Fujimori & Fujimori
[2024] FedCFamC1F 226
•8 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Fujimori & Fujimori [2024] FedCFamC1F 226
File number(s): ADC 6246 of 2020 Judgment of: KARI J Date of judgment: 8 April 2024 Catchwords: FAMILY LAW – PROPERTY – Interim application – Where the wife seeks orders for a company to be wound up pursuant to s 461(k) of the Corporations Act 2001 (Cth) – Where the company appears to be insolvent – Where the husband opposes the orders and seeks for the application to be dismissed – Where the original jurisdiction expressly conferred upon Division 1 is invoked – Consideration of the relevant legal principles and Rules –Orders made for the winding up. Legislation: Corporations Act 2001 (Cth) ss 9, 461, 462, 1337C
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 29
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 1.18
Federal Court (Corporations Rules) 2000 (Cth) rr 2.4, 5.1, 5.4, 5.5, 5.6
Cases cited: Eblin & Eblin and Ors [2020] FamCA 1
Gallieni & Gallieni & Ors [2012] FamCAFC 205
Leadarn & Leadarn (No 2) [2015] FamCA 895
Weir & Weir (1993) FLC 92-338
Number of paragraphs: 82 Date of hearing: 16 November 2023 and 19 December 2023 Place: Adelaide Counsel for the Applicant: Mr Hay Solicitor for the Applicant: Mens Legal Service Counsel for the Respondent: Mr Tredrea Solicitor for the Respondent: Precision Legal ORDERS
ADC 6246 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR FUJIMORI
Applicant
AND: MS FUJIMORI
Respondent
ORDER MADE BY:
KARI J
DATE OF ORDER:
8 APRIL 2024
THE COURT ORDERS THAT:
1.Pursuant to s 461(k) of the Corporations Act 2001 (Cth), B Pty Ltd (“the Company”) be wound up and Mr C and Mr D be appointed as joint and several liquidators (“the Liquidators”) of the Company forthwith.
2.In accordance with the relevant sections of the Corporations Act 2001 (Cth), the Liquidators have the powers to do all things necessary or convenient to:
(a)Secure and take into their possession any and all assets of the Company;
(b)Realise the assets of the Company;
(c)Effect the sale of the assets of the Company; and
(d)Pay the net proceeds from the realisation and/or sale of the Company’s assets into a trust account controlled by the Liquidator, less the Liquidators costs, expenses and remuneration.
3.The Liquidators be empowered to do all things necessary to investigate and report to the Court on voidable transactions in accordance with Part 5.7B of the Corporations Act 2001 (Cth).
4.The Liquidators be entitled to be paid from the Company’s assets their costs, expenses and remuneration in respect of work undertaken as Liquidators at the rates set out in annexure “MSF3” in the affidavit of Ms Fujimori filed 14 April 2023.
5.Liberty to the Liquidators to apply as to any consequential orders.
6.That save as to the question of costs, the Application in a Proceeding sealed 18 April 2023 and the Response sealed 11 May 2023 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
KARI J:
INTRODUCTION
These reasons relate to an interlocutory application made by Ms Fujimori (“the wife”) in financial proceedings seeking a tranche of orders which would have the effect of appointing a liquidator and winding up a company known as B Pty Ltd.
Mr Fujimori (“the husband”) is the sole Director of B Pty Ltd. He opposes the wife’s application.
For the reasons that follow, orders shall be made as sought by the wife.
INFORMATION ABOUT THE PARTIES
The parties to these proceedings are the parties to a marriage which took place in 2001.
The husband was born in 1973 (now aged 50), and the wife was born in 1976 (now aged 48).
The wife asserts that the parties commenced cohabitation in 2000.
The parties separated on 14 February 2019.
There are two children of the marriage:
(a)Mr X, born 2004, and now aged 19; and
(b)Y, born 2009, and now aged 14.
BACKGROUND
The husband is self-employed. He is the sole Director of B Pty Ltd. When the proceedings commenced, the husband described his businesses in the following terms (per affidavit of the husband filed 24 December 2020):
16.I founded [B Pty Ltd] in 1999 and incorporated it as [B Pty Ltd] in the year 2003. The business grew during the period of the relationship up until 2018 and up until that time paid for us to lead a comfortable lifestyle.
17.[B Pty Ltd] commenced trading in 1999 principally for the development of [technology services]. The business grew over time until changing market demands, commoditisation of web services and increasing competition reduced the profit margin of the business to a point where it was no longer viable to continue with the initial business model.
18.A new business model was needed and an opportunity was identified to develop an application for the hospitality industry to provide [businesses] with an alternative [technology service] to the incumbent offerings. [E Pty Ltd] was incorporated as a dedicated vehicle for this new development.
19.At the time I considered that the market required a product like [E Pty Ltd], and intended to attract investors into the business to grow it rapidly. However, as a startup business, [E Pty Ltd] was unsuccessful in attracting the right level of investment and ultimately the business failed.
20.Financially, this was a very difficult period. [B Pty Ltd] was no longer providing the revenue to support the expenses and [E Pty Ltd] was not delivering any financial return. Debt was increasing and an alternative was required.
