BARSTOW & BARSTOW & ORS
[2020] FCCA 1298
•25 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BARSTOW & BARSTOW & ORS | [2020] FCCA 1298 |
| Catchwords: FAMILY LAW – Property – interim applications – where the Applicant Husband entered bankruptcy and a company of which the Husband was the director entered into liquidation in December 2019 – where the Husband seeks orders for discovery against the Wife – where the Wife seeks an injunction against the liquidator to prevent the liquidator dealing with real property owned by the company in liquidation as trustee of a family trust – where the Wife seeks that the matter be transferred to the Family Court of Australia. |
| Legislation: Acts Interpretation Act 1901 (Cth), s.2C Corporations Act 2001 (Cth), s.1337C Family Law Act 1975 (Cth), ss.90AB, 90AC, 90AF(2), 90AF(3), 90AF(4) Federal Circuit Court of Australia Act 1999 (Cth), ss.45(1), 45(2), 39, 18 Federal Circuit Court Rules 2001 (Cth), rr.14.02, 8.02 |
| Cases cited: Vinden v Wrong Fuel Rescue Pty Ltd & Anor [2019] FCCA 1091 Hearne v Street [2008] HCA 36 |
| Applicant: | MR BARSTOW |
| First Respondent: | MS BARSTOW |
| Second Respondent: | MS RODGERS (AS THE TRUSTEE IN BANKRUPTCY OF THE BANKRUPT ESTATE OF MR BARSTOW) |
| Third Respondent: | MR JENKINS IN HIS CAPACITY AS LIQUIDATOR OF A PTY LTD |
| File Number: | ADC 560 of 2017 |
| Judgment of: | Judge Kari |
| Hearing date: | 11 May 2020 |
| Date of Last Submission: | 11 May 2020 |
| Delivered at: | Adelaide |
| Delivered on: | 25 May 2020 |
REPRESENTATION
| The Applicant appeared in person |
| Counsel for the First Respondent: | Ms Horvat |
| Solicitors for the First Respondent: | Lindbloms Lawyers |
we
| Solicitors for the Second Respondent: | Mr Ryder of O’Loughlins Lawyers |
| Solicitors for the Third Respondent: | Mr Neate of Lynch Meyer |
ORDERS
That the Application in a Case of the husband filed 1 May 2020 be dismissed.
That the Application in a Case of the wife filed 16 October 2019 be dismissed.
That paragraphs 5 and 6 of the Application in a Case of the wife filed 13 December 2019 be dismissed.
That the Application in a Case of the wife filed 19 March 2020 be dismissed.
That the Third Respondent be restrained and an injunction is granted restraining the Third Respondent from dealing in any way with the properties situate at B1 Street, Suburb C in the State of South Australia and B2 Street, Suburb C in the State of South Australia without leave of the court.
IT IS NOTED that publication of this judgment under the pseudonym Barstow & Barstow & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 560 of 2017
| MR BARSTOW |
Applicant
And
| MS BARSTOW |
First Respondent
And
| MS RODGERS (AS THE TRUSTEE IN BANKRUPTCY OF THE BANKRUPT ESTATE OF MR BARSTOW) |
Second Respondent
And
| MR JENKINS IN HIS CAPACITY AS LIQUIDATOR OF A PTY LTD |
Third Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings relate to the question of property settlement.
Unfortunately however, while the proceedings have been before the court since February 2017, they have been delayed and complicated by circumstances which culminated in the husband voluntarily entering into bankruptcy on 16 December 2019, together with a company of which the husband was a director entering into voluntarily liquidation on 3 December 2019.
While the substantive competing claims for settlement of property have not meaningfully progressed since the inception of these proceedings, the focus of the interim applications which the court is being asked to determine at this stage are of narrow and specific focus.
