The case of Tarok & Kardan involved the Husband’s application to join a third party bank to the family law proceedings involving his Wife.
The Husband was attempting to obtain Orders for various injunctions from the bank essentially restraining them from calling in a debt secured against assets of the parties pending the determination of the matter at final trial.
The court dismissed the application.
The relevant facts and considerations
- The Husband and Wife were involved in family law proceedings. Entities in relation to the parties were in default and the Husband and Wife were the guarantors of the loan.
- The bank sought to recover the debt appointing a receiver. A Default Notice was issued in the amount of $2,011,151.89.
- The Husband sought Orders from the court to join the bank to the proceedings, to have the bank be restrained from 'calling in, collecting and selling any secured assets that form part of the matrimonial property pool until judgment is delivered after the final hearing'. This included the security property (which each party said they wanted to retain).
- There were submissions made on behalf of the Husband that the court should grant the injunction sought by the Husband because otherwise it would jeopardise the assets of the parties and the business the Husband wished to retain as part of his overall settlement and where there could be no question that the debt would not be repaid.
- The bank made various submissions, but importantly they contended that the injunctions sought by the Husband deprived them of rights under their security facility.
The outcome
The court dismissed the Husband’s application and in doing so stated:
- 'It needs to be recognised that a commercial lender who has a first mortgage has a power to sell a property without court order. That is a very important right and if it is being acquired, it has to be acquired on just terms.'
- 'I find it is not appropriate for the mortgagee to lose their registered security and queue up behind others who are owed yet to be determined totals and aggregates after the sale of other properties at unknown times, and in an unknown order, over which the mortgagee has no control in respect of sale.'
- 'I have also had regard to s90AK of the Act. As no alterative security is proffered, I am not satisfied it is just and convenient that a third-party lender, who has acted quite properly, should be placed in a position of having their ability to exercise their security affected. In doing so, the rights of a third party are taken away on other than just terms.'
Key takeaways
- It is important to contemplate carefully an attempt to join or impact third parties’ rights in family law matters.
- Financial and legal advisors should work together to discuss solutions and options ahead of taking steps that may impact upon a third party. It is often that costs consequences may flow where a third party’s rights are impacted and/or where an unsuccessful application is made to join a third party.
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