right, no matter what other people, such as the wife’s counsel, might suggest to him in court. He did not display in court any of the paranoia that emerged from his written submission.
I am satisfied that there were, at all material times, proceedings under the Family Law Act on foot, as there were consent orders prepared to resolve the property proceedings between the parties. The sale of the former matrimonial home from the husband to Mr and Mrs Thomas was negotiated whilst the documentation for those consent orders was being prepared.
The former matrimonial home constituted the major matrimonial asset. A sale of that asset to a third party would remove the major asset from the property pool, and render the proposed consent orders virtually nugatory. The evidence, in my opinion, allows the inference to be drawn that the husband was aware of the effect of the sale, and the likelihood, if not the virtual certainty, that the disposition of the former matrimonial home to Mr and Mrs Thomas. The evidence further allows the inference to be drawn that this was the husband’s intention, as witness his actions in concealing the exchange of contracts from the wife and her solicitor.
Irrespective of that intention, the disposition was likely to defeat a property order made under the memorandum of consent orders prepared by the wife’s solicitor.
The former matrimonial home constituted the major asset, even if its value is taken at the sale price of $250,000.00. The only other known assets of any value were a Holden station wagon valued at about $500.00 and household contents valued at about $1,500.00. The value of the husband’s business is unknown and the parties’ bank accounts were nominal. The parties’ unsecured debts far exceed the value of the assets other than the home.
I agree with the wife’s submission that the property was not sold to a bona fide purchaser without notice. The second respondent was a
long-time friend of the husband’s. The sale was rushed through, at what I consider to be a bargain price. Mr and Mrs Thomas were not bona fide purchasers. They had constructive notice of the proposed consent orders at the time of entering into the contract to purchase the property and they should have made reasonable inquiries. Mr Thomas’ bald statement in his submission that Mrs Woollard had made no contribution to the property indicates a lack of knowledge about the law relating to settlement of matrimonial property.
I am satisfied that, if the disposition were not set aside, the husband would lack the capacity to satisfy the proposed property orders that were to be made by consent.
In considering the position of the second and third respondents, it is clear that only the second respondent, Mr Thomas, had any part in the dealings with the husband. Despite the confident pronouncements made by Mr Thomas in his submission that “Mrs Deborah Woollard who was named as the caveator did not contribute to the purchase price of the property in any way, let alone on an equal basis and definitely not with my knowledge”[19] I am satisfied that Mrs Woollard has an interest in the matrimonial property. Mr Thomas clearly misunderstands the wording of the caveat, in that the term “registered proprietor” refers not to him but to Mr Woollard.
[19] Mr Thomas’ submission page 4
In any event, there is no evidence that Mr Thomas had any knowledge of the circumstances of Mr and Mrs Woollard, other than any information that he would have obtained from Mr Woollard himself. Unlike Mr Thomas, I do not consider Mr Woollard to be a reliable witness.
I intend to set the sale aside. Mr and Mrs Thomas should receive their purchase money back. I do not propose to order the restitution of any conveyancing costs, land tax, pest inspection or building inspection fees. These amounts would be payable even if a sale were not to go through.
I do not consider, however, that Mr and Mrs Thomas should be reimbursed for the amount of water rates paid at settlement ($50.42) and the council rates that they paid, amounting to $822.31. These amounts should be the responsibility of the husband and wife, as I intend to restore the position ab initio, with the exception of the amounts paid by Mr and Mrs Thomas to which I refer in paragraph 108.
There remains the question of costs. For the wife, Mr Kenny has submitted that although it might be argued that Mr Thomas was acting in collusion with the husband in order to defeat the property order, there is insufficient evidence to support that proposition. He submits:
Instead, it is merely contended, above, that Mr Thomas had constructive notice of the Husband’s intention to defeat the property orders. It is therefore submitted that Mr Thomas ought not to have to pay the costs of any other party to the proceedings.[20]
[20] Wife’s submission page 12
In my view, this is a rather generous concession by the wife. There is at least an arguable case for a costs order against Mr and Mrs Thomas, based on their constructive knowledge and the fact that they have been unsuccessful in the proceedings (see Family Law Act, s.117(2A)(e)). Nevertheless, as the wife is not seeking an order against the second and third respondents, I will not make an order for costs against them.
These proceedings have been necessitated by the deceitful actions of the husband in negotiating a sale of the former matrimonial home whilst purporting to negotiate on a property settlement. He has been unsuccessful in these proceedings. He opposes a costs order. In my view, the justice of the case requires an order that the husband pay the wife’s costs.
Subsequent Property Orders
Having set aside the disposition of the property, I now consider what property orders should be made. The same principles of law that apply in other property proceedings apply. I have already set those principles in paragraphs 39 to 44 above.
