I delivered the principal judgment in these proceedings on 17 June 2022: see Norris v Brooks [2022] NSWSC 804 ("J").
In accordance with what the parties informed the Court are the procedures for ensuring the anonymity of the parties, the witnesses, and the people and places involved in family law proceedings in the Federal Circuit and Family Court of Australia (Family Court), the reasons for judgment will be processed before they are published, so that the name of the proceedings will be changed and arbitrary names are given instead of the real names of the relevant persons and places. When these reasons for judgment are published, the same procedure will be followed to ensure a proper level of anonymity.
Norris (a pseudonym) v Brooks [2022] NSWSC 1278 | Case summary | Zoe
The issue dealt with in the principal judgment was an application by the husband for orders under s 79 of the Family Law Act 1975 (Cth) altering the interests of the husband and wife to their matrimonial property. The proceedings had been transferred to this Court by an order made by Foster J of the then Family Court of Australia on 21 January 2020.
The hearing took place in the period between [hearing dates redacted]. The issues raised in this lengthy hearing were complex and unfamiliar to the day-to-day jurisdiction exercised by this Court. As I recorded at J[540], the reasons for judgment were substantially completed by 23 March 2022, but on 31 March 2022, the husband foreshadowed making an application to reopen his case. On 3 June 2022, my Associate was advised on behalf of the husband that the application to reopen would not proceed. The reasons for judgment were then delivered on 17 June 2022.
The reasons for judgment were therefore delivered some 15 months after the completion of the hearing.
For the purposes of the proceedings, the husband and wife agreed that the property to which they were entitled should be divided into two pools. Only Pool 1 was to be divided between the parties.
The order I made at J[532] was that the existing matrimonial property of the parties - in effect, the property in Pool 1 - was to be divided between them in the proportion 52.5% in favour of the wife and 47.5% in favour of the husband. This order would not provide for any fixed sum to be divided in the stated proportions between the wife and the husband. It contemplated that they would receive shares of what the property in Pool 1 was actually worth.
The largest asset in Pool 1 is a residential property at [Suburb D] that was the final matrimonial home of the parties. For the purposes of the hearing, the parties treated the [Suburb D] property as having a value of $3.8 million. That value was derived from a formal valuation undertaken by the joint expert valuer appointed by the parties and was stated as giving the value as at 24 February 2021.
The valuation undertaken by the expert valuer is accordingly now in the order of 18 months old. It is notorious that the value of residential properties in the Sydney market may have changed substantially over that period.
The issue to be determined in these reasons is whether the husband's share in the Pool 1 assets should be determined on the basis that the [Suburb D] property now has a value of $3.8 million, or whether the value should be determined by putting the property to public auction.
The husband's submission is that the only fair course is for the Court to make orders that will enable the actual present value of the [Suburb D] property to be determined by a public auction.
The wife has responded to this claim by submitting that the proceedings were conducted on the basis that the parties accepted that the [Suburb D] property had a value of $3.8 million, and that the Court's final orders should be made on the basis that the husband is entitled to a 47.5% share in that value.
In order to explain the detail of the wife's position fully, it is necessary to refer to that part of the principal judgment in which I explained that the wife, the husband and each of their four children were entitled to percentage shares in the sale price of a property at [Suburb B]. It is not necessary to refer to the relevant aspects of the principal judgment in detail. It is sufficient to note that, during the hearing, a purchaser was found for the [Suburb B] property at a very favourable price that was substantially greater than the value of the property that was supported by the valuation evidence that was then available. The Court made appropriate orders to facilitate the appointment of trustees for sale, and in due course the [Suburb B] property was sold for the price that was offered and the contract for sale was ultimately completed.
Thereafter, the eldest child of the parties was appointed by order of this Court as the financial manager of the affairs of the three youngest children under the supervision of NSW Trustee and Guardian.
For the purpose of considering the final orders that should be made following the delivery of the principal judgment, the wife provided evidence that the NSW Trustee and Guardian had approved amounts of $1,283,333.33 from the estates of each of the three youngest children being applied by their financial manager for the purpose of the common purchase by the three youngest children of a suitable residential property that will be appropriate to accommodate them into the indefinite future. The proposal conveyed by the wife to the Court is that these three amounts would be applied on behalf of the three youngest children to purchase the [Suburb D] property for a price of $3.8 million.
The parties' eldest daughter received the largest share in the proceeds of sale of the [Suburb B] property, and the wife advised the Court that the daughter was prepared to apply part of that share in supporting the purchase of the [Suburb D] property, whether that be in the name of the wife or of the three youngest children.
The principal reason why the husband objected to this course is that he believes that the [Suburb D] property now has a market value substantially greater than $3.8 million. In an affidavit provided to the Court, the husband noted that the [Suburb B] property had in fact sold for a price some 40% over the valuation given to it in the evidence before the Court.
