Arman and Arman (No. 2)

[2009] FamCA 200

FAMILY COURT OF AUSTRALIA

ARMAN & ARMAN (NO. 2) [2009] FamCA 200

FAMILY LAW – PROPERTY – Application to set aside a transaction pursuant to s106B – Evidence – Finding transaction likely to defeat claim – Discretion exercised against third parties

APPLICANT: Ms Arman

RESPONDENT: Mr Arman

FILE NUMBER: MLC 3450 of 2007

DATE DELIVERED: 29 January 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Jordan J

HEARING DATE: 23 & 29 January 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Dr R S Ingleby

SOLICITOR FOR THE APPLICANT: Harwood Andrews Lawyers

SOLICITOR FOR THE RESPONDENT: Mr Goldsmith, Goldsmiths Solicitors

ORDERS

IT IS ORDERED

1. That pursuant to s 106B of the Family Law Act 1975, the Contract of Sale entered into on 28 November 2008 between the Husband MR ARMAN as Vendor and J COMPANY PTY LTD as Purchaser be set aside.

2. That the Husband be by himself, his servants or agents restrained from dealing with, disposing of or doing any act or thing or signing any document for the purpose of selling or encumbering the properties at B Street in the State of Victoria and/or T Street in the State of Victoria, otherwise than in accordance with the Orders of Justice Cronin of 31 October 2008.

3. That costs be reserved.

IT IS DIRECTED

1. That the legal practitioners for the Wife provide written submissions in relation to the costs of today and any other reserved costs within 21 days of today’s date.

2. That the legal practitioners for the Husband provide written submissions in reply within a further 21 days thereafter.

3. That the legal practitioners for the Wife have a further 7 days thereafter to provide a brief submission in reply.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER:  MLC 3450 of 2007

MS ARMAN

Applicant

And

MR ARMAN

Respondent

REASONS FOR JUDGMENT

ex tempore

1. On 4 December 2008, the wife filed an application pursuant to section 106B of the Family Law Act to set aside a transaction to sell a property at B Street.

2. For the purposes of these proceedings, this matter has as its origins the judgment and final orders of his Honour Cronin J made on 31 October 2008 in the determination of contested proceedings between the parties for parenting and property orders. 

3. The relevant property orders include the following:

   “(16)   For the purposes of these orders, “the pool” is defined as follows:

   (a)the proceeds of the sale of the [B Street] property after the discharge of the mortgage encumbering the [B Street] property and the real property at [T Street] and all costs and expenses of the sale of the [B Street] property;

   (b)      the [T Street] property with a specified value of $195,000;

   (c)      the husband's car with a specified value of $3,000; and

   (d)      the wife's car with a specified value of $600.

   (17)The pool be divided as to 65% to the wife and 35% to the husband.

   (18)That for the purposes of the pool, by 4 pm on 14 November 2008, the husband and the wife do all acts and things and sign any necessary document to place the [B Street] property on the market for sale and the proceeds of sale be applied as follows:

   (a)first, to discharge the mortgage encumbering the [B Street] property and the [T Street] property;

   (b)secondly, to pay all costs, commissions and expenses of the sale; and

   (c)      thirdly, to divide the balance so as the wife receives        65% of the pool and the husband 35% of the pool.

   …

   (21)That as part of the entitlement of the wife, the husband transfer to the wife, at her expense, all of his interest in the [T Street] property.

   …

   (24)That for the purposes of the sale of the [B Street] property, in default of the parties' agreement by 4 pm on 14 November 2008 as to the real estate agent, the conveyancing solicitor or conveyancing company and the terms and conditions of any sale, the parties have liberty to apply to me on short notice for such matters to be determined on application supported by appropriate affidavit material.” 

4. In her material in support, the wife relies upon her affidavit filed on 15 December 2008; an affidavit of Mr D filed on 27 January 2009; the orders and judgments of this court made on 31 October 2008, 12 December 2008 and 17 December 2008; Exhibit 1, an ASIC company extract dated 4 December 2008 and Exhibit 2, a letter from the wife's solicitors, Harwood Andrews Lawyers, to the secretary of J Company Pty Ltd dated 9 December 2008.

5. The husband filed an affidavit in reply on 16 December 2008, and the paragraphs of that affidavit which are relevant to this application are there identified as paragraphs 1, 2 and 13 to 19. 

