Cook and Cook and Ors (No 2)

[2009] FamCA 1089

FAMILY COURT OF AUSTRALIA

COOK & COOK AND ORS (NO. 2) [2009] FamCA 1089

FAMILY LAW – PROPERTY – Substantial and complex commercial litigation – Case part-heard after 14 day hearing – Substantial written submissions received – Substantial property asset now the subject of appointment of liquidator by creditors and appointment of receiver/manager by primary bank pursuant to mortgage – Further and continuing discloser of corporate and financial information – Application for further interim orders and distribution of interim property – Partial property orders foreshadowed but adjourned – Interim division of superannuation assets now sought – Failure to give notice to liquidator and receiver/manager for related corporate entities – Involvement of third parties – Substantial and ongoing costs – All matters adjourned part-heard

Family Law Act 1975 (Cth)

APPLICANT: MR COOK

RESPONDENT: MR COOK

FILE NUMBER: MLF 1997 of 2003

DATE DELIVERED: 5 OCTOBER 2009

PLACE DELIVERED: MELBOURNE

PLACE HEARD: MELBOURNE

JUDGMENT OF: YOUNG J

HEARING DATE: 5 OCTOBER 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: MR ST JOHN SC

SOLICITOR FOR THE APPLICANT: MARSHALLS & DENT

COUNSEL FOR THE RESPONDENT: MR SPICER

SOLICITOR FOR THE RESPONDENT: KENNEDY WISEWOULDS

Orders

IT IS ORDERED:

1. THAT all extant applications are adjourned on a part-heard basis before Young J to 11 November 2009 at 11.30 a.m.

2. THAT until that adjourned hearing date the husband, by himself, his servants or agents be and is hereby restrained from dealing with or withdrawing funds or any form of pension or other entitlement from the Spectrum Superannuation Fund or the Tower Superannuation Fund or likewise from so dealing with the Strategy Superannuation Fund but save for all current financial and pension arrangements now in place with that Fund.

3. THAT within fourteen (14) days the solicitors for the wife make, file and serve any further application in a case detailing specific orders sought and supported by an appropriate affidavit(s) of the wife or other witness.

4. THAT within a further ten (10) days the husband make, file and serve any response to any further interim or other orders sought by the wife and file an affidavit(s) in support thereof.

5. THAT notice of any further orders sought and notice of the adjourned hearing date be given by the wife’s solicitors to TG Firm, as Receiver Managers appointed, and J Firm as Liquidators appointed to appropriate corporate entities identified in these proceedings.

6. THAT the husband do all acts and things and provide all necessary and ongoing instructions to his solicitors to ensure that the solicitors for the wife are provided with immediate access to all correspondence, applications and other documents forwarded between himself and each of the Liquidator and Receiver Manager in relation to XC and its property development project, finance or all related corporate or financial issues.

7. THAT the wife be at liberty to issue any further subpoenae as may be required to prepare or assist her legal argument in these proceedings.

8. RESERVE liberty to each of the husband and wife, or to the Liquidator or Receiver Manager, should they wish to make application to this Court, but upon proper documentation filed and served and then the matter is to be listed by prior arrangement with his associate before Young J.

9. THAT the extempore reasons for judgment be transcribed, be placed upon the Court file and be made available to the parties and, upon request to the Liquidator and the Receiver Manager.

10. THAT the issue of any costs of the husband or wife of and incidental to the appearance at Court this day be reserved for legal argument and consideration before Young J on the adjourned hearing date.

IT IS CERTIFIED

1. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Senior Counsel and Counsel for each of the husband and wife.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 1997 of 2003

MS COOK

Applicant

And

MR COOK

Respondent

REASONS FOR JUDGMENT

1. This matter was listed before me this day for the purpose of receiving oral submissions from Counsel for both the husband and wife, supplementing their substantial written submissions.  The background can be summarised as substantial litigation from 2003, which has occupied the Court and many of the judges, both present Judges and Judges long retired.  I heard this matter over approximately 14 days in and around the month of July of this year, and my judgment on all section 79 issues is reserved.  By agreement, a timetable was prepared and ordered by the Court so that written submissions could be filed by Counsel, and that has been completed as of Friday of last week.

