Cox & Cox

[2018] FamCA 620

FAMILY COURT OF AUSTRALIA

Cox & Cox [2018] FamCA 620

FAMILY LAW – PROPERTY – Interim proceedings – Injunctive powers pursuant to s 114 of the Family Law Act 1975 (Cth) – Matrimonial cause – Conflict between the parties – Business of the parties at risk of financial failure – Interim orders crafted to preserve the asset and do not create prejudice to either party.

Family Law Act 1975 (Cth) s 4(1)(e), 114

Jackson v Suburb J Industries Limited (1987) 162 CLR 612
R v Dovey, Ex-parte Ross (1979) 141 CLR 526
Waugh & Waugh (2000) FLC 93-052

APPLICANT: Mr Cox

RESPONDENT: Ms Cox

FILE NUMBER: ADC 710 of 2018

DATE DELIVERED: 17 August 2018

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 10 August 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Clark

SOLICITOR FOR THE APPLICANT: Howe Jenkin

COUNSEL FOR THE RESPONDENT: Ms Kari

SOLICiTOR FOR THE RESPONDENT: Barnes Brinsley Shaw Lawyers

Orders

(1)That until further order the parties do forthwith appoint Mr B of C Accountants, (“Mr B”) as follows:-

(a)As Director of the following companies, with voting rights at any meeting of directors:-

(i)E Pty Ltd (ACN …);

(ii)D Pty Ltd (ACN …);

(iii)F Pty Ltd (ACN …),

(collectively referred to as “the companies”), with such appointment to occur at a meeting of the directors to be convened within twenty four (24) hours of the date of the making of these orders; and

(b)Upon Mr B being appointed as a Director of the companies, as Chairman of the companies and Executive Director of E Pty Ltd.

(2)That the parties do all such things as may be required to include Mr B in the Director and Officers liabilities insurance cover taken out for each of the companies at the cost of each of the companies and do provide an indemnity to Mr B for any liability incurred by him as a Director and Chairman of the companies in the ordinary course of business of the companies.

(3)That until further order the parties do attend all meetings of the directors of the companies and only attend at the business premises of the companies as directed by Mr B.

(4)That the parties do at the conclusion of the meeting of directors referred to in order 1, sign the written resolutions of the companies as annexed hereto as Appendix One to the reasons for judgment to give effect to orders 1 to 3 inclusive of these orders.

(5)That in default of either party signing the resolutions to effect orders 1 to 3 inclusive of these orders, pursuant to Section 106A of the Family Law Act 1975 (as amended), a Registrar or Deputy Registrar of the Family Court of Australia, upon proof by affidavit of such refusal or neglect, is hereby appointed to sign the resolutions on behalf of the defaulting party and do all such acts and things and execute such other documents as shall be necessary to give full force and effect thereto.

(6)That the orders of the Federal Circuit Court of Australia made in these proceedings on 26 March 2018 be varied to:-

(a)       Delete subparagraph 1(b)(i);

(b)Delete the words “and provide the wife with unhindered access” in subparagraph 1(c); and order 2 be discharged.

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 Cox & Cox 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 Adelaide

FILE NUMBER: ADC 710 of 2018

Mr Cox

Applicant

And

Ms Cox

Respondent

REASONS FOR JUDGMENT

introduction

1.Mr Cox (“the husband”) is 78 years of age and Ms Cox (“the wife”) is 75 years of age.

2.The parties have been married for 47 years and have two adult children who are financially independent of the parties.

3.In March 1974 the parties started a business known as E Pty Ltd (ACN …) (“EPL”) which engages in manufacturing.

4.The husband and wife are co-directors and equal shareholders in EPL.

5.To better run the business, the parties started up two subsidiary companies namely, the D Pty Ltd (ACN …) (“DPL”) and F Pty Ltd C (ACN …) (“FPL”).

6.The business has three divisions that deal with manufacturing, and sales both national and international.

7.The husband contends that the financial fortune of the business is mixed. The international sales are buoyant whereas the national sales have significantly decreased.

8.The business remains profitable but the husband is concerned that it is finely poised and could become unprofitable.

9.EPL operates from premises owned by it at G Street, Suburb H (“EPL premises”).

10.Whilst not necessarily agreed and in any event subject to valuation by a single expert, the parties acknowledge that the business and the premises are of substantial value. In addition, EPL and its subsidiaries hold substantial cash reserves.

11.The parties undertook well-defined roles with the husband involved in the management of development and production and the wife oversaw the sales, marketing, quality control and human resources of the business. The staff are loyal to the business and have been trusted by the parties.

