Eastern Equity Pty Ltd v Jones - [2014] SASC 10

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Interlocutory Order)
EASTERN EQUITY PTY LTD v JONES & ANOR
[2014] SASC 10
Judgment of The Honourable Justice Nicholson
30 January 2014
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - GENERALLY
Interlocutory application brought by the first defendant seeking an order that the former matrimonial home owned jointly by the first defendant and his wife be excluded from the terms of an assets freezing order previously obtained by the plaintiff. The first defendant and his wife wish to conclude a proposed consent property settlement under the Family Law Act 1975 which would involve the transfer of the first defendant’s interest in the matrimonial home into the wife’s name.
Held: Application refused.
Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 s6; Family Law Act 1975 (Cth), referred to.

EASTERN EQUITY PTY LTD v JONES & ANOR
[2014] SASC 10
NICHOLSON J.
Introduction

On 14 June 2013, the plaintiff filed a statement of claim seeking indemnification by and contribution from the defendants pursuant to s6 of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 together with orders for damages and equitable compensation. On 17 June 2013 and upon the plaintiff’s ex parte application dated 13 June 2013, a judge of this Court made orders restraining the defendants from removing any assets located in Australia or disposing of, dealing with, or diminishing the value of those assets together with ancillary orders (the freezing orders). One of the assets captured by the freezing orders is the former matrimonial home of the first defendant, the legal title to which is in the joint names of the first defendant and his now estranged wife.
On 13 December 2013, an interlocutory application filed by the first defendant came before me in the Chamber List. By that application, the first defendant seeks the following order.
That the freezing order made on 17 June 2013 be varied, in particular order 6(a), 7(1)(a), 7(1)(b) so that the matrimonial residence situated at 6 Garden Street, South Plympton in the State of South Australia 5038 being the whole of the land comprised in Certificate of Title Register Book Volume 5074 Folio 40 and (sic) be removed from the freezing order, so that property settlement orders in the Federal Circuit Court of Australia before her Honour Federal Judge Mead can be considered and sealed.
In short, the first defendant seeks an order that the former matrimonial home be excluded from the freezing orders in order to permit him to conclude a property settlement with his estranged wife.
The evidence bearing on the first defendant’s application
The first defendant’s interlocutory application was supported by an affidavit sworn on 4 December 2013 by the first defendant’s solicitor, Mr David Ashley Starke (the first Starke affidavit). On the day of the argument, 13 December 2013, the first defendant filed a further affidavit again sworn by his solicitor (the second Starke affidavit). In response to the first defendant’s application, the plaintiff relied upon an affidavit of its solicitor, Mr Matthew Selley, sworn and filed 12 December 2013 together with written submissions, filed on 12 December 2013, to which were attached the plaintiff’s written submissions provided to the Court on 14 June 2013 when the freezing orders were sought and obtained. In addition to this written material, I have had the benefit of oral submissions from counsel for the first defendant and senior counsel for the plaintiff.
The freezing orders obtained on 17 June 2013 were granted because the judge of this Court who heard the matter was satisfied, on the evidence then before the Court, that the plaintiff had established a prima facie case for relief in accordance with the authorities that govern such applications and that the balance of convenience favoured the granting of relief as sought. The usual undertaking as to damages was provided. There has been no appeal by either defendant against the making of the freezing orders or as to their terms. Counsel for the first defendant, during submissions, expressly disavowed any intention to reargue the initial imposition of the freezing order. Accordingly, one starts from the position that the freezing orders as presently in force were properly made.
As such (and as counsel for the first defendant acknowledged) any variation to the freezing orders, if not made by consent, would require a sufficient evidentiary foundation. The only evidence before the Court in support of the first defendant’s interlocutory application is that contained in the two Starke affidavits.
Exhibited to the second Starke affidavit is a true copy of the original certificate of title for the matrimonial home. The fact that the first defendant and his wife have held the legal title to the property in their joint names since 1988 does not now appear to be in contest. The title is subject to a registered mortgage in favour of the St George Bank. Mr Starke deposes to the fact that he has been told that the property has a present value of or about $510,000 with the amount owing to St George Bank under the mortgage being in the vicinity of $355,000. I leave aside the question of whether an opinion given in this form by way of affidavit evidence is admissible. However, I will assume for present purposes that this information as provided to Mr Starke is reasonably accurate.
