BOYLE & BOYLE

FAMILY COURT OF AUSTRALIA

BOYLE & BOYLE

[2018] FamCA 346

FAMILY LAW – PROPERTY – Interim s 79 application and s 114 application for injunction by husband to seek reinstatement of his position in a trustee company for the purposes of enabling him to bring oppression proceedings concerning the sale value of the trust’s interest in another business – Where the absence of evidence to show value in such oppression action and likelihood of success militates against granting the husband’s application-application refused

Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)

Campbell and Back Office Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Catalano v Managing Australia Destinations Pty Ltd (2014) 314 ALR 62
Malec v J C Hutton Pty Ltd (1990) 169 CLR 638
Morgan v 45 Flers Ave Pty Ltd (1986) 10 ACLR 692
Re Saul D Harrison & Sons Plc [1995] 1 BCLC 14
Sieling & Sieling (1979) FLC 90-627
Stanford & Stanford (2012) FLC 93-518
Strahan & Strahan [2009] FamCAFC 166
Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459

APPLICANT:

Mr Boyle

RESPONDENT:

Ms Boyle

FILE NUMBER:

MLC

3580

2018

DATE DELIVERED:

21 May 2018

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

8 May 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Hutchings with Mr Hibble

SOLICITOR FOR THE APPLICANT:	Tisher Liner Fc Law
COUNSEL FOR THE RESPONDENT:	Ms Vohra SC

SOLICITOR FOR THE RESPONDENT:

MDL Law

Orders

Save as otherwise set out in the following orders, the application in a case filed by the husband on 27 April 2018 (as amended by the proposed orders contained in the minutes tendered) is dismissed.
Paragraphs 7 and 11 of the minutes (relating to the re-appointment of the husband as a director) are adjourned to a date to be fixed to be relisted should the husband be so advised.
Paragraphs 5, 8, 9 and 10 of the said minutes are dismissed.
Paragraphs 4, 5, 6 and the first of the two paragraphs numbered 7 of the minutes (relating to the application under s 79 of the Act) are dismissed.
The second paragraph numbered 7 of the minutes (relating to application under s 79 of the Act) is adjourned to a date to be fixed to be relisted should the husband be so advised.
The response of the wife filed 3 May 2018 to the husband’s proposed interlocutory orders is dismissed.
The application for interim orders set out in the wife’s response filed 30 April 2018 is dismissed.
The extant applications for final orders sought by the husband and the wife are adjourned for a directions hearing before Registrar Jenkins at 9.30am on 4 July 2018.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Boyle & Boyle has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 3580 of 2018

Mr Boyle

Applicant

And

Ms Boyle

Respondent

REASONS FOR JUDGMENT

The present interlocutory proceedings arise out of the long marriage of Mr Boyle (“the husband”) to Ms Boyle (“the wife”) which came to an end when they separated in April 2016.

The parties and their entities

The husband and wife had set up a corporate and trust structure. Having been incorporated, B Pty Ltd (BPL) became the trustee of the Boyle Family Trust. Relevantly, the trust held units in the C Group (CG). It is unnecessary for me to set out the more formal arrangements of ownership because it was not a contentious issue. Suffice to say, BPL had a one third interest in CG. The two other unit holders were apparently similar entities and, needless to say, there were individuals behind them. For my purposes, I shall describe the unit holders or their controllers in these reasons (without intending any disrespect) as D and E.
To complete the relevant picture, the directors of BPL were the husband and wife but the shareholder was the wife. Both parties are professionals. Until recently, the husband was a senior manager of CG. As will be seen below, that position has been terminated. One might immediately conclude that these various structures were specifically put in place for wealth creation and preservation.

The CG dispute

All was fine until a number of events changed the corporate and legal structures. Well after the marriage came to an end and using her corporate power as the sole shareholder of BPL, the wife removed the husband as a director. Subsequently, CG terminated his position with the Group.
All of these activities occurred in the midst of an issue of who was to ultimately own and run CG. In the evidence to which I turn, it will be seen that there were negotiations back and forth between the husband and wife and between them and D and E. They culminated in D and E (with the consensus of the wife) endeavouring to settle what they presumably would say was an agreement that they would buy out the interest of BPL in CG. That was not something with which the husband was happy and it has led to the current dispute.
Along the way, the negotiations between the husband and wife included a mediation in which they endeavoured to resolve the family law dispute. With that over-simplistic background, I turn to the immediate issue.