2. Mr St John, Senior Counsel for the wife, and Ms Stewart, have, at all times, appeared for her.  Mr Spicer of Counsel has, at all times, appeared for the husband, and each of them appear to this day.  Both parties are in Court.  This is complex litigation, made more so by the diverse range of corporate, valuation and financial issues that have occupied evidence time before the Court, from the parties, and an expert witness.  The affidavits were long and complex.  The written submissions are involved.  There are many issues upon which findings have been sought, and for the purposes of this ex tempore judgment, I do not further touch upon all of the matters of that defended hearing, and my reserved judgment, which remains outstanding.  In the current circumstances, that judgment is unable to be now completed, as there remains further issues of, and related to, the identification and valuation of the pool of assets, and the first step in the four step process to determine a just and equitable settlement of property pursuant to section 79(2) of the Act.

3. A number of matters have recently occurred outside of this Court, which centrally touch upon the evidence and at least one of the substantial assets.  The husband, through a corporate entity, was involved with the acquisition and staged development of a property in outer Melbourne known as XC property.  In a joint venture agreement with Mr BT, there was the planned reconstruction of the historic home thereon, and otherwise, the further proposed subdivision and development of residential allotments as a housing estate, or retirement village, or whatever may hereafter have been determined was economically appropriate.  When the matter was last before me in evidence, there were significant issues before the Court about the ongoing financing and development of the project, and to that extent, the husband gave evidence that he was wholly occupied in having others, on his behalf, re-arrange finance for the development.  There was then a gentleman, acting as some form of mortgage procurer, in Asia, talking to banks and/or other financial institutions, about a borrowing facility of up to 10 million dollars (US), and at a substantial procurement fee of at least one million dollars (US).

4. At the time evidence concluded, those matters all remained somewhat uncertain.  I had raised many issues with Counsel and of the parties, particularly the husband, during the trial, and the matter was left to be dealt with in written submissions, but on the basis that the Court would be advised of ongoing issues and developments.  This morning I have already raised with Counsel that there were at least four occasions on which I raised matters with the parties or which Counsel for the husband indicated to the court that the progress of commercial aspects of this case would be disclosed.  For example, at page 741 of the transcript on 28 July, Mr Spicer, in the context of the timetable for preparation of written submissions, said:

   “I can indicate to the court that if there is any development within the three week period, I will notify both my learned friends and the court”.

   Subsequently at page 792 of the transcript, it is said by Mr Spicer in response to a question from me, that:

   “I have got some instructions from my client on that, that through me, your Honour, I can indicate I have spoken to my client, and that he will inform either Ms Grobtuch, myself, or both of us, of any significant event, and that will be communicated both to my learned friends and to the court”.

   And again, at page 855 of the transcript on 29 July 2009, it is said by Mr Spicer:

   “I have indicated that I have instructions, your Honour, to give an assurance – I am not sure that an undertaking is appropriate – that within 14 days I undertake to inform the court of whatever the instructions I receive are”.

   And finally, at page 888 of the transcript, there are certain timetable observations made by myself, of the ongoing need for accurate updating of the Court.

5. With that very brief overview and background, the matter adjourned pending written submissions and oral supplementation of submissions to this day.  I have read the primary submissions and submissions in response now filed by the husband.  I have read the substantial submissions of the wife, which in themselves, are 85 pages in length, and all of the various draft orders and amended orders, and the basis of the pool of assets upon which those orders are sought.  As an overview, and without, in any way, commenting upon a reserve judgment, but that which I have said in Court already today, the pool of assets, or at least the discrepancy in the pool of assets, has only grown over the time, so that the gulf between the parties is now far greater as to the potential pool of assets as it was prior to the commencement of the case.  There are any number of reasons, some valid and proper, and other reasons, for that upon which I do not now comment, as they would form part of a substantial judgment, if and whenever delivered.

6. The issues today are two-fold.  I was advised by letter dated 30 September 2009, from the solicitors for the wife, that they have received correspondence as to the appointment of a receiver/manager to the entity XC Pty Ltd.  As matters more particularly were disclosed today, the firm TG has been appointed by Bank West as receiver/manager of two corporate entities, they being, XC Proprietary Limited (and this entity is the landowner of the XC development), and XCP Pty Ltd.  Mr BM, a partner with TG Firm and the co-receiver, along with his principal and colleague, Mr NA, was appointed on 21 September 2009, by Bank West, as receiver/manager of those two entities.  They are in the course now of undertaking their investigations, seeking co-operation from the husband and others, and preparing a statement of position as a result of a questionnaire sent to the husband and his brother, Mr W Cook, who originally had filed an affidavit in the proceedings, but who elected not to give evidence, and was, therefore, not available to the Court.

7. It now transpires that, as a result of instructions Mr Spicer has from his client, that the husband has, in fact, given personal guarantees to Bank West for the debt in his capacity as a director of that corporate entity, and also additional personal guarantees for insurance premiums, estimated to be no less than $40,000 per annum.  It was also suggested that both the brother, Mr W Cook, and perhaps Mr BT, have given personal guarantees, although that matter is not wholly substantiated on the disclosure made to the Court today.

8. The additional matter that arose at court that was unknown prior to this morning, was that a different firm of chartered accountants, J Firm, has now been appointed as a liquidator of the entity, XC Development Proprietary Limited.  The husband is not a director of this company, he having previously resigned on 3 April 2009.  To the knowledge of the court, the remaining director is Mr BT.  The groups or individuals behind the liquidation are seemingly various creditors, such as the company that has connected and constructed sewerage to the development project, along with various builders, architects, and other like groups.

9. Two exhibits were shown to the court today, and no objection was taken.  Marked as exhibit “W42” is a statement by way of a company extract from ASIC.  That highlights the directorship of Mr BT, the resignation of the husband, and more particularly, the issues that arose between 5 August and 2 September this year.  That is immediately after the closure of the evidence in the case, and whilst judgment was reserved and during the period that written submissions were prepared and lodged.  Those notifications included the pronouncement of a winding up order, the appointment of a liquidator by the Supreme Court of Victoria, a report as to the affairs of the winding up and the preliminary report of the liquidator lodged 2 September 2009.  None of those matters had been, at any stage, disclosed to the Court.  Mr Spicer was at some length to explain that he, and he indicated both his solicitor, and perhaps, more importantly, his client, were not actively involved in, or did not have the knowledge of, that liquidation process, presumably, on that basis, because it was being conducted at the development company end by Mr BT.  I carefully make no further finding in that regard as it need await further evidence if it is to be of relevance.

10. The second document tendered and marked as exhibit “W43”, is a copy caveat which highlights that the liquidator of XC Developments Pty Ltd, caused to be lodged on or about 16 September 2009, a caveat over all of the land comprised within the XC project, and more particularly described in Certificate of Title Volume … Folio ….  Again, the basis of the lodgement of that caveat, the knowledge of its existence, and the economic and legal consequences thereof, may all await another day.

11. For those various reasons, great financial uncertainty may now surround the XC development.  It is but one aspect of the property case of the husband and wife.  Its former valuation was a matter of agreement on the basis of a valuation undertaken by C B Richard Ellis.  The valuation document was exhibit “W33” in the proceedings, as at August 2008.  Its valuation was subject to a high level of dispute, and certainly extensive cross-examination, primarily as to an appropriate timing date, or net valuation there from, after expenditure, which is, and remains, largely unknown as to total quantum thereof.  Again, I do not further touch upon or develop these contentious issues which are part of the wider judgment in the matter.

