Aitken & Aitken (No 6)
[2022] FedCFamC1F 996
Federal Circuit and Family Court of Australia
(DIVISION 1)
Aitken & Aitken (No 6) [2022] FedCFamC1F 996
File number(s): SYC 5021 of 2019 Judgment of: WILSON J Date of judgment: 14 December 2022 Catchwords: FAMILY LAW – PROPERTY – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – application for enforcement of final orders – applicant sought third party debt notice pursuant to r 11 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 – consideration of third party debt notice rules and application – no third party debt found – third party debt notice not applicable in this proceeding
FAMILY LAW – PROPERTY – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – consideration of s 106A of the Family Law Act – s 106A not engaged in this case because no mandatory obligation to execute documents existed – remedial orders made creating an obligation to execute documents which engage s 106A remedial measures
Legislation: Family Law Act 1975 (Cth) ss 79 and 106A
Family Law Rules 2004 (Cth) r 20
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 11
Cases cited: Alexander v Ajax Insurance Co Ltd [1956] VLR 436
Salomon v Salomon & Co Ltd [1897] AC 22
Woodhurst & Rubbens (No 2) [2016] FamCA 786
Division: Division 1 First Instance Number of paragraphs: 40 Date of last submission/s: 14 December 2022 Date of hearing: 8, 9 and 14 December 2022 Place: Melbourne Counsel for the Applicant: Mr N. Ford Solicitor for the Applicant: Nolan Lawyers Counsel for the Respondent: Mr Stapleton on 14 December 2022 Solicitor for the Respondent: Avondale Lawyers ORDERS
SYC 5021 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS AITKEN
Applicant
AND: MR AITKEN
Respondent
order made by:
WILSON J
DATE OF ORDER:
14 DECEMBER 2022
THE COURT ORDERS THAT:
1.I direct that forthwith the husband must execute the resolution of directors annexed hereto and marked “A”.
2.If the husband fails, refuses or neglects to execute the resolution of directors in accordance with paragraph 1 of these orders, then by not earlier than midday on Friday 16 December 2022 I order that pursuant to s 106A of the Family Law Act a Registrar is empowered and directed to execute the resolution of directors on behalf of the husband forthwith on and from midday on Friday 16 December 2022.
3.At any time from noon on Tuesday 20 December 2022 the wife, in her capacity as a director of D Pty Ltd has authority to transfer to her own account or to such other account as she directs, the sum of $8,693,345.66 from –
(a)Westpac Banking Corporation term deposit account …11;
(b)Westpac Banking Corporation term deposit account …03; and
(c)Westpac Banking Corporation trading account …29.
so as to comply with paragraph 16 of my orders made in this proceeding dated 16 November 2022.
4.The wife is authorised to produce a copy of this order to Westpac Banking Corporation.
5.I direct that this order be drawn up by my associates and signed by me.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Aitken & Aitken has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
On 16 November 2022 final orders in this proceeding were pronounced by me in the hope of finally quelling the controversies between the parties. That hope has proven forlorn.
In reliance upon paragraph 38 of the final orders made 16 November 2022 the wife has brought two applications for relief subsequent to final orders. She filed an application in a proceeding dated 5 December 2022 and sought an urgent hearing before me, which I granted, returnable on 8 December 2022. This proceeding has been in this court’s Major Complex Financial Proceedings List, one imperative of which requires the court (me in this case) to be available at very short notice to hear and determine contested applications. This application was contested. The wife’s application could have been heard on 6 or 7 December 2022 had the husband’s legal representatives not informed my associates of the husband’s counsel’s unavailability. In view of the urgency pressed by the legal representatives for the wife, I heard this application during the lunchtime adjournment on 8 December 2022 at which junior trial counsel for the wife appeared and the solicitor for the husband appeared. The case ran over to pre-court hours on 9 December 2022, during lunch on that day and after 4:00pm on the same day as well as today.
The wife pressed for orders in respect of two issues. Each was said to relate to paragraph 16 of the final orders made by me on 16 November 2022.
