Fox Enterprises Pty Ltd v Fox

[1995] QSC 15

IN THE SUPREME COURT

OF QUEENSLAND

No. 1786 of 1994

Brisbane

Before the Hon. Justice G N Williams

[Fox Enterprises Pty Ltd v. Fox & Anor]

BETWEEN:

FOX ENTERPRISES PTY LTD

Plaintiff

AND:

GARNETT ALAN FOX

First Defendant

AND:

RETA MERVELLA ANNE FOX

Second Defendant

JUDGMENT - G N WILLIAMS J

Judgment delivered 24/02/95

CATCHWORDS:     Cross-vesting - husband and wife sole directors and shareholders of company at relevant time - company now under control of husband's de facto spouse - company in action claims constructive trust over land owned in common by husband and wife arising from alleged breach of fiduciary duties as directors - wife's application for property settlement pending in Family Court - proceeding transferred to Family Court.

Counsel:Hamwood for applicant

R. Peterson for respondent

Solicitors:M.A. Kent and Associates for applicant

Cervetto & Co for respondent

Hearing Date:   17 February 1995

IN THE SUPREME COURT

OF QUEENSLAND

No. 1786 of 1994

BETWEEN:

FOX ENTERPRISES PTY LTD

Plaintiff

AND:

GARNETT ALAN FOX

First Defendant

AND:

RETA MERVELLA ANNE FOX

Second Defendant

Judgment delivered 24/02/1995

This is an application brought by the second defendant in the action to have the proceedings transferred to the Family Court pursuant to the provisions of the Jurisdiction of Courts (Cross-vesting) Act 1987. In the circumstances it is necessary to say something about this proceeding and also about other proceedings currently pending in the Family Court.
           There was no appearance by the first defendant, the former husband of the second defendant, and the application was strenuously resisted by counsel for the plaintiff company.
           Unfortunately the material before this Court seems to assume that certain information, for example when the husband and wife separated, is available to the Court presumably from the Family Court file.  Whilst there are deficiencies in the material, particularly as to dates, there is nevertheless sufficient to make the general picture fairly clear.
           The applicant and the first defendant were married some time prior to 1980.  On or about 27 November 1980 they became registered proprietors, as joint tenants, of 4.2492 hectares of land situated at Lot 311 Stokes Road, Pine Mountain.  In or about 1982 a residence was constructed thereon which became the matrimonial home of the applicant and the first defendant. 
           From at least September 1983 until about mid 1988 the applicant and the second defendant were the sole shareholders and directors of the company.  In this action, the company alleges that it paid, either wholly or in part, for some of the improvements carried out on the land hereinbefore described.  The allegation is that a total of $44,751.25 was paid out by the company for improvements on the land owned by the applicant and the first defendant as joint tenants.
           The parties separated around mid 1988.  From about that time Robyn Dianne Burren, who if not then has at least been for some years now the de facto spouse of the first defendant, became a director and shareholder of the company.  Shortly thereafter one R.J. Schickert, who at least at some time was an employee of the first defendant, also became a shareholder and director. 
           It appears that since the husband and wife separated the husband and R.D. Burren have resided in the house on the subject property. 
           The applicant, inter alia, commenced proceedings in mid 1988 claiming property settlement in the Family Court; that application is still pending.  It should be recorded that the application for property settlement has been stayed until certain pending litigation in New South Wales in relation to a property in which the husband and wife had an interest has been concluded.       Schickert became a director after the removal of the applicant from that office in about October 1989.  The circumstances of that removal are the subject of proceedings in the Family Court. 
           The disputes between the husband and wife appear to have remained wholly within the jurisdiction of the Family Court until last year.  On 26 September 1994 the first defendant served documents on the applicant pursuant to the provisions of the Land Title Act 1994 severing the joint tenancy and creating a tenancy in common. Then this writ was issued on 9 November 1994. In the Statement of Claim delivered 7 December 1994 it is alleged that the company made demands on both defendants for payment of the sum of $44,751.25 previously referred to; but no particulars of such demands are given. The material presently before the Court does not indicate that any formal demand was made prior to the institution of the proceedings.
The relief claimed in the action is a declaration that the defendants hold the subject land on a constructive trust for the plaintiff because of "unconscionable conduct" or "breach of fiduciary duty". Reliance is placed on s.229 of the Corporations Law which imposes fiduciary obligations on directors of a company.
           In his defence the first defendant admits that the company "possibly has some interest in the property" but asserts that he cannot "confirm the extent of the interest without proof by the plaintiff of their claim".
           I should also mention that a caveat has been lodged by the company against the title.
           Against that background it seems clear that the applicant and the first defendant have been in a state of dispute as to property settlement since about June 1988 and the company did not make any specific claim to an interest in the land until November 1994.  At all times material to the relevant events pleaded in the Statement of Claim the applicant and the first defendant were husband and wife and were the sole directors and shareholders of the company.
           There is nothing before the Court to indicate how the expenditure of the $44,751.25 was shown in the company's books of account; it is quite possible that the expenditure was treated, for example, as a director's loan. 
           It is, in my view, of some significance that the company is presently under the control of the de facto spouse of the first defendant, and that she and the co-owner are residing in the home in question.  A Court would have to scrutinise carefully the allegations made in support of the relief claimed in the Statement of Claim particularly given the delay in making any formal allegations of that nature.  This could well be but a ruse by the first defendant to deny his former wife her property rights.  Given all of the matters I have referred to I am satisfied that the matters for determination in the pending proceedings in this Court are related to the property settlement proceedings pending in the Family Court.  The question is whether an order ought in all the circumstances be made transferring this proceeding to the Family Court.
           Counsel for the company referred to a number of authorities in support of the proposition that a transfer ought not be made where questions of law, more appropriately justiciable in this Court, were involved.  He referred in particular to three authorities which in his submission demonstrated that the order sought should not be made in this case.  In Re Hamilton-Irvine(1990) 101 F.L.R. 11 Beaumont J (sitting as the Supreme Court of Norfolk Islands) was primarily concerned with an application, by a person who was disqualified from acting as a director, for leave to be appointed director and secretary of a number of companies. At the time that applicant's wife was seeking orders for property settlement from the Family Court. Some of the companies of which the applicant sought to be made director were involved in those proceedings. Beaumont J pointed out in his reasons that the dispute in the Family Court involved private litigation between the parties to the marriage, whereas the relief sought in the proceeding before him was of a public kind. The application was generally expressed and, if leave as sought was granted, the applicant would have been entitled to act as director of companies in which the wife had no interest. That would have been sufficient, as the learned Judge indicated, to warrant refusing to make an order transferring the application to the Family Court; but in addition his Honour came to the conclusion that he did not have jurisdiction to do so because the proceeding was not one "arising out of" or "related" to the proceedings in the Family Court.
           In my view that case is clearly distinguishable.  The critical question was the applicant's fitness in all the circumstances to be given leave to act as a director of a number of companies; the relief sought was of a public nature.  The determination of the application was in no way limited to consideration of the conduct of husband and wife.
           Of perhaps more relevance for present purposes is the decision of Needham J in MJH Pty Ltd v. Hannes (1990) F.L.C. 92‑140.  There was there a proceeding pending in the Supreme Court of New South Wales seeking relief pursuant to s.320 of the Companies Code; it was alleged that the affairs of the company were being conducted in a manner oppressive to one or more of its members, or that directors of the company had acted in the affairs of the company in their own interests rather than in the interests of the members as a whole.  Of course on such an application there was a variety of orders that could be made affecting the company and its directors and shareholders.  Amongst the assets of the company was the former matrimonial home which continued to be occupied by the wife.  The former wife had proceedings pending for property settlement in the Family Court.  The wife was also one of the plaintiffs for relief pursuant to s.320.  An application was then made for the transfer of the company proceeding to the Family Court.   Needham J pointed out that the two cases were quite distinct; the company proceedings were based on the conduct of the male party as a director, and not as a husband.  It was also pointed out that it was desirable that the company proceedings be heard and determined before the question of property settlement was finalised; any order made in favour of the wife by way of property settlement may well be dependent upon, or at least affected by, the outcome of the company application. 
           Again, in my view, that case can be distinguished though it does have some similarities with the matter now before me.  At some stage a determination had to be made on the s.320 application, independently of any question of property settlement, and it was more appropriate that that decision be made by the Supreme Court.
           The final authority referred to was that of Leithead v. Leithead (1991) 109 F.L.R. 177, a decision of Murray J of the Supreme Court of Western Australia. The parties had been married in 1958 and divorced in 1977. Some nine years later a home unit was purchased of which the former husband was registered proprietor. The former wife resided in that home unit and she commenced proceedings in the Supreme Court seeking to have resolved the issue of her alleged beneficial interest therein. She also commenced some proceedings in the Family Court relating to maintenance and seeking an order that the former husband be restrained from disposing of the home unit. There was no general proceeding in the Family Court with respect to the rights of the parties relating to the home unit or other property owned by them or either of them.
           It was held that the real contest was a property dispute between the parties and that it was not materially related to any proceedings pending in the Family Court.  Given the lapse of time since the dissolution of the marriage there was no real reason why it was more appropriate to have the issue determined in the Family Court rather than in the Supreme Court.  That is sufficient to distinguish the case from the present. 
It is also not irrelevant to note that pursuant to s.42A of the Corporations (Queensland) Act 1990 jurisdiction is conferred on the Family Court with respect to civil matters arising under the Corporations Law of Queensland.
           Bearing in mind the approach suggested in Bankinvest A.G. v Seabrook (1988) 14 N.S.W.L.R. 711 I have come to the conclusion that the appropriate order to make in this case is one transferring this proceeding to the Family Court pursuant to the provisions of the cross-vesting legislation. The issues to be determined primarily relate to the matrimonial affairs of the parties and involve the question as to what extent the interests of the former husband and wife in the subject property are diminished because of an interest held by a company in which at all material times they were the sole directors and shareholders. An order will be made in appropriate terms transferring the matter to the Family Court.