12. The issues that arose today were, in part, an explanation by Counsel, or questioning by Counsel, of the issues that had developed, and as can be expected in a matter of the legal complexity and detail with which proceedings have been before the Court, issues of the bona fides of one of the parties and disclosure, and co-operation with the court, were all issues put to the fore.

13. An interesting interim aspect of the case arose when Mr Spicer, on behalf of the husband, indicated his client would not consent, but may well not oppose, an interim order being made to transfer the home from the joint names of the parties, to the sole name of the wife.  That home has a valuation agreed at $1,150,000, and is encumbered by an NAB mortgage of $150,000.  Thus, the equity is one million dollars.  The caveat to that proposal was that the mortgage could not be cleared by the husband before 31 December of this year.  The wife, of course, would accept that property in her sole name, subject to the immediate clearance of the mortgage.

14. It does raise the question of what is an appropriate interim property determination, and in what circumstances, particularly having regard to the recent as yet unreported decision of the Full Court in Strahan & Strahan, that judgment being a judgment of their Honours Boland, Thackray and O’Ryan JJ, delivered 14 September 2009, and which is now very much the authorative word on all issues of interim property settlement and related matters, and which significantly does vary the previous Full Court decision and logic in Harris & Harris.  The issue that I raised with Counsel was, of course, the position of the receiver/manager, and the liquidator, and the need to give appropriate knowledge or notice of any transactions, all be that they are in no way related to XC.

15. I am not going to make any interim property order today, first, on the basis that no appropriate notices have been given to interested parties;  secondly, that there is no application before the Court;  thirdly, that the husband does not consent and sees a modified form thereof;  and finally, between now and the shortened adjourned date when I will bring this matter back to court on 11 November, there does not seem to be any threat that I can detect as to that home, or its current title, or to the wife’s use and occupancy thereof.  If there are to be interim orders sought on a partial property basis, then they do need, in my opinion, to be carefully prepared and lodged with the Court, and it also affords the parties an opportunity to discuss appropriate orders, or more appropriately deal with the encumbrance on title to that home.

16. What arose thereafter was that Mr St John SC addressed the Court on various injunctive and other orders that should be pronounced today.  Time was of the essence, and these orders were drawn over lunch, and Mr Spicer, and certainly his client, had not seen the draft of orders sought at 2.15 p.m., when this matter resumed.  I am now delivering these ex tempore reasons for judgment without leaving the bench, and it is after 4.00 p.m.  I have heard brief submissions from both parties, but I am not satisfied that the husband has read or fully understood the orders sought.  However, the issue is that orders need to be considered in real time, and on the basis of perceived or actual urgency before the Court.  Mr Spicer has had the opportunity of referring me to a well-known reported decision of Waugh v Waugh, and the impact and requirement of that decision on the injunctive making process.

17. On the basis of a hand-written document before me, the wife seeks to restrain the husband, until further order, by himself, his servants and agents, and including in his capacity as a director of any entity or company other than within the Z Group, from disposing of, transferring, encumbering or diminishing assets, but with the qualification that expenditure on money on ordinary living expenses may be excluded.  A further injunction is sought to restrain the husband from dealing with, or withdrawing, superannuation funds from three nominated accounts, which are well-known to the Court, and which have been the subject of extensive evidence in the section 79 proceedings.

18. I must therefore balance the established need and urgency of such interim orders on the basis of their preparation over lunch, and limited knowledge or opportunity for the husband to respond, or even to understand the orders, against the risk that the husband, or others on his behalf, might act to defeat the process before the Court, to divert assets, or to take and use funds that are, and should be, before the Court.  Mr Spicer urged that I should establish, before any injunctive order is made, a course of action to defeat both the anticipated order of the Court, and perhaps in a wider context, the reasonable financial order and security that the parties have in the current ownership structure of assets that has existed for the many years post their separation earlier this decade.