The oppression proceedings

The present issue concerns the desire of the husband to again become a director of BPL so that he can issue what was loosely described as oppression proceedings in the Supreme Court of Victoria under the Corporations Law against D and E (in their corporate guises).
On the face of the documents initially filed in this Court, the proposed Supreme Court proceedings were to be by the husband and the wife to seek to unwind what he described as a “forced sale” of the interest of BPL in CG but, in the alternative, he desired to seek a payment from D and E as compensation for what he said was not a fair market value for the BPL shares. When the hearing began, the husband’s counsel said that things “had moved on” by which I understood him to mean that the husband is now specifically seeking to advance or increase the assets of the husband and the wife pursuing the oppression proceedings on the basis that the offer to BPL was not proper or correct. The difficulty is that the wife disagrees that the action should be commenced.

The relief now sought

No proceedings were commenced or joined in this Court under the Corporations Law to deal with any oppression issue. Rather, the husband relies upon the Family Law Act 1975 (Cth) (“the Act”) to pursue relief against the wife so that he can then pursue D and E in the Supreme Court.
The husband took two different but specific approaches seeking relief. The first was to seek an injunction against the wife to reinstate him as a director which in turn would give him standing to bring the oppression proceedings. The second proposed relief was, as an alternative, to have the shares in BPL held by the wife transferred to him to enable him to take that same action.
The relief in both cases is discretionary. In respect of the latter, the Court still has to consider whether any exercise of the powers under s 79 of the Act is just and equitable. In respect of the former, to rely upon the s 114 power, the Court has to be satisfied that it is proper to make the order.
In respect of both exercises, the husband maintains that he is protecting the parties’ assets. I have to consider whether he is protecting assets or whether he is endeavouring to increase the assets for division and if so, is there a difference and, in any event is that necessary in this case? That question is raised because, in the exercise of the s 79 power, the husband makes clear that the action is an attempt to increase the assets in dispute in this Court.
It is significant therefore that the wife opposes his orders. She is content with what had occurred at CG and opposes the husband commencing oppression proceedings.
In the middle of all of this, D and E have paid to the solicitors for the wife the sum of just over $7 million for the interest of BPL in CG but that payment has not been accepted by the wife because of these proceedings.
Having considered the factual basis upon which the husband desires to increase the assets and then the justification for granting the relief sought, the husband’s application fails. My reasons are as follows.

The substantive property proceedings

The substantive property proceedings between the husband and wife were commenced by him on 5 April 2018. Before those were issued, there had been negotiations between the parties including a mediation arranged between the legal practitioners where the mediator was the Honourable Peter Young QC.
When the husband issued proceedings, and in fairness, it seems he did it quickly when all negotiations broke down, he sought to be excused from particularising his proposed relief pending “the completion of the proposed sale of the Boyle Family Trust’s interest in the C Group of entities” and the parties “jointly obtaining tax advice”. Thus, by 5 April, he was contemplating a sale would proceed.
In the context of the wife’s opposition to the present relief sought by the husband, her response neither agreed nor disputed the orders sought by the husband but rather, sought there be a “property settlement with respect to assets of 65 per cent to the wife and 35 per cent to the husband”. Whilst not pleaded precisely such as to be seen as orders which would alter particular property interests, the wife’s position was at least apparent.

The position changes

Notwithstanding his position had only been filed on 5 April, on 27 April 2018, the husband filed an application in a case seeking interlocutory orders as to his reappointment as a director of B Pty Ltd and, effectively, that the parties together issue proceedings under the Corporations Act 2001 (Cth).
As earlier indicated, at the hearing on 8 May, counsel for the husband began by indicating that time had moved on and, in addition to being re-instated as director relying on the injunctive power, he also sought in the order under s 79 of the Act for the wife to transfer to him, all of the shares; that is, all of the shares in BPL.

Additional relief

The husband also sought an injunction against the wife from “sharing, providing or allowing any information” with another person. The subtle message in seeking that order was that the husband thought the wife was cooperating with, or providing information to, the other unit holders who otherwise control CG. That is denied by the wife to the extent that there is any indication of impropriety.
The husband also sought orders relating to a Suburb F home in which the wife lives and that money held by her solicitor from the sale of another property be used to reimburse the husband for mortgage instalments debited to his bank account. He otherwise sought orders that the balance of monies from the sale of property be divided equally. There was a further order pursued relating to the disposal of a property at Suburb G.
In her response to the husband’s orders, the wife also sought a number of orders including relating to child support departure issues, the disposal of $16,833 held in trust, tax obligations advice and what to do with the proceeds of the sale of the one-third interest in the C Group; that is, the $7 million.

Oppression proceedings

Members of companies have rights and remedies under the Corporations Act. The relevant chapter sets out the grounds for a court to exercise its powers. For example, the court may make an order if the conduct of a company’s affairs, or a resolution of members of a company, is either contrary to the interests of the members as a whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
The husband therefore maintains that if he were a member, he would bring the claim in the Victorian Supreme Court. That could only be on the basis that the actions of the other members were oppressive to his interests or the interests of BPL.
Section 233(1) of the Corporation Act 2001 provides as follows:
233     Orders the Court can make
(1)      The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a)     that the company be wound up;
(b)that the company’s existing constitution be modified or repealed;
(c)regulating the conduct of the company’s affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company’s share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g)authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company’s property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)requiring a person to do a specified act.
It will be obvious that the powers of the court are very wide.
Section 234 requires the applicant to be a member of the company (and “member” is defined), or a person who has ceased to be a member of the company if the application relates to the circumstances in which they cease to be a member. It is not disputed by the wife that he requires that standing but she opposes him having it. As I understand her argument, there has been no oppression of a member because she is satisfied with the resultant sale.
A test of whether or not the actions were oppressive, or indeed unfairly prejudicial, is to be seen objectively through the eyes of a commercial bystander. That bystander is said to possess any special skill, knowledge or acumen possessed by directors. The directors must have in mind the importance of furthering the corporate object (Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459 per Brennan J). There is no dispute that CG is a commercial company despite the “ownership” revolving around three unit holder members in their capacities as trustees of three family trusts.
Absent the involvement of D and E in the present proceedings, I am unable to say what view they have taken not only about oppression proceedings but also whether they perceive the acquisition by them of the BPL units as having been completed. The $7 million has been paid into the trust account of the solicitors for the wife but, consistent with the wife’s undertaking to the husband about settling when he wanted to institute oppression proceedings, it has not accepted in satisfaction of BPL’s entitlements. It is unclear what that means to the interests of the wife but she appears content to settle on the terms offered to her. That said, the correspondence upon which each party relied shows the wife had concerns about the valuation exercise undertaken that gave rise to the figure of $7 million. That is not a matter that affects my determination other than it is part of the consideration at play in the exercise of the broad discretion as to both types of relief sought.
It is also said by the husband that his position as a senior manager of CG was terminated on the basis of some wrong-doing in his role. I do not consider that is a matter I should take into account. Apart from the evidence being vague and the allegations unsubstantiated, as I understand the law, such matters would not preclude the husband bringing an oppression application. In Campbell and Back Office Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, the High Court held that breaches of contractual arrangements including under a shareholders’ agreement, did not preclude engagement with oppression provisions under corporations legislation. The husband does not have to prove dishonest motive, purpose or intention (Campbell). The objective test requires the court to identify a substantive commercial unfairness (Morgan v 45 Flers Ave Pty Ltd (1986) 10 ACLR 692 and Catalano v Managing Australia Destinations Pty Ltd (2014) 314 ALR 62). In Morgan, Young JA referred to the relevant conduct being so unfair that reasonable directors would have considered the decision unfair.
It is not my task to do that objective assessment but rather to consider whether or not the discretion should be exercised taking into account whether there is a justiciable cause that may have some impact on the proceedings in this Court. That falls to the balancing exercise of the competing interests of the husband and the wife. Ultimately, that examines the balance of convenience. The balance of convenience must include the potential loss to the wife as much as the husband’s likelihood of success.
With the wife opposing the proposed oppression proceedings, the order contemplated by the husband on its face seems to ask this Court to ignore the rights of the wife as a director and shareholder. Her opposition to the oppression action must mean that if she is unjustified in that position, some adjustment could be made in the property proceedings for any wantonness or negligence on her part. That approach in the balancing of competing interests would require the Court to consider the parameters of the property dispute. It seems that absent a definitive answer about the taxation consequences of any sale of BPL, there is still a significant amount of money available for distribution between the husband and wife. The dilemma is that whilst the wife has defined the parameters from her perspective, the husband has not. More importantly, it is unclear what he expects would be added to any asset values if he was successful.

Background to the involvement of BPL in CG

In 2009, the husband commenced working as a senior manager of CG and that continued until February 2018. That termination was almost two years after the husband and wife separated in April 2016.
Almost a year after the husband and wife separated, the husband’s relationship with Mr D and Mr E broke down.
The wife is the appointor of the trust and the sole shareholder of BPL; as I have already indicated, that is how the parties, and in particular, the husband, set it up. Until 20 February 2018, both the husband and the wife were directors.
Between the three “owners” of CG, there was a shareholders’ agreement. It was executed in 2015. Paragraph 15 of the agreement provides that unless all unit holders agree, or the agreement otherwise provides, transfer of units will not be effective unless all of the units held by the unit holder are transferred and all loans from the relevant trust to the unit holder repaid in full. Presumably, that gives the remaining unit holders control and protection.
The agreement also provided that the remaining unit holders would have the first option to buy out the selling unit holders’ units. It provided that if a unit holder desired to sell units, there was a procedure which included the selling party giving one month notice. What then followed was that the value of the units had to be negotiated and failing agreement, the value was to be determined by a procedure set out in the document. A regime then followed including for the payment and transfer of the units along with the repayment of any loans.
The agreement provided for a default position if the remaining unit holders did not desire to buy the units of the proposed seller but it also provided that all unit holders had to act reasonably in any sale process and thereby not unreasonably withhold, or delay, their consent to any third party acquiring a selling party’s interest.