In broad terms the interlocutory applications before the court can be broken into 4 categories as follows:
a)the wife’s application for partial settlement of property for litigation funding purposes;
b)applications for discovery made by each the husband and the wife seeking the discovery of specific documents from each other;
c)the wife’s application for an injunction as and against the liquidator of A Pty Ltd to prevent the liquidator dealing with the assets held by A Pty Ltd either in its own right or as trustee for the D Family Trust; and
d)the wife’s application that the proceedings be transferred to the Family Court of Australia.
While there were a range of applications before the court for the purposes of the hearing, ultimately changes were made to the wife’s position during the course of the hearing which resulted in:
a)the wife’s application for discovery as and against the husband being abandoned, and orders made by consent for each the liquidator and the trustee in bankruptcy to provide the wife with a list of all relevant documents in their possession; and
b)the wife making an oral application (which was not opposed) to adjourn her application for partial property settlement orders.
From the court’s perspective, it is frustrating that much of the lengthy half-day hearing was devoted to traversing the issues raised by the applications made by the wife which were ultimately abandoned or adjourned. It would seem that insufficient attention had been given to the matter at the wife’s end because acknowledgements were made by the wife’s Counsel during the course of the hearing that the wife had not put sufficient evidence before the court to deal with those applications, necessitating an adjournment. In a high volume court where court time is a precious and scarce resource, it is disappointing that close attention had not been given to the matter prior to the hearing.
Background
The brief background of the parties and their relationship is as follows;
a)the wife was born in 1970 and she is accordingly 50 years of age;
b)the husband was born in 1974 and he is accordingly almost 46 years of age;
c)the parties commenced cohabitation in approximately 1996 and they were married in 1998;
d)the parties separated on 23 September 2014;
e)the parties have two children X born in 2002 (who is 18 years of age) and Y born in 2004 (who is 16 years of age);
f)the children have remained living with the wife since separation, while the husband has relocated to live in Queensland;
The wife commenced these proceedings by filing an Initiating Application seeking orders with respect to parenting arrangements for the children and property settlement on 14 February 2017.
Up until approximately June 2018, the husband operated a business through the D Family Trust. While the court has not been provided with the trust deed for the trust or any financial statements or returns for the trust or the trustee company, from the report prepared by the liquidator dated 2 March 2020 annexed to the wife’s affidavit filed 17 March 2020, I understand:
a)The trustee of the trust is A Pty Ltd;
b)Until 19 December 2017, both the husband and the wife were directors of A Pty Ltd;
c)As and from 19 December 2017, the husband has been the sole director and shareholder of A Pty Ltd;
d)A Pty Ltd does not trade in its own right and otherwise holds no assets;
e)One of the categories of assets owned by the trustee company on behalf of the trust is two pieces of real property situate at B Street, Suburb C in the State of South Australia. While I understand that one of the pieces of real property is the home in which the wife and the children reside, and the other is a piece of farming land, it is not clear to me which is which. In any event the two pieces of land are as follows:
i)B2 Street, Suburb C, which has been valued at $540,000 and has a mortgage registered to secure a loan to E Bank in the amount of approximately $126,089; and
ii)B1 Street, Suburb C which has been valued at approximately $310,000 and has a mortgage registered to secure a loan to the Commonwealth Bank in the amount of approximately $236,961.
f)That as and from approximately 1 July 2018, the husband has operated a new business called F Pty Ltd, and that since that date the assets of the trust have been maintained either by the husband personally or through F Pty Ltd.
On or about 1 August 2017, the husband was met with a Bankruptcy Notice from the Australian Taxation Office with respect to a judgment debt of somewhere in excess of $290,000.
As a consequence of that Bankruptcy Notice, the proceedings entered into a state of suspended animation because as best as I can ascertain the husband was attempting to avoid bankruptcy and the wife appeared willing to accommodate those efforts so that the parties could work towards a negotiated resolution. As a consequence various orders have been made in these proceedings to facilitate the identification of and the value of various assets owned by the parties personally and/or by the D Family Trust, the sale of some assets, the repayment of debt (including the debt owed to the Australian Taxation Office) and to facilitate alternative dispute resolution processes to avoid the ongoing costs of the litigation.