Paragraph 16 of the final orders was as follows –
Forthwith the husband and the wife must do all things necessary to cause [D Pty Ltd] to declare a fully franked dividend so as to cause a cash payment to the wife in the sum of $8,693,345.66.
It will be observed that the obligation imposed by that paragraph was set against a temporal requirement of immediacy, hence the word “forthwith”. Paragraph 16 required the husband and wife to do all things necessary to cause D Pty Ltd (“D Pty Ltd”) to declare a fully franked dividend so as to cause a cash payment to the wife in the sum of $8,693,345.66.
D Pty Ltd is and was, at all relevant times, owned and controlled equally by both the husband and the wife. Paragraph 16 of the final orders mandated that both the husband and the wife do all things necessary to achieve a particular outcome, namely, to cause D Pty Ltd to declare a dividend franked in the manner set out in paragraph 16. Counsel for the wife informed me that extremely recently a form of the resolution she wanted the husband to sign had been provided to the husband’s solicitors. Mr Gutierrez, the husband’s solicitor, told me he had not had an opportunity of discussing the documentation with his client or with his client’s counsel.
In discussions with Mr Gutierrez, he revealed that the husband is dissatisfied with the reference in paragraph 16 of the 16 November 2022 final orders to “fully franked dividend”. Mr Gutierrez submitted that the declaration of a fully franked dividend will impose what he said was a very considerable hardship on D Pty Ltd. That was a curious submission because the other director of and shareholder in D Pty Ltd was the wife who took the opposite view by seeking the order for the declaration of a fully franked dividend.
Mr Gutierrez also informed me that his client intends to appeal against my orders although no notice of appeal had been filed at the time of the hearing last week. Equally, no stay application, pending appeal had been filed by the husband at the time of the hearing last week. I asked Mr Gutierrez whether his client needed time and advice before deciding whether or not to do as paragraph 16 commanded him to do forthwith from 16 November 2022. Having regard to what Mr Gutierrez informed me, it was open for me to conclude that it is unlikely that the husband will comply with the obligation imposed on him by paragraph 16 until he exhausts his avenues on appeal.
The opening word of paragraph 16 is “forthwith”. That means immediately. Strictly speaking, the obligation on both husband and wife pursuant to paragraph 16, so as to give effect to the order, commenced on and from the moment the order was passed and entered. Both husband and wife were required to “do all things necessary to cause [D Pty Ltd] to declare a fully franked dividend …”. Having regard to the fact that each was a director of that company and that a company can only act through the agency of one or more natural persons,[1] the execution of documentation anterior to the declaration of the dividend was among the tasks associated with doing “all things necessary” to cause D Pty Ltd to declare the relevant dividend. It was put by Mr Gutierrez that the relevant documentation for the husband’s execution only came into the husband’s hands extremely recently. That may be correct. I do not have enough information before me to positively say whether that is true. However, irrespective of the person who prepared the documentation (husband or wife or the respective solicitors for either) the requirement in paragraph 16 of the final orders called for immediacy in their doing all things necessary to cause D Pty Ltd to declare the dividend.
[1] Salomon v Salomon & Co Ltd [1897] AC 22.
It was not disputed that on 16 November 2022 the wife’s solicitors wrote to the husband’s solicitors, specifically referring to paragraph 16 of the orders made that day, stating that the husband was directed and authorised by the wife to pay $8,693,345.66 into the trust account of the wife’s solicitors. The husband did not do as he was requested to do by that correspondence.
In paragraph 2 of the application the wife now brings, she seeks to invoke paragraph 36 of the final orders made 16 November 2022. That application is broad. Her application is as follows –
That pursuant to Order 36 of the Orders dated 16 November 2022, a Registrar of the Federal Circuit and Family Court of Australia execute the necessary documentation to cause [D Pty Ltd] (“[D Pty Ltd]”) to declare a fully franked dividend so as to cause a cash payment to the wife in the sum of $8,693,345.66.
Such an order, expressed in such breadth, would or might permit the registrar to undertake the task of selecting the documentation for execution that met the description, “the necessary documentation” to be executed. That is beyond what I am prepared to order. I am willing to make an order requiring a registrar of this court to order the execution of a specific identified document, which I will append to the order, such as the resolution canvassed by counsel for the wife.
I am willing to make an order and I now hereby do order that a registrar of this court forthwith executes the document annexed to these reasons marked “A”.
THE THIRD PARTY DEBT NOTICE
The second application by the wife was sought so as to physically procure D Pty Ltd to pay the wife the sum of $8,693,345.66. The wife chose to adopt the third party debt notice procedure set out in rule 11 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the 2021 rules”).
The third party debt notice in the rules had its genesis in the Family Law Rules 2004 although not in identical terms. The 2004 third party debt notice rules more closely resembled rules of common law courts relating to the garnishee of a person’s wages or an attachment of debts, especially rules 20.30 to 20.41. The 2021 rules are more elaborate.
Part 11.1 of the 2021 rules is entitled “enforcement of financial orders and obligations”. A party may enforce an obligation where that obligation arises under an order (rule 11.04). An “obligation” is defined to include an obligation to pay money (rule 11.01(1)). The third party debt notice provisions are in division 11.1.4 of the 2021 rules which is expressed to apply to any one of three sets of circumstances. The first is money deposited in a financial institution that is payable to a “payer” on call or on notice. The financial institution there mentioned includes a bank. Money standing to the credit of a person in an account with a bank is covered by rule 11.32(a) so long as those funds are payable to the person in whose name the account stands either on call or on notice. A term deposit is likely caught by the phrase “on notice” and an ordinary cash account is likely caught by the phrase “on call”. The “payer” there mentioned is the person who is required to make the payment under the third party debt notice. Counsel for the wife submitted on this application that the wife did not rely on rule 11.32(a).
The second circumstance to which rule 11.32 applies is where a third party is required to pay money to a person (described as “the payer”) from the date when the enforcement order is served on the third party. This is rule 11.32(b). A third party debt notice is an “enforcement order” as defined under rule 11.05(b). The “third party” mentioned in rule 11.32(b) is any person (corporate or natural) which is or who is paying money to the payer, which in this instance translates to the bank as a third party and D Pty Ltd as the payer. The wife, in this application, relied on rule 11.32(b) of the 2021 rules.
The third circumstance to which rule 11.32 applies is earnings payable to a payer. That provision equates to an attachment of earnings application where a judgment creditor was owed a judgment debt and the judgment creditor obtained an order for its judgment debt to be satisfied out of the salary or wages that an employed judgment debtor regularly received from an employer. The judgment debtor’s earnings were “attached” so that the employer was directed by court order to pay the judgment creditor a portion of the judgment debtor's regular income to the judgment creditor in progressive satisfaction of the judgment debt.
The mechanics of a third party debt notice application is specified in rule 11.34 and following of the 2021 rules. Several matters call for mention. They include –
(a)the payee may ask the court to issue a third party debt notice requiring payment to the payee of any money to which division 11.1.4 applies;
(b)the payee may make the application for the issue of a third party debt notice without prior notice to the payer or the third party;
(c)the very precise stipulations of rule 11.34(2) in relation to the contents of the affidavit in support must be strictly observed; and
(d)the relevant affidavit in support must be made no more than two days before it is filed (rule 11.06(2)).
Counsel for the wife informed me that the wife’s solicitors encountered difficulty filing the application for the issue of a third party debt notice because, so he informed me, once final orders were pronounced an application in a proceeding had to be filed, which was in fact filed on 5 December 2022, along with the wife’s affidavit in support made 5 December 2022. That affidavit addressed what the wife called her “precarious financial position”. The information required by rules 11.06 and 11.34(2) were set out in the wife’s affidavit made 23 November 2022 contrary to the requirement of rule 11.06(d) of the 2021 rules which call for the relevant affidavit to be made no more than two days before it was filed.
When I brought that requirement to the attention of counsel for the wife he said his client would remedy the deficiency, which he did, by relying on an affidavit made on 8 December 2022. The affidavit made 8 December 2022 was not identical in terms to the affidavit made by the wife on 23 November 2022.
Counsel for the wife submitted that the 8 December 2022 affidavit, nevertheless, addressed each and every element of the information required to be included by rule 11.06 and by rule 11.34, all stipulations being mandatory in nature.
CONSTRUING THE THIRD PARTY DEBT NOTICE RULES
The wife relied on rule 11.34 entitled “third party debt notice”. Throughout division 11.1.4 of the 2021 rules certain specific phrases are used, each having a precise meaning, namely, “payer”, “third party”, “payee”, and “third party debtor”. Those are defined terms in rule 11.1.05. A “payer” is defined to mean a person who has an obligation to pay money to a payee under, relevantly, an order. A “payee” is defined to mean a person who is entitled to take action against a payer to enforce an obligation to pay money created (relevantly) by an order with which the payer has not complied. A “third party debtor” means a person from whom a payee claims that a debt is owed to the payer.
In this application for the issue of a third party debt notice the relevant dramatis personae were the wife, D Pty Ltd, and a major bank. The wife contended she was a person entitled to be paid a sum certain, namely, $8,693,345.66. She said the entity holding funds capable of meeting that payment was D Pty Ltd and that D Pty Ltd held funds under its control that could be applied to meet that payment.
According to ordinary parlance, D Pty Ltd was not a “debtor” of the wife nor is the sum to be paid to the wife “a debt” owed and, in the configuration of entities presently relevant, the wife is not the “payer.” She may be a payee. She is receiving a payment of money. For the purposes of the definition of “payee” the wife is a person who may well be “a person who is entitled to take action against the payer to enforce an obligation to pay money”. But that depends on whether D Pty Ltd is properly characterised as a “payer” because a “payer” is defined to be a person who has an obligation to pay money to a payee.
In paragraph 16 of the final orders, drafted by counsel for the wife, the relevant wording was “… to cause [D Pty Ltd] to declare a fully franked dividend so as to cause a cash payment to the wife in the sum of $8,693,345.66.” At face value it would seem peculiar to construe paragraph 16 as involving a positive requirement on D Pty Ltd to pay the wife a specific sum. The order is not expressed in such manner that D Pty Ltd must pay the wife the specific sum stated or on a particular date. That is not surprising because D Pty Ltd was and remains owned and controlled as to identical proportions by both husband and wife.
Further, rule 11.34 speaks of a “third party debtor”, a term defined to mean a person from whom a payee claims a debt that is owed to the payer. No debt existed between the wife and D Pty Ltd under paragraph 16 of the final orders. In Alexander v Ajax Insurance Co Ltd,[2]Sholl J made observations about the differences between a “debt” or “liquidated damages”, on the one hand, as compared with an unliquidated damages claim on the other. Aside from the specific wording of the third party debt notice rules, according to ordinary parlance, it is not easy to see how it could fairly be said that pursuant to paragraph 16 of the final orders, D Pty Ltd was “indebted” to the wife.
[2] [1956] VLR 436.
More correctly, paragraph 16 is to be construed as the outcome of a s 79 application in which property interests of the parties have been altered in such manner that the sum of $8,693,345.66 is to be transferred to the wife. To contend that a “debt” is thereby created seems to me to strain the concept of an action for debt as was considered by Sholl J in Alexander v Ajax Insurance Co Ltd. There his Honour traced the learning to the mid-19th century holding the claims in debt usually arose upon civil contracts, upon a quantum meruit or upon a statute such as one involving an insurance claim. In this case paragraph 16 of the final orders makes provision for a sum certain. It also makes provision for the declaration of a dividend as the precursor to causing D Pty Ltd to pay the wife that sum certain. If the dividend were not declared, did the wife have a debt that she could pursue? In my view, she did not. Mr Gutierrez submitted that, in this case, any obligation upon D Pty Ltd to pay the wife the sum specified in paragraph 16 was conditional upon the declaration of the fully franked dividend and that unless and until such a dividend was declared, no obligation fell upon D Pty Ltd to pay the wife any amount. There is force in that submission. However, in this case, the husband has expressly indicated that he rejects the declaration of a fully franked dividend. So it follows, it seems to me, that he is most unlikely to actively participate in the execution of a resolution pursuant to which a fully franked dividend in favour of the wife is declared. In other words, he has stated that he will not join the process by which a fully franked dividend is declared.
Returning to the wording of the third party debt notice rules, counsel for the wife contended that the wording of the rules themselves conferred the requisite status in relation to the debt. He argued that the tripartite relationship of relevance was a relationship between the bank as the third party debtor, D Pty Ltd as the payer and the wife as payee. Counsel for the wife submitted that according to mainstream orthodoxy in banking and finance law a relationship of debtor and creditor existed between the bank and the depositor pursuant to which in respect of an ordinary cash account the bank was liable to meet the precise terms of a depositor’s call in relation to funds standing to the depositor’s credit and to that extent the bank was indebted to the depositor. There is merit in that contention.
Next counsel for the wife submitted that the bank as a “third party debtor” as defined was liable to a “payer” who he said was to be understood to be D Pty Ltd. That seemed correct because the relationship of debtor and creditor prevailed as between the bank and D Pty Ltd. The bank was indebted to the “payer” who, in turn, was liable to make good the indebtedness of the payer to the payee.
I hasten to add that this three party analysis of a relationship between the bank, D Pty Ltd, and the wife, is specific to the third party debt rules. It is a construct that would ordinarily not be evident in circumstances beyond the 2021 rules and their application.
Mr Gutierrez placed heavy reliance upon the provision of s 106A of the Family Law Act. He submitted as follows –
(a)long before any investigation is undertaken about the application of the third party debt notice provisions, it was first necessary to ascertain how the wife became entitled to an enforcement claim to $8,693,345.66 in pursuance of paragraph 16 of the final orders;
(b)paragraph 16 of the final orders is in two parts, the first of which requires the husband and the wife to forthwith do all things necessary to cause D Pty Ltd to declare a fully franked dividend;
(c)the second part of paragraph 16, so he said, was commentary in that it provided, without mandating, that the activity described in the first part of paragraph 16 was “so as to cause a cash payment to the wife in the sum of $8,693,345.66.”;
(d)before the obligation arose for D Pty Ltd to put the wife in funds as to that amount, a fully franked dividend had to be declared;
(e)that had not yet occurred;
(f)the wife’s solicitors supplied to the husband’s solicitors a draft of the wife’s proposed resolution of directors on 8 December 2022, being the day this application first came before me;
(g)the husband had not refused to execute the draft resolution;
(h)s 106A has not been engaged;
(i)the third party debt notice procedure has not been properly enlivened; and
(j)this application for third party debt notice by the wife should be dismissed.
SECTION 106A
It was readily apparent that “forthwith” on and from 16 November 2022 the husband and wife did not do as paragraph 16 of the final orders contemplated because they did not do all things necessary to cause D Pty Ltd to declare a fully franked dividend. Counsel for the wife submitted that the wife complied by procuring her solicitors to write to the husband solicitors the relevant terms of which authorised and directed the husband to pay $8,693,345.66 to the wife’s solicitors’ trust account. That did not equate to doing “all things necessary to cause [D Pty Ltd] to declare a fully franked dividend”. By the same token, paragraph 16 did not contain a mandatory stipulation for either party to create and execute a directors’ resolution pursuant to which D Pty Ltd resolved to pay a fully franked dividend to the wife in the amount of $8,693,345.66. It must not be overlooked that the wife executed the director’s resolution that she wishes to compel the husband to execute as recently as 8 December 2022, on the day of the hearing of this application.
Mr Gutierrez submitted that the final order made 16 November 2022 in paragraph 16 did not direct any party specifically to execute an identified deed or instrument. That was true. The order said no such thing. The draft of paragraph 16 was prepared by the wife’s counsel. It was expressed in the passive tense of “causing” an event to occur and it did not identify that a particular person was directed to execute a deed or instrument. It seemed to me that Mr Gutierrez was correct in his contention that the threshold requirement for the invocation of s 106A had not been engaged in this case.
