ARMINGTON & ARMINGTON (No.2) - [2019] FCCA 1232

FEDERAL CIRCUIT COURT OF AUSTRALIA

ARMINGTON & ARMINGTON (No.2)

[2019] FCCA 1232

Catchwords:
FAMILY LAW – Property – interim – valuation of property – leave granted for parties to be joined pursuant to s.500(2) of Corporations Act 2001 – where wife seeks an audit of the husband’s financial interests – order made for single auditor – costs to be shared equally between husband and wife.

Legislation:

Family Law Act 1975 (Cth), ss.79, 117

Federal Circuit Court of Australia Act 1999 (Cth), s.39
Federal Circuit Court Rules 2001 (Cth), rr.11.01, 11.02(2)
Corporations Act 2001 (Cth), ss.446A, 471B, 500(2)

Cases cited:

Armington & Armington [2019] FCCA 1233
Judd & Treasure [2018] FamCA 50

Applicant:

MS ARMINGTON

First Respondent:

MR ARMINGTON

Second Respondent:

COMPANY A PTY LTD

(ACN …)

Third Respondent:

COMPANY B PTY LTD
(ACN …)

Fourth Respondent:

COMPANY C PTY LTD
(ACN …) IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE ARMINGTON FAMILY TRUST

Fifth Respondent:

AACN … PTY LTD (FORMERLY COMPANY D PTY LTD) (ACN …) (IN LIQUIDATION)

Sixth Respondent:

AACN … PTY LTD (FORMERLY COMPANY E PTY LTD) (ACN …) (IN LIQUIDATION)

Seventh Respondent:

AACN … PTY LTD (FORMERLY COMPANY K PTY LTD) (ACN …)

File Number:

MLC 1627 of 2016

Judgment of:

Judge C. E. Kirton QC

Hearing date:

12 April 2019

Date of Last Submission:

12 April 2019

Delivered at:

Melbourne

Delivered on:

13 May 2019

REPRESENTATION

Counsel for the Applicant:

Ms Jenkins

Solicitors for the Applicant:

Taussig Cherrie Fildes

Solicitors for the First Respondent:

In person

Solicitors for the Second to Fourth Respondents:

No appearance

Solicitors for the proposed Fifth and Sixth Respondents:

Madgwicks

Counsel for the proposed Fifth and Sixth Respondents:

Mr Snyder

Solicitors for the proposed Seventh Respondent:

No appearance

ORDERS

(a) Subject to Order 1(b), leave to proceed pursuant to s.500(2) of the Corporations Act 2001 (Cth) is granted to join:
(i)AACN … Pty Ltd (formerly Company D Pty Ltd) (ACN …) (in liquidation) as Fifth Respondent; and
(ii)AACN … Pty Ltd (formerly Company E Pty Ltd) (ACN …) (in liquidation) as Sixth Respondent.
(b)(i) The Fifth and Sixth Respondent are excused from participating in the proceeding and have the right to participate at any stage of the proceeding should they wish to do so.
(ii)The Applicant will forthwith serve a copy of all orders made in the future in this proceeding on the solicitors for the Fifth and Sixth Respondents.
Pursuant to r.11.02(2) of the Federal Circuit Court Rules 2001 (Cth) AACN … Pty Ltd (formerly Company K Pty Ltd) (ACN …) be joined to this proceeding as Seventh Respondent.
The Husband and Wife forthwith do all acts and things and sign all such documents as are required to:
(a)Appoint Accountants (Auditor) to prepare an audit (Audit) of the entities which are to be valued by the Court expert pursuant to the Husband and the Wife’s joint letter of instruction to Mr T of Accountants, dated 21 February 2019.
(b)Provide the Auditor with such documents and information…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading ARMINGTON & ARMINGTON (No.2)

Details

AGLC: Armington and Armington (No.2) [2019] FCCA 1232
Case: [2019] FCCA 1232
Decision Date: 13 May 2019

CaseChat Overview and Summary

This matter concerned an application by the wife to join several companies, including two in liquidation, as respondents to family law proceedings concerning property settlement. The dispute involved the valuation of the husband's business interests, and the wife sought an audit of these interests. The court was required to determine the appropriate legal basis for joining the companies in liquidation and whether an audit of the husband's financial interests should be ordered.

The court was required to determine the correct provision of the *Corporations Act 2001* (Cth) under which leave should be granted to join companies in liquidation, specifically whether it was s. 500(2) or s. 471B. Additionally, the court had to consider the necessity and terms of joining these companies as parties and whether to order an audit of the husband's financial interests, including the allocation of costs for such an audit.

The court accepted submissions that s. 500(2) of the *Corporations Act 2001* (Cth) was the appropriate provision for granting leave to join the companies in liquidation, as they had entered into a creditors' voluntary liquidation. The court found that the participation of these companies was necessary for the complete and final determination of the proceedings. Consequently, leave was granted to join two companies as the Fifth and Sixth Respondents, with conditions excusing them from active participation unless they chose to do so, and requiring them to be kept informed of the proceedings. A third company was joined as the Seventh Respondent. The court also ordered that the husband and wife appoint an auditor to conduct an audit of the entities to be valued, and that the costs of this audit be shared equally between them. The proceedings were subsequently transferred to the Melbourne Registry of the Family Court of Australia.

Orders

Orders of the court

(a) Subject to Order 1(b), leave to proceed pursuant to s.500(2) of the Corporations Act 2001 (Cth) is granted to join:

(i) AACN … Pty Ltd (formerly Company D Pty Ltd) (ACN …) (in liquidation) as Fifth Respondent; and

(ii) AACN … Pty Ltd (formerly Company E Pty Ltd) (ACN …) (in liquidation) as Sixth Respondent.

(b) (i) The Fifth and Sixth Respondent are excused from participating in the proceeding and have the right to participate at any stage of the proceeding should they wish to do so.

(ii) The Applicant will forthwith serve a copy of all orders made in the future in this proceeding on the solicitors for the Fifth and Sixth Respondents.

Pursuant to r.11.02(2) of the Federal Circuit Court Rules 2001 (Cth) AACN … Pty Ltd (formerly Company K Pty Ltd) (ACN …) be joined to this proceeding as Seventh Respondent.

The Husband and Wife forthwith do all acts and things and sign all such documents as are required to:

(a) Appoint Accountants (Auditor) to prepare an audit (Audit) of the entities which are to be valued by the Court expert pursuant to the Husband and the Wife’s joint letter of instruction to Mr T of Accountants, dated 21 February 2019.

(b) Provide the Auditor with such documents and information as may be required to complete the Audit.

The cost of the Audit is to be shared equally between the Husband and the Wife.

Within seven (7) days of any payment (including any deposit into a trust account in advance) by or on behalf of the Husband in relation to the fees and expenses of any legal practitioner acting on his behalf (including all expenses in association with the preparation of his case), except for any fees and expenses paid by the Husband to a joint expert or the Auditor retained on behalf of both parties, the Husband pay, or cause to be paid the same amount by direct deposit into the Taussig Cherrie Fildes Trust Account.

Within twenty four hours (24) after any payment by or on behalf of the Husband as described in Order (5), the Husband cause a memorandum to be provided to the Wife’s solicitors stating the amount or amounts so paid.

The amounts paid pursuant to Orders (5) and (6) to the Wife’s solicitors be applied by them only in payment of the costs and disbursements incurred by the Wife in the conduct of these proceedings.

The Wife’s costs of and incidental to the Wife’s Application in a Case filed on 19 March 2019 and the appearance on 12 April 2019 are reserved.

Pursuant to s.39 of the Federal Circuit Court of Australia Act 1999 (Cth), these proceedings be transferred to the Melbourne Registry of the Family Court of Australia to be listed with such priority as that Court deems appropriate.

AND THE COURT NOTES THAT:

A. The proceeding is being transferred due to the number of parties that have recently been joined to the proceeding and the consequent anticipated increased length in hearing time required.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