Apart from the foregoing the only evidence (and the primary evidence) in support of the first defendant’s application to have the freezing orders varied is that set out in the first Starke affidavit. Given that I have taken the view that the application must fail in limine for want of a sufficient evidentiary foundation it is convenient to set out the whole of the terms of that affidavit, omitting formal parts.
1.I am the solicitor acting for the defendants in the proceedings. His Honour Justice David has the current carriage of these proceedings.
2.I refer to the freezing order made on 17 June 2013 by Her Honour Justice Vanstone that restricts the defendants from dealing with assets.
3.I ask that this application be listed before His Honour Justice David and or Justice Vanstone (who was the presiding Justice at the time the freezing order was made on 17 June 2013).
4.The first defendant, Malcolm Royce Jones, in these proceedings, is the respondent in the Federal Circuit Court of Australia, Action No: 2814 of 2013, brought by his wife Julianne Margaret Jones Action No. 2814 of 2013 for a property settlement. Those proceedings have been adjourned to 5 December 2013 at 9.15am. Now produced and shown to me and marked as Exhibit “DAS-1” is a true copy of the Orders made on 16 September 2013 by Her Honour Federal Judge Mead.
5.The applicant wife is represented by Barnes Brinsley Shaw, solicitors who specialize in matrimonial issues.
6.A property settlement has been negotiated between the applicant wife and the respondent husband. The terms of settlement are set our (sic) in a letter dated 17 September 2013 from the applicant wife’s solicitors to my office. Now produced and shown to me and marked as Exhibit “DAS-2” is a true copy of the said letter which has been masked in parts as it was a without prejudice letter.
7.I am awaiting the draft consent property orders from the solicitors for the applicant wife which I have been advised are being settled by senior counsel.
8.The solicitors for the applicant wife have insisted that our office obtain an order of this Honourable Court for the discharge or removal of the former matrimonial home from the freezing order prior to consent orders being lodged in the Federal Circuit Court of Australia.
9.I seek orders of this Honourable Court that the property situated at 6 Garden Street South Plympton 5038 in the State of South Australia 5038 being the whole of the land comprised in Certificate of Title Register Book Volume 5074 Folio 40 be discharged and or removed from the freezing order made 17 June 2013 and in particular orders 6(a), 7(1)(a), 7(1)(b) be amended.
10.I know the facts deposed to herein of my own knowledge.
The affidavit evidence relied upon by the first defendant can be described as economical at the least. The chronology would appear to be as follows.
(i)The freezing orders were made ex parte on 17 June 2013.
(ii)On an unknown date but presumably shortly prior to 16 September 2013 (see next entry) the wife filed an application in the Federal Circuit Court of Australia for property settlement.
(iii)On 16 September 2013, her Honour Judge Mead of the Federal Circuit Court made what appear to be fairly standard orders aimed at ensuring that the parties would make full disclosure of their respective financial circumstances, in order that the application for property settlement might be progressed.
(iv)Also on 16 September 2013, Judge Mead made an order that the parties attend at a conciliation conference with the Registrar of the Court on 5 December 2013. I am unaware as to whether or not that conciliation conference took place.
(v)On 17 September 2013, that is one day after the initial hearing before Judge Mead on 16 September 2013, the solicitors for the wife wrote a letter to Mr Starke as solicitor for the first defendant setting out what, according to the instructions received by the wife’s solicitors, were the terms of “an agreement in principle regarding the division of assets”. The agreement in principle is summarised in the letter.[1]
(vi)On 4 December 2013, the first defendant filed in this Court the interlocutory application presently under consideration.
(vii)According to the first defendant’s counsel, the Federal Circuit Court proceedings have now been adjourned to 31 January 2014, presumably in order to give the first defendant time to pursue this interlocutory application.
[1] The letter is exhibit DAS-2 to the first Starke affidavit.
The effect of the “agreement in principle” reached by the first defendant and his wife is that the former matrimonial home is to be transferred from the joint names of the parties into the wife’s sole name subject to the wife refinancing the mortgage secured against the former matrimonial home so that she is to assume full responsibility for it. Other assets and liabilities in the names of the two parties are also dealt with. However, it would seem that the only asset embraced by the freezing orders which would suffer an ownership change is the former matrimonial home. In all other respects, the protections afforded to the plaintiff by the freezing orders would remain undisturbed. Accordingly, the only variation to the freezing orders sought by the first defendant, in order to give effect to the “agreement in principle” reached with his wife, is the exclusion of the matrimonial home from the purview of the freezing orders.