The husband had also obtained appraisals by local real estate agents regarding the current value of the [Suburb D] property. Those appraisals were given in June 2022 and were within the following ranges: $4.8 million to $5.2 million, $4.5 million to $5.0 million, and $7.0 million to $7.5 million.
The husband submitted that the significant range in the values indicated by these appraisals made it more appropriate for the market value of the [Suburb D] property to be determined by public auction, rather than by a current valuation report.
The aspect of s 79 of the Family Law Act that is of particular significance to the determination of the present issue is s 79(2), which provides:
(2) The court shall 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.
As was stated in Stanford v Stanford (2012) 247 CLR 108 at 121; [2012] HCA 52 at [39]-[40] by French CJ, Hayne, Kiefel and Bell JJ (footnotes omitted, emphasis in original):
[39] Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.
[40] Thirdly, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
In substance, this means that a court exercising jurisdiction under s 79 of the Family Law Act must, as a separate exercise, satisfy itself that in all the circumstances, it is just and equitable for the Court to make an order altering the interests of the parties to the marriage in the matrimonial property. The making of the order must be just and equitable at the time it is made, not only when the proceedings are heard.
I accept the husband's submission that a change in the value of the [Suburb D] property is a matter which will influence the practical effect of the orders and, accordingly, may impact the justice and equity of the decision.
This submission was supported by the following extract from the judgment in Halstron & Halstron [2022] FedCFamC1A 65 at [52]-[53] (McClelland DCJ and Austin J):
[52] The ability of the primary judge to make a just and equitable adjustment of the parties' property was, in the unique circumstances of this case, infected by the delay in his Honour delivering reasons for judgment. In that respect, as the High Court observed in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, even a period of 10 months was "an excessive period of reservation, even for the most complex of trials" (at [152], citing Friend v Brooker (2009) 239 CLR 129 at 169-171).
[53] The resulting injustice was exacerbated by his Honour's decision to permit an updated valuation of one aspect of the parties' property, namely, the parties' shareholdings but not of the major asset of the parties, being the Suburb J property, in circumstances where the property was to be retained by the respondent.
While it may be appropriate in some circumstances for the Court to order that the current value of the relevant property be determined by a new and up-to-date valuation, I am satisfied that, in the present case, the preferable course is for the Court to order that the [Suburb D] property be put to public auction. As will be immediately apparent from a survey of the reasons in my principal judgment, there is an extreme level of antipathy between the parties and of the children towards the husband. The Court cannot be confident that the parties will cooperate in the sale of the [Suburb D] property. If the value were to be determined by a further valuation, that may give rise to further disputes between the parties. The only practical way to avoid the possibility of further disputation is to let the market determine the value of the [Suburb D] property.
The husband has provided affidavits containing consents to being appointed as trustees for sale of the [Suburb D] property by the two solicitors who were appointed by the Court to conduct the successful sale of the [Suburb B] property. I am satisfied that the hourly rate of each proposed trustee appears reasonable (although I am not required at this stage to determine that matter), and the estimated cost of acting as trustee of $10,000 plus GST, and the costs of acting on the conveyance of $4,000 plus disbursements and GST, appear reasonable. The Court has an affidavit of fitness in respect of both trustees by one of their partners.
The orders to be made will permit the wife and the children to bid at the auction. Provided NSW Trustee and Guardian gives final approval, the parties' three youngest children will be able to bid at the auction through their financial manager. As indicated, the parties' eldest daughter should have the resources to assist her family members to place the highest bid, if that is something that they all think is an appropriate course to follow at the auction.
I will add an order that will permit the trustees for sale to authorise the auctioneer to accept a bid from any or all of the wife, the eldest daughter, and the eldest daughter as financial manager for the three youngest children, to apply the wife's share in the sale price of the [Suburb D] property towards its purchase. That order should have the effect that the wife will be able to bid a price that takes advantage of her entitlement to receive half of the net sale price after allowance is made for all costs and other impositions such as capital gains tax.
The parties and the trustees will be able to relist the matter before me if it becomes necessary to make any adjustment to the order that will permit the wife to apply her share in the proceeds of sale of the [Suburb D] property towards its purchase.
Subject to certain changes made by me and which I explain below, the husband's solicitor has advised me that the following orders conform to the approach that is commonly adopted by the Family Court in these circumstances:
THE COURT ORDERS:
A. In these orders:
a. "[Suburb B] Property" means the property at [Suburb B address].
b. "[Suburb D] Property" means the property at [Suburb D address].
c. "Pool Amount" means the notional total of assets to be calculated in accordance with the method set out in Order 11.