The valuation procedure referred to in the shareholders’ agreement is quite explicitly defined in paragraph 1.32 of the shareholders and unit holders’ agreement.
On 31 March 2017, D and E through their entities offered to purchase the interest of BPL for just over $4.2 million plus unpaid entitlements and profit entitlements. Whilst that offer can be seen to significantly lower than what has been more recently discussed, it did not matter because nothing happened and the offer lapsed at the end of the financial year 30 June 2017.
In the meantime, the husband and the wife, as a separated couple, were endeavouring to negotiate their own property settlement and attended the mediation. It is common ground that agreement was reached that the husband would have the opportunity to purchase the interests of D and E for himself. That agreement seemed also to initially find favour with D and E because in October 2017, they reached agreement with (presumably) BPL that the husband would purchase their interests at $7.5 million each. However, the agreement provided that if the husband could not raise the necessary finance, D and E would purchase BPL’s interest for $5.7 million plus a profit distribution, management fees and an expense reimbursement which would have taken the amount to be received by BPL to $6.4 million.
Over the ensuing weeks, discussions went on between everyone mostly directed to whether or not the husband had the necessary finance. At paragraph 14(g) of the wife’s affidavit, she said it was clear to her that the husband could not raise the finance so she withdrew her support. That meant that the alternate position (that is, D and E buying out the interest of BPL) applied.
Despite the wife’s indication, the husband continued to pursue finance and the wife agreed to allow him to do so.
On 20 December 2017, the husband’s lawyers wrote that the husband proposed to settle on 19 January 2018. Apparently for the first time, the other unit holders disagreed. Mr D’s lawyer responded by saying that as the husband had not completed the purchase by 18 December 2017 (and that had been demanded by D and E in writing back on 5 December 2017), the other unit holders had decided to exercise their option to acquire the interest of BPL. Whilst at first blush that may have been seen as a fait accompli, D and E went on to say that the husband could continue to endeavour to purchase their interest if the sale agreement was signed by 5.00pm on 21 December 2017; that is, the following day.
On 21 December 2017, no sale agreement was signed but the husband made his offer of $7.5 million to each of D and E with a settlement to occur on 19 January. He went one step further and said that if the settlement did not occur on that date, BPL would sell the relevant interest to D and E for $6.4 million according to the October 2017 agreement. On 22 December 2017 both husband and wife signed that sales agreement.
However, on 12 January 2018, Mr D indicated he was not willing to sell his interest and three days later, Mr E’s lawyer stated the same.
That too may have sounded like a fait accompli, but on 18 January 2018, a meeting occurred between the husband and D and E at which no agreement was reached. The husband continued to pursue finance. However, he must not have been entirely confident about the finance options open to him because he proposed to the wife that BPL be sold to D and E for $8.3 million plus three months wages and various ancillary amounts of money. That offer was put to D and E indicating that it was open until 25 January (seven days later) and settlement would take place on 31 January 2018.
D and E did not respond to the husband’s offer.

Termination of the husband’s employment

There was a lull for some weeks until 12 February 2018 when the husband’s employment at CG was terminated. That termination meant that under the shareholders’ agreement (Clause 21.3) the husband (and presumably the wife) had three months to offer any units held by BPL to the other unit holders (Clause 15.3 of the shareholders’ agreement).
Immediately after the husband’s employment was terminated, silence followed and the wife’s solicitors wrote to the husband’s solicitors saying that if the husband did not immediately respond about what steps he was taking to sell the interest of BPL to D and E, she would commence negotiations herself.
Whilst in January, the husband had proposed that BPL sell its interest to D and E for $8.3 million plus extras, on 19 February 2018, he said that he was prepared to buy their interests for $8.6 million or in the alternative, D and E could buy his interest for $8.6 million failing which, he would issue oppression proceedings in the Supreme Court.
By 19 February 2018, the wife decided that the appropriate course was to proceed to sell BPL according to the pre-Christmas agreement. In her capacity as the sole shareholder, on 20 February 2018, the wife held a meeting (presumably by herself) and removed the husband as a director and secretary and appointed herself as the secretary in his stead. Whilst there was clear criticism of the wife for that unilateral action, the husband did not take legal proceedings at that time. There is an assertion in the husband’s evidence that this action was part of some arrangement with D and E but it is neither appropriate nor necessary that I make any such finding.
Three days after being removed as a director and secretary, the husband demanded undertakings from the wife, one of which she gave, preventing her from changing BPL as trustee of the Boyle Family Trust, altering the shareholding or officer bearers of BPL or making or accepting any proposal or offer in relation to BPL or participating in any activities which would have changed the office holders or shareholders of the entities that comprise the C Group of entities.
While that was going on, D offered (obviously now to the wife) to purchase the interest of BPL for $7.5 million but only left the offer open for five days.
Whilst the clock ticked after the D’s offer, the husband approached the wife asking her to allow him to try again to buy out D and E but she declined.
On 27 February 2018, the husband’s lawyers asserted that the share price for the BPL interest was $1 million less than that prescribed for the shareholdings of D and E and that issue needed to be negotiated further. The husband offered to negotiate. At that time, he said that he had a “letter of comfort” indicating that there was a $15 million loan available to him. The wife’s response was if the offer was unconditional that day, (and it was obviously not), she would agree to him negotiating with D and E.
On 28 February 2018, D said he was not interested in selling to the husband. Over the ensuing days, there was argument about the tax implications if the offers were accepted and whether the correct figures had been used for the calculations. All of this had an air of desperation about it.
By 5 March 2018, D wanted the husband removed as a director of the C Group and the wife agreed subject to her right to appoint a replacement director.
By 13 March 2018, the wife’s lawyer referred to the shareholders’ agreement and observed that as the husband was no longer an employee, the shareholders’ agreement required the disposal of the units. Thus, the wife wanted to accept the D and E’ offer despite the husband saying that he wanted to commence oppression proceedings. There is some confusing correspondence indicating, almost as a tactical response, that the husband delay the sale beyond 30 June to enable them to take advantage of the formula that would, in his view, provide a better outcome.
One week later, and for reasons that are unclear, D increased his offer from $7.5 million to $7.6 million but only left it open for a day. The wife sought an extension beyond the deadline but that was rejected by D and E.
On 29 March 2018, the husband claimed to the wife that he could increase their “asset pool” by more than $500,000 if the agreement that had been provided to them by D and E was negotiated. The wife maintained her stance that the sale should proceed. That is when the litigation in this Court began. The affidavit of the husband (filed 27 April 2018) said of this issue:
[7]Based on my 9 years’ experience in the business and my intimate knowledge of its day to day operations up until 12 February 2018, I believe that our family trust may be entitled to be paid consideration for its shares and profits up until 24 April 2018, totalling approximately $11,200,000 million (sic). The “purchasers” have not tendered to our family trust, its share of the profit from the business between January 2018 and 24 April 2018, and I estimate that amount alone at approximately $500,000. (underlining is my emphasis)
The difficulty I have with the husband’s evidence, which has not been tested, is how much weight to give to it. It is evidence upon which he relies of what may be available to the husband and wife if he is successful. Against that are the words underlined all of which are speculative and not justified by any basis other than his experience. I acknowledge that he was a senior manager but how were these calculations undertaken? In my view, it is not evidence upon which I can place any weight.
On 5 April 2018, the husband issued proceedings in this Court against the wife and D and E were notified. But, they were advised that the husband was not opposed to the proposed sale. Rather, he wanted to be involved in further negotiation and he was seeking orders from this Court, the terms of which were to be first agreed as between he and the wife. D and E then invoked Clause 21.3(d) of the shareholders’ agreement which provides (relevantly):
A unit holder will be required to offer its units forthwith for sale in accordance with procedure set out in Clause 15.3 upon the occurrence of anyone of the following events, namely if a unit holder or director:
…
(d) within three months of resigning or being terminated (for whatever reason) from their employment with the company.
On 23 April 2018 D, through lawyers, deposited $7.1 million into the trust account of the lawyers for the wife and sent the relevant share transfers for execution. Properly, the wife’s solicitors responded indicating that payment was not accepted and would be held in escrow until it could be returned. The view of D was that the sale was complete and that the accountant of the company, who held a power of attorney, could execute the share transfers. That all led to the urgent hearing for interlocutory relief in this court.

The husband’s submission

The husband’s submission was that there was no prejudice to the wife if he took her role and began the oppression proceedings other than there was “some risk” or costs or interest. I am very conscious of the Campbell decision which makes clear that breach of contractual obligations does not preclude oppression proceedings. Whatever accusations there are against the husband in his former role as a senior manager, it is one of the bases upon which D and E seemed to invoke the requirement that the BPL units be transferred. That may not matter depending upon whether or not the husband’s claim, if he could make it, is only in respect of the quantum of the relief sought.

Protection of assets?

Counsel for the husband submitted that the action in this court related to the protection of assets. All parties know what money is sitting there but the husband wants to “protect” the assets of the parties by increasing their value. I have doubts as to whether it is an asset protection order he seeks rather than an “asset pool” or asset value order. The difficulty in assessing this suggested protection is that I have no indication such as his written advice as to the likely success of increasing that value. I do have his assertion about a million dollar discrepancy and his own estimate that he may be able to obtain another $500,000 or better still, get the parties into the next financial year when the share of profits may be included, but not much more.
There is also no written advice of an accountant in evidence. The husband took issue with the independence of the company accountant who was said to be preparing the valuation of the business (presumably for the purposes of the relevant offer) and he noted that the financial statements for the year ended 30 June 2017 were “drafts” albeit that the company accountants indicated they did not expect the draft accounts to change in any material way. However, D and E have refused the requests of both the husband and the wife (in their capacity as the “owners” of BPL) for updated details of the financials. I am unsure what is behind that but I have noted the termination of the husband’s position in the company triggered the argument about the transfer of the units and there is the apparent agreement in December 2017 as to quantum if nothing else.
The Court also has no draft statement of claim and am I unaware of the specific relief the husband seeks ultimately in this Court in the substantive proceedings. That is, what is the potential gain if the husband succeeded and would it matter in the ultimate alteration of property interests here?
In his affidavit filed 8 May 2018, the husband said that the grounds of the oppression claim included the termination of his employment without valid reason on 12 February 2018 (paragraph 8 of the affidavit 8 May 2018) but that presumably is a separate cause of action no doubt personal to the husband and there is no suggestion that the wife desires to thwart him taking some action of that nature. I do not know how, if at all, that would fit into the oppression action and what difference it would make to the value of BPL.

The wife’s position

The wife’s position was that if the husband was put back into a position where he was a director, he would embark upon those proceedings which she anticipated would be lengthy, expensive and unsuccessful. That pessimism which was not supported by any tangible evidence runs counter to the husband’s assertion (which I accept) that the Supreme Court conducts a corporations list which is the envy of this Court and that it would be heard expeditiously. Against that however, no-one knows what D and E will do. The wife also alleges she is in a precarious financial position because she has no money. Counsel for the husband observed that that was a temporary position although I doubt that is much comfort. There are two mortgages which require payments of $2389 per month not to mention other liabilities and the husband is currently unemployed.

Discussion

The substantial part of the parties’ assets is tied up in this dispute. The most fundamental problem for me is to determine whether, as alleged by the wife, this oppression proceeding would make any substantial difference that could not otherwise be rectified by some adjustment as between the husband and the wife under s 79 of the Act. In other words, does the ultimate benefit to the parties outweigh the potential loss?
The “forced sale” decision which seems no longer to be an issue relates primarily to valuation. In respect of that value, there were various amounts under negotiation that did not become contentious until just before proceedings were issued. The husband’s idea of pushing negotiations into the next financial year has an air of opportunism about it. This last-ditched stand over money has made the whole issue contentious. If it was decided that the time element was determined by the shareholders’ agreement, it is conceivable that another court may view the constant negotiation as having gone on long enough in the commercial relationship such as to make that relationship untenable (see Re Saul D Harrison & Sons Plc [1995] 1 BCLC 14 in the English Court of Appeal).
My task is not to second-guess what another court would do but rather, decide whether the requisite discretion in both ss 114 and 79 should be exercised in the husband’s favour.
The husband’s application seeks a transfer to him of “all (the wife’s) right, title and interest, specifically including her shareholding” in BPL.
The right, title and interest presumably means the shareholding in the corporate trustee, and perhaps the positions of authority if they can be deemed to be property, along with the beneficial interest in the trust. The proposed s 79 order seeks to give the husband legal ownership of the shares to enable him to make such decisions as he sees fit to “protect” the relevant asset. Nothing in the husband’s proposed orders suggested that he would be restrained from exercising any specific entitlements of ownership; what, if any, equitable ownership the wife would have, and, whether, the court could later alter the ownership other than by using the setting aside or alteration powers in s 79A of the Act. Unashamedly, the husband seeks control of the asset.
There is no undertaking as to damages proffered which would usually militate against granting injunctive relief particularly here where the wife’s position is that the husband is risking money and presumably time. There is also no indication how the wife’s immediate financial dilemma can be resolved and that is a factor that that must be weighed in the balance of convenience test.
Senior Counsel for the wife submitted that the Court had to contemplate whether such an order was just and equitable in the first place citing Stanford & Stanford (2012) FLC 93-518. That was a reference to the question of first identifying the legal and equitable ownership of the parties in property and determining whether it was just and equitable to alter those interests at all. It was the husband who set up the structure of BPL with the wife as shareholder with him as a director but I consider that of minimal significance because the wife does not seek to retain the trust. In any event, if there was a “Stanford” point, this Court would look to the evidence to see what assumptions lay behind the structure and whether the parties had set it in place for their mutual benefit. I doubt in the circumstances that there is an issue associated with that although the husband has given me no indication of his view about the wife’s claim for 65 per cent of whatever assets the parties have.

