Allan and Allan and Ors (No. 2)

[2010] FamCA 998

FAMILY COURT OF AUSTRALIA

ALLAN & ALLAN AND ORS (NO. 2) [2010] FamCA 998

FAMILY LAW – INJUNCTIONS – INTERIM PROPERTY – Orders sought relating to the management of company finances and projects by the wife – Where an assessment of the husband’s ability to co-direct the project requires an assessment of the parties’ cooperation and the wife’s skills in directing the project

Family Law Act 1975 (Cth)

APPLICANT: Mrs Allan

RESPONDENT: Mr Allan

2^nd RESPONDENT: W Nominees Pty Limited

3^rd RESPONDENT: Ms C Allan

4^th RESPONDENT: Mr L Allan

5^th RESPONDENT: Ms H Allan

6^th RESPONDENT: Ms E Allan

12^th RESPONDENT: Mr Senne as trustee

13^th RESPONDENT: Mr Senne

INTERVENORS: Mr D and Mr CP (“Receivers”)

FILE NUMBER: SYC 3842 of 2008

DATE DELIVERED: 28 October 2010

PLACE DELIVERED: Cairns

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 8 October 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lloyd, SC

SOLICITOR FOR THE APPLICANT: Paul & Paul Lawyers

COUNSEL FOR THE RESPONDENT: Mr Burridge, QC

SOLICITOR FOR THE RESPONDENT: Newnhams Solicitors

COUNSEL FOR 3^RD - 6^TH RESPONDENTS: Mr Bell

SOLICITOR FOR THE RESPONDENT: Horowitz & Bilinsky Pty Ltd

COUNSEL FOR THE 12^TH RESPONDENT Mr Costigan

SOLICITOR FOR THE 12^TH RESPONDENT: Delaney Lawyers

COUNSEL FOR THE 13^TH RESPONDENT: Mr Corsaro

SOLICITOR FOR THE 13^TH RESPONDENT: Ghobrial Legal

COUNSEL FOR THE INTERVENOR: Mr Roberts

SOLICITOR FOR THE INTERVENOR: Kelly & Co Lawyers

Orders

PENDING FURTHER ORDER:

1. Order 4 made 16 February 2009 be dismissed.

2. The wife, in her capacity as director of W Nominees Pty Limited (“W Nominees”), be permitted to extend the company’s borrowing, without the prior consent of the Court or other parties, provided she give the other parties 21 days notice of the company’s intention to extend the borrowing.

3. Orders 2 and 4 sought in the husband’s Application in a Case filed 17 September 2010 be dismissed.

4. Order 2 sought in the husband’s Application in a Case filed 3 September 2010 be dismissed.

5. The wife, in her capacity as the sole director of W Nominees, have the ultimate authority for decisions in relation to the rezoning of the M property.

6. The wife, at all times, and in a timely manner, provide all relevant information to the husband in respect of the M development.

7. The wife shall, more than 7 days before any significant decision is taken in respect of the M development, inform the husband in writing of the decision that the wife intends to make (the proposed decision).

8. The husband, if he chooses, shall within 7 days of being informed about the proposed decision, provide the wife with his opinion about the proposed decision in writing.

9. The wife consider the husband’s opinion in respect of the proposed decision before making it.

IT IS NOTED that publication of this judgment under the pseudonym Allan & Allan and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT CAIRNS

FILE NUMBER: SYC 3842 of 2008

MRS ALLAN

Applicant

And

MR ALLAN

Respondent

And

W NOMINEES PTY LTD

2^nd Respondent

And

MS C ALLAN

3^rd Respondent

And

MR L ALLAN

4^th Respondent

And

MS H ALLAN

5^th Respondent

And

MS E ALLAN

6^th Respondent

And

MR SENNE AS TRUSTEE

12^th Respondent

And

MR SENNE

13^th Respondent

And

MR D AND MR CP (RECEIVERS)

Intervenors

REASONS FOR JUDGMENT

INTRODUCTION

1. The wealth of the husband and wife has reduced during the course of the extensive litigation between them. A large proportion of the parties’ current wealth is represented by the M property (the property to be known as ‘M property’ for the purpose of this judgment). If a rezoning and subdivision of M property is approved, the value of the land will substantially increase. It is in both parties’ interests for this to occur.