In Armington & Armington[9] (Previous Judgment) I considered the Application to join the Armington Companies[10]. I refer to and rely on paragraphs 46 to 88 in the Previous Judgment in relation to this application to join these companies.[9] Ibid., at [7]-[10].[10] The definitions used in the Previous Judgment are also used in this Judgment. AACN … Pty Ltd (formerly Company D Pty Ltd) (ACN …) (in liquidation) and AACN … Pty Ltd (formerly Company E Pty Ltd) (ACN …) (in liquidation) and AACN … Pty Ltd (formerly Company K Pty Ltd) (ACN …) were vendors in the Contract of Sale (Vendor Companies). On the basis of my reasoning in the Previous Judgment, I determine that pursuant to r.11.01(1) of the Federal Circuit Court Rules 2001 (Cth), the participation of the Vendor Companies in the proceeding is necessary for the Court to completely and finally determine all matters in the proceeding. The Vendor Companies must therefore be included as parties to the proceeding. Therefore in relation to the Vendor Companies:a)Leave to proceed pursuant to s. 500(2) of the Corporations Act will be granted to join AACN … Pty Ltd (formerly Company D Pty Ltd) (ACN …) (in liquidation) and AACN … Pty Ltd (formerly Company E Pty Ltd) (ACN …) (in liquidation) as Fifth and Sixth Respondents. b)Pursuant to r.11.02(2) of the Federal Circuit Court Rules 2001 (Cth) AACN … Pty Ltd (formerly Company K Pty Ltd) (ACN …) shall be joined as Seventh Respondent. Orders will be made accordingly. In the Application in a Case the Wife sought the following orders:a)The Husband and Wife do all acts and things and sign all such documents as are required to:i)Appoint Accountants (Auditor) to prepare an audit of the entities which are to be valued by the Court expert pursuant to the joint letter of instruction dated 21 February 2019 (Audit). ii)Provide the Auditor with such documents and information as may be required to complete the Audit. Counsel for the Wife also sought an order that the Audit be conducted forthwith and be at the joint expense of the parties. Council relied upon the Wife’s affidavit that all deposed to the following matters. On 21 February 2019 Mr T was engaged to prepare an updated valuation of the Husband’s business entities as at 30 September 2018, pursuant to Orders made on 13 June 2018[11]. [11] Wife’s Affidavit, at [7]. On 26 February 2019 Mr T wrote to the Wife’s lawyers and to the Husband indicating that due to the volume of material that he needed to review and analyse he did not believe that he would be able to complete his updated valuation report in time for the scheduled final hearing on Monday 4 March 2019. On 1 March 2019 the Wife’s solicitors wrote to Mr T and asked him:a)For an estimate of the time he would require to complete a “non-limited valuation report”.b)For a list of all further information he would require to complete the updated valuation.c)Whether he would be assisted by a forensic audit in particular “of the expenses of the business in light of your preliminary review of the documents and information provided”[12].[12] Ibid., at [9].

Ratio Decidendi

Legal Principle Established

Counsel appearing for the Liquidator submitted that the appropriate provision of the Corporations Act 2001 (Cth) (Corporations Act) for the Court to grant leave under was s.500(2) and not s.471B. This was because both of the companies initially went into voluntary administration. The effect of s.446A of the Corporations Act is that where a company under voluntary administration goes into liquidation it is deemed to have entered into a creditors’ voluntary liquidation. Section 471B of the Corporations Act deals with a compulsory winding up of a company where there has been a court order. Section 446A applies where, inter alia, the creditors of a company under administration resolve that the company be wound up: s.446A(1). I accept the submission that s. 500(2) of the Corporations Act is the appropriate provision for the Court in this case to grant leave to join AACN … Pty Ltd (formerly Company D Pty Ltd) (ACN …) (in liquidation) and AACN … Pty Ltd (formerly Company E Pty Ltd) (ACN …) (in liquidation) as Respondents. Counsel for the Liquidator submitted that the Liquidator did not oppose leave being granted subject to certain conditions. Counsel submitted that the Liquidator did not want to incur further costs as the companies in liquidation had limited funds. The conditions that the Liquidator requested were set out in detail a letter from the Liquidator’s solicitors, Madgwicks, to the Wife’s lawyers, dated 8 April 2019 (Madgwicks Letter)[3]. The Liquidator sought that: a) the Companies be kept informed of the progress of the proceeding and be served with any additional materials filed within it. Likewise, if the companies call to view prior materials filed within it, the companies will be given access and copies of such materials;b) the Companies be kept informed of all future hearing dates and the orders sought at such future hearing dates, and reserve the right to appear at such hearings (and in the event that they do not wish to appear, they would notify the parties of this in advance of the hearing);c) at the appropriate time at trial or beforehand if the Companies wish to participate in the proceeding, the Companies be permitted an opportunity to be heard but otherwise be excused from participating in an active capacity at trial while reserving the right to do so if required[4]. [3] Affidavit of Ms JJ, filed 12.4.19, Annexure “-1”.[4] Ibid., filed 12.4.19, Annexure “-1”, at [6(a)-(c)]. The Husband did not oppose the application to join AACN … Pty Ltd (formerly Company D Pty Ltd) (ACN …) (in liquidation) and AACN … Pty Ltd (formerly Company E Pty Ltd) (ACN …) (in liquidation) as Respondents[5].[5] Transcript T9:42-10:1. Counsel for the Wife submitted that the orders sought in paragraphs (a) and (b) of the Madgwicks Letter were unnecessary as the parties were already required to serve Court documents on all other parties to the proceeding. Counsel submitted that paragraph (c) of the Madgwicks Letter was appropriate.