6. Objection was taken to all or part of the following paragraphs of the wife's affidavit, being paragraphs 5 to 8 and 13 to 16.  Objection was taken to the production of some letters.  Those matters may have been largely overtaken by the subsequently filed material, and the wife today was granted leave to file a further affidavit by her solicitor.

7. As to the objections, whilst there may be some technical merit to some of the objections taken, I have indicated that I do not propose to formally rule in the husband's favour, as, in every case, in my view, the material particulars of the wife's case, in those portions of her affidavit under review as part of this objection process, are established either in the paragraphs of the husband's affidavit relied upon in these proceedings or in the correspondence attached to the wife's affidavit, to which no objection has been taken, or are a matter of record in the orders and judgments referred to earlier, or are the subject of facts agreed in the course of legal argument by the representatives for each of the parties in argument before me.

8. The material facts which emerge from the totality of the aforementioned sources are as follows:

   a)In accordance with the determinations and orders of Cronin J on 31 October 2008, the property at B Street was to be sold. 

   b)The husband is the sole registered proprietor of the B Street property.

   c)The proceeds of sale, after certain defined deductions, were to form part of the pool to be distributed as to 65 per cent to the wife and 35 per cent to the husband.

   d)The material placed before the trial Judge for the purposes of the proceedings to be determined by him included valuation evidence by L valuers, prepared in the month before the trial, in which the subject property was valued at $300,000. 

   e)It is an agreed fact before me that, at the trial, the parties agreed that the property had a value of $300,000.

   f)Paragraph 24 of the orders of his Honour required the parties to reach agreement as to the real estate agent or conveyancing solicitors or conveyancing company and, importantly, as to the terms and conditions of any sale, and thereafter provided for further mechanisms for a resolution in the absence of such agreement.

   g)The parties reached agreement about the agent to be appointed for the sale, being D Real Estate, and the parties each signed an authority appointing D Real Estate as their exclusive agent.

   h)That on or about 27 November 2008, the husband entered into some negotiations with a friend of his, one Mr S, in relation to the sale of the subject property to Mr S.

   i)The husband agreed to enter into a contract to sell the property to his friend.

   j)The husband agreed to sell the property at a price of $200,000.

   k)At approximately 1.30 pm on 28 November 2008, the husband and his friend attended at the office of D Real Estate and spoke to the agent handling the matter, one Mr D, and requested that he draw up a contract to secure the sale of the property to the husband's friend at a price of $200,000.

   l)The agent declined to proceed as instructed.

   m)As a consequence of that refusal, on the same afternoon, the husband and his friend, Mr S, attended upon a firm of solicitors, Wyndham Partners, and gave joint instructions to have a contract drawn up in the name of the husband, as vendor, and a company, J Company Pty Ltd, as purchaser.  The contract was executed by the purchaser and the vendor that afternoon and a deposit of $5000 was paid by Mr S and lodged with Wyndham Partners. 

   n)The husband did not inform Wyndham Partners of the Family Court orders.

   o)The relationship between the husband's friend, Mr S, and J Company is not explained by the husband. 

   On the material before me and in the absence of an explanation from the husband or any material or appearance by the friend, Mr S, or by or on behalf of the company, J Company Pty Ltd, I conclude that J Company is the alter ego of Mr S, and note in particular the following matters:

   i)That the husband informs the court that on 27 November 2008, Mr S informed the husband that he, Mr S, was interested in purchasing the B Street property.

   ii)The husband informs the court that Mr S offered to pay $200,000 to purchase the property.

   iii)Mr S apparently attended with the husband at Wyndham Partners and apparently gave instructions in relation to the contract.

   iv)Mr S apparently executed the contract of sale on behalf of the purchaser.

   v)Mr S paid the deposit of $5000.

   vi)Mr S is a director and shareholder of J Company Pty Ltd.

   vii)The principal place of business of J Company is R Street in G.

   viii)Mr S’s residential address is the same address in R Street in G.

   p)The terms and conditions of the contract entered into between the husband and Mr S were entered into without the wife's knowledge, agreement or consent.

   q)On 1 December 2008, Mr D, the parties' appointed exclusive agent, received an offer to purchase the property at a price of $250,000. 

   r)In correspondence, Mr D informed the parties that it remained his hope and expectation that the subject property would sell for approximately $270,000.

   s)It is noted from paragraph 169 of his Honour's judgment that the husband himself sought orders fixing the reserve price on the B Street property of $300,000 and that, after the trial, the parties agreed on a listing price with the agent of $330,000. 