2. Presently, the wife is the sole director of W Nominees No. 2 Pty Ltd (“W Nominees”) which owns M property. I removed the husband from this position on 26 June 2009. The husband does not agree with the wife’s management of the project and seeks to be reappointed as a director of the company.

APPLICATIONS

1. A number of interim applications were scheduled to be heard, pursuant to my directions of 22 September 2010. Some however were not pressed. The applications dealt with were:

   3.1.That the wife, as director of W Nominees, have unrestricted borrowing subject to giving the parties 21 days notice of the company’s intention to borrow. This is pursuant to proposed order 2 of the wife’s Application in a Case filed 29 July 2010 “That Order 4 made 16 February 2009 and Order 5.4 made 8 September 2008 are discharged in so far as those orders apply to [W Nominees] acting in its capacity as trustee of the [Allan Family] Trust and effect from 15 June 2010.”

   The applicable order made on 16 February 2009 is in these terms, “Until further order the husband and the second respondent ([W Nominees]) are each restrained from doing, causing or permitting any act or thing to be done that causes any further funds borrowed by the [Allan] Family Trust to be extended, drawn upon or encumbered in any way”.

   3.2.That the husband be reappointed as director of W Nominees. This is pursuant to proposed order 4 of the husband’s Application in a Case filed 17 September 2010: “ORDER that [the husband] be appointed a Director of [W Nominees] Pty Limited (“the Second Respondent”) forthwith”. At the hearing the husband did not press order 2 which proposed “that order 4 of the orders made 26 June 2009 is set aside”. This is the order which appointed the wife as the sole director of W Nominees.

   3.3.That any order restraining the husband from conversing with persons involved in the intended subdivision of the M property be removed. This is pursuant to proposed order 2 of the husband’s Application in a Case filed 3 September 2010 “That the Wife provide to the Husband unfettered access to all necessary documents, consultants and parties to conclude the rezoning of [M property]”.

DOCUMENTS RELIED UPON

1. The wife relied on the following documents:

   4.1.Wife’s affidavits filed 6 October 2010, 1 September 2010, 29 July 2010 and 19 October 2009;

   4.2.Affidavit of Ms BR filed 7 October 2010;

   4.3.Affidavit of Ms KG filed 26 October 2009;

   4.4.My Judgment of 26 June 2009; and

   4.5.Exhibit X – Submissions by Senior Counsel Mr Richardson, dated 28 October 2009.

2. The husband relied on the following documents:

   5.1.Husband’s applications filed 3 September 2010 and 17 September 2010 (to the extent detailed above);

   5.2.Husband’s affidavits filed 7 October 2010, 17 September 2010 and 3 September 2010;

   5.3.Affidavit of Ms C Allan filed 8 October 2010; and

   5.4.Wife’s affidavit filed 23 September 2010.

DISCUSSION

Wife’s unrestricted borrowing

1. The children (3^rd – 6^th Respondents) and the Receivers did not object to this order being made. The husband did not object to this order being made, provided that he was reappointed a director of W Nominees.

2. The wife explains the necessity for this order. My orders of 17 September 2009 allowed W Nominees to borrow $2million from A Finance Ltd. Since that time, the orders of 23 September 2009, 17 November 2009, December 2009, 1 February 2010, 16 April 2010 and 28 May 2010 have allowed this loan to be drawn down by $2,202,529.26 plus interest. Increasing the loan to some degree is therefore necessary to avoid incurring additional penalty or interest rates, or default. The wife offered to provide 21 days notice of a drawdown, and to provide the necessary documentation for accounting purposes.