Unfortunately, all of those attempts to assist the parties to progress the matter towards a negotiated resolution have been unsuccessful and the parties are now seeking the assistance of the Court to progress the matter.
What appears obvious from the affidavit material filed by the wife in support of the current applications before the court is that there is genuine deep seated mistrust on the part of the wife towards the husband. This mistrust extends to include a belief on the wife’s part it would seem, that the husband has manufactured the timing of his bankruptcy and the liquidation of the trustee company so as to cause maximum damage to her application for property settlement before this court.
It appears to be agreed that aside from superannuation and the party’s furniture and effects, the bulk of the assets in which the parties have an interest are owned by A Pty Ltd as trustee of the D Family Trust. Those assets include the properties at Suburb C in which the wife and the children presently reside, together with some motor vehicles.
In addition, there is significant conjecture as to whether an art collection is owned by A Pty Ltd as trustee of the D Family Trust or whether it is owned by the parties personally. Leaving to one side the dispute as to the ownership of the art collection, there is also a cavernous dispute as to the value of that art collection, with valuations putting the collection at somewhere between $400,000 and $1.68 million.
Sensibly, at the commencement of the hearing the court was presented with a proposed consent minute of order to facilitate the orderly sale of the art collection. This will mean there will be no need for the court to determine the dispute as to the value of the art collection, as the ultimate value to be brought to account will be the sale proceeds generated by those sales. That however does not resolve the question as to ownership of the art collection, but that is an issue for a later stage.
The Husband’s Application for Discovery filed 1 May 2020
The husband filed an Application in a Case seeking discovery of documents personally from the wife on 1 May 2020.
Relevantly the application in a case was filed after the husband became bankrupt and after the husband’s trustee in bankruptcy became a party to these proceedings on 18 December 2019.
As a consequence of the husband’s bankruptcy there is no dispute and indeed the husband agreed during the course of the hearing that he only has standing to make submissions in relation to property that has not vested in the trustee in bankruptcy, and in particular in relation to superannuation and items of furniture and effects which the husband’s trustee has no interest in.
The husband’s application for discovery seeks orders requiring the wife to produce to him documents and provide to him information as follows:
1)That within 7 days the Respondent provide all outstanding discovery as required by Item 5 of the Order of this Court dated 13 September 2018;
2)That within 7 days the Respondent provide the following information, currently missing from her financial statement dated 14 January 2020:
a. Current ATO debt;
b. Details of any Centrelink debt;
c. Current legal debt;
d. Estimate of her income (item 9 on the statement);
3)That within 7 days the Respondent provide an explanation to the Applicant as to why the household contents are now valued at $5,000, compared with the $30,000 in her previous statement;
4)That within 7 days the Respondent provide details to the Applicant of the grand piano included in the financial statement dated 14 January 2020;
5)That within 7 days the Respondent provide an explanation and accompanying evidence to the Applicant as to the origin of the monies used to make repayments on the mortgage held by E Bank for B2 Street, Suburb C.
6)That the Respondent be restrained from disposing of any jointly-owned household assets and contents and within 7 days provide the Applicant a list of any items disposed of since 23 September 2014 and any monies received from such disposals.
As can be readily seen from the classes of documents sought by the husband in his application, he seeks information well beyond the scope of property to which he does have standing to make submissions about in these proceedings. Indeed, the wife’s position was that the whole of the application should be dismissed due to a lack of standing on the husband’s part to bring the application.
Ultimately, during the hearing the husband conceded that certain categories of documents were outside the scope of that which he is entitled to be heard about. As a consequence, the husband amended his position and ultimately only sought to press those categories of documents identified in paragraphs 3, 4 and 5 and 6 of his application. Save and except as to the information sought in paragraph 5, I accept that the refined requests for discovery by the husband are indeed matters that he has standing to be heard about.