9. I am satisfied that J Company and Mr S had notice of these proceedings as a consequence of a letter sent by the wife's solicitors to the secretary of that company on 9 December 2008 at its principal place of residence, and which is also the residence of Mr S. 

10. Further, of course, I note that the husband has informed the court that Mr S is his friend.  I am unaware of any impediment to the husband informing him of these proceedings.  I conclude, in those circumstances, that both the company and Mr S chose not to appear or seek to be heard and chose not to file any material in relation to these proceedings. 

11. Section 106B of the Family Law Act provides in part:

    “In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.”

12. Under the terms of his Honour's orders, the wife's entitlement to property settlement is defined in part by the quantum of the proceeds of sale of the B Street property.  I am satisfied that the wife's entitlement to property settlement may be materially and substantially prejudiced if the contract proceeds, including, by way of example, by as much as $60,000, being the potential deficit in her share of the proceeds as represented by the difference between the value of the property and the present contract price. 

13. On the only admissible evidence before me, the value of the subject property is $300,000.  The material filed by the parties includes multiple indicators that the parties and the wife can expect to do substantially better than the contract price entered into by the husband and his friend.  The contract price of $200,000 is 33 per cent below the valuation of the property. 

14. I conclude that to allow the transaction to proceed might substantially defeat the wife's claim under his Honour's orders.  That finding gives rise to a discretion to set aside the subject contract.  In the exercise of that discretion, I must, amongst other things, take account of the interests of third parties. 

15. As I have indicated earlier in my judgment, I am satisfied that the third party, or parties, have had notice of these proceedings and that they have elected not to appear or to file any material, and they have not taken any steps designed to protect their interests under the contract. 

16. I take account of the declared friendship between the vendor and the purchaser.

17. I take account of the fact that the vendor and purchaser jointly approached one firm of solicitors and gave joint instructions and the fact that the entire transaction, including its apparent haste and the lack of reference to the wife, indicates a transaction not at arm's length. 

18. I take account of the fact that the contract price is substantially below the value of the property. 

19. I take account of the fact that the husband and the purchaser bypassed the agent appointed by the parties jointly in accordance with the court order. 

20. I take account of the fact that the husband entered into the agreement without the wife's knowledge or consent, and therefore in contravention of the terms of the court order.

21. In all the circumstances, I propose to exercise my discretion in favour of the wife and against the husband and the apparently disinterested third party. 

22. I propose to provide the relief sought by the wife and, in particular, order (1), that pursuant to section 106B of the Family Law Act, the contract of sale entered into on 28 November 2008 between the husband, Mr Arman, as vendor, and J Company Pty Ltd, as purchaser, be set aside.

23. I propose to make order (4), other than I propose to add the words that the husband and his servants and agents be restrained from dealing with, disposing of or doing any act or thing or signing any documents for the purpose of selling or encumbering those properties otherwise than in accordance with the orders of Cronin J of 31 October 2008.

24. Order (5) has already been made, I understand. 

25. As to orders (2) and (3), having succeeded in this application to set aside the transaction, having sought to restrain the husband from acting in that way, I take the view, otherwise, that his Honour Cronin J has heard and determined this matter, including how the orders should be put into effect.  I do not propose to interfere with that process, save to say that, in light of my findings and determinations in this case today and in light of the order reflecting order number (4) in the application which I have now made, there should be no doubt in anyone's mind about the seriousness of any conduct in the future which is in any way inconsistent with the orders of his Honour Cronin J, as now expanded upon by these orders.  If that was established in future, I would regard it as the gravest affront to the authority of this court, which would be likely to attract the gravest of sanctions available to this court.  I hope and trust that those observations are not lost and that the parties can pass through this difficult process without further unnecessary rancour and certainly without further unnecessary litigation. 

26. I reserve the question of costs.

27. I direct the legal practitioners for the wife to provide their submissions in relation to these costs and any other reserved costs within 21 days and I direct the solicitors for the husband to provide submissions in reply within a further 21 days thereafter.

DISCUSSION

1. Given that the husband's solicitors will be able to include in their submissions the opportunity to reply, I will give the wife's legal representatives seven days after the time of the husband has expired to provide, hopefully, a brief submission in reply.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Jordan

Associate: 

Date: