Custodio v Pinto & Ors
[2006] FamCA 941
•1 September 2006
[2006] FamCA 941
FAMILY LAW ACT 1975
IN THE FAMILY COURT OF AUSTRALIA
AT CANBERRA File No. 872 of 2003
BETWEEN:
Applicant Wife
-and-
WP Respondent Husband
-and-
NP Second Respondent
-and-
SPThird Respondent
-and-
PH PTY LTD Fourth Respondent
-and-
GD PTY LTD Fifth Respondent
FAMILY LAW – SUMMARY DISMISSAL – Application by third party respondents for summary dismissal of orders and declarations sought by the applicant wife insofar as those orders and declarations affected the interests of the third parties respondents.
CORAM: Finn J
DATE OF HEARING: 28 and 29 August 2006
DATE OF ORDERS: 1 September 2006
Appearances:
Mr Mater of Counsel (instructed by Anne Marie Proctor & Associates, DX 24718 Manuka) appeared on behalf of the applicant wife.
Mr Bartfeld of Senior Counsel with Mr Kearney of Counsel (instructed by Farrar, Gesini & Dunn, DX 5700 Canberra) appeared on behalf of the respondent husband.
Mr North of Senior Counsel (instructed by Crowley Clifford Simpson, DX 5615 Canberra) appeared on behalf of the second, third and fifth respondents.
Order
That the application contained in paragraph 1 of the orders sought in the application filed on behalf of the second, third and fifth respondents on 18 August 2006 be dismissed.
Introduction
On 18 June 2003 the wife filed an application for orders for property settlement against the husband. The orders sought by the wife were for the transfer to her of six properties (free of any mortgages) in Australia and the payment to her of the sum of $15,000,000. It was foreshadowed at a directions hearing on 27 March this year (2006) that the wife's application would be set for a hearing of at least five days to commence on 28 August 2006. That listing was confirmed by an order made on 6 June 2006, although it was noted that the hearing might take 7 to 10 days.
On 6 June 2006 the wife filed an amended application (“the wife’s amended application”) in which she continued to seek the orders mentioned in the previous paragraph. However in her amended application she joined as parties to the proceedings between herself and the husband, their adult daughter, N, (the second respondent), their adult son, S, (the third respondent) and a company, GD Pty Ltd, (the fifth respondent) and she sought an extensive range of orders and declarations, many of which would affect the interests of the daughter, the son or the company. I will later set out the terms of those orders and declarations.
On 18 August 2006 the second, third and fifth respondents filed an application seeking the summary dismissal of “paragraphs 5, 6 and 7” of the orders sought by the wife in her amended application filed on 6 June 2006 “in so far as they affect the second, third and fifth respondents”. (Where necessary, I will in these reasons refer to the second, third and fifth respondents collectively as “the third parties”.)
It was only possible for that application for summary dismissal to be heard by me on 28 August 2006, that is, the day on which the hearing of the property settlement proceedings was due to commence.
At the conclusion of the hearing of the summary dismissal application on 29 August 2006, it was agreed between Counsel for all parties and myself that the further hearing of the property settlement proceedings should be adjourned until I was in a position to make orders and deliver reasons for judgment in relation to the summary dismissal application for the reason that the outcome of that application would affect how all parties would conduct their respective cases in the property settlement proceedings.
Principles relevant to an application for summary dismissal
It was common ground before me that the principles which govern an application for summary relief are as stated by Kirby J in Lindon v The Commonwealth (no 2) (1996) 70 ALJR 541 at 544-5:
The approach to be taken by the Court to [an] application for summary relief is not in doubt:
1.It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the Court, is rarely and sparingly provided; [General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128f; Dyson v Attorney-General [1911] 1 KB 410 at 418.]
2.To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action [Munnings v Australian Government Solicitor (1994) 68 ALJR 196 at 171f, per Dawson J] or in advancing a claim that is clearly frivolous or vexatious; [Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.]
3.An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant termination. [Coe v The Commonwealth (1979) 53 ALJR 403; Wickstead v Browne (1992) 30 NSWLR at 5-7.] Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;
4.Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of a demurrer. [Coe v The Commonwealth (1979) 53 ALJR 403 at 409.] If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts;
5.If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. [Church of Scientology v Woodward (1980) 154 CLR 25 at 79.] A question has arisen as to whether O 26, r 18 applies to part of a pleading. [Northern Land Council v The Commonwealth (1986) 161 CLR 1 at 8.]… ; and
6.The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.
See also the decisions of the Full Court of this Court in Bigg v Suzi (1998) FLC 92-799 paragraphs 5.1 to 5.10; Ferrall and McTaggart v Blyton (2000) FLC 93-054 paragraphs 95 – 98; Pelerman v Pelerman (2000) FLC 93-037; and Beck v Beck (2004) FLC 93-181 paragraphs 17 – 18.
The authorities also establish that there are limitations on the material upon which an applicant for summary dismissal can rely in establishing the case for such relief. As Kirby J said in Lindon (supra) that in order to secure relief by way of summary dismissal, “the party seeking it must show that it is clear on the face of the opponent’s documents that the opponent lacks a reasonable cause of action” (at 544-5).
In Beck (supra) the Full Court cited a passage from the joint judgment of Mason CJ, Dean and Dawson JJ in Webster v Lampard (1993) 177 CLR 598 at 608 concerning the power to summarily dismiss which concluded with the following:
As has been said, it was incumbent on the Master, in the absence of any opportunity of cross-examination, to dispose of the case on the basis that the [respondent’s] version of the facts, which was not inherently incredible, would ultimately be accepted on the trial of the action.
10.Having cited this passage, the Full Court in Beck continued (at paragraphs 20–21):
20.Further support for the proposition that an application for summary dismissal must be determined on the basis only of the material put forward by the respondent (to that application) is to be found in the passage from the judgment of Kirby J in Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541 at 544-5 (which was quoted by the Full Court in its judgment in Bigg v Suzi) where his Honour said:
“…2. To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action (Munnings v Australian Government Solicitor (1994) 68 ALJR 196 at 171f, per Dawson J) or in advancing a claim that is clearly frivolous or vexatious; (Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.)”
21.Regard should also be had to paragraph 6.31 of the judgment in Bigg v Suzi where the Full Court referred to the fact that the wife, who was the applicant for the summary dismissal of a s 79A application by the husband, “had no right to adduce any evidence at that summary hearing to contradict the evidence of the husband or to seek to contradict any inference which it might be submitted should be drawn from that evidence.”
11.In the recent decision in BA P Associations LLC and Ors & K and Ors [2006] FamCA 518, having referred to what was said in paragraphs 21 of the judgment in Beck (supra), the Full Court of this Court accepted the proposition:
21.… that apart from material in the case of the respondent to an application for summary dismissal, the court may have regard to relevant non-contentious facts, even if raised by the applicant for summary dismissal.
12.In the present case I did not understand any attempt to be made by the applicants for summary dismissal to rely on any of their own material.
13.It was the position of Counsel for the respondent wife that in opposing the application for summary dismissal he could rely on all material before the Court. I did not understand that proposition to the challenged.
14.Reliance was, however, placed on behalf of both the applicant third parties and to a greater extent by the respondent wife (with no objection being taken by either party) on the affidavit material of the husband (who is not a party to the summary dismissal proceedings). Certainly it is necessary to have regard to some of the affidavit material filed by the husband in order to understand certain of the orders and declarations which are sought by the wife and which are the subject of the summary dismissal application. It is also necessary to have regard to parts of the husband’s affidavit material to understand the wife's affidavit material.
15.It was of course accepted that in this jurisdiction in which there are no pleadings, it is necessary to have resort to the affidavit material in order to understand the substance of the claim which is sought to be summarily dismissed.
The scope of the summary dismissal application
16.Notwithstanding the reference in the application for summary dismissal to paragraph “5” of the orders sought in the wife’s amended application and the reference to paragraph “8” of those orders in the written submissions of Counsel for the third parties, it was clear from Counsel’s oral submissions that the application for summary dismissal is directed to paragraphs 6 (a) and (b) and 7 (a) to (n) and (w) to (bb) of the wife’s amended application.
17.Paragraph 6 (a) and (b) of the orders sought is in the following terms:
That the Court shall determine that [the property of the husband and the wife] shall inter-alia include:
(a)The whole of the issued shareholding in the company [VP&F];
(b)The whole of the issued shareholding in the company [GD Pty Ltd.]