Having heard submissions from the husband it became apparent that the documents sought in relation to paragraphs 3, 4 and 6 of his application were sought primarily on the basis of the husband asserting that as he was still paying insurance on items in the wife’s possession, he wanted to understand what the wife asserts the value to be so that he can maintain the insurance coverage and payments. I did not understand from the husband’s position that there was a dispute from him as to what items of furniture and effects the wife has in her possession, save and except as to one item being a grand piano which I shall return to shortly.
The wife’s position is that she is maintaining insurance coverage for all of the items of furniture and effects in her possession and that she is meeting the payment of the premiums in that regard.
There is however a dispute as to one specific item of furniture namely a grand piano; with the wife asserting that it was taken by the husband when he moved to Queensland after the parties separation, and the husband asserting that it is not an item in his possession. This dispute as to whether or not a piano exists and in whose possession it is in is not a dispute that I can or need to determine at this juncture.
In addition the husband’s trustee in bankruptcy expressed a preliminary view that if there was a grand piano, he considered that it would likely be an item that would vest in the trustee in bankruptcy, and that the trustee would take up enquiries in relation to its existence.
So far as the document sought by the husband in relation to paragraph 5 of his application, the husband ultimately made submissions to the court that he was seeking that information from the wife not so as to prosecute any matters in this jurisdiction, but to assist him with a child support dispute currently working its way through the Child Support Agency.
Before any order for discovery can be made by the court[1], the court must be satisfied and must make a declaration “that it is appropriate, in the interests of the administration of justice” to make those orders.[2]
[1] Federal Circuit Court Rules 2001 (Cth) r 14.02.
[2] Federal Circuit Court of Australia Act 1999 (Cth) (‘the FCCA Act’) s 45(1).
In Vinden v Wrong Fuel Rescue Pty Ltd & Anor [2019] FCCA 1091 (at 12-15), Judge Kendall made the following observations as to those factors the court is to consider before granting a declaration:
12. Before granting a declaration under s 45 of the FCCA Act, the Court will specifically consider s 45(2). That section provides:
(2) In deciding whether to make a declaration under subsection (1), the Federal Circuit Court of Australia or a Judge must have regard to:
(a) whether allowing the interrogatories or discovery would be likely to contribute to the fair and expeditious conduct of the proceedings; and
(b)such other matters (if any) as the Federal Circuit Court of Australia or the Judge considers relevant.
13. In this Court, there appears to be a presumption that the “fair and expeditious conduct of the proceeding” does not require discovery: Devine Marine Group Pty ltd v Fair Work Ombudsman [2013] FCA 442 at [54]. That does not mean, however, that it will not ever be given.
14. To determine whether discovery will contribute to the “fair and expeditious conduct of the proceedings”, the Court will first consider the Court’s objects. These can be summarised as follows:
a. the Court should act as informally as possible in the exercise of judicial power;
b. proceedings should not be protracted;
c. the resolution of the proceedings should be achieved justly, efficiently and economically;
d. streamlined procedures should be used; and
e. the Court should seek to avoid undue delay, expense and technicality.
15. In relation to s 45(2)(b) of the FCCA Act, the Court notes that in Abrahams v Qantas Airways Limited (No.2) (2007) 210 FLR 314 at [25] (“Abrahams”) Federal Magistrate Lucev (as he then was) identified a non-exhaustive list of matters that may be considered “relevant” for the purposes of s.45(2)(b). His Honour highlighted the following matters:
(a) the relevance of any documents sought to be discovered;
(b) the volume of documents sought to be discovered;
(c) whether there is a court book containing relevant documents, and the extent to which relevant documents are included in the court book;
(d) whether discovery would narrow the issues;
(e) whether both parties seek discovery;
(f) whether there is consent to discovery;
(g) whether discovery is “of benefit” to the litigation; and
(h) the effect of discovery on litigants; especially vulnerable litigants.
Having heard submissions from the husband during the course of the hearing as to the reasons why he has brought his application for discovery and why he pursues the more limited orders for discovery, I do not consider that it is appropriate or in the interests of the administration of justice for the court to make a declaration pursuant to section 45 of the Federal Circuit Court of Australia Act.