3. The husband raises allegations that the money has not been spent as it was supposed to be spent under the orders listed above, however gives no evidence in support, except to assert that the wife’s lawyers have not provided complete documentation to account for how the monies have been used. The husband also says that the wife “has lost control of the finances” but again offers no evidence to support that assertion. The husband has not made any case that the wife has acted inappropriately or squandered funds, and even senior counsel for the husband seemed to concede this. There is nothing to convince me that the wife should not be allowed, in her capacity as director of W Nominees, to cause W Nominees to borrow on an unrestricted basis, provided proper notice is given to the other parties as to the intended amount and the purpose to which the funds will be applied. An order will be made, allowing the wife to borrow, with 21 days notice provided. This will be the order, regardless of whether the husband is or is not reappointed a director of W Nominees.

The application to reappoint the husband as director of W Nominees

1. Counsel for the wife objected to the hearing of this application on the basis of an estoppel where the husband has been in breach of multiple orders. In doing so he adopted the submissions of Richardson SC of 28 October 2010 (exhibit W). Although I accept there is strong prima facie evidence of some of the alleged breaches, I note that the alleged breaches have not been tested thoroughly, nor made out in the proceedings before me. One example is the wife’s allegation that the husband breached spousal maintenance orders, where the husband contends in reply that the wife breached her orders in relation to properly accounting for money in O Company. A curious statement was made from the bar table that an application by the husband about discharging spousal maintenance was returnable on 9 September 2010 but no-one attended court that day.

2. For reasons set out below, I have made the determination that the husband not be reappointed a director. In those circumstances, it is unnecessary for me to determine the question of whether the husband should have been allowed to pursue his application.

3. The wife also objected to this application by the husband being heard on the basis that this application had been heard previously and nothing new had been produced since then.  The husband asserted that circumstances had changed where he had only received a report about the M project recently, and has only had a short time to assess the progress of the project. The order I made was pending further order. I find that it is appropriate to reconsider the original interim decision given that the wife’s original expectations in respect of the completion of the M project have not been realised.

4. In coming to a decision about whether injunctive orders should be set aside and the husband should be reappointed a director of W Nominees, I am essentially balancing two concerns – whether the direction the wife is taking will decrease the assets which the parties will eventually have to divide, and whether the husband and wife can effectively cooperate to maximise the future value of M property.

5. In relation to the first concern, the husband asserts that the wife’s current course of conduct will lead to a result which is disastrous for the development of M property and consequently, for W Nominees in long term. He believes that under the direction of the wife, a subdivision cannot occur within 18 to 24 months, and in circumstances where the property is accumulating a debt of approximately $800,000 each month, this will substantially deplete the asset pool. The husband asserts that his planned course of action will lead to a result in 4 months, however I have no evidence of a coherent plan formulated which describes what he would do differently. The husband outlines his original plan which he prefers over the wife’s plan but does not explicitly say he would endeavour to return to this plan. Senior Counsel for the husband however has made it clear that the husband believes the wife has gone in an inappropriate direction. The potential for future conflict between the two directors is clear.

6. This project has had a history spanning nearly a decade. On 5 December 2008 the husband’s proposal was deemed by the Department of Planning (“the Department”) to be ready to proceed to the local environmental planning stage. This followed the Department’s assessment that the proposal was consistent with the ‘Sustainability Criteria’ for land release in the ‘Metropolitan Strategy’. The proposal then, was to be considered within the context of the Local Environmental Plan (LEP) which was still in draft form. Stage 1 of the LEP involved public exhibition of the draft between October 2008 and December 2008. The proposal, having been approved by the Department only in December 2008, was not ready to proceed under Stage 1, but would be considered under Stage 2.

7. Stage 2 of the LEP has been subject to numerous delays for a variety of reasons. Ms BR has outlined these in her affidavit of 7 October 2010 at paragraph 32, including that the breadth of the LEP created too many conflicts of interests with the Councillors. Ms BR says the delays in having the proposal included under stage 2 of the LEP are therefore in no way a result of the wife’s management. The wife has been advised that stage 2 of the LEP would not be exhibited to the public until March 2011. The wife maintains that it would be premature to sell the property without Council approval of the proposal, as Council approval would attract a much higher price for the property.