18.Paragraph 7 of the orders sought commences with the following words:
For the purpose of giving efficacy to its intentions pursuant to Orders hereof, the Court shall make such of the following findings, declarations and orders as it deems just and equitable[.]
19.There then follow the 28 sub-paragraphs numbered (a) to (bb). Relevantly for present purposes, those sub-paragraphs are broadly concerned:
·with the overseas company known as VP&F and with real estate outside Australia (sub-paragraphs 7 (a) to (i) and (w) to (bb)); or
·with the Australian company, GD Pty Ltd (sub-paragraphs 7(j) to (r)).
20.As was submitted by Counsel for the third parties at the commencement of his oral submissions, paragraph 6 could only have an operation if one or more of the orders or declarations sought in the various sub-paragraphs of paragraph 7 was made.
The orders and declarations sought concerning interests overseas
21.As already indicated, a substantial number of the orders and declarations which are sought by the wife and which are the subject of the summary dismissal application, relate to the overseas company, VP&F, and to real property in another country. Before considering the summary dismissal application so far as it is directed to those orders and declarations sought, it will be useful to consider the evidence concerning that company and that real property.
22.I mention at this point that there was no evidence before me in relation to company or land law in that other country, or indeed to any aspect of that country’s law. In these circumstances it must be assumed, that that country’s law is the same as Australian law, and argument proceed before me on this basis.
The wife’s affidavit of 18 June 2003
23.In the affidavit sworn 18 June 2003 in support of her original application for property settlement, the wife stated:
3.12The respondent is also involved in purchasing and developing land both privately and through companies [overseas]. Between 1982-84 when we were living [overseas] we established the company [WPL]. I do not believe that this company continues to trade. The respondent also established [VP&F]. I was not involved with the [overseas] companies although from time to time I have written up ledgers of the rental income relating to properties which it owns.
3.13I have instructed my solicitors to seek disclosure about the companies and assets including those [overseas]. That has not been forthcoming….
…
5.1There are a number of properties [overseas] which have been purchased over the years by the respondent or by … Corporations he controls called [WPL] and [VP&F]. I do not presently know which of the properties listed below were purchased directly by the respondent and which may have been purchased in the name of [WPL] or some other entity.…
The husband’s affidavit of 18 July 2003
24.The husband’s first affidavit was sworn on 18 July 2003. In that affidavit he stated (emphasis added):
3.3On 25 September 2002 my solicitors wrote to the applicant’s solicitors to confirm I had no objection to the applicant contacting Mr [B], our lawyer [in the other country], to obtain information in relation to all property held [overseas]. …
…
29I have a 10% share in [VP&F], [an overseas] company. My son [S] and my daughter [N] each hold a 45% share in this company. This company was set up some years ago to do building work [overseas]. Whilst [S] and [N] are shareholders in this company, I operate it.
30[VP&F] owns:
30.1Approximately 28,000 square metres of land at [L]. At the present time the local Council has stymied a proposal for sub-division.
30.2An office in a building… near F Hospital. I purchased land and built this building in 1999 or 2000.
30.3[VP&F] has an office in [F]… which is currently empty.
30.4Two units in [Q]…, one of which is empty and the other is rented.…
30.5An interest in a subdivision project in [F]. A deposit has been paid but the seller is in default and there is a risk that this project will not go ahead.
30.6Some vehicles at my father’s home. These vehicles include a VW Golf.
31In early 2002 the company signed a contract to purchase land known as [“MA”]. To date contracts have not been exchanged. Therefore the title to this land is not in the name of the company.
32The assets of [VP&F] are subject to a mortgage that secures a debt currently standing at about AUD$3 million. The applicant and I own a number of properties [overseas]. These are detailed below. These assets are also mortgaged to support the debt owed by [VP&F].
[WPL]
33This company does not trade. It was set up to be used as a trading entity but has never been used. It does not own any assets or have any liabilities.
25.The husband then went on to list a number of properties which he had received from his family, a number of properties which the wife had received from her family and the two properties (one of which comprised 5 shop units) which he said were in the joint names of himself and the wife.
26.Later in the same affidavit, the husband sought to explain his businesses overseas in the following way:
59In a letter dated 26 June 2003 the applicant’s solicitors notified my solicitors that the applicant seeks further restraining orders that would essentially restrain me from causing funds to be removed from Australia to [the other country], or from [the other country] to any other country except Australia, and except in the usual course of business with the applicant’s consent. In response to these restraining orders I say:
59.1I have used funds from my Australian operations to pay debts [overseas] on two occasions. The first occurred approximately 2 years ago. At this time my [overseas] business lost money following a subdivision. Money was owed to the bank. I sent approximately $400,000 to [the other country] to pay the bank. I obtained these funds from the [PH Pty Ltd’s] loan facilities with St George Bank. The second occasion occurred approximately 8 years ago. At this time I sent approximately $10,000 to $20,000 to [the other country] to pay expenses incurred in a property development.
59.2I do not anticipate needing to send money from Australia to meet expenses incurred in my [overseas] operations in the near future.
59.3The business operations undertaken by the companies I operate [overseas] are separate to the business operations undertaken by [PH Pty Ltd] in Australia.
59.4All profits from my [overseas] operations are paid back into my [overseas] operations. I also use income generated [overseas] to pay for a maid for my elderly father who lives [overseas]. I have paid for my father’s maid since my father gave me the properties referred to in paragraph 5.10 of the applicant’s affidavit.
27.It is also relevant for present purposes to note that in this first affidavit the husband stated with reference to certain Australian companies (emphasis added):
58.3The only instances when the structure of the entities comprising [PH Pty Ltd] have been changed are:
58.3.1.[PI Pty Ltd] was registered on 24 September 1976. At the time this company was registered, it was not possible to have sole director companies. For this reason, in addition to myself, the applicant, the applicant’s father and the applicant’s brother were also directors. I am now the sole director of this company, the other directors having resigned some years ago.
58.3.2.[PH Pty Ltd] was registered on 14 August 1984. I am currently the sole director and shareholder of this company. When this company was first registered, the applicant and I were joint shareholders and directors. In about February 1998 the applicant resigned as a director of this company and transferred her share holding to me.
The husband’s affidavit of 26 April 2006
28.In the husband’s affidavit sworn 26 April 2006, he elaborated further on these issues of the directorship of and/or shareholdings in Australian companies, stating (emphasis added):
10.On 14 August 1984 I registered the company [PH] Pty Ltd which is the trustee of the [PH] Trust. The beneficiaries of the [PH] Trust are myself, my relatives, any companies in which myself or any of my relatives are directors or shareholders, any trust of which myself or any of my relatives are beneficiaries, educational institutions and charitable bodies. …
11.[PH Pty Ltd] built houses and owns investment and rental properties.
12.I am the only director of [PH Pty Ltd]. [The wife] was a director and a shareholder but in February 1998, at her instigation, she transferred her shares to me and resigned as a director. This was in about February 1998. This was at her instigation. I held her power of attorney so in the later years of the marriage she did not need to sign any documents in relation to business projects.
13.[PD] Pty Ltd was registered in 1992. I am the sole director. [The wife] and I are each registered as owing one share however in 1998 [the wife] resigned as a director and signed her share over to me but that share transfer has not been registered. [PD’s] only asset is money owed to it by [PH]. Our accountant has advised us to wind up the company and distribute a dividend to the shareholders.
14.[PI] Pty Ltd is the trustee of the [WP] Family Trust. It was registered in 1976. I am the sole director of the company. [The wife] and I are each registered as owning half of the shares, however in 1998 [The wife] resigned as a director and signed her share over to me but that transfer has not yet been registered. [PI] is not currently a trading entity. It is the trustee of the [WP] Family Trust. The beneficiaries of the [WP] Family Trust are myself, the applicant, and our children or grandchildren. …
29.In this second affidavit sworn 26 April 2006 the husband also provided the following further evidence concerning the overseas company and the fate of his original 10% shareholding in that company:
38.In 1998 I caused to be incorporated in [another country] a company called [VP&F]. I owned 10% of the shares in the company from its beginning. My son [S] owned 45% and my daughter [N] 45%. I was the sole director. I owed money to a real estate agent in [F] named [Mr B] for commissions on apartments which he sold for the VP&F. We were in dispute about the amount. He wanted me to pay as I was the person he had dealt with even though the properties belonged to the company. In 2005 he took court action [overseas] to recover the debt. I did not know of this until much later. In October 2005 he obtained a judgment from a court at [L]. I did not know of this. The Court ordered that my shares in VP&F be seized to satisfy the judgment debt. When I became aware of the judgment I spoke to [the daughter] and [the son] and we agreed that the company would pay the debt and the shares would become theirs. Our lawyer [Mr C] [overseas] held power of attorney and he paid the debt. …
30.Then having set out a list of property which he and the wife owned or had owned outside Australia, the husband provided the following evidence concerning land near the town of F which VP&F had apparently contracted to buy but which was apparently purchased in the names of the husband and wife:
41.In 1999 [VP&F] (“the company”) contracted to buy portion of a large parcel of land outside [F]…. A company called [PRSFI] (“the seller”) had contracted to purchase that parcel of land from about fifteen different owners. The plan was that the seller would sub-divide and develop the land, obtaining the necessary Local Government approvals. The seller did not have sufficient money to complete the purchase and so the company agreed to buy the right to acquire part of the land once the property had been sub-divided. It was one of a number of buyers. It paid a deposit which was then used by the seller to make the acquisition from the fifteen owners. The deposit paid by the company was secured by mortgage over the portion of the property that the company was to acquire. That mortgage was made out in my name. I should have had it made out in the company name but I considered that I was contracting on behalf of the company and the contract was in the name of [the husband] “or Nominee” and with the knowledge of my children who were the majority shareholders. Overall there were about 15 buyers of the development. All of them had paid money “up front” on account of their purchase. The company was the only secured buyer which meant that when the original developer absconded, and the development was taken over by another company, the money that [VP&F] had put into the development was protected by the mortgage that I had insisted on.
42.Settlement of the transfer of ownership of the land took place in [L], on 28 January 2004.
43.Under [the relevant country’s] law a husband and wife cannot contract in their sole name without the consent of their spouse. A … lawyer attended settlement and produced a Power of Attorney signed by [the wife] I was present. The … lawyer said words to the effect “[the wife] will not consent to the withdrawal of the mortgage unless the property is put in her name.” Even though [the wife] and I had been divorced in Australia she insisted that the withdrawal of the mortgage in my name could not proceed without her signature.
44.Failure to discharge the mortgage would have not only prevented settlement of the purchase of the [VP&F] land, but also would have prevented settlement of the purchase of many other blocks as the company held a mortgage over several blocks additional to those which it was buying. The transaction was very complex and had the company not settled its purchase the whole project would have fallen over with losses of many millions of dollars. It had taken five years to achieve the development and arrange settlement and [the wife’s] actions were putting everything at risk.
45.Therefore I agreed, at her insistence, that the purchase of the land would be in our joint names rather than in the name of the company, [VP&F], which had put forward all of the money for the purchase. In these proceedings I am seeking orders that our registered interest in that property be transferred to the company [VP&F].
46.I travelled [overseas] several times each year over several years to acquire, in the name of VP&F, various parcels of land for development projects. VP&F has completed a number of building projects [overseas].
The wife’s affidavit of 6 June 2006
31.The wife swore a second affidavit on 6 June 2006 for the stated purpose of responding to the husband’s affidavits of 26 April 2006 and 18 July 2003. In response to the husband’s evidence concerning the shareholdings and directorships of the Australian companies, PH Pty Ltd, PD Pty Ltd and PI Pty Ltd, the wife stated:
5.As to paragraph 10 [of the husband’s affidavit of 26 April 2006], I deny that the respondent (alone) registered [PH Pty Ltd]. He and I both were originally the shareholders and directors of the company. It was then called [N Pty Ltd] and later changed its name to [PH Pty Ltd]. My brother…] settled the [PH] Trust, not the respondent.
6.With respect to paragraph 12, I accept that I signed a resignation and transfer of my shares in [PH Pty Ltd]. However, I did not at the time of signing the documents appreciate their effect and the respondent did not tell me their effect and I have no recollection of knowingly signing them. It was a common practice that the respondent would ask me to sign documents relating to the business or the companies which I often did without reading them. Usually the documents I was asked to sign related to tax and I signed the documents at the respondent’s request. I did not intend to resign as a director of the companies nor did I wish to transfer my shares. No resignation or transfer of shares from me to the respondent in any company has been at my instigation. The respondent held numerous powers of attorney that I had granted to him which he used in business both in Australia and [overseas]. He often signed documents as my attorney, particularly relating to loan applications and the like. He continued to use those powers even after I had informed him that he was no longer to act as my attorney nor was he to allow anyone else to act as my attorney. I provided him with a notice that he should not use the powers by letter from my solicitor in Australia dated 19 July 2002 and [overseas] by notices given by my [overseas] solicitor and notices published in newspapers….
7.During the marriage it was the usual practice that our accountant came to our home with documents for me to sign. I signed such papers as he asked me to usually without reading them. I trusted the respondent and assumed that it was appropriate for me to sign any document he or the accountant asked me to sign. …When the accountant stopped coming to our home in about 1998 I said to the respondent "Why isn't the accountant coming anymore?" He said "You don't need to sign anything anymore, the solicitors will do these things now". In the latter years of our marriage if I asked the respondent anything about the business or companies he would often become angry and shout at me saying things such as “It’s nothing to do with you. You don’t need to know. You don’t know anything”. At no time did I want to resign or become less involved with the companies. I only discovered that I was no longer a director or shareholder some time after I first instructed my solicitors in these proceedings. I was never given any explanation by the respondent or our accountant as to why I did not remain a director and shareholder in [PH Pty Ltd] and other companies.
…
9.In response to paragraph 13, at no time did I knowingly resign as a director or transfer my shares in [PD Pty Ltd]. I accept that I unknowingly and at the request of the respondent signed documents to that effect.
10. In response to paragraph 14, I did not knowingly resign or transfer my shares. I accept that I unknowingly and at the request of the respondent signed documents to that effect. No distribution was ever made into my hand from the [WP] Family Trust.
32.In response to the husband’s evidence in his affidavit of 26 April 2006 concerning the shareholding in VP&F the wife stated:
36.In response to paragraph 38, Annexure 'A' is a reference to a company debt that has nothing to do with the respondent or me. I recall that at least the sum of about $A430,000 was transferred [overseas] to enable [VP&F] to establish its business [overseas]. Various properties [overseas] which stood in the names of the respondent and/or myself have been also sold over the years, as to which I refer to paragraph 5 of my affidavit sworn 18 June 2003. I do not know the final destination of the proceeds of those sales. I do not know whether or not properties [overseas] have been sold since I swore my affidavit of 18 June 2003. I am not aware of any financial contribution to the affairs of [VP&F] made by either [the son, S] or [the daughter, N]. Nor have either of them to my knowledge ever played any role whatever in the company’s day to day operations. VP&F was established, so far as I am aware, in 1998. The respondent told me shortly afterwards in words to the effect “I’ve set up a company [overseas] called [VP&F] to do some development projects.” He said nothing to me as to who the shareholders were or in what proportions they were held. I assumed at the time that he and I controlled the company as was the long standing arrangements regarding our companies. It was not until after I consulted my solicitor in these proceedings that I learned that [S] and [N] were registered as each holding 45% of the shares in the company. Somehow without my consent and without consulting with me the respondent has transferred properties from our joint names to the company VP&F.
33.With respect to the husband’s evidence in his affidavit of 26 April 2006 concerning the transaction in relation to the subdivisible land at F, the wife responded:
42.With respect to paragraph 41 am unaware as to when the respondent first entered into an agreement to purchase that land however as I understand it that land was acquired in our joint names before the creation of VP&F. From what I can understand from the respondent's affidavit it seems that because of some difficulties with the seller he took a mortgage over the land and at the time that contracts were to be exchanged it required my signature to deal with the mortgage. The respondent had two contracts prepared to purchase the land, the first contract was to transfer the land into our joint names, the second contract was to transfer the land into the name of the company. I agreed to sign the first contract, a copy of which is annexed hereto and marked with the letter ‘K’. That contract was signed on my behalf by my attorney [Ms S] on 29 January 2004 in accordance with the urgent request of the children and the respondent. Prior to [the son, S] attending my home in late January I knew nothing about this acquisition. A second contract was prepared which was not disclosed to me. A second contract was apparently entered into on 4 February 2004 without my knowledge or consent. I did not authorize Ms [R] to act as my attorney. Subsequently the second contract was stamped/signed by [Ms R] presumably using an old power of attorney which I had withdrawn. A copy of that contract is attached hereto and marked with the letter ‘L’ . That contract suggests that I received money from the company upon sale of my interest, I deny that. Copies of those revocations are annexed hereto and marked with the letter ‘M’. They were forwarded to the respondent’s [overseas] lawyer and directly to the respondent by letter dated 29 January 2004. I did not want to interfere with the arrangements the children had entered into with their father however I did not feel it appropriate that I be left out of those arrangements until proper disclosure had been made.