19. I am mindful that the matter comes back before me on 11 November.  I am further mindful that in this part-heard case there does need to be strict compliance with court procedures and protocols.  The application of necessity is in hand-writing, but I do think that if orders are sought, they should be prepared in a more orderly fashion as to the application which supports those orders, and in this case, notice should be given both to the receiver/manager and to the liquidator, via each of their firms of accountants, and we were advised today that Middletons are the solicitors engaged by the receiver/manager.

1. On balance, in respect of the personal and corporate injunctive order sought in paragraph 1(a) of the orders now before me, I will not pronounce any order today.  I do so with the caveat, that there is an understanding of the wife’s concern, and on one view, there has either been a remarkable lack of interest or knowledge by the husband, or otherwise a deliberate removal, by himself, from circumstances where otherwise he would have, or should have, or could have, known of events that were developing.  All of those matters remain of a level of importance to the Court, and perhaps at some great expense to the parties in this continuing monumental legal cost case, will continue to exercise the mind of Counsel and solicitors, and ultimately, at the financial cost of the parties, who yet may finish up with little or nothing from these procedures before the Court, where they have been for the past six years.

2. Superannuation is an issue where an injunctive order is sought, and perhaps with an overwhelming measure of caution, but because I am wholly aware of certain aspects of the available superannuation moneys, and notwithstanding what I have earlier said, and balancing all aspects of a just and proper outcome, I intend to make, until further order, a restraint upon the husband from dealing with or withdrawing moneys from Spectrum Superannuation Fund, or Tower Superannuation Fund, or otherwise from changing any financial arrangement with Strategy Superannuation Fund, and by that, I endorse, in the short term, the current interim arrangement which was explained to the Court in July by way of payments from that by way of an allocated pension of some $2,374 per calendar month.  There may be any number of yet to be considered financial or taxation aspects of otherwise interfering with that allocated pension, where counsel need urgently to reflect on those matters and advise their clients and the Court.

3. Otherwise, the various orders that Mr St John, on behalf of the wife, seeks, identify a procedure for the filing of further affidavits, the provisions of questions to be asked of the husband or witnesses, for other documentation to be provided to the Court by and on behalf of the husband and/or receivers, and/or liquidators.  Additionally, subpoenas are flagged that the wife may wish to issue, and that the wife may wish to file further affidavits in this increasing and more and more complex legal scenario.

4. I intend to take a relatively simple approach, and try, between now and 11 November, avoid a further flurry of documentation to the Court, and the substantial engagement of Counsel and solicitors on this matter.  Perhaps my hope is forlorn, that there could ever be any level of pragmatic or commercial discussion or disclosure, or an understanding that the costs will ultimately become so overwhelming that not only will there be no winners, save the lawyers, but there may not be enough funds to go around.  Again, that is a theme that I have repeated on countless occasions through the hearing, and to which I do not, again, revert.

5. I intend, therefore, to adjourn the matter before me on a part-heard basis, to endeavour to provide a requirement of disclosure by the husband, and a level of involvement of the Court appointed liquidator, and the receiver/manager, so that the wife and her solicitors have equal knowledge, as do the husband’s solicitors, of events that have and will transpire.  I well understand these extempore orders and reasons are endeavouring to cover the situation in a less than perfect manner, but I do what time permits today, and which, hopefully, will put some modest fetter upon expenditure, and highlight to the husband the blunt necessity of urgent, complete and whole co-operation with every aspect of this case.

6. I will have those brief extempore reasons transcribed, placed upon the court file, and made available to all parties.

7. I have tried to be as broad as possible on that issue of leaving any and all costs issues before me, but I will be reluctant to adjourn them again, onwards, beyond 11 November.  I am not saying there will or there will not be a costs order.  I am not saying both parties will receive a costs order, because one party may or may not.  All issues are left open.

8. And finally, there will be certification for counsel, including senior counsel for the wife.

I certify that the preceding paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young

………………………………………………………..
Associate: