Eliot and Eliot and Anor
[2014] FamCA 1090
•8 December 2014
FAMILY COURT OF AUSTRALIA
| ELIOT & ELIOT & ANOR | [2014] FamCA 1090 |
| FAMILY LAW – PROPERTY SETTLEMENT – Interlocutory Application – where the wife sought an order restraining the liquidators of the parties’ company from pursuing proceedings in the Supreme Court of New South Wales – where the Court is satisfied that where Family Law proceedings were commenced prior to the death of the husband and remain outstanding, and where there is an arguable case for the wife to establish that she should not be subject to debts incurred by the husband post-separation, that it is just and convenient to grant the injunction – Orders made joining the liquidators as second respondents – liquidators restrained from taking any further steps in relation to the proceedings filed in the Supreme Court of New South Wales |
| Family Law Act 1975 (Cth) ss 90AF, 114 |
| CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 Keene & Scofield & Anor [2013] FCCA 540 Lederer v Hunt (2007) 36 Fam LR 587 |
| APPLICANT: | Ms Eliot |
| FIRST RESPONDENT: | Ms B Eliot as the legal representative of the Estate of Mr C Eliot (Deceased) |
| SECOND RESPONDENT: | Mr D and Mr E (as Liquidators of F Pty Ltd) |
| FILE NUMBER: | (P)NCC | 593 | of | 2012 |
| DATE DELIVERED: | 8 December 2014 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Cleary J |
| HEARING DATE: | 13 November 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bithrey |
| SOLICITOR FOR THE APPLICANT: | Catherine Henry Partners |
| SOLICITOR FOR THE FIRST RESPONDENT: | Mr Piggott |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Levick |
| SOLICITOR FOR THE SECOND RESPONDENT: | Mullane & Lindsay |
Orders
That Mr D and Mr E (as liquidators of F Pty Ltd) be joined as a party to these proceedings as second respondents pending further order.
That pending further order, the second respondents be and are restrained pursuant to s 114 of the Family Law Act from taking any step in the proceedings filed in the Supreme Court of New South Wales Case Number ….
IT IS NOTED that publication of this judgment by this Court under the pseudonym Eliot & Eliot and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: (P)NCC593 of 2012
| Ms Eliot |
Applicant
And
| Ms B Eliot as the Legal Representative of the Estate of Mr C Eliot (Deceased) |
First Respondent
And
| Mr D and Mr E (as Liquidators of F Pty Ltd) |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by the applicant wife for orders restraining second parties from pursuing proceedings in the Supreme Court of New South Wales. For the purpose of the application, liquidators of the company F Pty Ltd (‘the Liquidators’) were joined as second respondents. The second respondents presently have a common law claim in the Supreme Court (Case No. …) listed for directions on 10 December 2014.
The first respondent, Ms B Eliot, is the personal legal representative of the Estate of her late father, Mr C Eliot (‘the husband’). There is a claim in the Supreme Court of New South Wales in respect of an application by the first respondent for provision out of the Estate of her late father (Case No. …). The first respondent appeared but did not participate in these proceedings, which are much less pressing for her.
The matter was argued before me on 13 November 2014.
As an agreed course, judgment was reserved pending the outcome of a conciliation conference involving all parties on 1 December 2014.
This Court was subsequently advised that issues remain unresolved. Accordingly, and again as an agreed course, the Court was asked to make orders prior to the next event in the Supreme Court.
Evidence
The material relied on was as follows:
a)Interim or procedural orders sought by the applicant wife in her Further Amended Initiating Application filed 7 November 2014.
b)Affidavit of the applicant wife filed 1 October 2014.
c)Affidavit of Mr D (one of the liquidators of F Pty Ltd) filed 13 October 2014.
d)Written and oral submissions on behalf of the applicant wife and the second respondents.
Tendered into evidence by the second respondents[1] was evidence of debt owed by the company, the applicant wife and the Estate, to the National Australia Bank, the Australian Taxation Office and the Australia Government Department of Employment. The Australian Government Department of Employment (Employee Entitlements) and superannuation guarantee charge of the company.
[1]Exhibits 1-4
Authorities
The Authorities relied on are as follows:
a)CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345;
b)Lederer v Hunt (2007) 36 Fam LR 587; a decision of the Full Court (Bryant CJ, Finn and Boland JJ);
c)Keene & Scofield & Anor [2013] FCCA 540; a decision of the Federal Circuit Court of Australia (Judge Brown).
Short history
The husband was born in 1951 and died in 2012, aged 61. The wife is aged 57. The parties met in 1992. At that time, the husband was operating his father’s company, called Eliot Pty Limited. The parties then commenced a business of their own, called F Pty Ltd.
On 3 October 1992 the parties began living together. The following year, receivers from the Commonwealth Bank took over the husband’s father’s company.
In 1994 the parties married.
On 8 August 1995 the husband made a Will providing for half of his estate to go to his new wife (the applicant) and the other half to his adult children, Ms B Eliot (the first respondent) and Mr G Eliot.
In 1997 the parties purchased factory premises in H Town.
On 17 November 1997 the parties’ business was incorporated.
In 2001 there was a period of six months separation.
In March 2011 the wife resigned her active role in the company, alleging that the husband prevented her accessing company bank accounts.
On 31 March 2011 the parties separated after a 17 year marriage.
In July 2011 the husband transferred business accounts from one bank to another; namely the National Australia Bank. The husband asked the wife to sign a personal guarantee for a loan of $980,000, with an overdraft of $350,000, from the National Australia Bank, to keep the business afloat.
In February 2012 the husband was admitted to hospital suffering pneumonia.
On 17 February 2012 the wife contacted F Pty Ltd to ask for assistance to get the husband into hospital. He had become comatose.
On 7 March 2012 the wife filed an Initiating Application in this Court seeking orders for adjustment of interests in property.
The Guardianship Tribunal appointed Ms B and Mr G Eliot as the joint guardians of the husband for a period of 21 days to enable decisions to be made about the husband’s health care and medical treatment. The wife consented to that order.
On 9 March 2012 the husband filed a Response seeking his own orders in relation to property and an interim order appointing Ms B Eliot as a Case Guardian for the proceedings.
On 13 March 2012 the wife filed an Application in a Case proposing, amongst other orders, her appointment as a Director of F Pty Ltd and as a trustee of the husband’s shareholding.
On 14 March 2012 by consent, Ms B Eliot was appointed Case Guardian for the husband; agreement was reached that the order of the Guardianship Tribunal was limited to health care decisions by Ms B Eliot about her father and not financial matters in these proceedings. Undertakings were made by the wife and Ms B Eliot, as Case Guardian, not to dispose of any asset of the marriage.
On 23 March 2012 the husband died. The proceedings continued.[2]
[2]Section 79(8) of Act
On 2 April 2012 a Deed of Agreement was prepared in relation to F Pty Ltd, which was in similar terms to the agreement reached in the consent orders of 14 March 2012, and put into place arrangements for the business of the company to continue with the wife and Ms B Eliot as Directors.
On 26 March 2012 there was a case assessment conference before a Registrar of this Court.
On 29 June 2012 Ms B Eliot lodged a Caveat to prevent the Grant of Probate in relation to the husband’s Will dated 8 August 1995.
On 11 July 2012 Ms B Eliot notified the wife of her intention to make a claim for provision out of the estate.
On 30 July 2012 Ms B Eliot filed a Summons to that effect in the Supreme Court.
On 31 August 2012 Ms B Eliot filed a further Amended Summons applying for Letters of Administration.
On 7 September 2012 the wife filed an Application in a Case seeking to have Ms B Eliot restrained from moving on her further Amended Summons in the Supreme Court, or in the alternate, that she be restrained from dealing with the shares of the husband in the company.
On 20 September 2012 by consent, provisions were made for disclosure of documents by the wife to Ms B Eliot. Current applications were withdrawn and dismissed and a hearing date was vacated.
Over the following months there were several procedural events in this Court.
On 27 August 2013 directions were made for the parties to serve Mr D[3] (the second respondent liquidator), who was then the administrator of F Pty Ltd, with copies of all documents filed to date. It was noted that the parties had reached consensus with respect to all outstanding issues via private mediation; that consensus possibly being jeopardised as a result of the appointment of administrators to F Pty Ltd. The disputes identified on 27 August 2013 were:
a)These Family Law proceedings;
b)Probate proceedings in the Supreme Court of New South Wales;
c)Contested Will proceedings in the Supreme Court of New south Wales;
d)Administration of F Pty Ltd;
e)Dissolution of the parties’ partnership and consequently the finalisation of the financial relationship as between that partnership and the National Australia Bank.
On 20 November 2013 the proceedings were still on foot and leave was granted to provide a copy of the orders to the liquidators of F Pty Ltd.
The matter was subsequently adjourned on 6 June 2014. There was no appearance by Ms B Eliot.
On 16 July 2014 the matter was listed for an undefended hearing on 8 August 2014, with directions for filing of documents.
On 7 August 2014 the matter was adjourned to 17 February 2015, with leave to relist the matter.
On 1 October 2014 the wife filed an Amended Initiating Application and the matter was set down for this interlocutory hearing on 13 November 2014. The Court noted the undertaking of the Liquidators to take no further action in the Supreme Court during the period of the adjournment.
On 13 October 2014 the Liquidators filed a Response seeking to be removed as parties.
On 7 November 2014 the wife filed a Further Amended Initiating Application which came before me today.
The Application
The wife seeks to restrain the Liquidators from proceeding with their claim in the Supreme Court. The thrust of her argument is that her right to argue that debts incurred by the husband shortly prior to his death would be attributable to him alone and should not be visited on her in an analysis of competing applications for adjustment of interests in property in Family Law proceedings. Further, she argues that debts owed by the company, F Pty Ltd, do not have to be crystallised in Supreme Court proceedings for this Court to undertake the exercise of determining her interests. The argument is that Family Law proceedings should be concluded first, so as to identify the wife’s entitlements.
On behalf of the liquidators, it was argued that the Court should exercise its discretion against making an order or injunction under s 114 of the Family Law Act 1975 (Cth) (‘the Act’) binding a second party (the Liquidators).
There was no dispute that the Court has the power identified in s 90AF of the Act to make an order under s 114 of the Act against the Liquidators, restraining them from commencing, or in this case continuing, legal proceedings against a party to a marriage (the wife and the legal personal representative for the estate of the husband).
The thrust of the argument for the Liquidators was that it is essential for the debts associated with the business and the company which owns it, to be crystallised before the Family Law proceedings were heard. It was also argued that there would be a dispute over what those debts were, if they were not crystallised in the Supreme Court proceedings. Counsel for the Liquidators conceded that his clients also had the option of continuing as a party to the proceedings in this Court for that purpose.
There is a lot at stake for all parties. On behalf of the wife, it is said that there may be about $700,000 worth of equity in the matrimonial assets, after deduction of matrimonial liabilities. On behalf of the Liquidators, it is said that debts owed by the company exceed $2,000,000, the effect of which would be that there was no excess for consideration in these proceedings.
The Court may make an order or injunction of the type that is sought by the wife if:[4]
The making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage.
[4]Section 90AF(3)(a) of the Act
In my view, it is. It affords the wife the opportunity to raise her argument about adjustments of interest and preserve her position in the event that the Supreme Court proceedings were concluded. The inevitable next step would be the payment by the Liquidators of outstanding debts and their own costs associated with the liquidation; the opportunity for the wife to preserve her arguable interest would be lost.
Section 90AF(3)(b) of the Act states that if the order or injunction concerns a debt of a party to the marriage, it is not foreseeable at the time that the order is made or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full.
On behalf of the Liquidators, it was submitted that this was a relevant consideration in declining to order the injunction. I do not agree. At this time, it is uncertain whether the assets will be sufficient to meet the debts which are mounting, both to the Australian Tax Office and to the National Australia Bank and also in respect of employee benefits. However, this is not a question of an independent second party debt. The wife herself and the Estate are potential debtors in the liquidation. There was no dispute that the second party in question had been accorded procedural fairness.
I am satisfied that in these circumstances, where the Family Law proceedings were commenced prior to the death of the husband and remain outstanding, and where there is an arguable case for the wife to establish that she should not be subject to debts incurred by the husband post-separation, that it is just and convenient to grant the injunction.
Of the matters contained in s 90AF(4) of the Act, I take into account that the capacity of a party to the marriage may be affected, as to the ability to repay an outstanding debt. In particular, that the ability of the Estate to repay debts may be reduced.
Accordingly I make the following orders:
1.That Mr D and Mr E (as liquidators of F Pty Ltd) be joined as a party to these proceedings as second respondents pending further order.
2.That pending further order the second respondents be and are restrained pursuant to s 114 of the Family Law Act from taking any step in the proceedings filed in the Supreme Court of New South Wales Case Number 2014/162581.
I note the decision in Lederer v Hunt is an authority for the proposition that an interlocutory anti-suit injunction, like that which has been made here, is effectively a final determination as to where the matter or some particular aspect of it is to be litigated. I have taken into account that it is open to the second respondents to continue as parties to protect their own interests and to participate in any argument over the nature and size of the debt. Equally, it would be open for the Liquidators to continue the proceedings in the Supreme Court of New South Wales after the conclusion of these proceedings.
Presently, the indication is that the common law claim would likely be heard in approximately August/September 2015. That is also a matter that I have taken into account in concluding that the restraining order should be made.
I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 8 December 2014.
Associate:
Date: 8 December 2014.
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