34.Then later in her affidavit of 6 June 2006 and in response to the husband’s evidence in his affidavit of 18 July 2003 concerning land asserted by the husband to be owned by VP&F, the wife said (emphasis added):
58.1As to property described in paragraph 30.2, that property was originally purchased by the respondent and myself jointly on 17 March 1979 and the building constructed on it consists of approximately seven storeys of apartments and commercial units and the construction was completed in 1998. Searches I have obtained … show that the property was transferred into VP&F on 21 October 2002, some months after separation. I have never knowingly signed any transfer of my interest in that property.
58.2As to paragraph 30.3, my understanding is the property referred to is the same as for the property mentioned in 30.2.
58.3As to paragraph 30.4, the properties described in this paragraph were both acquired in the joint names of the respondent and myself on 16 January 1997 and searches disclose that they were apparently transferred to VP&F on 18 October 2002. I did not knowingly sign any transfer of my interest in that property.
58.4As to paragraph 30.5, to the best of my understanding the respondent and I contracted in our joint names to purchase the land referred to in this paragraph prior to separation. Towards the end of January 2004, our son [S] came to my home during one morning on three separate occasions. On each occasion he asked me to attend at the [relevant country’s] Embassy where he said there was a power of attorney for me to sign in favour of a … lawyer named [Ms R], a person unknown to me and with whom I had no professional relationship. [S] said it was important that I sign the power of attorney immediately with respect to a transaction relating to the property referred to in this paragraph. I told [S] that I had never met [Ms R], and that I would speak to my solicitor here and my solicitor [overseas] about his request. At about lunchtime the same day both of the children came to my home and again asked me to go to the Embassy to sign the power of attorney. I refused. I think it was on the same day, or it may have been the following day, that my Australian solicitor received a letter from the respondent’s solicitor dated 28 January 2004, a copy of which is annexed hereto and marked with the letter ‘O’….
58.5On the advice of my [overseas] lawyer, [Ms S], I provided a power of attorney to her to act as my attorney with respect to the transaction to enable it to proceed. She subsequently provided to me a document prepared by [Ms R], a true copy of which was annexed at paragraph 42 and marked with the letter ‘K’. …[Ms S] executed that document on my behalf. A further document was apparently executed on 4 February 2004, a true copy of which was annexed earlier and marked with the letter ‘L’.…
58.6As to paragraph 31 of the respondent’s affidavit sworn 18 July 2003 regarding land known as [“MA”], the vendors of that property were two brothers [EM] and [JM]. [EM] continues to work for the respondent as a plasterer. On 16 January 2002 they came to our home in Canberra. The respondent paid them monies, some by cheque and some by cash. They then signed a document a true copy of which is annexed hereto and marked with the letter ‘R’. …That land can be registered in the respondent’s sole name whenever he wishes to proceed with the registration.
35.The letter from the husband’s solicitor to the wife’s solicitor dated 28 January 2004 referred to in paragraph 58.4 of the wife’s affidavit of 6 June 2006 and annexed as Annexure ‘O’ to that affidavit, is primarily concerned with the apparently urgent need for the wife to provide the necessary signatures for the subdivision in F. However, and importantly for present purposes, the penultimate paragraph of that letter is as follows (emphasis added):
Given that your client has her own independent legal representation [overseas], it would seem to the writer that she is able to satisfy herself concerning details of the transaction. It has always been the case that our client’s interest in [VP&F] is an asset to be taken into account in the property settlement. Your client signing a discharge of mortgage does not prejudice her entitlements in any way. Her failure to do so could cause substantial losses.
The wife’s affidavit of 18 August 2006
36.On 18 August 2006 the wife swore a further affidavit in support of an application for adjournment of the trial and in which, after listing the overseas properties held in the parties’ names or inherited or gifted to them, she continued:
3.3 Properties in the name of [VP&F]:
(a) [Property in Q] – apartment
(b)[Property in Q] – commercial unit rented to bank
(c)[Property in F] – commercial unit, Husband’s/VP&F office
(d)[Property in L] – house and land purchased on 30 August 2000
The properties referred to at paragraphs 3.3 (a), (b) and (c) were all owned by us and subsequently transferred to the company without my knowledge or consent.
3.4There is one further property owned by the company the purchase of which is not yet settled and in relation to which an unresolved dispute exists – see paragraphs 31 - 33 below. It is a tract of subdivisible land at [F].
37.The wife then continued further with respect to VP&F (in similar terms to paragraph 36 of her second affidavit):
4.The company [VP&F] was incorporated [overseas] on 6 May 1998. Searches disclose that the nominal shareholders were our daughter [N] as to 45% of the shareholding, our son [S] as to 45% of the shareholding and the respondent as to 10% of the shareholding.
5.The respondent Husband arranged for the company to be incorporated. He did not consult me about it before doing so.
6.I learned of its incorporation from the Husband only after it had been incorporated. He said to me words to the effect “I’ve set up another company [overseas] to do some developments. I’ve called it [VP&F].” I assumed the shareholdings were the same as I understood was the position with regard to all our other companies, namely that the Husband and I were the only and equal shareholders. I only became aware that the children were named as shareholders after I consulted my solicitors in 2003 in relation to the present proceedings.
38.Later in paragraphs 28 and 29 of her affidavit of 18 August 2006 the wife referred again to the matter of the properties which she claimed had been transferred from the parties’ name to VP&F, stating:
28.Title searches I have obtained reveal that several properties have been transferred out of the names of the Husband and myself into VP&F before and after the separation of the Husband and myself. I was never consulted about any of those transfers. I did not sign any documents in relation to them and I was unaware that those transfers had occurred before these proceedings were instituted.
29.Those properties which have apparently been so transferred are as follows:
a.The property … (a seaside apartment in [Q]) which was acquired by the Husband and myself personally on 30 May 1996. It was apparently transferred to VP&F on 16 September 1998. I refer to the search and English translation thereof annexed hereto and marked “H1” and “H2” respectively.
b.Land at … [Q] which was acquired by the Husband and myself personally on 16 January 1997. The seven storey building known as [“EA”] was subsequently built on it and all of the apartments and shops within it, except one (see paragraph 3.3(b) hereof) were subsequently sold. No details of construction costs or profits made have been provided by the Husband and I do not have any such information. Searches show that the one remaining shop was transferred from the Husband’s and my name to that of VP&F on 18 October 2002, some six months after the Husband and I separated and SOME [sic] four months after I revoked the Husband’s powers of attorney. Annexed hereto and marked “I1” and “I2” are true copies of relevant … search documents and English translations thereof.
c.Land at [F] was acquired on 17 March 1997. The seven storey building also known as [“EA”] was subsequently built on it and all of the apartments and shops within it, except one (see paragraph 3.3(c) hereof) were subsequently sold. No details of construction costs or profits made by whom have been provided by the Husband and I do not have any such information. Searches show that the one remaining shop was transferred from the Husband’s and my name to that of VP&F on 21 October 2002, some six months after the Husband and I separated and some four months after I revoked the Husband’s powers of attorney. Annexed hereto and marked “J1” and “J2” are true copies of relevant …. search documents and English translations thereof. It is now used as an office by the Husband/VP&F.
39.Elsewhere in this third affidavit the wife referred to, amongst other things,:
·events surrounding the husband’s alleged loss of 10% shareholding in VP&F and to her contention that “the husband’s purported divestment of his 10% shareholding in VP&F is a sham” (paragraphs 7-16);
·apparent seizures of certain of the parties’ land overseas on account of unpaid tax debts (paragraphs 17 to 23); and
·the circumstances surrounding the purchase and mortgage arrangements for the subdivision at F, which was the subject of paragraphs 41 to 45 of the husband’s affidavit of 26 April 2004 and of paragraph 42 of the wife’s affidavit of 6 June 2006 which is then quoted (paragraphs 31 to 33).