The first defendant’s submissions
Counsel for the first defendant made submissions, based on estimated values[2] of the various assets caught by the freezing orders, to the effect that under the proposed property settlement the wife would take property with a nett value of approximately $195,000 and the first defendant would take property with a nett value of approximately $234,000. It was counsel’s contention that, on the assumption that the estimated values provided by the first defendant for the various assets as disclosed were reasonably accurate, and given the length of the parties’ marriage, it could be inferred that the proposed settlement was a legitimate or genuine arms length settlement and not one merely designed to circumvent the terms of the freezing orders. There are a number of potential difficulties with this submission including, in particular, the fact that the evidentiary basis for it has not been tested. Nevertheless, for present purposes, I will assume the correctness of the ultimate proposition that counsel has put.
[2] As disclosed in the first defendant's affidavit of assets.
Counsel next submitted that the purpose of the interlocutory application was to respond appropriately to the Federal Circuit Court property proceedings which had been brought by the wife against the first defendant. Counsel then put a number of submissions directed to an attack on the plaintiff’s claims against the first defendant, as set out in the statement of claim and affidavit evidence filed on behalf of the plaintiff. Counsel challenged the notion that even if the plaintiff ultimately were to succeed with its claim against the first defendant it did not necessarily follow that the plaintiff would be able to trace its entitlements against the first defendant into the wife’s legal and equitable interest in the matrimonial home.
The difficulty with this submission is two-fold. First, the plaintiff’s case, as it was accepted at the time the freezing orders were made, is that the first defendant’s equitable interest in the matrimonial home may exceed his notional half interest as reflected by the legal title shown in the register. A court exercising jurisdiction under the Family Law Act 1975 to effect a property settlement can only do so on the basis of property identified as owned by the respective parties. Often this will not require investigation, particularly where the parties are in agreement as to where the legal and equitable interests lie. However, in this case, the plaintiff is still to be heard on its claims that the first defendant has a greater interest in the matrimonial property than the legal title otherwise would suggest. It is for this reason that the freezing orders as granted captured the whole of the matrimonial home property.
The second difficulty with the first defendant’s submission here is that any attack on the plaintiff’s claims to the effect that they are not sufficient to permit the freezing orders to capture the whole of the matrimonial home property has been foreclosed by the making of the freezing orders in circumstances where they were not challenged either at the time when the ex parte orders were confirmed or on appeal. In the absence of new evidence counsel was right to advise the Court that there was to be no challenge to the making of the freezing orders.
Resolution of the application
In essence, it is not open to the first defendant to seek to have the matrimonial home excluded from the freezing orders on the basis that the freezing orders, as made, should never have included this property owned jointly by the first defendant with his wife. The only contention open to the first defendant on interlocutory application, as presently formulated, is that in the circumstances as they now stand, balance of convenience factors have changed sufficiently to permit a variation of the freezing orders so as to exclude from their reach the matrimonial home.
However, the only new piece of information available to the Court is that the first defendant and his wife have reached an agreement in principle for the division of the matrimonial assets. This is as far as the evidence goes. Apart from the fact that the first defendant, apparently, wishes to engage in and finalise a property settlement with his wife and apart from the fact that it might be inferred from the solicitor’s correspondence that the wife wishes likewise,[3] there is no evidence upon which the Court can assess any change in balance of convenience issues insofar as the plaintiff is concerned, the first defendant is concerned and, if necessary, the third party wife is concerned.
[3] Although no affidavit evidence has been filed seeking to identify or establish the wife's interest in or attitude to the first defendant's interlocutory application.
I accept the submission by counsel for the plaintiff that there has been no basis provided in the evidence for any variation to the freezing orders earlier made by another judge of this Court. At the time the orders were made a prima facie case was made out and the balance of convenience was assessed to favour the plaintiff. I agree with counsel’s submission that there is no evidence that will enable a finding that either of those matters has changed. It is for this reason that the application to vary the freezing orders fails in limine.
This is sufficient to decide the application. However, the plaintiff also relied on alternative submissions to the effect that the plaintiff’s case for the making of the freezing orders, including over the former matrimonial home, had strengthened since the time the orders were made. I do not need to take the time to consider these alterative submissions further. Given that the matrimonial proceedings are next before the Federal Circuit Court on 31 January 2014, I expect that the first defendant will be anxious to know the outcome of his interlocutory application.
The first defendant’s interlocutory application is refused. I will hear the parties as to any consequential orders.