I find the matrimonial assets to be:
(a) 26 Willow tree Avenue Emu Plains
$260,000.00[21]
(b) Holden station wagon (wife)
$500.00
(c) Household contents
$1,500.00
(d) Husband’s Mazda 323 motor car
$1,800.00
(e) Husband’s computer
$500.00[22]
(f) Husband’s business “Cash for Cars”
NIL [23]
(g) Husband’s MTAA superannuation
$13,494.00
TOTAL
$277,794.00
[21] As valued by Mr McMurray
[22] See husband’s financial statement filed 30th January 2003
[23] As set out by husband in his financial statement
Liabilities at separation:
(a) Mortgage
$135,906.91
(b) Metropolitan Credit Union
$8,870.00
(c) Community First Credit Union
$9,897.37
(d) American Express
$3,942.63
(e) St George Bank
$14,620.69
(f) Commonwealth Bank MasterCard
$2,966.19
(g) ANZ Bank personal loan
$8,105.76
TOTAL
$184,309.80
By subtracting the liabilities of $184,309.80 from the gross assets of $277,794.00 I arrive at a net total of $93,494.20.
I find the net value of the matrimonial assets to be $93,484.20.
Looking at the parties’ contributions, I note the parties commenced cohabitation in 1982 and separated in April 2002. At the commencement of cohabitation, neither party had any assets of any significance. The husband worked as a car salesman and buying and selling cars privately in his spare time. The wife deposed that he had periods of unemployment.
The wife worked as a process worker at the commencement of the cohabitation. She deposed that she gave up work to look after the husband’s daughter by a previous relationship. She also looked after the two children of the marriage on a full-time basis. The wife also deposed that she did some part time work as a cleaner for cash to contribute to the family income.
The two children of the marriage have remained living with the wife since separation. The husband has been paying only $240.00 per annum, by way of child support. In my opinion, the wife’s almost complete support of the children since separation should be regarded as a contribution under s.79(4) (see Williams & Williams (1984)
9 Fam LR 789; FLC 91-451; Ferraro & Ferraro (supra)).
I find the contributions by the parties to be equal.
I now turn to the relevant matters under subsection 75(2).
The wife was born on 6th February 1962. She is now 43 years of age. She appears to be in good health.
The husband was born on 12th June 1959. He is now 45 years of age. He appears to be in good health.
The husband discloses no income at all in his financial statement. I see no reason why he should not be capable of working in paid employment. He has had years of experience in the motor trade.
The wife left school after obtaining the school certificate. She has worked as a cleaner and a process worker. She has been out of the paid workforce for some years and she has no vocational qualifications.
The wife has the care of the two children of the marriage, both of whom are under the age of 18. The younger child is still in primary school. The wife receives benefits from Centrelink and $20.00 per month child support from the husband. This is the minimum amount. It is unlikely that the husband will be in a position where he is contributing any significant amount of child support.
The wife has the responsibility to house the children and care for them until they are over 18. In my view, taking into account the relatively modest amount of the assets, a 35% adjustment in favour of the wife is called for.
I am satisfied that the matrimonial property should be divided as to 85% to the wife and 15% to the husband.
Section 79(4) (d)
The proposed orders are unlikely to have any effect on the earning capacity of either party to the marriage.
Section 79(4) (f)
I have already taken into account the fact that on 18th May 2004 I made orders by consent providing that the two children of the marriage would continue to live with the wife and the husband would have defined contact.
The husband will retain his computer, his business and his superannuation. The wife will retain her car, the former matrimonial home and the furniture in the home. As the wife has to provide a home for the children as well as herself, I am satisfied that, in all the circumstances, the orders I propose to make are just and equitable.
Division of the matrimonial property
The wife will receive 85% of the net property of the parties, or $79,461.57. The husband will receive 15%, or $14,022.63.
The entitlement of the husband will comprise the following:
(a) Mazda 323 motor car
$1,800.00
(b) computer
$500.00
(c) Business “Cash for Cars”
NIL
(d) MTAA Superannuation
$13,494.00
TOTAL
$15,794.00
I note that the assets that the husband will receive assets of a greater value than his share. The difference of $1,771.37 is, in my opinion, too small to require a cash adjustment by the husband. At this stage I doubt that he would have the wherewithal to find that amount.
I am satisfied that the husband should pay the wife’s costs. There proceedings have been necessitated entirely by the husband’s actions, which reflect no credit upon him.
The proceedings lasted for four hearing days. They were matters of some complexity. All parties were represented by counsel. In my view, it was appropriate to brief counsel in these proceedings, and I certify for counsel under Rule 21.16. I note that the question of costs was canvassed at the hearing and in the wife’s submissions. The husband has made no submissions about costs, although he has had the opportunity to do so. I have calculated costs on the basis of the Federal Magistrates Court Rules. In my view, the husband should pay the wife’s costs in the sum of $20,505.00. The Second and Third Respondents should pay their own costs, for the reasons I have already mentioned.
I certify that the preceding one hundred and thirty-seven (137) paragraphs are a true copy of the reasons for judgment of Scarlett FM
Associate: S.Polley
Date: 30 March 2005
[i] The submission refers to the transcript of the proceedings on 20th May, although it is clear from an examination of the transcripts that the correct date is 21st May 2003.
[ii] The submission uses the word “exchange” but this is clearly an error.
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