The husband’s affidavit of 22 August 2006
40.In a fourth affidavit from the husband sworn on 22 August 2006, he responds to all the material in the wife’s affidavit of 18 August 2006 to which I have just referred. In relation to the properties which the wife claims were previously owned by the parties but are now owned by VP&F, the husband responded:
4. Paragraph 3.3 – These are properties owned by the company.
(a)I have produced the Deed of Purchase showing that the company bought the … property on 8 July 1998.
(b)I have produced the Deed of Purchase showing that the company acquired the … property on 30 August 2002.
(c)I have produced the Deed of Purchase showing that the company acquired the property on 30 August 2002.
(d)I have produced the Deed of Purchase showing that the company purchased the property on 9 August 2000.
The documents show that the statement that we previously owned all the property is untrue.
The husband’s affidavit of 24 August 2006
41.In a fifth affidavit from the husband sworn on 24 August 2006, the husband responded to the wife’s affidavit of 6 June 2006:
2.In relation to paragraph 5. Admit contents save that it was at my instigation, based on the advice of my accountant, that we set up the [PH] Trust. [The wife] had nothing to do with it except that she was a director of the company.
3.In relation to paragraph 6. Our relationship was deteriorating for some years. We would argue frequently in front of the children. She would call me a “bludger” and other abusive names. I would retaliate saying things like “You’re only with me for the money”. I recall on more than one occasion she said words to the effect “I’d rather eat shit than have a dollar off you”. I said in reply words to the effect “OK, well you should get out of the company if you’re not interested.” On one occasion she said “Alright” or words to that effect. I had Price Waterhouse prepare papers for her to resign as a director and stop being a shareholder in [PH]. I deny that she did not know what she was signing. I remember putting the papers in front of her at home and saying words to the effect “These are the papers for you to resign from the company.” She signed them and gave them back to me. I did not hold “numerous” powers of attorney for her. I conducted business in [overseas] and so I had her power of attorney to enable me to do that. She also signed a power of attorney authorising our [overseas] real estate agent, Mr [C], to sign documents on her behalf. Mr [C] also had my power of attorney. I also had [the wife’s] power of attorney … to enable me to sign business documents on her behalf if I was [overseas]. I did not receive any notice from [the wife’s overseas] solicitor revoking the … power of attorney. I am aware that she published notices in the newspapers. The documents which are annexure “M” to her affidavit seem to relate to correspondence between her and [the overseas] lawyers revoking the power of attorney that she had given them.
…
7.In relation to paragraph 9. I deny the contents. She signed the resignation as a director of [PD Pty Limited], [PI Pty Limited] and [PH Pty Limited] at the same time.
42.Specifically in relation to properties which the wife claims to have been transferred from the joint names of the parties to VP&F, the husband responded:
25.….
b) [The seaside apartment at Q] - We do not own and never have owned the apartment. It is owned by [VP&F]. In her Notice to Admit facts [the wife] required me to admit that we own the property. In paragraph 8 of my Notice Disputing Facts dated 27 March 2006 I denied that fact. I have obtained a copy of the Deed of Purchase and Sale under which the original owners sold the property to the company. Annexed hereto and marked with the letter “B” is a copy of that Deed …. It is dated 8 July 1998. Annexed hereto and marked with the letter “B1” is a translation of annexure “B” into English. Copies of both annexures have been supplied previously to [the wife’s] lawyers.
c) [The property, “EA” at Q] - I bought the land in the 1990s. After [VP&F] was started it built units on the land and we transferred the land to the company. It built a seven storey apartment block comprising about twenty eight units. It sold all of the units except for one which it kept for itself as an office. As the units were completed and sold the ownership was transferred from me and [the wife] to the buyers under power-of-attorney. In paragraph 7 of her Notice to Admit facts [the wife] required me to admit the value of the unit retained by the company. In paragraph 7 of my Notice Disputing Facts I stated that I did not know the value. The company paid us € 50,000 for that unit. The price of € 50,000 remained [overseas] and was used for other expenses there. I have obtained a copy of the Deed of Purchase and Sale under which we transferred the property to the company. Annexed hereto and marked with the letter “C” is a copy of that Deed…. It is dated 30 August 2002. Annexed hereto and marked with the letter “C1” is a translation of annexure “C” into the English language. The transfer was executed on behalf of [the wife] and I by [Mr C] who held powers of attorney from both of us. Annexure “M” to [the wife’s] affidavit filed 6 June 2006 contains letters to [Mr C] revoking his power of attorney from 31 January 2004, well after this transfer.
d) The [“EA” property] in [F] was developed on the same lines as the one in [Q]. It is an apartment block and the units have been sold except for one unit which the company retains as its office. In paragraph 10 of her Notice to Admit facts [the wife] required me to admit that the unit is worth € 123,500. In paragraph 10 of my Notice Disputing Facts I stated that I did not know the value. In July 2006 I obtained a valuation of that unit. It is valued € 163,400. A copy of the valuation was sent to [the wife’s] lawyers. I do not know whether she agrees to that figure. I have produced a copy of the Deed of Purchase and Sale of the unit under which [the wife] and I transferred our interest in it to the company on 30 August 2002. Annexed hereto and marked with the letter “D” is a copy of the Deed …. Annexed hereto and marked with the letter “D1” is an English translation. The Deed was executed on our behalf by [Mr C] under the power of attorney that we had given him, which had not been revoked.
Towards the initial purchase of the land in [Q] and [F] I sent $400,000 [overseas]. Additionally there was money borrowed from [an overseas] bank to finance the purchase of the land and the subsequent construction of the apartment blocks. Those borrowings were repaid following the sale of the apartments.
43.As to the issues concerning land apparently seized by authorities overseas to satisfy a tax debt or debts, and also the subdivision at F, the husband continued in paragraph 24 of his affidavit of 22 August 2006:
25.….
e) [Property at VC] – In her Notice to Admit Facts [the wife] required me to admit that we own this property and that is worth € 253,500. In my Notice Disputing Facts, paragraph 6, I admitted those matters. In paragraph 39(a)(v) of my affidavit filed 27 April 2006 I confirmed my agreement to that value for the purpose of the proceedings. In July 2006 I travelled [overseas] to obtain documents for this case. I learned that a charge has been put on the property for outstanding tax owed to the [relevant country’s] Department of Finance. I also learned that [the wife’s] lawyer [overseas] has spoken to the Taxation Department. I was present in Court on 22 August 2006 when [the wife’s] barrister told the Court that [the wife] learned of the tax debt when she saw the papers that I had sent back from [overseas]. I deny this. I say she was aware of the debt well before that. Annexed hereto and marked with the letter “E” are tax print outs given to me by my accountant showing I have [an overseas] tax liability of € 1,023 621. Based on current exchange rates as at 24 August 2006 that is AUD $1,716,705. It is my understanding that [the wife] is liable for the debt jointly with me. The tax arises from a review by the Department of Finance of property sales by [the wife] and I from 2000. To the best of my knowledge these are the sales of units in the apartment buildings known as [“EA”] in [F] and [Q]. The land was in our names because I bought the land with company money but it was put in the names of [the wife] and I. The tax is Capital Gains Tax and income tax. The properties that have been attached will be sold by auction if we cannot pay the tax. If the company could obtain ownership of the land at [L] it could raise the money.
…
k) [The property at L] - This is the land referred to in paragraphs 41 to 45 of my affidavit filed 27 April 2006. It is land that should be transferred to the company [VP&F].
The wife’s case in relation to the overseas interests
44.It can thus be seen that the wife’s case in relation to the overseas company and its real estate holdings, as it emerges from the affidavit material and as her Counsel endeavoured to demonstrate in opposition to the application for summary dismissal, is as follows.
45.Although the parties did not separate until April 2002, the marriage was in difficulty at least from 1998 as is confirmed by paragraph 3 of the husband’s affidavit of 24 August 2006 where he discusses the changes in the Australian companies.
46.In February 1998 the wife relinquished her shareholding and directorships in the various Australian companies in circumstances where she claims not to have understood what she was doing.
47.In May 1998 the husband established VP&F overseas, with each of the children holding 45% of the shareholding and the husband holding 10%, but that 10% is no longer held by him.
48.The husband is also the director of VP&F and he states that he “operates” the company.
49.The wife asserts that at least three real estate properties now registered in the name of VP&F were originally owned by herself and the husband and she disputes the validity of powers of attorney which may have been used to sign transfers on her behalf.