The husband’s evidence

The husband filed three affidavits. The first, filed on 5 April 2018, was directed to the injunctive relief now sought. He said that he had “originally” hoped to retain the trust’s interest in the CG business and to acquire it but he acknowledged “that outcome was ultimately not achievable”. Thus, his first evidence was about asset protection and not to seek control of the business interest. The implication in that is that he only wanted fair value. It is not clear why some adjustment could not be made against the wife if he could show that she was being wanton, negligent or reckless with their respective assets.
The second affidavit filed 27 April 2018 was again in support of his application for injunctive relief to “protect and preserve our matrimonial assets”. The substance of this evidence was that the wife was not doing anything to protect the BPL asset and that his disclosed advice was that he had standing to issue oppression proceedings in the Supreme Court where it “would be likely to order an independent valuation of the business, to ascertain the fair value” of the trust’s interest. No indication was given as to what that fair value was likely to be.
The third affidavit filed 8 May 2018 was designed to reply to the evidence of the wife. He said that D and E “erroneously” relied on the original shareholders agreement to complete the sale but that was a reference to the wife’s evidence that those unit holders should not use the power of attorney to achieve the end result. Nothing otherwise addressed the issues raised by the wife about the various sale negotiations even if he had threatened to take oppression proceedings in February. Nothing was clear about why he had negotiated as the wife described and why it had been such a struggle to achieve financial backing.

