Money owed under property settlement

Money owed under property settlement

Ritchie & Scammell [2016] FCCA 1455 (17 June 2016)

  1. The applicant and the respondent were in a defacto relationship which concluded in September 2012. On 11 July 2013 they entered into a binding financial agreement which required the respondent, the defacto husband, to pay to the applicant, the defacto wife, $250,000 within 10 months of 11 May 2014. Upon payment the applicant would remove the caveats over two properties registered in the name of the respondent.
  2. The binding financial agreement contained a default clause for the sale of the properties if the payment was not made. The payment was not made and the applicant applied for the binding financial agreement to be registered as an order of the Court. This was done by a consent order made on 3 July 2014.
  3. The consent order extended the time for the payment and included a clause for interest at the rate of 9.5% per annum calculated with daily rests from 11 May 2014 until the date the payment was made. It also provided for a Registrar to execute documents under the power contained in s.106A of the Family Law Act 1975 (Cth).
  4. The payments were not made and sale of the properties were not carried out by the respondent. The properties, upon execution of the transfers by a registrar, were transferred to the applicant and she has now sold the properties. The applicant alleges that there is a balance owing. The respondent alleges that the properties were sold at an under value. He also alleges that he was prevented or hindered in obtaining finance to make the payment because the applicant had caveats over the properties and he also alleges, although faintly, that if the properties were sold at less than an amount which allowed the whole payment to be made, he had no further liability.
  5. The applicant applies for certain property, motor vehicles and a motorbike to be transferred to her to be sold by her and the proceeds used in satisfaction of the amount owing. The respondent disputes that he owns two of the motor vehicles as alleged by the applicant.
  6. The Binding Financial Agreement contains these clauses:

5.Mr Scammell shall:

a) within 10 months upon making this agreement pay to Ms Ritchie the sum of $250,000 (‘the payment’)
b) forthwith upon making this agreement to Ms Ritchie (certain motor vehicles);
c) Mr Scammell is to indemnify Ms Ritchie against any liability for all taxes, rates, outgoing of or in respect to the property of whatsoever nature and kind.

6. Ms Ritchie sign all such documents and do all things necessary to immediately release to Mr Scammell or his solicitor $46,160.50 of the proceeds of sale of the Property L property referred to in paragraph I(iv) hereof, held in trust by her solicitors. The remainder of $25,000 is to be regarded as the payment towards the payment referred to in paragraph 5(a) herein.

7. In the event of default by Mr Scammell in making the whole of the payment due when required to be paid, he shall forthwith transfer his right title and interest in all real property (referred to in paragraph I (i)-(iii) hearing), to the applicant to be held in trust for sale (“sale”) and shall be applied:

a) firstly to pay all costs commission and expense of the trust transfer and sale;
b) secondly to discharge any encumbrances affecting the title to the real property;
c) thirdly to pay to Ms Ritchie so much of the amounts of the payment as is then outstanding together with interest thereon at the rate of 9.5% per annum calculated with the rests from the due date; and
d) fourthly to pay the balance then remaining to Mr Scammell.

      1. The recitals to the Binding Financial Agreement included that the assets of the parties included three pieces of real property all in the respondents name, Property Y (“Property Y property”), Property G, (“Property G property”) and Property S (“Property S property”).
      2. The respondent was unable to obtain finance to make the payment. The applicant commenced an application in the Federal Circuit Court of Australia on 12 May 2014 which concluded with this final order made by consent on 3 July 2014:
        1. that pursuant to Section 90UN(c) of the Family Law Act 1975 the Binding Financial Agreement (“the agreement”) executed by the parties and bearing date 11th July 2013 confirmed as if it were an Order of this Court.
        2. That the time for making the payment set out in paragraph 5(a) of the agreement be extended to the 30th August 2014.
        3. That if, on or before the 30 August 2014, the respondent provides to the solicitors for the applicant a letter from a financial institution approving finance such as to enable him to make the payment on or before the 30thSeptember 2014, then the time for making the payment set out in paragraph 5 (a) of the agreement be extended to the 30 September 2014.
        4. That in the event that any institution to which the husband makes application (giving rise to a letter as described in paragraph 3 hereof) the applicant’s solicitors job provided a letter to that institution indicating that any caveat lodged by the applicant over any real property which would be used as security for the proposed borrowings by the husband would be withdrawn upon the making of the payment.
        5. That the payment shall include interest in the rate of 9.5% per annum calculated with daily rests from 11 May 2014 until the date of payment is made.
        6. That in the event of default by the respondent in compliance with paragraph 2 or 3 hereof then pursuant to S106A of the Family Law Act 1975, the Registrar of the Family Court of Australia as Dandenong be empowered to sign all such documents as may be required to give effect to paragraph 7 of the agreement.
        7. That an affidavit by the solicitor for the applicant attesting to the default referred to in paragraph 6 shall be sufficient for the Registrar to exercise the power set out in paragraph 6 hereof.
        8. That in the event of default by the respondent in compliance with paragraph 2 or three hereof, that he shall pay the legal costs of the applicant fixed in the sum of $3000, and such amount shall be added to the amount of the payment which the respondent is required to pay pursuant to the terms of the agreement and these orders.
      3. The respondent was still unable to obtain finance and the payment was not made.
      4. In September 2014 the Registrar signed the Transfers of Land for the properties and they were transferred into the applicant’s name.
      5. The Property G property was sold in early 2015 but after payment of the mortgage and other outgoings, there was no amount left for payment to the applicant. The property was sold for $207,000.
      6. The Property Y property was sold for $585,000. From the proceeds of sale the applicant received $170,741.13. This is the total of the last three amounts in the Vendors Statement of Account which is annexure R-21 to the applicant’s affidavit of 18 January 2016. She had already received $25,000 and so the total amount she has received is $195,701.13. When that is subtracted from the $250,000 to be paid the result is $54,258.87 owing.
      7. The recitals to the Binding Financial Agreement state a value for the Property G property of $230,000 and for the Property Y property $650,000. The respondent alleges that the applicant sold the Property G property with a shortfall of $23,000 and the Property Y property with a shortfall of $65,000.
      8. The respondent argues that if the properties sold for amounts which meant that the whole of the $250,000 could not be paid, the applicant was not entitled to any further payment. This was argued only faintly and is not correct. The properties were registered in the respondent’s name. He owned them prior to the parties’ de facto relationship commencing. Clause 5 of the Binding Financial Agreement is unequivocal. The applicant is to pay the respondent the sum of $250,000. The default clause then provides for the sale of the real estate but is independent of the applicant’s liability to pay the respondent the sum of $250,000.
      9. The applicant claims:
        1. $54,258.87 being the balance of $250,000;
        2. Interest of $23,248.32 calculated on the amount of $225,000 from 11 May 2014 until 12 June 2015 (when she received partial payment from the sale of the property), being 397 days at 9.5% interest;
        3. Interest of $3,092.28 calculated 13 June 2015 until 18 January 2016 being 219 days at 9.5% interest on the amount of $54,258.37; and
        4. Costs pursuant to Final Order made 3 July 2014 of $3,000.
      10. The applicant claims $83,599.47 plus interest on $54,258.87 from 18 January 2016 to the date of payment at 9.5%.
      11. The respondent next argues that the existence of the applicant’s caveats over the two properties after the date of the binding financial agreement and after the making of the order on 3 July 2014 hindered his ability to obtain finance. He says that the banks required the removal of the caveat. That is correct, but the banks would only require the removal of the caveats at the time they advanced the money. The existence of the caveats could not hinder the respondent’s ability to apply for and obtain approval for further finance.
      12. The respondent argues that the sale of the Property G and Property Y properties was at an under value. The applicant is a (occupation omitted). At the time of transfer to the applicant on trust for sale the respondent had the properties listed for sale with an estate agent. They had not been sold. Once they were transferred into the name of the respondent she terminated those listings and marketed the properties herself until they were sold.
      13. The applicant says the properties were sold at the best price available. She produced an internet record of the prices at which each of those properties was listed at various times showing the reducing asking prices. Eventually they were sold. She says they were sold at the best price available.
      14. Part of the applicant’s case is an exchange of text messages between the applicant and the respondent in which the applicant discusses the offer of $580,000 for Property Y property with the respondent. The respondent says to take the offer in one text message but also says in another “Yes the market is down at the higher scale. I want out of here and everything paid off”. The respondent replies “Well 580 won’t pay everything will it”. The applicant says “it will have to do, such is life, get rid of it ASAP”. The applicant then says “Can you get a bank payout figure?” The respondent says “It’s got to be sold you have sold the other home so take the offer”.
      15. The respondent complained that the applicant was communicating directly with him and should have been communicating with the solicitors who had all the figures. This does not change the fact that the respondent gave his consent to the sale of the Property Y property for $500,000.
      16. The respondent argued that the text messages show agreement that the property be sold for $580,000 provided the amount owed by the respondent was paid. That is not a possible interpretation. The respondent agreed to sell the property at $580,000.
      17. The applicant applies for transfer to her for sale of the following:
        1. Ford (omitted);
        2. Ford (omitted) sedan;
        3. (omitted) motorcycle;
        4. Holden (omitted).
      18. The respondent says that the Ford (omitted) belonged to his brother and that he has transferred ownership of the Ford (omitted) to the parties’ son X.
      19. The applicant says that she and the respondent were together and purchased the Ford (omitted) in 1994 and that $40,000 worth of parts to enable reconditioning the engine were subsequently purchased by them much of it over the internet by her.
      20. The respondent is now living at a house owned by his son X in (omitted). X is 21 and has been working as a (occupation omitted) in (employer omitted). The respondent says that X has given him money because he needed it for the bills and that he has transferred the Ford (omitted) to X in return for $11,000.
      21. There are significant reasons why the respondent’s evidence should be doubted but when there is sworn evidence before me that third parties own each of the Ford (omitted), I cannot order their transfer to the applicant in the absence of those third parties.
      22. The appropriate way for deciding the issue of ownership of the two Ford (omitted) motor vehicles is procedures under div.25B.2 of the Federal Circuit Court Rules 2001 (Cth), the Enforcement Provisions. Rule 25B.22 provides:
            <li “=””>

        Request for Enforcement Warrant

<li “=””>

(1) A payee may, without notice to the payer, ask the Court to issue an Enforcement Warrant by filing:

      <li “=””>

(a) an affidavit; and

        <li “=””>

(b) the Enforcement Warrant sought and a copy of it for service.

(2) The affidavit must:

(a) comply with rule 25B.12; and

(b) include the following details of the property owned by the payer:

(i) for any real property:
(A) evidence that the payer is the registered owner; and
(B) details of registered encumbrances and of any other person with an interest in the property;
(ii) for any personal property:
(A) the location of the property; and
(B) whether there is any other person who may have an interest in the property, including as a part owner or under a hire purchase agreement, lease or lien.
Note: A person seeking to enforce the payment of a child support liability must first apply for an order for the amount owed (see rule 25B.09).
(3) If an Enforcement Warrant is issued, the payee must give the enforcement officer:
(a) the Warrant; and
(b) either or both of the following:
(i) a written undertaking to pay all reasonable fees and expenses associated with the enforcement if they are greater than the amount recovered on the enforcement;
(ii) the amount (if any) required by the enforcement officer to be paid on account for the reasonable fees and expenses of the enforcement.
Note: Although the payee is liable to pay the enforcement officer any reasonable fees and expenses relating to the enforcement, the payee is entitled to recover those fees and expenses under the Enforcement Warrant (see subrules 25B.31(2) and (3)).

  1. The respondent acknowledges that he owns the (omitted) motorcycle and the Holden (omitted) and that they are unencumbered. I will include a declaration that the respondent is the owner of these vehicles. I will direct that in any affidavit in support of a request for an Enforcement Warrant include that the respondent’s brother and respondent’s son may have an interest in the Ford (omitted) motor vehicles and that a copy of this order be annexed to the affidavit.
  2. Once this is done, div.25B.2 contains procedures for determining any claim to ownership of the vehicles by third parties in this case the respondent’s brother and the parties’ son X.
  3. The applicant applies for costs and argued this at the hearing. The proceedings have been necessitated by the failure of the respondent to comply with the previous order of the court the costs consideration in s.117(2A)(d) of the Family Law Act 1975 (Cth). The respondent’s financial position is not strong. He is living in a house owned by his son X and relies on casual work. Nonetheless, he has contested the applicant’s claim and been unsuccessful and so should pay the applicant’s costs.
  4. The quantum of costs was not argued at the hearing. I will fix the applicant’s costs and each party within 21 days to apply to have the costs reassessed. The application does not fit comfortably into Schedule 1 of the Federal Circuit Court Rules 2001 (Cth). The application was commenced by an Initiating Application filed on 10 August 2015. Application of Schedule 1 on a strict basis would result in costs of $11,000 $12,000 plus disbursements. The nature of the application and the work involved would not justify this. For instance, strict application to allow item 6, preparation for final hearing for a rate for a one day matter is $5,412. The issues in this case were not that complicated.
  5. I will fix a lump-sum amount of $6,000 plus disbursements which means that the lists are:

Professional Costs $6,000
Filing Fee $ 430
Setting Down Fee $ 590
Total $7,120


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