8. The husband’s affidavit of 3 September 2010 explains the historical significance of the M property and the unique concerns involved in its rezoning or subdivision. M property is an historic home …, and is surrounded by the heritage M area and 500 acres of forest. The husband’s original approach for the property ensured a visual corridor between M property and the M surrounds was undeveloped, with the subdivision situated out of sight of both, separated by the Forest. The husband also proposed a trust from which to maintain the homestead for the next 100 years. The husband says the wife’s plan does not adequately address the heritage aspects, and will therefore create delays in the approval process.

9. In relation to the husband’s concerns about the heritage aspects, the affidavit of Ms BR acknowledges that changes were made to the proposal. Ms BR said the number of dwellings proposed for the Eastern Precinct was increased from 75 to 90 and would move into the area previously reserved for the ‘visual corridor’. Ms BR said this decision was made to increase the project’s commercial viability, in circumstances where the requirement for a visual corridor is arguably negotiable. Similarly, the number of dwellings proposed for the Western precinct was increased from 50 on large lots to 90 on smaller lots, in circumstances were the available land was reduced upon the discovery of a threatened species and the smaller yield did not make development viable. Ms BR argues that the changes leave a smaller ‘footprint’ and allows a greater area for conservation. There is also a proposal to sell off some small portions of the land, which will require a ‘Development Control Plan’ for each portion. The trust arrangement for the future preservation of M property was also decreased from $5 - $10million to $3million, to ensure development was viable. Ms BR’s evidence is that the changes have not slowed down the project in any way, as the original proposal would still be subject to the delayed LEP Stage 2 assessment.

10. The husband submits that the wife’s changes to the proposal will require a new submission, which will prolong the process. He says that the new proposal contravenes the original agreement with the local council, Heritage Council and State Planning Authority. It is no longer the same proposal that was given conditional approval by the Department, which was granted after 7 years of effort (2001 - 2008). The husband points to the letter from the Department at annexure A of his primary affidavit which was to advise of the Department’s conditional approval of the proposal. The letter also outlines a number of issues to be taken into account if the proposal was to be integrated into the LEP Stage 2 which include (not an extensive list):

    18.1.Finalising the Conservation Management Plan (CMP) with the satisfaction of the Heritage Council;

    18.2.Whether the development has any impact on the heritage significance of M property, and whether it is in accordance with the CMP; and

    18.3.That the Council should liaise with the Heritage Council about the proposed rezoning to ensure consistency between the CMP and LEP.

11. As can be seen above, negotiations with the Heritage Council about the Conservation Management Plan and the impact of development and rezoning on heritage aspects are pertinent to this proposal being included in the LEP Stage 2. The husband submits that:

    19.1.The wife’s new proposal undermines the basic core concept to prevent urban sprawl in a heritage area, and has created public disapproval; and

    19.2.The new proposal’s changes in regards to heritage interests and maintenance could prolong negotiations and delay its inclusion in LEP Stage 2.

12. The husband notes that the deadline of July/August 2009 to submit the final reports for consideration under Stage 2 were never met, although the wife denies this.

13. The husband opines that further public exhibition of the plan will have to be provided as the proposal deals with such a significant region. The husband says the proposal will not go to the public before March, and will remain on public display for close to a year.

14. It is the husband’s case that in the past, he has been a very successful property developer. The wife points out however, that the husband has not been particularly successful in the recent past. As evidence for this, Counsel for the wife points to the Allan Family Trust, where assets fell from approximately $120million to approximately negative $42million between 2001 and 2009, a loss of $162million.

15. Concerns were raised about the future funding of the project. The wife submits that the husband is in no better position than she is to raise funds for the project.

16. I note that I heard evidence at the present hearing that there has previously been an $8million payment to the husband’s sister that was frozen as per the orders of Moore J under section 106B of the Family Law Act, given the assertion by the wife that the payment was a disposition by the husband which has the effect of defeating the wife’s property claim in the Family Court. There is a suggestion that the husband could secure a loan from his sister on the basis that the wife abandons her claim against the balance of the $8million. The husband’s sister has not yet been joined as a party to these proceedings.

17. The central concern is that the husband and wife would have difficulty in cooperating and when a decision must be made to instruct the experts, a stalemate is likely to occur. The wife made it clear that regardless of the result, she wanted to remain as a director. The wife says she will act in the interests of the company, but doubts the husband will reciprocate such good intentions. The husband says he similarly wants to act in the best interests of W Nominees.

18. Already, the husband has shown that he does not regard the wife’s experts highly. There was a recent “on the record” meeting of the parties and the current consultants at which the husband called David O’Donnell (Partner at Mallesons) a “pig of a thing” and Ms BR and her team a bunch of “carpet baggers”. Further uncooperative behaviour was demonstrated by the husband at that meeting, when he called the wife “a dill” and said “You don’t know anything”. Senior Counsel for the husband reasoned that the husband is under a lot of stress due to ongoing Court action and his dwindling assets, and should be forgiven for this outburst. Counsel for the children said the husband’s ‘robust speech’ is not of great weight to the issue to be decided, and is just a distraction. Counsel for the children said they do not require a written management plan to feel comfortable with the husband as co-director, as they are familiar with the husband’s expertise and the value he brings to the possible future success of the M project.

1. At that meeting, the husband was invited to hear about the progress of the project and provide advice and guidance. The transcript annexed to the wife’s affidavit shows that the husband got himself into a state and marched out of the room before any detailed consultation was undertaken. Before the meeting he was sent correspondence by the wife’s lawyers inviting him to set out his preferred plan for the proposal, and never gave any information in response. I have noted a similar uncooperative stance taken by the husband in the Court, whereby he repeatedly failed to file a Financial Statement, and when he did, it was incomplete.

2. I note too that part of the current team of consultants is Ms KG. Ms KG was previously hired by the husband, who dispensed with her services over an issue with billing estimates. I am unable to say whether the husband will be able to continue to work with Ms KG.

3. The wife points to my Judgment of 26 June 2009 where I made the decision to remove the husband as a director to W Nominees and appoint the wife as the sole director. That decision was made on the basis that the husband was being uncooperative in relation to providing information about the M properties and failing to account for his actions as director of W Nominees.

4. I do not have confidence that the wife and husband will be able to work together in relation to the M property proposal. The husband has demonstrated his lack of cooperation both in the Court proceedings and in the M property correspondence. The short meeting between the husband and the wife’s experts clearly showed his contempt for those who the wife is currently instructing. The husband gave no indication in the hearing that he would continue to instruct the current experts. I think it is very likely that should the husband and wife both be directors, there will be conflict between the two parties, disagreements as to who to instruct, disagreements as to the direction of the proposal and decisions that need to be made, and consequently an unworkable stalemate. I have no plan from the husband as to how he would proceed. Where the husband and wife are unlikely to be able to work together, and with a high level of uncertainty about the husband’s vision for the process, I cannot find that there is a basis for varying the previous injunctive orders which I have made, so that the husband be reappointed a director of W Nominees.

5. The evidence before me does not establish that the wife has done anything since she was given control of W Nominees or is currently doing or failing to do anything which will decrease the assets which the parties will eventually have to divide.

Husband’s future role in the M project

1. If the husband had been made a director, it would obviously follow that he should be permitted to speak with the appropriate people regarding the M project. I have decided however that it is untenable for the husband to become a director, and so his interaction with those running the project is not required. I also reiterate that the husband’s interaction with those persons has been uncooperative and difficult in the past. I do acknowledge however the husband’s breadth of experience in property development. The wife will have the directorship of W Nominees and the decision making authority, however she is to share, in a timely manner, all relevant information about the M development with the husband and consult with him and consider his advice before making her decisions.

I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 28 October 2010.

Associate: 

Date:  28 October 2010.