1. That [Trustee 1] and [Trustee 2] be appointed as trustees (the Trustees) for sale of the [Suburb D] Property for sale by auction within 3 months from the date of these orders (the Auction Date) on the following terms and conditions:
a. an agent (the Agent) be:
i. agreed by the Parties, in the following manner:
1. by the Husband nominating three (3) agents within 14 days from the date of these Orders, and
2. the Wife selecting one of those three nominated agents within seven (7) days from the husband's nomination, to be the Agent; or
ii. if the parties cannot agree upon the appointment of the Agent in the manner contemplated by sub-order 1(a)(i), appointed by the Trustees;
b. the reserve price of the [Suburb D] Property shall be:
i. agreed between the Parties no later than fourteen (14) days prior to the date that that property is auctioned; or,
ii. if the Parties fail to reach an agreement, the reserve price be determined by the Trustee, taking into account any recommendation by the Agent on the appropriate reserve price;
c. in the event, that the [Suburb D] Property does not reach the reserve price at the auction the Trustee through the Agent may negotiate with the highest bidders or any interested persons and effect the sale of the [Suburb D] Property at the highest price negotiated by the Agent for the [Suburb D] Property.
2. In the event that the [Suburb D] Property is not sold on the first occasion that it is auctioned, then the Trustee (and, to the extent necessary to give effect to this order, the Parties) shall do all acts and things and shall sign all necessary documents to cause the Agent to auction the property again every 6 weeks until it is sold.
3. That:
a. the Wife hand over vacant possession and the keys of the [Suburb D] Property to the Trustee 2 weeks prior to the completion of any contract for the sale of the [Suburb D] Property where the purchaser is not the Wife and/or one or more of the Parties' children;
b. the Wife do all acts and things necessary to ensure that her children also vacate the [Suburb D] Property by that date and in those circumstances;
c. the Wife will, at least 4 weeks before the Auction Date at the Parties' cost, such cost in the first instance to be paid by the Wife but reimbursed by payment to the Wife by the Trustees from the amounts referred to in Order 12(b) in the proportions therein set out, repair the [Suburb D] Property and carry out any minor works, recommended by the Agent (the "Repair Work");
d. if the Wife fails to carry out the Repair Work, the Agent is to arrange for the Repair Work to be carried out and the costs of the Repair Work is to be paid by the Parties from the amount referred to in Order 12(b) in the proportions therein set out.
4. That the Wife, and the children of the Parties, be permitted to bid at the auction or auctions of the [Suburb D] property.
5. That the Trustees be authorised to implement these Orders (and to the extent necessary to so instruct the auctioneer) by permitting the Wife to participate in bidding at the auction or auctions by making or joining in the making of bids that can be met out of the Wife's share in the net proceeds of sale of the [Suburb D] Property, to the intent that the Wife will not be required to pay to the Trustees any part of the sale price until the Wife becomes entitled to receive her share of the Net Proceeds pursuant to Order 12(b).
6. That, pursuant to s 114 of the Family Law Act 1975 (Cth), the Wife is restrained from:
a. removing from the [Suburb D] Property any fixture on the property;
b. damaging the [Suburb D] Property;
c. taking any action intended to reduce the value and presentability of the [Suburb D] Property;
d. taking any action which may have the effect of preventing, frustrating or hindering the sale or auction of the [Suburb D] Property;
e. encouraging or aiding and abetting any other person to do any of the acts contemplated by (a) to (d) above.
7. That [named solicitors] be appointed to act as solicitor on the conveyance of the property, on behalf of the Trustees.
8. The Wife to do all acts and things necessary and to pay all money to discharge the mortgage, if any, secured on the [Suburb D] Property at her cost on or before the completion of any contract for the sale of the [Suburb D] Property where the purchaser is not the Wife and/or one or more of the Parties' children.
9. Upon the settlement of the sale of the [Suburb D] Property the proceeds of sale shall be paid in the following manner and priority:
a. payment of the adjustment of rates on settlement, which are to be deducted from the amount paid to the Wife in accordance with Order 11(b)(ii);
b. payment of the Agent's commission, auctioneer's costs and advertising or other expenses, if any, payable on the sale;
c. payment of the Trustees costs and the legal costs incurred by [named solicitors] for their acting as solicitor/conveyancer on the sale;
d. the balance to be placed into the trust account of [named solicitors], pending effect being given to the orders below.
10. That the Parties, within 21 days from the date of these orders, do all acts and things and sign all documents necessary to file any and all outstanding tax returns.
11. That, upon determination of the parties' respective capital gains tax liabilities arising from the sale of the [Suburb B] Property, an amount equal to:
a. the balance of the sale proceeds of the [Suburb D] Property, after the payments contemplated by sub-orders 9(a)-9(c) (the Net Proceeds);
plus
i. the Wife's share of the proceeds of the [Suburb B] Property (the Wife's [Suburb B] Entitlement);
plus
ii. the Plaintiff Husband's share of the proceeds of the [Suburb B] Property (the Husband's [Suburb B] Entitlement);
Minus
b. the total capital gains tax liability incurred by the parties in respect of the sale of the [Suburb B] Property (the CGT Liability);
be determined as the 'Pool Amount'.