50.The husband admits that at least $400,000 raised through one of the Australian companies, has been sent to his “[overseas] operations”. His evidence also confirms that certain of the real property in the name of VP&F was originally in his own name or in the joint names of himself and the wife.
51.The wife also claims that a significant tax debt has now emerged overseas which has caused certain overseas properties of the parties to be seized by the authorities.
52.It is apparently against the background of these claims that the wife seeks orders and declarations that:
·the issue of the shares to the adult children in VP&F was a sham (7(a));
·that VP&F is the alter ego of the husband (7(b));
·that the husband has de facto control and ownership of VP&F (7(c));
·that the adult children hold their shares and interests in VP&F upon a constructive or resulting trust for, or subject to an equitable charge in favour of, the husband and the wife and/or corporations or trusts controlled by them (7(d ) and (e));
·that the issue of shares in VP&F be set aside pursuant to s106B of the Family Law Act 1975 (“the Act”) (7(g));
·that pursuant to Part VIIIAA of the Act the adult children transfer these shares and interests in VP&F to the husband and/or the wife;
·that any transfer of the husband’s shares to the adult children in VP&F be declared a sham or set aside pursuant to s106B of the Act (7(i));
·that the “purported transfers” by the husband and the wife to VP&F of the properties referred to in paragraphs 30.2 and 30.4 of the husband’s affidavit of 18 July 2003 (being an office in a building called “EA” near F Hospital, and two units in Q) be set aside pursuant to s106B of the Act (7 (w) and (y)); and
·that any “purported transfer” by the husband and the wife to VP&F of the property referred to in paragraph 30.5 (being the subdivision project at L) be set aside pursuant to s106B(7(aa)).
The summary dismissal application in relation to orders and declarations concerning the overseas interests
53.I turn now to the summary dismissal application in so far as it is directed to relief sought by the wife in paragraph 7 of her amended application in relation to the overseas company and real estate.
7(a)That it be found or declared that the issue of shares to the daughter and the son in the company VP&F was a sham;
54.In support of the application for summary dismissal of paragraph 7(a) of the wife’s amended application, Counsel for the third parties relied on the interpretation of the expression “sham” provided by the High Court in Equuscorp Pty Lda v Glengallan (2004) 211 ALR 101 at [46]:-
"Sham" is an expression which has a well understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences.
55.Against the background of that interpretation, Counsel submitted that the limited evidence before the Court concerning the establishment of, and original shareholding in, VP&F did not indicate, even by inference, that the husband and the adult children intended that the issue of those shares should have any effect other than its apparent legal effect. Counsel further submitted, relying on the decision of the High Court in Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 364, that given the relationship between the husband and the children, and in the absence of evidence to the contrary, this Court ought presume that the husband, in causing shares to be issued to his children, intended that they each take those shares beneficially.
56.Notwithstanding the existence of the presumption that where a parent causes an allotment of shares to be made to his or her children, the children will take those shares beneficially, I am not persuaded that it would not be possible for the wife to establish, when the evidence is “elaborated” (per Kirby J in Lindon (supra)) in the context of the trial, that, given the state of the marriage at the time of the incorporation of VP&F, the initial allotment of shares to the children was a sham, or, in other words, a device to limit the wife’s claim to property acquired by the husband. Thus I am not prepared to dismiss on a summary basis the application for the declaration contained in paragraph 7(a).
7( b)That VP&F Ltd is the alter ego of the husband;
57.I understood the essential submission in support of the application for summary dismissal of paragraph 7(b) of the orders sought by the wife to be that no declaration that VP&F is the alter ego of the husband – such that that company or its assets could be found to be the property of the husband, as opposed to a financial resource, for the purpose of the property settlement proceedings – could be made, unless the husband was found to have legal or equitable proprietary rights in the company (see for example, Kelly and Kelly (No 2) (1981) FLC 91-108). The evidence in this case, it was submitted, would not support such a finding, given that it is the husband’s case that he no longer holds his original 10% shareholding in the company.
58.While these submissions may well be correct, they overlook, in my view, the fact that other findings sought by the wife in later sub-paragraphs of paragraph 7 of her amended application, might be made which would result in the husband being found to have the necessary proprietorial interest in VP&F, such as would permit a finding that the company is the husband’s alter ego. Accordingly, I am not prepared to dismiss on a summary basis the application for the declaration contained in paragraph 7(b).
7(c)That the husband has de facto control and ownership of the company VP&F
59.In support of the application to summarily dismiss the application for the declaration sought in paragraph 7(c), being that the husband has de facto control and ownership of VP&F, it was submitted that such a declaration would be virtually meaningless and of no effect in any endeavour to establish that the company or its assets was the property of the husband (as opposed to a financial resource available to him).
60.That submission may well be correct. But again if other declarations sought by the wife were to be made which established some proprietorial interest of the husband in the company, a finding that he has de facto control of the company (which is a finding that would appear open given the evidence of the husband that he “operates” the company) may well have considerable significance in the determination of the case. Accordingly, I am not prepared to dismiss the application for such a finding or declaration on a summary basis.
7(d)That the daughter and the son each hold their shares and interests in VP&F upon constructive and/or resulting trust in favour of the husband and/or the wife and/or corporations and/or trusts controlled by the husband and/or the wife
7(e)That the daughter and the son each hold their shares and interests VP&F subject to an equitable charge in favour of the husband and/or the wife and/or corporations and/or trusts controlled by the husband and/or the wife
61.The submission made on behalf of the third parties in support of their application for the summary dismissal of the declarations sought in paragraphs 7(d) and (e) was that there is simply no evidence to support a finding that the second and third respondents hold their shares in VP&F on a constructive or resulting trust, or subject to an equitable charge in favour of, the husband, the wife or corporations or trusts controlled by the husband and/or the wife.
62.There would seem to be considerable force in this submission insofar as it relates to the original 45% shareholding which each of the second and third respondents had in VP&F. But the issue in not so clear in relation to the 10% shareholding which the husband had. Some of the evidence suggests that that 10% shareholding has now been absorbed by the company. The problem, however, for the second and third respondents is that on their own evidence they claim to now own that 10% shareholding.
63.In paragraph 2 of her affidavit sworn 26 April 2006, the second respondent daughter, who, it should be noted is a chartered accountant and thus presumably understands concepts relating to corporations, stated:
2.My brother… and I each own 50% of the shares in [VP&F] … a company set up [overseas] by my father to undertake land development and building work ….
64.In paragraph 11 of his affidavit sworn 26 April 2006, the third respondent son stated:
11.I own 50% of the shares in [VP&F]…. This company was established about 7 years ago by my father. The company is [an overseas] and does not trade in Australia….My father owned 10% of the shares in the company but they were seized to pay a debt in his name [overseas]. He spoke to my sister and I and we all agreed that the company would pay the debt and those shares would be transferred to my sister and I equally. That increased our 45% share to 50%.
65.Further, it is the evidence of the husband in paragraph 38 of this affidavit sworn 26 April 2006, that he had agreed with the second and third respondents that if the company paid a particular debt for him, his “shares would become theirs”. It should be noted, however, that other evidence from either the husband or in his case is inconsistent with this evidence.
66.Given that the evidence concerning the circumstances of the husband’s loss of his 10% shareholding is somewhat unclear, as also is the exact fate of that 10% shareholding, the wife should be entitled to explore these matters in the context of a trial. It is also not without significance in this context that the husband’s solicitor advised the wife’s solicitor in the letter of 28 January 2004 that it has “always been the case” that the husband’s interest in VP&F is “an asset to be taken into account in the property settlement”.
67.With these considerations in mind, and given that the declarations in question draw no distinction between the original shareholding of the second and third respondents and the additional shares which they now claim to own, I am not prepared to summarily dismiss the application for the declarations sought by the wife contained in paragraphs 7(d) and (e).
7(g)That the issue of shares in VP&F to each of the daughter and the son be set aside pursuant to Section 106B of the Family Law Act
68.Section 106B of the Act provides:
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1A) If:
(a) a party to a marriage is a bankrupt; and
(b)the bankruptcy trustee is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the bankrupt; and
(d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1B) If:
(a)a party to a marriage is a debtor subject to a personal insolvency agreement; and
(b)the trustee of the agreement is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the debtor; and
(d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2)The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3)The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4)A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4AA)An application may be made to the court for an order under this section by:
(a) a party to the proceedings; or
(b)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c)any other person whose interests would be affected by the making of the instrument or disposition.
(4A)In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1).