The provision in paragraph 16 of the final orders stated “Forthwith, the husband and wife must do all things necessary to cause [D Pty Ltd] to declare a fully franked dividend” was not an order or a direction that a person “execute a deed or instrument” as s 106A requires. It seemed to me that paragraph 16 contemplated the doing “all things necessary” which may have, but was not limited to, executing a deed or instrument. It also contemplated for example, the convening a meeting of directors, doing acts antecedent to any such meeting including the calling of the meeting and, if necessary, addressing proxies. The breadth of the things to be done in pursuance of paragraph 16 was necessarily wide and deliberately non-specific. Under no construction of paragraph 16 could it be said that the paragraph was an “order” by which a person was “directed to execute a deed or instrument” as s 106A stipulates. In my view, that disposed of the s 106A application.
Paragraph 2 of the wife’s application in a proceeding dated 5 December 2022 was not expressed to be sought in reliance upon paragraph 36 of the 16 November 2022 orders. That paragraph is expressed to be conditioned under s 106A of the Family Law Act. In other words, paragraph 36 of the 16 November orders provided that a registrar of the court was authorised to execute “any deed or instrument necessary to give effect to the order herein” yet the registrar was appointed under s 106A to execute any such deed or instrument in the name of the defaulting party. To my mind, the same obstacles confront the wife under paragraph 36 as confront the wife under s 106A. No prior order had been made requiring the execution of a specified deed or instrument and no disobedience with any such order had been shown.
RULE 11.07
As an alternative to paragraph 3 of the wife’s application in a proceeding dated 5 December 2022, the wife sought an order pursuant to which she was authorised to sign on behalf of D Pty Ltd bank documents that enabled her to transfer from three nominated accounts held in a particular bank amounts that aggregated to $8,693,345.66. Counsel for the wife submitted that rule 11.07(e) provided the requisite jurisdictional foundation for the making of the alternative order sought by the wife. That rule enabled orders to be made by the wife in aid of enforcement of an obligation. In relation to an obligation to execute a document, rule 11.01(1)(b) provided that an obligation to sign a document under 106A was an obligation that was amenable to enforcement under part 11.1. For reasons already canvassed, s 106A is not presently applicable because no current extant order has directed the husband to execute a specific deed or instrument. To my mind, the absence of a specific order, which may enliven s 106A was the missing element in this application.
RESOLUTION
One of the largest impediments to the grant of relief the wife seeks in this application is the fact that no order has yet been made requiring the husband to execute a specific document.
In those circumstances, I direct the husband to execute forthwith the resolution marked “A” to these reasons.
If the husband fails or refuses to execute that resolution by noon on Friday 16 December 2022, then I order that a registrar of this court executes that resolution in the husband’s name by not later than noon on Monday 19 December 2022 in pursuance of s 106A of the Family Law Act. A similar approach was adopted by Austin J in paragraph 4 of his Honour’s reasons in Woodhurst & Rubbens.[3] But even when a registrar executes the resolution in accordance with these reasons, that will not procure the funds to be paid to the wife. Having regard to the statements made on behalf of the husband that the husband challenges the notion of a fully franked dividend being declared so as to derive for the wife the sum of $8,693,345.66, the husband has displayed his reluctance to participate in or assist in the disbursement to the wife of $8,693,345.66, so the wife should be permitted to deal directly with D Pty Ltd’s bank, Westpac Banking Corporation, in the manner contemplated by paragraph 4 of the wife’s application in a proceeding dated 5 December 2022. Accordingly, I make an order in terms of paragraph 4 of the wife’s application in a proceeding and rely on rule 11.07(e) as the jurisdictional foundation for the making of that order. However, the word “immediately” is deleted from the wife’s proposed order and the wife will only be entitled to approach Westpac Banking Corporation to effect the transfer from noon on Tuesday 20 December 2022.
[3] (No 2) [2016] FamCA 786.
I certify that the preceding forty (40) numbered paragraphs are a true copy of the ex tempore Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 14 December 2022
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