I have formed this view in relation to the orders sought in paragraphs 3, 4 and 6 of the husband’s application because:
a)It does not appear that there is any dispute as to what items of furniture and effects exist, the dispute is limited to one of value which is best dealt with by orders for valuations in due course, not by orders for discovery.
b)That in relation to the requests regarding the grand piano, the husband does not have standing to pursue that application.
c)I do not see the benefit to the litigation and the issues in dispute in requiring the wife to be put to the expense and effort of going on oath as to the issues the husband would like her to be on oath about at this stage. If these issues remain a concern for the husband in due course, the wife can ultimately be cross-examined at trial about these issues, to the extent that they are relevant.
d)I also do not consider that this Court and the discovery process should be used by any litigant, in this case the husband, to protract and delay the progression of the proceedings by chasing every rabbit down a hole at an interlocutory stage without regard to the ultimate relevance of the documents sought or the questions asked.
I have formed this view in relation to the orders sought in paragraph 5 of the husband’s application because:
a)Firstly, I do not consider that the husband has standing to bring this application as the information sought by the husband relates to the mortgage registered over real property in which he is not entitled to be heard.
b)In addition, it is not appropriate for the husband to seek orders for discovery in these proceedings in circumstances where he unambiguously and unashamedly declared his ulterior purpose to use the documents and information elsewhere; in the present circumstances in the process underway with the Child Support Agency.
c)In addition, even if the court did consider (a) that the husband had standing to seek the information that he has, and (b) the court was satisfied that it was in the interests of the administration of justice for the court to make orders as to discovery, the husband should be aware that he would not be permitted to use the documents produced in these proceedings pursuant to those orders elsewhere, without leave of the Court.[3]
[3] Hearne v Street [2008] HCA 36.
The Wife’s Application for an injunction against the Liquidator of A Pty Ltd
The wife by virtue of two separate applications asks the court to make an injunction in the following terms:
a)Pursuant to the Application in a Case filed 13 December 2019,
That the said liquidator be restrained and an injunction granted restraining the liquidator from calling in and dealing with any assets or liability the subject of these proceedings whether owned by A Pty Ltd or otherwise, without Order of this Honourable Court.
AND/OR
b)Pursuant to the Application in a Case filed 19 March 2020,
That until further order, the 3rd Respondent is restrained and an injunction is placed restraining them from finalising the winding up of the company A Pty Ltd (in liquidation) as trustee for D Family Trust.
It is not clear to the court which injunction was that pursued by the wife.
The affidavit sworn by the wife on 9 December 2019 in support of her Application in a Case filed 13 December 2019 does not devote any time to the injunction that was sought by the wife and it is impossible to discern what issues were of concern to the wife at that stage, beyond the mere fact that the husband had become bankrupt and A Pty Ltd had gone into liquidation.
The affidavit sworn by the wife on 17 March 2020 in support of her Application in a Case filed on 19 March 2020 does not set out with any precision the basis for the injunction sought against the liquidator. Rather that affidavit is predominately used as a vehicle for the wife to complain:
a)about the timing of the husband’s bankruptcy and the liquidation of A Pty Ltd to “defeat” the wife’s claim for property settlement and her “standing” in relation to any property settlement claim; and
b)about the liquidator fulfilling its statutory obligation to wind up the company as she asserts that the “assets of the company” are also “assets of the marriage”; albeit that she does not particularise which alleged “assets of the marriage” fall into this category.
What became clear during the hearing however is that:
a)The wife asserts that the assets held by the trust should be treated as assets of the parties in circumstances where until the liquidation, the husband was in complete control of the trust; and
b)The wife was pursuing an injunction against the liquidator because she wishes to retain the home at Suburb C (and presumably the adjoining farm land, although that was also not clear) in which she and the children presently reside.
In the affidavit of the wife filed 17 March 2020, the wife deposes that:
a)On or about 6 March 2020, she received a Default Notice with respect to the mortgage payments for B1 Street, Suburb C. Subsequently the wife liaised with the bank and she has personally paid all of the arrears owing on the mortgage (approximately $3,780) and in addition, she now intends to meet the monthly mortgage payments of $1,260 as and when they fall due to stave off the bank taking possession of the property.
b)She is aware that the Commonwealth Bank has issued a Default Notice for the property (which I presume is B2 Street, Suburb C) with respect to mortgage arrears in the amount of $4,600.79. However, unlike the arrangements that she has made with respect to B1 Street, Suburb C, the bank has not been willing to liaise with the wife in that regard.
In preparation for the hearing the court made orders requiring written submissions from each party with respect to the applications before the court. Attached to the submissions of the liquidator, there was a schedule of assets and liabilities as at 24 February 2020 for A Pty Ltd as trustee of the D Family Trust. From that document, it is understood that from the liquidators perspective:
a)The gross assets of the trust are valued at approximately $878,605, which I note for present purposes includes the disputed art collection at a total figure of approximately $302,821;
b)The gross liabilities of the trust are approximately $1,109,378;
c)There is a net deficit of $230,773 (which on my calculation would make a deficit of $535,594 if the disputed art collection is not an asset of the trust);
d)The most significant liabilities of the trust are unpaid distributions to the husband in the amount of $719,368 and the wife in the amount of $269,038 (a combined total of $988,406).
e)In addition the trust has liabilities owing to:
i)The Australian Taxation Office in the amount of $20,111;
ii)F Pty Ltd (being the husband’s new company) in the amount of $37,861; and
iii)The husband’s parents secured by a caveat registered over B1 Street, Suburb C, in the amount of $63,000.
By directing attention to the statement of assets and liabilities prepared by the liquidator, it is readily understood that once the liquidator has achieved its statutory obligation to call in and realise the assets of the trust and pay out the existing liabilities, there will firstly be insufficient funds to pay all creditors in full, and in addition there will in fact be no surplus available for distribution to the beneficiaries (who I was told during the hearing are the husband and the wife and the parties’ children). This deficit will be all the more greater if the wife is correct in her assertion that the art work is not an asset of the trust.
The liquidator asserts that the court does not have the power to make any orders by way of the injunction as sought by the wife because there is no provision in the Corporations Act 2001 (Cth) (‘the Corporations Act’) to make such an injunction.
This is not a submission I accept in light of the provisions set out in Part VIIIAA of the Family Law Act 1975 (Cth) (‘the Family Law Act’).
Part VIIIAA of the Family Law Act deals with the power of the court to make orders and injunctions binding third parties. Relevantly:
a)Section 90AB defines a third party as “a person who is not a party to the marriage” (noting that a “person” includes a “body politic or corporate as well as an individual”).[4]
b)Section 90AC makes it clear that the provisions in Part VIII apply “despite anything to the contrary” in any other law of the Commonwealth, or anything in a trust deed or instrument.
c)Section 90AF(2) provides the court with the power to make “any other order, or grant any other injunction that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.”
[4] Acts Interpretation Act 1901 (Cth), s 2C.
d)Sections 90AF(3) and (4) provide that the court may only make an order or grant an injunction if:
(3) (a)the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b)if the order or injunction concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and
(c)the third party has been accorded procedural fairness in relation to the making of the order or injunction; and
(d) for an injunction or order under subsection 114(1)--the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and
(e)for an injunction under subsection 114(3)--the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and
(f) the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4).
(4)The matters are as follows:
(a) the taxation effect (if any) of the order or injunction on the parties to the marriage;
(b) the taxation effect (if any) of the order or injunction on the third party;
(c) the social security effect (if any) of the order or injunction on the parties to the marriage;
(d) the third party's administrative costs in relation to the order or injunction;
(e) if the order or injunction concerns a debt of a party to the marriage--the capacity of a party to the marriage to repay the debt after the order is made or the injunction is granted;
Thus it must be said that the court certainly has the power to make an injunction binding a third party (in this instance the liquidator), subject to the constraints and considerations set out in s 90AF(3) and (4). Or put differently, the exercise of discretion to make an injunction against a third party is fettered.
The liquidator also asserts that the assets of the D Family Trust are no longer a “financial resource” of the parties for the purposes of sections 75(2)(b) and 79(4)(e) of the Family Law Act. Again, this is an assertion with which I do not agree because I do not agree that the parties’ interest in the D Family Trust is limited to that of expectant beneficiaries. Rather, the husband and the wife are the single biggest creditors of the trust. As such, while the parties have an expectation that they may receive a distribution of the capital of the trust, the parties interest in the trust as creditors (albeit that they might not realise the full amount of what is owed to them), is one that fits within the broad definition of property in section 4(a) of the Family Law Act.
The question in these proceedings then becomes a question as to whether or not the court should make the injunction(s) sought by the wife, or frankly some other injunction that would permit the liquidator to fulfil some of its statutory obligations.
In my view, there is a strong basis for the making of an injunction that restrains the liquidator from dealing with the real property at Suburb C that the wife wishes to retain, because in my view such orders are at this stage reasonably necessary and appropriate to effect a division of property between the parties:
a)That either way the net assets of the trust appear to form the bulk of the property of the parties one way or another, when looking at the liabilities of the trust.
b)That the net value of the properties at approximately $486,950 is a figure which is much less than the unpaid distributions owing to the husband and the wife (a combined figure of $988,406). Indeed, even the combined capital value of the properties at $850,000 is less than the unpaid distributions owing to the husband and the wife.
c)It remains to be seen what the overall property available for division between the parties is, but I cannot at this stage exclude the possibility, that the wife’s entitlements may result in her being able to retain the Suburb C properties.
d)The wife has expressed her willingness and intention to meet the ongoing mortgage liabilities for both of the Suburb C properties and as such, she is not exposing the trust (and as a consequence the liquidator) to any potential losses.
e)There is a distinct possibility that if the wife is able to retain the Suburb C properties as part of her overall entitlements, her doing so may well mitigate the losses of the trust, as there will not be any sales costs, agency fees and commissions, and in addition capital gains tax will not be required to be paid.
f)A limited injunction will mean that the liquidator is able to properly attend to the balance of its statutory obligations, which includes assets that the wife has not expressed a desire to retain, and potentially release funds for the discharging of debts owed by the trust (including to the ATO).
The Wife’s Application for a transfer of the proceedings to the Family Court of Australia
There is no doubt that the Federal Circuit Court Australia can of its own volition or on the application of a party, transfer proceedings to the Family Court of Australia.[5]
[5] Federal Circuit Court of Australia Act 1999 (Cth) s 39; Federal Circuit Court Rules 2001 (Cth) r 8.02.
The wife’s application to transfer the proceedings to the Family Court of Australia is said to be grounded in her position that the Federal Circuit Court of Australia does not have original jurisdiction in the same way that the Family Court of Australia has (pursuant to section 1337C of the Corporations Act) to deal with issues and make orders under the Corporations Act.
My preliminary view is that there are likely three alternative pathways for me to be satisfied that the Federal Circuit Court of Australia does indeed have jurisdiction to deal with issues arising under the Corporations Act, either by way of:
a)Original jurisdiction (accepting that there is conjecture about the same);
b)Associated jurisdiction (section 18 of the FCCA Act); or
c)Accrued jurisdiction.
However, for present purposes it is not necessary for me to determine this question conclusively because the wife has not sought any orders on either a final or an interim basis pursuant to jurisdiction found in the Corporations Act.
That reason alone in my view is fatal to the application to transfer the proceedings at the present time, and I accordingly decline to do so at this stage.
For all of the reasons I have enunciated in these reasons, I now make those orders that appear at the commencement of these reasons.
I certify that the preceding fifty three (53) paragraphs are a true copy of the reasons for judgment of Judge Kari
Associate:
Date: 25 May 2020
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