12.Following separation in 2016 the husband and the wife lived separately and apart but under the same roof at their Suburb J property.

13.The husband is keen to retire from the business. He is prepared for its sale and the parties took advice from the company accountants C Accountants that a general manager should be appointed to take over the day to day management of the business and to report to the parties. They would cease to be employees and would receive a dividend each month.

14.Following the decision to appoint a general manager, the wife appeared to change her mind and without notice or discussion with the husband made unilateral decisions in respect of the management of the business. The husband contends that she began to “micromanage the business in a way which she did not do previously”.

15.Various decisions were made by the wife which were considered by the husband to be adverse to the integrity of the business and threatened its financial viability and caused some key employees to either leave or to seriously consider their future employment with the business.

16.The husband summarised the wife’s behaviour as “idiosyncratic” and “disordered”.

17.The circumstances reached a critical point in February 2018 when the wife blocked the husband’s access to the business bank accounts and with the assistance of two employees refused the husband’s entry to the business premises. The husband alleges that he was assaulted by the wife and that she then kicked his motor vehicle.

18.The wife gave a direction to the staff that the locks of the business premises had been changed thereby denying the husband any future access.

19.The husband has confidence in Mr B of C Accountants who has been the long-term accountant of the business.

20.Mr B has developed a good understand of the business having been invited by the parties to take on a role as quasi-Chairman of the Board. It is his advice that the wife’s conduct and business decisions place the financial viability of the business at high risk.

21.On 26 March 2018, the wife appeared in person and consented to an order that enabled the business accountants to continue to assist the business and in particular to prepare financial statements and tax returns for the 2017 financial year.

22.The orders also provided for the parties to continue to be involved in the business but restrained from making any decision on the operation of the companies unless determined with the prior consent of both parties in writing.

23.It was anticipated that the parties would attend mediation to explore a resolution of their differences.

24.On 13 June 2018 an order was made that required the parties to engage the accountants to assist in the appointment of an accounts/finance manager and that Mr B be instructed to oversee the financial operation of the business.

25.The interim orders failed to resolve the dispute and the husband considered that the wife’s conduct and poor decision making was unaffected by the orders. Money was continuing to be withdrawn from the company accounts without the knowledge of the husband. Various invoices in respect of important international suppliers were not paid. Complaints were received by customers and staff at the consequences of the wife’s poor decision making.

26.The husband attended the premises on various dates in July 2018 and found that the doors had been locked with a heavy chain and padlock that prevented not only the husband but also the staff from being able to enter the premises.

27.On 23 July 2018 Mr B forwarded correspondence to the parties which highlighted the following:-

·His grave concerns for the financial governance of the company.

·That he had not been given access to the financial records of the company pursuant to the Court Order of 13 June 2018.

·That he had not been given adequate financial management reports since early 2018.

·That key members of staff, in particular the export manager had resigned apparently as a consequence of the wife’s conduct and business decisions.

·That funds available to meet staff, the Australian Tax Office and creditors are at risk of being exhausted.

THE APPLICATION

28.The husband seeks the following interim orders:-

(1)That an injunction be granted restraining the wife, in her capacity as a director of EPL, DPL and FPL (“the companies”) from doing any act or thing in the operation of the business of the companies without the husband’s prior consent in writing.

(2)That until further order the parties do forthwith appoint Mr B of C Accountants as a director of the companies with voting rights at any director’s meeting with such appointment to occur at a meeting of directors of the companies to be convened within seven (7) days of the date of the interim orders. That on being appointed as a director that Mr B be appointed as Chairman of the companies and Executive Director of EPL.

(3)That the parties do all such things as may be required to include Mr B in a Director and Officers liability insurance cover taken out for each of the companies at the cost of the companies and do provide an indemnity to him for any liability incurred by him as a director and chairman of the companies in the ordinary course of the companies’ business.

(4)That until further order the parties do attend all meetings of directors and only attend at the office premises of the companies as directed by Mr B.

29.Mr B has indicated his preparedness to accept the role as proposed by the husband.

30.The orders sought by the husband have been further refined and now are set out in a Minute of Order tendered to the Court by the husband’s counsel. The significant amendment provides the following additional order:-

That the parties do at the conclusion of the meeting of directors referred to in order 1 sign the written resolutions of the companies annexed hereto to give effect to orders 1 to 3 inclusive of these orders.

And to seek variations to an order made on 26 March 2018.

LEGAL PRINCIPLES

31.The gravamen of the orders sought is to require the wife by mandatory injunction to vote in such a way that would appoint Mr B as a Director of the company. In particular, the orders would require the wife (or a Registrar of the Court should the wife refuse to sign) to execute certain resolutions.

32.The husband relies upon the injunctive power pursuant to s 114 of the Family Law Act 1975 (Cth) (“the Act”).

33.An injunction can be either a form of relief in its own right, or can be an ancillary form of relief which is in support of a principal form of relief.

34.Proceedings can be instituted for an independent injunction under s 114(1) of the Act only if they constitute a matrimonial cause as defined in s (4)(1). The relevant matrimonial cause is that in para (e) of the definition of “matrimonial cause” in s (4)(1).

35.“Matrimonial cause” is defined in s (4)(1)(e) as:-

Proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship (other than proceedings under a law of a State or Territory prescribed for the purpose of section 114AB).

36.There are two basic requirements of a matrimonial cause namely, that there must be circumstances arising out of the marital relationship and the proceedings must be between parties to a marriage.

37.An injunction pursuant to s 114(1) or s 114(3) can be used to restrain the disposition of property where the orders is necessary to protect a party’s rights in proceedings that are pending.

38.In R v Dovey, Ex-parte Ross (1979) 141 CLR 526, an order of injunction was used to restrain the husband from exercising his voting rights which if unfettered would have allowed the husband to sell the former matrimonial home owned by a company under his control.

39.In Waugh & Waugh (2000) FLC 93-052 at [35] the Full Court quoted with approval, the following statement of the High Court in Jackson v Suburb J Industries Limited (1987) 162 CLR 612 as per Deane J at 623:-

“As a general proposition, it should now be accepted in this country that ‘a Mareva injunction can be granted … if the circumstances are such that there is a danger of [the defendant’s] absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied’…”

(citations omitted).

40.And at [43] of Waugh & Waugh (supra) the following is stated:-

In their joint judgment in Cardile v LED Builders Pty Ltd (supra) Gaudron, McHugh, Gummow and Callinan JJ, after referring to a number of judicial statements about the limited nature of a “Mareva” order, said this (at 310 – 311, paras [50] and [51]:)-

“[50]… Nevertheless, those statements should not obscure the reality that the granting of a Mareva order is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight ‘negative pledge’ species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of a court invited to make an order of that kind. An order lightly or wrongly granted may have a capacity to impair or restrict commerce just as much as one appropriately granted may facilitate and depose its due conduct.

…

CONCLUSION

41.The husband is concerned to preserve the value of the business asset. It is the single most valuable asset of the parties and recognising as he now does that the parties ability to continue to manage and operate the business profitably is challenged by their age, it is his intention to ensure that the business remains viable and should the wife not wish to retain the business, it can be sold in a way that will maximise its marketability and sale price.

42.The wife has not yet filed a response. There is some concern as to whether she can conduct the proceedings on her behalf and may need the appointment of a Case Guardian.

43.The orders sought by the husband appear to have been carefully crafted so that they do not create any prejudice to the wife. The husband proposes that both he and the wife have limited involvement and that the business management is left in the hands of Mr B and other key staff members.

44.In all the circumstances, I consider that the current conflict between the parties is adverse to the interests of the business and places it at significant risk of financial failure.

45.I propose to make the orders as sought by the husband.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 17 August 2018.

Associate: 

Date:  17 August 2018

APPENDIX ONE

1. WRITTEN RESOLUTION EPL PTY. LTD. ACN …

2. E PTY. LTD. ACN …

   (the 'Company')

   Pursuant to clause 67 of the Constitution of the Company

   The following resolutions were passed by written resolution pursuant to clause 67 of the Constitution of the Company by all the Directors of the Company who are eligible to vote as resolutions of the Company on  / /2018:

   1.IT WAS RESOLVED that Mr B of C Accountants ('Mr B') be appointed as a director of the Company, with voting rights at any meetings of Directors (the 'Appointment').

   2.IT WAS RESOLVED that following the Appointment, the Directors of the Company resolve that Mr B be appointed as Executive Director of the Company and Chairman of the Board of Directors of the Company.

   3.IT WAS RESOLVED that following the Appointment, Mr B be included in the schedule of Directors, covered by the liability insurance of the Directors and Officers of the Company.

   4.IT WAS RESOLVED that to the extent permitted by law the Company, Mr Cox ('Mr Cox') and Cox ('Ms Cox') do indemnify Mr B for any liability incurred by him as Director and Chairman of the Company in the ordinary course of the business of the Company.

   5.IT WAS RESOLVED that, pursuant to the Interim Orders of the Family Court of Australia dated   /         /2018, Ms Cox and Mr Cox agree to not attend the business premises of the Company, other than as directed by Mr B.

   The Directors whose signatures appear below state that they are in favour of  the resolution  set out in this document with effect from the date on which this document was last signed by a Director. The Directors also acknowledge that two or more identical documents, each of which is signed by one or more Directors, together constitute one document signed by those Directors on the day on which they signed the separate documents.

   SIGNED BY:

   Ms Cox and Mr Cox in their capacities as both Directors and Shareholders of the Company

3. WRITTEN RESOLUTION

   DPL CORPORATION PTY. LTD. (ACN …)

   
   

   DPL CORPORATION PTY. LTD. (CAN…)

   (the 'Company')

   Pursuant to the Constitution of the Company and the Corporations Act 2001 (Cth)

   The following resolutions were passed by written resolution pursuant to the provisions contained under the Constitution of the Company and the Corporations Act 2001 (Cth) by Ms Cox ('Ms Cox') and Mr Cox ('Mr Cox') in their capacities as both Directors and Shareholders of the Company who are eligible to vote as resolutions of the Company and the Shareholders on / /2018:

   1.IT WAS RESOLVED that Mr B of C Accountants ('Mr B') be appointed as a director of the Company, with voting rights at any meetings of Directors (the 'Appointment').

   2.IT WAS RESOLVED that following the Appointment, the Directors of the Company resolve that Mr B be appointed as Executive Director of the Company and Chairman of the Board of Directors of the Company.

   3.IT WAS RESOLVED that following the Appointment, Mr B be included in the schedule of Directors, covered by the liability insurance of the Directors and Officers of the Company.

   4.IT WAS RESOLVED that to the extent permitted by law the Company, Mr Cox and Ms Cox do indemnify Mr B for any liability incurred by him as Director and Chairman of the Company in the ordinary course of the business of the Company.

   5.IT WAS RESOLVED that, pursuant to the Interim Orders of the Family Court of Australia     dated     /           /2018, Ms Cox and Mr Cox agree to not attend the business premises of the Company, other than as directed by Mr B.

   Ms Cox and Mr Cox, in their capacities as both Directors and Shareholders of the Company, whose signatures appear below, state that they are in favour of the resolution set out in this document with effect from the date on which this document was last signed by Ms Cox or Mr Cox. Ms Cox and Mr Cox also acknowledge that two or more identical documents, each of which is signed by one or more Directors and/or Shareholders, together constitute one document signed by those Directors and/or Shareholders on the day on which they signed the separate documents.

   SIGNED BY:

   Ms Cox and Mr Cox in their capacities as both Directors and Shareholders of the Company

1. WRITTEN RESOLUTION

   F PTY LTD (ACN …)

   
   

   F PTY LTD (ACN …)

   (the 'Company')

   Pursuant to the Constitution of the Company and the Corporations Act 2001 (Cth)

   The following resolutions were passed by written resolution pursuant to the provisions contained under the Constitution of the Company and the Corporations Act 2001 (Cth) by Ms Cox ('Ms Cox') and Mr Cox ('Mr Cox') in their capacities as both Directors and Shareholders of the Company who are eligible to vote as resolutions of the Company and the Shareholders on / /2018:

   1.IT WAS RESOLVED that Mr B of C Accountants Chartered Accountants ('Mr B') be appointed as a director of the Company, with voting rights at any meetings of Directors (the 'Appointment').

   2.IT WAS RESOLVED that following the Appointment, the Directors of the Company resolve that Mr B be appointed as Executive Director of the Company and Chairman of the Board of Directors of the Company.

   3.IT WAS RESOLVED that following the Appointment, Mr B be included in the schedule of Directors, covered by the liability insurance of the Directors and Officers of the Company.

   4.IT WAS RESOLVED that to the extent permitted by law the Company, Mr Cox and Ms Cox do indemnify Mr B for any liability incurred by him as Director and Chairman of the Company in the ordinary course of the business of the Company.

   5.IT WAS RESOLVED that, pursuant to the Interim Orders of the Family Court of Australia dated             /       /2018, Ms Cox and Mr Cox agree to not attend the business premises of the Company, other than as directed by Mr B.

   Ms Cox and Mr Cox, in their capacities as both Directors and Shareholders of the Company, whose signatures appear below, state that they are in favour of the resolution set out in this document with effect from the date on which this document was last signed by Ms Cox or Mr Cox. Ms Cox and Mr Cox also acknowledge that two or more identical documents, each of which is signed by one or more Directors and/or Shareholders, together constitute one document signed by those Directors and/or Shareholders on the day on which they signed the separate documents.

   SIGNED BY:

   Ms Cox and Mr Cox in their capacities as both Directors and Shareholders of the Company