(5) In this section:
"disposition" includes:
(a) a sale or gift; and
(b)the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
"interest" :
(a) in a company includes:
(i) a share in or debenture of the company; and
(ii)an option over a share in or debenture of the company (whether the share or debenture is issued or not); and
(b) in a trust includes:
(i) a beneficial interest in the trust; and
(ii)the interest of a settlor in property subject to the trust; and
(iii) a power of appointment under the trust; and
(iv)a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and
(v)an interest that is conditional, contingent or deferred.
69.Counsel for the third parties submitted that the date of the issue of the shares to the second and third respondents in 1998 was important because s106B(5) applies only to dispositions which occur on or after 3 August 2005 and that the prior definition was simply “disposition includes a sale and a gift”. Relying on Ord Forrest Pty Ltd v Commissioner for Taxation (1974) 130 CLR 124, it was Counsel’s initial submission that the issue of shares in a corporation is not a disposition, but rather the creation of a new interest.
70.Subsequently, Counsel drew my attention to the decision of the Full Court in Ferrall and McTaggart v Blyton (supra) which upheld the decision of the primary Judge, O’Ryan J, that an allotment of shares was “a disposition” for the purposes of s85 of the Act, which was the predecessor provision of s106B. But Counsel then sought to distinguish that decision from the present case on the basis that in the former case the allotment of shares had been made in an existing company which had real value, whereas in the present case the allotment occurred at the time of the incorporation of the company.
71.A further basis on which it was sought to distinguish Ferrall and McTaggart v Blyton (supra) was that in that case there was clear evidence of an intention on the part of a party to property settlement proceedings to defeat the interests of the other party to those proceedings.
72.I am not persuaded that in this context of a summary dismissal application, I should distinguish what would otherwise be binding authority on me on the basis of these perhaps somewhat subtle distinctions. This is not to say, of course, that they may not be valid distinctions.
73.But as the evidence is explored and fuller argument is presented (see again Kirby J in Lindon (supra)), those distinctions might be found not to exist. In other words, VP&F may be found to have had some value immediately upon its incorporation; certainly on the husband’s evidence contained in his affidavit sworn on 22 August 2006, the company had acquired property by July 1998. Further, an intention on the part of the husband to defeat the wife’s interest through the creation of VP&F might be established in the course of a trial.
74.I am thus not prepared to summarily dismiss the application in paragraph 7(g) for an order under s106B.
7(h)That pursuant to Part VIIIAA of the Family Law Act each of the daughter and the son shall do all things and execute all documents necessary to transfer to the husband and/or the wife the whole of their shares and interests in VP&F to the husband and/or the wife
75.I agree with the submission of Counsel for the third parties that it is not clear whether the wife proposes to rely on the provisions of Part VIIIAA of the Act for the purposes of machinery relief only, or whether she seeks some form of substantive relief under that Part (and if so, what would be the basis of that relief).
76.But however that may be, given my decision not to summarily dismiss any of the applications so far sought by the wife in paragraph 7 of her amended application, I would not summarily dismiss this application for an order which at the very least, would provide the machinery if any of those other applications were ultimately successful.
7(i)That any transfer of shares by the husband to either of the daughter or the son of shares in VP&F be declared to be a sham and/or that it be set aside pursuant to Section 106B of the Family Law Act
77.In support of the application to summarily dismiss paragraph 7(i), it was submitted that there is “no real evidence” that there has been any transfer of shares in VP&F by the husband to either the second or the third respondent.
78.However, this submission appears to overlook the evidence of the second and third respondent which I referred when discussing paragraphs 7(d) and (e) being that the husband’s 10% shareholding has been transferred to them. Given that evidence, and also the statement in the letter from the husband’s solicitor of 28 January 2004 that the husband’s interest in VP&F was to be an asset in the property settlement proceedings, the opportunity for the wife to explore in the course of a trial, the circumstances whereby the husband lost his interest in that company and, if necessary, to obtain any necessary relevant relief, should not be denied to her at this stage.
7(w)That the purported transfer by the husband and the wife to VP&F on or about 21 October 2002 of the property referred to in paragraph 30.2 of the husband’s affidavit sworn 18 July 2003 be set aside pursuant to Section 106B of the Family Law Act
7(y)That the purported transfer by the husband and the wife to VP&F on or about 18 October 2002 of the properties referred to in paragraph 30.4 of the husband’s said affidavit be set aside pursuant to Section 106B of the Family Law Act
7(aa)That any purported transfer by the husband and the wife to VP&F of the property referred to in paragraph 30.5 of the husband’s said affidavit be set aside pursuant to Section 106B of the Family Law Act
7(bb)That in the event that such a transfer has purportedly been made each of VP&F do all things and execute all documents necessary to reconvey the said property to the husband and the wife.
79.As earlier mentioned, the properties which would be the subject of the orders sought in these sub-paragraphs are the office in a building called “EA” (near F Hospital); two units in Q; and the sub-division at L.
80.It is the submission of Counsel for the third parties that there is nothing in the material before the Court which would support a claim by the wife under s106B in relation to any of these properties. Counsel further submitted, at least in effect, that it is not enough for the wife to simply assert that “that once she and the husband owned the property or the land upon which a unit now exists and to point to the property or unit now owned by the company and to say without more, that she is entitled to the relief she claims”.
81.In my opinion once it is established that a property which was once in the name of the wife (albeit jointly with the husband) is no longer in her name and in circumstances where she alleges that she did not authorize any transfer of that property out of her name, she is entitled to explore within the context of a trial how and why the transfer came about. Exploration of these matters at trial may well provide the basis for a claim under s106B. Accordingly I am not prepared to dismiss summarily the wife’s application for relief under s106B as sought in paragraph 7 (w), (y) and (aa), nor for the necessary machinery order sought in 7(bb).
Conclusion in relation to applications directed to the overseas interests
82.It will thus be seen that I am not prepared to dismiss summarily any of the sub-paragraphs of paragraph 7 of the wife’s amended application insofar as they are directed to the overseas company or overseas real estate. For the reasons which I have given, no part of the wife’s case in relation to the overseas company or real estate can be said to be “so clearly untenable that it cannot possibly succeed”.
83.However, in my view, there was great force in many of the submissions put by Counsel for third parties. Indeed, those submissions indicate how weak the wife’s case would appear to be in many respects. What can perhaps be seen as having saved the wife’s case, is the inter-relationship between many of the matters which are the subject of the declarations and orders sought by the wife. In other words, if the wife was to succeed in obtaining one particular declaration, that may enable or assist her to obtain one or more of the other orders or declarations sought by her. However, I do not consider that her task will be easy. But that, of course, is not a reason for denying her the opportunity to develop her case in the context of a trial.
The evidence concerning GD Pty Limited
84.The first reference in the evidence concerning the company known as GD Pty Ltd appears to be in the husband’s affidavit sworn 26 April 2006 where he stated:
69.I am 54½ years old. I have worked hard all my life since I was 12 years old. I have built a successful business with my own hands. I was taken ill in Christmas 2004 and spent time in hospital. I began to ask myself why I was working so hard, especially as my wife was not working and claiming an equal share of the assets which I had created. I started to scale down my work. My son [S] had been overseas and I wanted to guide him into the building trade in which I had been successful. I wanted to help him by using my experience and my building license [sic]. [S] established a company called [GD] Pty Ltd of which he is the only shareholder and director. I have given a guarantee for the borrowings of that company from the National Australia Bank. I allow the company to undertake building projects using my builder’s licence. This is a common practice amongst builders. I provide advice and supervision to the building projects undertaken by [GD Pty Ltd]. Because it has only been running for a short period the arrangements for my remuneration have not been settled. We have been waiting to see what the company can afford. The assets of [GD Pty Ltd] belong to that company and [S], as its shareholder. I have no interest in its assets except that the [PH] Trust is owed $510,000, being money it advanced to enable [GD Pty Ltd] to buy land in [Canberra] during 2005.
70.I propose to continue to work in building helping my son but not to continue the operations of [PH] Pty Ltd. I do not propose to undertake further building work through [PH Pty Ltd]. Supervising the construction of houses is a stressful and demanding job and can be a seven day a week occupation. It is a young man’s job and I am no longer young and as healthy as I was. I take medication for blood pressure, high blood sugar and cholesterol.
85.The husband had stated earlier in the same affidavit:
15.[VP] Pty Ltd was established after [the wife] and I separated in April 2002. It is the trustee of the [VP] Superannuation Fund. I am the sole director and shareholder of the company and the sole member of the superannuation fund.
16.In the last couple of years I have scaled down my work. At the present time [PH Pty Ltd] has only one project on foot which is in …a new suburb of Canberra. Apart from that, [PH Pty Ltd] owns a number of investment properties. [PH Pty Ltd] has a number of liabilities. The financial statements for [PH Pty Ltd] and all other relevant companies have been prepared and provided to the wife’s solicitors.
86.In her affidavit sworn on 6 June 2006 in which she responded to the husband’s affidavit sworn on 26 April 2006, the wife said:
11.In response to paragraph 16, I am unable to say whether the respondent has scaled down his work. I am aware the respondent is involved in projects of [GD Pty Ltd] and other companies with which he is associated, eg JDWA Pty Limited and CRD. The respondent travels overseas very frequently and also conducts projects overseas.
…
60.6As to paragraph 15 I regret but it will be necessary for me to join both of my children in these proceedings because of their involvement in the VP&F company and now [the son S’s] involvement in [GD Pty Ltd].
87.Then in his affidavit sworn on 24 August 2006 responding to the wife’s affidavit sworn on 6 June 2006, the husband said:
8.In relation to paragraph 11. I have sent [sic] out in my affidavit my involvement in the projects of [GD Pty Ltd]. JDWA Pty Limited was a company set up for a project … as set out in paragraphs 20 to 22 of my affidavit filed on 18 July 2003. That project involved the development of land for housing. The land was developed, and the assets disposed of. JDWA Pty Limited is no longer active and as far as I am aware has no assets. … I am not a shareholder of CRD. [PH Pty Ltd] has in the past been part of a consortium set up by CRD to develop land in [a suburb in Canberra]…. Details of that project are set out in the affidavit of [Mr P]. [PH Pty Ltd] took an allocation of 15 out of 470 blocks in that development. Once it received those blocks it built upon them and sold those houses. [PH Pty Ltd] is not involved in further developments with [CRD].
…
43.In paragraph 69 of my affidavit filed 27 April 2006 I said that [PH Pty Ltd] had loaned money to [GD Pty Ltd] during 2005. The loan was actually from [PI Pty Ltd]. In May 2006 [GD Pty Ltd] repaid $125,000 of the debt.
88.In an affidavit sworn on 26 April 2006 the third respondent son gave the following evidence concerning GD Pty Ltd:
17.Last year I set up a company called GD Pty Ltd. I am the sole Director and sole shareholder. I work full time running that company. My father helps me but he is often away from Canberra or overseas, and when he is here he is not working as hard as he did when he ran his own business. My father has not been paid a wage and the company has not generated much profit yet. In due course he will be paid money for his work.
18.The company owes [PH] Trust $500,000 which was the price for the first land that the company acquired to start building houses. The company builds houses. At the moment we are building houses in [a suburb in Canberra]…. I intend to continue to operate this company and to make my future in the building industry.
19.I am aware that my mother’s solicitor has said that the assets of GD Pty Ltd should be treated as the property of my father. This is not so. I do not hold my interest in that company on my father’s behalf. It is mine.
The orders and declarations sought in relation to GD Pty Ltd
89.In paragraphs 7(j), (k), (l), (m), (n), (o), (p) and (q) and (r) of her amended application, the wife seeks the following orders and declarations:
7(j)That the purported ownership of the whole of the shareholding in GD Pty Ltd by the son is a sham
7(k)That GD Pty Ltd is the alter ego of the husband
7(l)That the son holds his shareholding in PD Pty Ltd upon constructive or resulting trust in favour of the husband
7(m)That the son holds his interests in GD Pty Ltd subject to an equitable charge in favour of the husband and/or PH Pty Ltd
7(n)That the son shall within such time as the Court shall allow do all things and execute all documents necessary to satisfy the said charge
7(o)That GD Pty Ltd holds the whole of its business and assets upon constructive and/or resulting trust in favour of the husband and/or PH Pty Ltd
7(p)That GD Pty Ltd holds the whole of its assets and business subject to an equitable charge in favour of the husband and/or PH Pty Ltd
7(q)That GD Pty Ltd shall within such time as the Court shall allow do all things and execute all documents necessary to satisfy the said charge
7(r)That the transfer of all contractual benefits from development projects from PH Pty Ltd to GD Pty Ltd be set aside pursuant to Section 106B of the Family Law Act
The summary dismissal application in relation to GD Pty Ltd
90.In support of the application for the summary dismissal of the applications for these orders and declarations sought by the wife in relation to GD Pty Ltd, Counsel for the third parties referred first to the evidence which I have set out above concerning GD Pty Ltd (other than the evidence from the third respondent son). Counsel then submitted that, having regard to the evidence to which he had referred, there was simply no evidence:
·to support the contention that the third respondent’s interest in GD Pty Ltd is a sham “as that word is understood”;
·to support the contention that GD Pty Ltd is the alter ego of the husband “or anyone else other than perhaps the [t]hird [r]espondent because the only evidence is that he is the shareholder and director of the company”; or
·to support the existence of a constructive or resulting trust in favour of the husband or any other person or the establishment of an equitable charge in favour of the husband or PH Pty Ltd.
91.It was, however, acknowledged on behalf of the third respondent that there is evidence from the husband that GD Pty Ltd is indebted to PI Pty Ltd as a result of loans that have been made by the latter company to the former company (some of which loans have been partly repaid). But it was submitted that insofar as GD Pty Ltd remains indebted to PI Pty Ltd, the amount of that debt represents an asset of PI Pty Ltd and that those parties who have a beneficial interest in the shares of that company, presumably the husband and/or the wife, have the benefit of that asset.
92.In relation to the claim contained in paragraph 7(r) of the wife’s amended application for an order under s106B in relation to GD Pty Ltd, it was submitted on behalf of the third respondent son that there is no evidence that the assistance the husband has offered to his son via his companies in the establishment of the business of GD Pty Ltd was done with the intention of defeating the wife's claim for property settlement. Furthermore, it was submitted that the evidence that has been led by the wife simply cannot support an assertion that such assistance was likely to defeat such a claim.
93.It was accordingly submitted on behalf of the third respondent son that on the evidence to support the wife’s claims in respect to GD Pty Ltd, such claims were doomed to failure, and therefore should be summarily dismissed.
94.The financial reports from the PH Trust for years 2004 and 2005 and for GD Pty Ltd for 2005 were tendered on behalf of the wife. However, in the absence of some expert analysis of those reports, I cannot see how they can assist the wife’s case.
Conclusion in relation to applications relating to GD Pty Ltd
95.It could, therefore, well be concluded that on the whole of the evidence now before the Court in relation to GD Pty Ltd, the relief sought by the wife in paragraphs 7(j) to (r) of her amended application could not possibly be granted, and accordingly, the application for the relief sought in those sub-paragraphs should be summarily dismissed.
96.However, such a summary dismissal would not mean that the wife would not be able at the hearing of the proceedings between herself and the husband, to explore the reasons given by the husband in his affidavit for scaling down his business activities and the course upon which he has accordingly embarked. Following such exploration, it would always be open to the wife to apply at that time to amend her application to seek, in reliance on matters which had emerged during such further exploration, relief against the third respondent son in the same form as the relief now sought in paragraph 7(j) to (r) of the orders sought by the wife in her amended application, even though the application for such relief had been previously summarily dismissed. The wife could, in my view, take this course because there would have been no previous dismissal on the merits of her previous application for such relief.
97.Given this possibility – remote though it might be – I do not consider that I should exercise the discretion to summarily dismiss the wife’s application for orders and declarations directed to the third respondent son and to the fifth respondent, GD Pty Ltd. I also take into account in deciding not to exercise the discretion to summarily dismiss the application for those orders and declarations, the fact that the third respondent son will continue to be a party to the property settlement proceedings between the husband and the wife because of my refusal to summarily dismiss the application for orders and declarations in relation to the overseas interests. Thus the considerations of trouble and expense referred to by Kirby J in paragraph 6 of Lindon (supra) have little application in this case.
Overall conclusion
98.I therefore propose to dismiss in its entirety the application of the third parties for the summary dismissal of the orders and declarations sought in the wife’s amended application of 6 June 2006 to the extent those orders and declarations affect the third parties.
I certify that the preceding ninety-eight (98) paragraphs are a true copy of the reasons for judgment of this Honourable Court
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