Financial claim by in-law

Financial claim by in-law

Sartin & Sartin & Anor [2016] FCCA 800 (11 April 2016)

The following is annotated. For full case: http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCCA/2016/800.html?stem=0&synonyms=0&query=family%20law%20act

Introduction

1. The parties in these proceedings are the Wife, the Husband and the Wife’s mother, the Second Respondent. The Second Respondent seeks payment in the sum of $648,982.58 from the spouse parties. Each spouse party seeks orders for the alteration of their property interests. The spouse parties were married for 24 years and have two adult children.
2. Until the Husband was cross-examined on the third day of hearing, the central issue in dispute was whether the Second Respondent, had a claim in equity against the spouse parties in the sum of $648,982.58 [$207,963.58 + $441,019]. The Applicant Wife has always agreed with the Second Respondent’s claim, but the Respondent Husband has always disputed the claim. The Husband was seeking relief providing for no monies to be paid to the Second Respondent. Much of the hearing was spent on the Second Respondent’s claim.
3. However, the Husband’s position changed on the third and final day of hearing. In the Husband’s Minute of Order tendered on that day[1], the Husband acknowledged that the Second Respondent was owed $207,963, though sought an order providing for the funds to be paid to the Second Respondent from the Wife’s share of the property settlement. In cross examination on the third day of hearing, the Husband conceded the $207,963 should be repaid to the Second Respondent by both parties, and he also conceded that the Second Respondent should be repaid the other amount claimed by her in the sum of $441,019. This meant that the Second Respondent’s claim was resolved.
4. On the final day of hearing, the parties agreed to a final order providing for the transfer of a motor vehicle to their eldest son, X. That order was made by consent on that day. The parties also agreed to a number of orders to be made at the time of final determination, (not at the time of hearing) which provide for the sale of the Property B property and for each party to retain assets in their possession and debts held in their respective names. I have therefore included those orders.
5. All parties were represented by counsel at the hearing. Mr Dura appeared for the Wife, Mr Ford for the Husband and Mr Stenhouse for the Second Respondent.

Issues

6. The issues for determination are:
   1. Whether a debt of $145,000 to (omitted) Ltd [“(omitted)”] secured by the Property B property, $120,000 borrowed by the parties 4 months prior to the date of separation and $25,000 borrowed nearly two years after separation, should be solely the responsibility of the Husband in whole or in part.
   2. Each party’s percentage entitlement to the balance of the sale proceeds of the Property B property.

Orders sought by Second Respondent, the Wife’s mother.

9. The Second Respondent seeks orders providing for the spouse parties to account to her for all monies applied by them firstly, in discharge of the mortgage to the (omitted) Bank over the Property G property in the sum of $441,019.00; and secondly in payment to the Wife in the amount $207,963.58, a total sum of $648,982.58. As already noted, by the end of the hearing the spouse parties agreed that the Property B property be sold and the Second Respondent paid the sum she claims. I therefore find it unnecessary to set out her alternative claim. The Second Respondent seeks her costs on an indemnity basis. Her counsel submits at the end of the hearing that the order relating to any payment to the Husband from the sale of Property B should be stayed, pending the outcome of her costs application against him.

22. The only issue in dispute on the balance sheet is whether the Husband should be responsible for the whole or only part of the debt owed to (omitted).
23. In May 2010, the Husband and a former colleague, registered a company known as (omitted) Pty Ltd. [“(omitted)”]. In June 2010, 4 months before their separation in October 2010, the Husband approached the Wife for her consent to borrow $120,000 from (omitted) secured against the Property B property, to invest in the new business. The Wife gave her consent (she says reluctantly) and in July 2010 the loan funds were paid. The Wife says the parties were dependent on the Husband’s income and the company he had been working for was in financial difficulty. The parties were living off the proceeds of sale of the Property G property so she was anxious the Husband’s business would succeed and generate income. The Husband wanted to offset his unpaid entitlements from his employer against the acquisition cost of plant and equipment from his past employer for the new business.
24. In July 2012, nearly two years after the parties’ separation, the Husband sought the Wife’s consent to extending the (omitted) loan by a further $25,000. By then, the Husband was a Director of (omitted). The Husband says his business partner wanted to withdraw from the business for personal reasons, and the Husband needed the funds to meet certain household expenses. The Wife says she consented to the increase in the loan but only on condition that the Husband would take responsibility for the whole of the debt of $145,000 [$120,000 + $25,000]. It is common ground that on 18 July 2012, the Husband signed a letter, prepared by the Wife, which read^[8]:
    <li “=””>

    I will be fully responsible for the repayment of the loan.

<li “=””>

I will be fully responsible for the payout of the loan.

<li “=””>

I will be fully responsible for the increased amount of the loan.

25. The Husband acknowledges his agreement to take responsibility for the whole (omitted) debt in cross examination when shown a copy of the letter, but says he had always understood he was only solely responsible for the additional $25,000, not for the whole debt. He says he was financially “desperate” and the Wife would not agree to the additional $25,000 unless he signed the letter. He says the funds were applied to the business which generated income for the Wife and children when the parties had no other income, before he moved to (country omitted) in April 2013. The Husband acknowledges that he has made no contribution to the debt since his relocation.
26. There is no dispute that the Husband agreed to take responsibility for the whole of the debt to (omitted) when the loan was extended by $25,000 in July 2012. However, I accept that the original loan funds were obtained to support the establishment of the Husband’s new business which both parties hoped would succeed. While (omitted) has been deregistered and has no value in these proceedings, I am satisfied that had it been successful its value would have formed part of the assets available for distribution. The Wife consented to the original loan of $120,000 without conditions, and I am satisfied the $120,000 should be the responsibility of both parties, despite the Husband’s later agreement to accept responsibility for the whole debt. I accept the Husband’s evidence that he signed the agreement while under significant financial stress. As the Husband agrees, he will take sole responsibility for the additional $25,000 borrowed from (omitted).

Orders

On settlement of the sale of the property pursuant to Orders (1) or (2) above, the proceeds of sale shall be paid in the following manner and priority:

<li “=””>(a) All costs and expenses of sale including legal costs and disbursements, Real Estate Agent’s commission, auctioneer’s costs, advertising costs, valuer’s fees and auction expenses (including repayments of any of these expenses as have been paid by any of the parties);<li “=””>(b) The amounts required to pay any outgoings of the Property including but not limited to all council and water rates outstanding with respect to the property;<li “=””>(c) In payment of the sum of $648,982.58 to the Second Respondent, Ms Moss;<li “=””>(d) In payment of the sum of $120,000 to (omitted) Ltd;<li “=””>(e) In payment of 70% of the balance then remaining to the Wife;<li “=””>(f) In payment to the Wife the sum of $12,605.60;<li “=””>(g) In payment of the sum of $25,000 (or the sum required to discharge the mortgage) to (omitted) Ltd; and<li “=””>(h) In payment of the balance to the Husband.