Crouch & Crouch - [2008] FMCAfam 472

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CROUCH & CROUCH

[2008] FMCAfam 472

FAMILY LAW – Property – parties married in excess of twenty three years – parties’ partners in farming enterprise – husband living on farm and operating enterprise – wife living in Adelaide – whether restraints should be placed on husband’s operation of business – degree to which husband should report to wife – considerations of justice and convenience.

Family Law Act 1975, s.114

G & T (2004) FLC 93-176

Applicant:

MS CROUCH

Respondent:

MR CROUCH

File Number:

ADC879 of 2008

Judgment of:

Brown FM

Hearing date:

12 May 2008

Date of Last Submission:

12 May 2008

Delivered at:

Adelaide

Delivered on:

14 May 2008

REPRESENTATION

Counsel for the Applicant:

Ms Pyke QC

Solicitors for the Applicant:

Rosey Batt & Associates

Counsel for the Respondent:

Ms Leeson

Solicitors for the Respondent:

Voumard Lawyers

ORDERS

Pursuant to section 26 of the Federal Magistrates Act 1999 the parties and their legal representatives attend a conciliation conference on 19 August 2008 at 9:15am with a Registrar of the court.
That further consideration of this matter is adjourned to 22 August 2008 at 9:30am for further directions and if necessary to fix the matter for hearing.
The husband and wife be restrained from selling, disposing of, encumbering, charging or in any way dealing with any of the plant or equipment of the partnership known as “Mr and Ms Crouch” (“the partnership”) or any other asset of the parties (other than within existing limits of borrowings) without the written consent of the other or an order of this Honourable Court.
The husband and the wife be restrained from selling, disposing of, charging or in any way dealing with any of the stock, crops and grain of the partnership other than by way of sale in the ordinary course of business through a recognised stock or grain agent to bonafide third party purchasers upon ordinary commercial terms. However the husband is authorised to engage in minor transaction involving the sale of such items up to a sum of $500.00 without having recourse to such a recognised stock or grain agent provided that he accounts for such sales to the wife within a reasonable period after such sale has occurred.
The husband do forthwith inform the wife upon the sale of any stock, crops or grain in accordance with paragraph 4 hereof and do forthwith provide to her a copy of all sale, invoices, statement and records and that the sale proceeds be deposited in accordance with paragraph 7 hereof.
The husband and the wife do sign all cheques drawn on the partnership for invoices in excess of $5,000.00 and that the husband do forward same to the wife fortnightly by post to the wife’s residential address for signature by her.
That all partnership funds including from the sale of stock, grain and crops be forthwith deposited upon receipt of same into the partnership accounts with NAB and Bank SA.
That the parties be restrained from debiting or withdrawing any money from the partnership accounts electronically or otherwise other than with respect to the amounts necessary for the day to day conduct of the farming operations of the partnership in the ordinary course of business including wages for bona fide employees and subject to paragraph 4 hereof PROVIDED THAT the husband shall be entitled to draw from the partnership an amount not exceeding $1,000.00 per week in respect of all personal expenses and expenditure of the husband including food, clothing and personal use of motor vehicles.
That the husband do provide to the wife on a monthly basis in writing an accounting in respect of all dealings of the partnership including all moneys received all liabilities incurred and payments made by the partnership.
That the husband subject to the terms of these orders, do conduct the day to day operations of the partnership in accordance with ordinary farming business practices.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
ADELAIDE

ADC879 of 2008

MS CROUCH

Applicant

And

MR CROUCH

Respondent

REASONS FOR JUDGMENT

Introduction

Ms Crouch and Mr Crouch married in 1984. They are the parents of three children aged twenty, eighteen and sixteen. They separated in October 2007.
On 2 April 1987, the parties signed a partnership agreement “Mr. & Ms Crouch”. Pursuant to this partnership agreement, each is entitled to fifty percent of the capital and income of the partnership.
Pursuant to section 9 of the Partnership Act 1891 (South Australia) each of the parties is jointly liable, with the other, for debts incurred by the partnership.
The husband has been engaged in farming, in the [X] area since at least 1978 and his family well before that. The husband apparently first acquired farming land, in the area, around 1978.
The business of the partnership is farming various parcels of land at [X]. The parties bought farming land, during their marriage, at [X], for this purpose. Other parcels of farming land were acquired, again during the marriage, in the husband’s name alone.
The wife puts the value of the various pieces of land at around $3.5 million in total. In addition, the partnership owns much plant and equipment, relating to the operation of the farming business worth a considerable amount of money.
The wife commenced proceedings, in this court on 29 February 2008. She seeks a division of the parties’ matrimonial assets, in as yet an unspecified proportion. The husband responded to this application on 28 April 2008. He too has not formally specified the basis on which the parties’ property should be divided.
Cases involving the division of farming property are very often complex, due to the nature of the property concerned and the manner in which it has been acquired – very often through a process of inheritance.
In addition, particularly in times of rural recession, it may be difficult to access capital, to pay out one of the spouses concerned, without dismantling the farming business involved, which may have serious ramifications for one or other of the parties concerned.
I am not dealing with these complex issues at this stage. Rather some interim issues have arisen, regarding the operation of the partnership, until the parties’ competing applications can be finally determined.
At this stage, the wife seeks orders that would prevent the husband from selling any of the partnership’s assets, including its stock and crops, without her written permission or an order of the court. In addition, she seeks a formal order that both she and the husband sign all cheques related to the partnership and all profits from the sale of crops, stock or other agricultural produce be deposited in the joint partnership accounts. Finally, she wishes the husband to account to her, on a fortnightly basis regarding the operations of the partnership.
The husband is a professional farmer. It is his position that, both now and in the past, he has made all the necessary executive decisions regarding how the farming business has been run, including what crops are planted, what stock is retained and the terms of sale of both crops and livestock. He wishes to retain this executive control, untrammelled, as he sees it, from excessive interference and possibly caprice, on the wife’s part.
It is the wife’s position that she was also integrally involved in the farm business, during the parties’ marriage. Axiomatically the marriage between the parties was one of significant length, which by necessary implication involved numerous and significant contributions by both parties.
As such, it is the wife’s position that she has a considerable interest in the parties’ marital capital and, accordingly, she wishes to remain involved in the administration of the business and, at the very least, know what is going on in it, so that she may look out for her long term financial interests.
Farming, in this day and age, is increasingly becoming a complex business, both technically and financially. It can require considerable capital investment to plant and harvest a crop or to grow a herd of cattle to maturity for sale. These complexities are heightened by unpredictability of climate, particularly rains. Great profits can potentially be made from farming enterprises but the risks can also be high.
The partnership, in common with many agrarian businesses, has borrowed considerable sums to finance the ongoing farming business, with the sums involved being secured against the parties’ considerable land holdings in [X].
The wife puts the total of her indebtedness at around $800,000.00. For his part, the husband estimates the level of indebtedness at around $1.15 million. The wife is concerned at the possibility of the partnership’s level of indebtedness (and so her liability to repay it) being increased, to her detriment.
On the other hand, the husband wishes to be able to borrow sufficient funds to ensure that the business remains viable and it can make appropriate capital investments, at appropriate times – such as when crops need to be planted and livestock purchased.
The circumstances surrounding the parties’ separation were difficult and acrimonious. Currently, the parties have very little capacity to trust one another. Each of the parties has alleged that the other has acted inappropriately around the time of their separation.
The husband is aggrieved that the wife withdrew a considerable sum of money ($100,000.00) from a joint account and has not properly accounted to him for its disposal.
On the other hand, the wife is concerned that the husband has opened accounts and incurred considerable liabilities, in his sole name, relating to the farming business, when it is appropriate that he conduct such operations through the existing entities and bank accounts relating to the partnership between the parties. She is critical that she was not consulted about these decisions.
On an interim basis, the wife has sought to receive a sum of $100,000.00, to be characterised either as a payment of interim spousal maintenance or a partial settlement of her property claim. The husband seeks the dismissal of this aspect of her case. I am not dealing with this aspect of the case, at this stage.
In order to safeguard her interests, the wife has instructed her solicitor to place caveats on the various parcels of farming land, which the parties own. This prevents the husband from further mortgaging any of the properties or charging them in some other way. It also appears to be the case that the wife has informed the partnership’s primary credit provider, Bank SA, to place a hold on advancing further funds to the farming business concerned.
It is the husband’s position that this is a financial calamity, for the business and so will have detrimental consequences, not only for himself, but also the wife.
In his response, filed on 28 April 2008, he seeks interim orders that would require the wife to withdraw the caveats in question and enable the farming business to access necessary “carry on finance” to continue its operations.
This was the background which confronted me on 7 May 2008. I was asked to hear the parties’ respective applications as a matter of urgency. I heard submissions from both parties’ counsel on this occasion.
It became apparent to me that both parties had a point and neither could be described as unreasonable. As a partner in the business, it seemed to me that the wife was entitled to know how the business was fearing, particularly whether it was necessary for it to incur any substantial liabilities and what those liabilities related to.
In the mutually suspicious circumstances of the parties, I could also understand why she would want to know whether or not any unusual payments were being made from the partnership’s accounts and why she was alarmed at the prospect of the husband operating the business through bank accounts in his sole name.
On the other hand, I could also see the husband’s position that farming is a complex business, in which he has extensive and hard won experience. I could appreciate that, from time to time, it might be necessary to make instant decisions about the sale of crops and cattle.
I could also understand why he would be concerned that the wife may, either consciously or unwittingly, delay the necessary decision-making process regarding the farm and the potential this may have for bad decisions to be made or for commercial opportunities to be lost.
Above all, I thought it imperative that I know precisely where Bank SA stood in regards to the parties, particularly in respect of the advance of any further sums to the partnership concerned and whether it would require the removal of the wife’s caveats to enable this to occur. I was told that the colder months are likely to be one of the busier times on the parties’ farm and the husband wanted access to funds to be able to plant his winter crops.
It also seemed to me that, in the parties’ acrimonious situation, they needed to consider the other’s position and work together to achieve a mutually satisfactory compromise, which recognised each of their points of view – the husband’s need to operate the farming business, as an expert farmer – and the wife’s need to know how the business was travelling financially and to be assured that her financial position was secure.
Accordingly, I asked each of the parties’ experienced counsel to prepare a minute of the orders, which each of their clients sought, at the interim stage and adjourned the proceedings until 4:30pm on Monday 12 May 2008.
I was also told that in this timeframe, the position of Bank SA could be ascertained. The husband had earlier indicated, through his counsel, that he was prepared to roll the overdraft facility, which he had opened in his sole name, into the partnership’s overdraft account. An outcome satisfactory to the wife, provided the account in the husband’s sole name was discontinued.
On 12 May 2008, I was provided with a letter from the relevant bank manager at Bank SA. The letter advised that the caveats would have to be removed before the bank would consider advancing further finance towards the parties. At present, an amount of around $35,000.00, is available to the parties from Bank SA to enable the farming business to continue.
From the husband’s perspective, this is a grossly inadequate sum and a figure closer to $400,000.00 is required to deal with the farm’s anticipated capital outlays.
For the wife’s part, she concedes that both she and the husband need to have some discussion with the Bank (and indeed with other potential financial providers) to see what further sums can be negotiated to ensure the ongoing operation of the partnership.
At this stage, the wife does not necessarily accept that a sum of $400,000.00 is required but she concedes that a sum well in excess of $35,000.00 is most probably needed. Accordingly, the parties agree that the question of the removal or otherwise of the caveats and the question of the exact amount which needs to be borrowed is a question for another day.
I am grateful to both Ms Pyke and Ms Leeson for preparing minutes of order relating to how the partnership should be operated in the short term. It seems that both parties have taken onboard, to some extent, the concerns of the other and, in the short to medium term, both realise that they must cooperate, again to some extent, to ensure their financial integrity.
Accordingly, the differences between the parties are perhaps not as great as they might first have perceived them to be. However, differences remain and I must resolve them.
The parties agree that both of them should be restrained from selling any of the plant and equipment of their partnership without the written permission of the other.
The husband also agrees that the parties should be restrained from selling any crops or stock other than through a stock and station agent to a bona fide third party for proper consideration. Where the parties differ is whether this will unduly restrict the husband from making minor sales of animals or crops, say to a neighbour. He characterises these as being minor transactions.
The husband also agrees that he will provide the wife with documentary proof, in respect of all sales of stock or crops and that the proceeds of such sale will be deposited in the existing partnership accounts and not be otherwise deposited into accounts in his name alone.
One of the significant areas of dispute between the parties is the relevant sum, which the husband should be able to draw from the business for his own personal living expenses. It is the tenor of the wife’s case that the parties’ separation has inaugurated a period of considerable financial austerity for her.
In general terms, the parties have agreed that the husband should be able to draw $1,000.00 per week, from the partnership, for his personal living expenses. It may be difficult for a precise division to be made in respect of some of these expenses, which stand in the partnership’s name but from which the husband derives personal benefits. This is particularly the case in regards to some of the utilities supplied to the farm.
The major areas of dispute between the parties are as follows:
·The wife wishes to sign all cheques drawn on the partnership for invoices greater than $2,000.00.
·It is the husband’s position that this would be unduly onerous and only cheques in excess of $15,000.00 should be jointly signed by the parties.
·The wife wishes to receive a fortnightly written accounting from the husband dealing with all moneys received by it and liabilities incurred by it.
·Again it is the husband’s position that this would be unduly onerous on him and he proposes that he provide such a report each month.
I have not been advised precisely how many cheques the partnership issues from week to week. I have been told that the demands on the business, in this regard, are seasonal. It is the wife’s position that it is no great burden, on the husband, for him to post cheques, drawn on the partnership account, to her and she will sign them and return them to the husband promptly. In essence, she says to the husband that she can be trusted and she will act responsibly in respect of this side of the partnership’s administration.
It is the husband’s position that this is an onerous requirement and is bound to lead to problems, particularly as he lives at [X] and the wife is living in suburban Adelaide and the parties themselves do not communicate well at the present time. For these reasons, he wishes to reduce the number of cheques, which will require the parties’ joint execution to a minimum. Essentially, he says the same as the wife, that he can be trusted not to incur any unreasonable or unnecessary expenses and will not conceal expenditure from her.
It is the husband’s case that he has retained a bookkeeper to prepare the accounts for the farming partnership. He wishes to free himself up to attend to the practical aspects of the business. It is his case that these records will be prepared on a monthly basis. As such, he contends that it is reasonable for the requisite accounts to be provided, to the wife, on a monthly basis. Initially, there will be a six week period before the first set of accounts is available.
As I indicated to the parties, I have no experience of the business of farming and little evidence regarding the number of cheques involved and what farming transactions should be regarded as unexceptional and so unworthy of specific attention.
In my view, the orders, which the wife seeks are analogous to injunctive orders. Pursuant to section 114(3) of the Family Law Act 1975, the Court may grant an injunction, in any case, in which it appears to be just and convenient to do so. Accordingly, it seems to me that, in differentiating between the parties’ competing positions, I should be guided by considerations of justice and convenience.

At the end of the day, considerations of justice dictate that there should be sufficient assets available to satisfy the wife’s proper claim and that there should be no unnecessary waste of those assets, particularly through the imposition of unreasonable or unnecessary borrowings.
Considerations of convenience dictate that the husband, acknowledged by the wife to have considerable expertise in the area of farming, should be able to operate the partnership properly, to the parties’ mutual benefit. This means that he should be able to agist stock when necessary and sell the stock and the farm’s crops for the best possible price.
In G & T[1] O’Reilly J summarised the principles relevant to the granting of such an injunction as follows:
“The purpose of interlocutory restraining orders in a case such as this is to preserve the status quo until the trial. In order to exercise its discretion the court is required to find that there is a serious issue to be tried and that the balance of convenience supports the making of an order…
Plainly, it is also a requirement that the restraints sought be reasonably necessary in the sense that if the restraining orders sought are not made there would be a real risk of the defeat of the applicant’s claimed interest.”
[1] G & T (2004) FLC 93-176 at 78,989
In my view, the orders, upon which the parties have largely agreed, serve the competing claims of justice and convenience, advocated by each of the parties. In my view, at this stage, there is no compelling evidence to indicate that the husband is intent on wasting assets or disposing of them to defeat the wife’s overall claim. At the end of the day, the parties’ considerable land holdings are worth a significant amount of money.
It does not seem to me to be likely that the husband would engage in any derelict or reckless conduct, which would result in the significant diminution of the parties’ wealth. That is not to say that the farming activity, which he proposes, is without all risk. I accept that farming is, very often, inherently a risky activity.
In these circumstances, it does not seem to me to be unreasonable that the husband should account to the wife on a monthly basis, as he currently proposes. In addition, in all the circumstances, I believe that it is appropriate that the parties jointly sign all cheques relating to invoices to a value in excess of $5,000.00.
Necessarily, the wife will learn of all transactions for less than this amount, when the husband provides the monthly accounts. He will also be bound by the stricture that he conduct the day to day operations of the partnership in accordance with ordinary farming business practice.
The husband resists having to make all sales of crops and livestock through a stock and station agent. He claims that considerations of expediency may dictate that he should be able to sell such items to a neighbour, without the necessity for any professional intermediary. In the circumstances I propose limiting this authority to minor transactions of up to $500.00.
The next step in the proceedings is to refer the parties to a financial mediation conference, with a Registrar of the court. Given the complexities of the current matter, it seems appropriate that the parties should be granted an extended appointment with the Registrar concerned. I have arranged for this to occur.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Brown FM

Associate: P Smith

Date: 14 May 2008