In Strahan & Strahan [2009] FamCAFC 166, the Full Court examined the issues associated with partial distribution of property pending final property settlement proceedings. Two steps need to be considered. First, the Court must consider whether there is jurisdiction. The second requires a consideration of the relevant factors under section 79 of the Act.
Boland and O’Ryan JJ said at [132]:
In relation to the first stage, in our view, when considering whether to exercise the power under ss 79 and 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.
Their Honours said that an order under section 79 is usually a “once and for all order”. That concept can be seen at [113]:
There is only one exercise of the power under s 79 of the Act. However, this power may “be exercised by a succession of orders until the power … is exhausted” and the power is exhausted “when there remains no property … with respect to which orders by way of alteration of interests in property could be or have been made”: Gabel per Bryant CJ and Coleman J at [57] . As Finn J in Gabel at [125] said: “it is only the final order, which deals on a final basis with all known property of the parties, which completes the one single exercise of the s 79 power”. Further, an earlier order whether made under s 79(6) or s 80(1)(h) is capable of alteration at any time prior to, or as part of the final exercise of the s 79 power: Gabel per Bryant CJ and Coleman J at [69]–[73] and Finn J at [126] .(citations omitted)
In respect of the first question, the husband acknowledges that whilst he would like to have retained the asset, it is not practicable to do so. He seeks the exercise of the power here for a purpose other than ownership. As the Full Court said, the over-arching principle is the interests of justice. Normally, an exercise of the s 79 power is a once only exercise. The husband must be able to show what such an order would mean for the wife as well as himself. As he is now apparently only seeking money, it is not clear to me how he sees her entitlement.
In his initiating application, the husband did not plead with any particularity and none of his evidence since then has given me any clear understanding of how he sees the interests of both he and wife are affected. In other words, is this proposed oppression action worthwhile? Is there any risk beyond interest and costs? If not, why not make the offer of an undertaking as to damages. In the absence of some indication of the parameters of the property dispute with the wife, the imprecise orders proposed by the husband are also not supported by any evidence that might satisfy s 79 of the Act. I have the responsive evidence of the wife that she is in need of money and receives no assistance from the husband because of his unemployment. That evidence from the husband’s perspective needs a response to give some indication about whether there is an entitlement worth pursuing.
Taking all these matters into account, I find in the circumstances this is not a case in which it would be just and equitable to exercise the s 79(1) power.
The second basis for the husband’s orders concerns the injunctive orders sought against the wife which, if granted, would see the husband returned as a director of the corporate trustee.
The jurisdiction to grant interlocutory injunctions is a statutory jurisdiction derived from s 114 and/or s 34(1) of the Act. In respect of the latter, the Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, and to issue, or direct the issue of, writs of such kinds, as the Court considers appropriate. It is not suggested by the wife that the power which the husband presses is not present.
Section 114(1) empowers the Court to make such order and grant such injunction as it considers appropriate in relation to the property of a party. Section 114(3) provides that a court exercising jurisdiction in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise, in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.
In Sieling & Sieling (1979) FLC 90-627 the Full Court observed:
The power to grant injunctions is, of course, a discretionary power, not to be exercised lightly. The Court must balance the hardship to each party of granting or refusing an order, and frame its order in such a way as to impose no further restriction than is necessary to achieve the protection of the applicant’s interest. It will not lightly interfere with the rights of an owner of property on the basis of a vague or uncertain claim.
That last sentence highlights some of the problem here. The wife does not want to interfere with what has been achieved. The parameters of the claim of the husband are unclear. I am uncomfortable about what any further litigation will achieve.
The husband has the onus of demonstrating:
(a)he has an existing or potential claim to an order altering property interests under s 79 of the Act; and
(b)there is an objective risk or danger that the claim may be prejudiced unless an injunction is granted.
I accept that the husband has a claim in this Court and the wife agrees because she pleads that there should be an alteration as to 65 per cent to her and 35 per cent to the husband. The parameters of that part of the dispute remain unclear but if the wife’s position was correct, 35 per cent of the ultimate result of any claim in the Supreme Court would have to be the focus rather than 100 per cent of the value because the wife does not wish to litigate.
Thus, it is the second question about risk that requires consideration. Assessment of risk to the husband’s claim requires allowance for adverse possibilities. The husband submitted that apart from interest and costs, the risk was minimal. The wife’s position is that this is litigation that is unnecessary and she does not want to be involved but it would hold up her access to money. Counsel for the husband submitted that in the Supreme Court, it was probable that the Court would grant the wife access to money presumably on the basis that there is little dispute that BPL is entitled to something. I have no sense of how that would work and most importantly, whether D and E would have a defence to any action that would preclude the release of money. No authority was presented to me to indicate the power of that Court to take that sort of action. Those uncertainties may not add to the risk of loss but they do add to the risk of the wife’s entitlements being held up in this Court.
Assessment of risk is not on the balance of probabilities but by reference to the existence and magnitude of that risk (see Malec v J C Hutton Pty Ltd (1990) 169 CLR 638). I find the absence of evidence and the uncertainty around just what is the husband’s claim both in this Court and the Supreme Court heightens the magnitude of that risk.
Ultimately, I find that the husband has not demonstrated that his entitlement to a property settlement in this court will have been prejudiced by a refusal of his application to direct the wife to re-instate him as a director.
The husband then sought further interlocutory orders that:
(a)Jointly held fund of about $16,000 be paid out as $4,549 to him to refund mortgage instalments taken from his account and otherwise the balance be divided equally “as and by way of part property settlement”; and
(b)That the net sale proceeds of the Suburb G property be paid out equally, again by way of part property settlement.
The wife sought that the husband’s application be dismissed but her earlier (and first) response sought orders:
(a)A child support departure order;
(b)That the $16,000 to which the husband referred be applied towards the May and June mortgage payments, the Suburb G water rates and then the balance be divided as to 2/3 to the wife and the balance to the husband;
(c)That the Suburb G proceeds be placed in trust;
(d)That apart from a payment of $300,000 each to the husband and wife, the BPL money be held in trust; and
(e)That a named accountant be engaged to advise the parties on the tax liabilities around BPL.
It would seem that there is common ground about the mortgage instalments having been paid from the husband’s account but the wife said in an affidavit filed 3 May 2018 that she had increased a line of credit so that various debts could be paid including money due to his parents. There appears no consensus about whether the husband should be given back that money and accordingly, the wife’s evidence is the only material upon which I can make any determination. The order should not therefore be made.
There is also no consensus about the division of the balance of that money and no agreement as to what should happen to the BPL money. The wife’s position is that each party should take $300,000 from it but, as I understand the position that the wife adopted, the money is not acknowledged as having been received in satisfaction of the contractual arrangement she has made with the other unit holders. Until that is sorted out, I do not consider that I can exercise the alteration of property powers (other than by consent and that is not apparent here) for the reasons that I have set out earlier about orders at an interim stage.
The wife’s application for orders under the child support legislation was also not supported by any material and in any event, her evidence is that the contractual arrangement with the school has now been terminated. There is no evidence of the nature and extent of any assessment that would enable me to use the relevant powers in that Act. That application must also fail.

I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 21 May 2018.

Associate:

Date: 21 May 2018

[2018] FamCA 346

21 May 2018

Key Legal Topics

Areas of Law

Family Law

Civil Procedure

Legal Concepts

Appeal

Jurisdiction

Procedural Fairness

Remedies