12. That payment be made from the Net Proceeds:
a. first, to each of the Husband and Wife of such amount as is necessary to discharge their respective CGT liabilities arising from the sale of the [Suburb B] Property;
b. secondly, of such amount to see that the Pool Amount is divided as between the parties:
i. 47.5% to the Husband; and
ii. 52.5% to the Wife.
13. For the avoidance of doubt, the distribution of the sale proceeds from the Net Proceeds to the parties contemplated by the above order is not to occur until the parties' capital gain tax liabilities arising from the sale of the [Suburb B] Property are determined.
14. That other than as otherwise specified in these Orders, the Husband retain and be declared to be the sole legal and beneficial owner of all his right, title and interest in and to:
a. All cash at bank and other moneys invested by him;
b. All personal effects in his possession;
c. His superannuation entitlements;
d. All other personal and real property in his possession, custody or control as at the date of these Orders.
15. That other than otherwise specified in these Orders, the Wife retain and be declared to be the sole legal and beneficial owner of all her right, title and interest in and to:
a. All cash at bank and other moneys invested by her;
b. All personal effects in her possession;
c. Her superannuation entitlements;
d. All other personal and real property in her possession, custody or control as at the date of these Orders.
16. That unless otherwise provided for herein, the Husband and Wife each be solely responsible for and indemnify the other in respect of all debts and liabilities in each parties' sole name or jointly with another person or persons, or entity or entities, or in the name of any company or entity in which that party has an interest, including but not limited to any personal loans, credit cards and liabilities encumbering any item of property which the parties are entitled to pursuant to these Orders.
17. That in the event that either party refuses or neglects to execute any deed, document or instrument necessary to give effect to these orders, the Registrar of the Federal Circuit and Family Court of Australia be appointed pursuant to s 106A of the Family Law Act 1975 (Cth) to execute such deed, document or instrument in the name of the said party.
18. That either party, or the Trustees, have liberty to relist this matter as to implementation or enforcement of these orders upon the giving of 7 days' written notice.
I have varied the draft orders submitted on behalf of the husband in the following principal ways:
1. I have not included an order requiring the wife to hand over vacant possession of the [Suburb D] property to the trustees 4 weeks before the auction date. As the wife will be permitted to bid at the auction and may be the purchaser, it will be an unnecessary imposition on her to have to give vacant possession in circumstances where she may become the purchaser. Consequently, order 3(a) will only require the wife to give vacant possession 2 weeks prior to the completion of any contract for the sale of the [Suburb D] property if the wife and/or her children are not the purchasers. Order 3(b) is to similar effect in relation to the children.
2. I have declined to order that the wife solely be responsible for paying the costs of any repair or minor works recommended by the agent. Order 3(c) requires the wife to pay those costs in the first instance, but the costs are to be reimbursed to her out of the ultimate pool assets to be divided between the parties. Order 3(d) has a similar effect.
3. Order 4 in the husband's draft orders permitted both parties to bid for the [Suburb D] property. Neither the evidence nor the submissions at the hearing that dealt with the orders to be made suggested that the husband had any intention to try to acquire the [Suburb D] property. It would not, in my opinion, be appropriate in those circumstances to permit both parties to bid at the auction, because it would enable the husband to use his potential share in the pool assets to bid up the price in a competition with the wife and the children.
4. I have added order 5 that will permit the wife to participate in bidding at the auction in a way that enables her to apply her share of the pool assets towards the purchase price. That will be on the basis that the wife will not be required to pay any part of the price that may be paid for out of her share of the pool assets until the time when that share becomes payable to her.
5. Order 7, as proposed on behalf of the husband, would have required the wife to discharge the mortgage on the [Suburb D] property within two months from the date the orders were made. That would not be a necessary step if the wife and/or children were the successful bidders at the auction. Order 8 will require the wife to cause the mortgage to be discharged on or before the completion of any contract for the purchase of the [Suburb D] property where the purchaser is not the wife and/or one or more of the children.
These orders are complicated in terms of structure and language, but I have decided that it is appropriate to make orders in these terms, given the advice I have received that the orders will conform with the approach commonly adopted by the Family Court. I will not cause the orders to be entered until 7 days after these reasons are delivered, to give the parties an opportunity to consider them and to advise my Associate whether there are any drafting difficulties that will justify some revision. I am conscious that the wife may find this process difficult as she has not been legally represented for the purpose of the formulation of the orders that will be appropriate to give effect to my principal judgment.
[3]
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Decision last updated: 31 October 2022