21.As a result of this, [B Group Pty Ltd], (previously incorporated in 2012 for the acquisition of a small […] business called [F Business]), was used to pursue a new venture in the growing area of […] technology. This business was given a trading name of “[G Business]” and the initial foray was in consultation with businesses enquiring about the use of […] technology, education and training. An opportunity was subsequently identified by me to develop a [related product] which was developed during 2018 and 2019. The business attracted some investment in that period however is yet to gain traction having been detrimentally impacted by COVID-19 related travel restrictions and the cancellation of tradeshows globally.
(As per the original)
In that same affidavit, the husband disclosed that he had “businesses and entities” as follows:
Businesses and Entities Shareholders B Pty Ltd 51% Mr Fujimori (Director)
49% Ms Fujimori (Shareholder)
Incorporated 2000B Holdings Pty Ltd 100% Mr Fujimori (Sole Director)
Incorporated 2015B Group Pty Ltd 90.03% Mr Fujimori (Sole Director)
Balance Investors, Incorporated 2012E Pty Ltd 94.5% H Family Trust
0.5% Ms K (Investor)
5% J Pty Ltd (Investor)
Incorporated 2017Fujimori Family Property Trust Previously held property L Street (now sold), Currently holds M Street, Suburb N Fujimori Family Trust Discretionary Trust
Beneficiaries Ms Fujimori, Mr Fujimori, Mr X, Y
Trustee: B Holdings Pty LtdH Pty Ltd Holding Company. Original purpose to be the holder and then vendor of the [T Product]. However, the transaction fell through.
There is agreement between the parties that the wife received an income from B Pty Ltd from approximately 2004 until separation in February 2019. Prior to and following the breakdown of the marriage, the wife has been employed as an administrator.
THE LITIGATION
The litigation was commenced by the husband when he filed an Application for Final Orders on 24 December 2020. By that application the husband sought orders that would have the effect of equally dividing the property of the parties, both superannuation and non-superannuation assets.
When the matter first came before the Court on 15 March 2021 at a hearing conducted by a Registrar, the parties (through their respective legal representatives) advised the Court that they wished to participate in a mediation to try to resolve their dispute.
At the time of the first hearing, the wife had not filed any Response, however she did so on the following day; 16 March 2021. By her Response, the wife agreed that there should be an equal division of property.
Despite this apparent consensus between the parties, throughout the litigation, which is now over three years in duration, there has been a growing crescendo of mistrust between the parties.
It is apparent from a perusal of the initial documents that were filed by the wife on 16 March 2021, that the mistrust on her part is based on information that she has obtained having hired the services of a private investigator. In the wife’s first affidavit, she identified that in the post separation period, she had instructed:
(a)A private investigator to investigate concerns she held about the husband’s behaviour, including but not limited to an alleged extramarital affair, but significantly for present purposes undisclosed business and financial dealings and assets.
(b)A forensic expert to undertake an examination and analysis of a computer that the husband had left at the former matrimonial home. From that examination and analysis, the wife had been informed that the husband:
10.(personally or through one of his entities) has been trading in large volumes of cryptocurrency occurring across a range of platforms, wallets, and mediums that deal in or hold cryptocurrency and that it involves extremely large sums of money and that these transactions occurred through and on behalf of both the Applicant personally and through various entities controlled by the Applicant. [1]
[1] Mother’s Affidavit filed 16 Mach 2023, paragraph 10.
Accordingly, while it is easy enough for the parties to have agreed from the inception of the proceedings to an equal division of their property, the dispute between these parties throughout the litigation has been over the property that exists and is to be divided between them.
The dispute between the parties as to exactly what property exists has resulted in numerous interlocutory disputes and applications. I propose to set out only a brief summary of those applications and their resolution.
The proceedings first came before me on 25 March 2021, in the Federal Circuit Court of Australia (as it then was), when I was a judge of that court. At that stage the parties’ competing interlocutory applications included orders for the sale of real property, together with a raft of injunctions sought by the wife to preserve assets. Those competing interlocutory applications were listed for argument before me on 31 March 2021.
At the hearing on 31 March 2021, the parties, with the assistance of counsel, presented the Court with a detailed Minute of Order to resolve all of the interlocutory disputes. Those orders included orders for:
(a)B Pty Ltd and B Group Pty Ltd to be valued;
(b)The sale of two real properties at M Street and a real property at Town P;
(c)Injunctions restraining the husband from dealing in any way with B Holdings Pty Ltd, H Pty Ltd, Fujimori Family Trust and 12 different financial accounts;
(d)Injunctions restraining the husband from dealing in any way, other than in the usual course of business and/or the payment of reasonable living expenses, with B Pty Ltd, B Group Pty Ltd, E Pty Ltd, Q Pty Ltd and Fujimori Property Trust, together with two financial accounts.
(e)An informal settlement conference to be conducted no later than 14 days prior to the adjourned date.
The valuation report of B Pty Ltd and B Group Pty Ltd ordered on 31 March 2021 was prepared by forensic accountant Mr R and is dated 31 January 2022 (“the Mr R report”). I shall discuss the relevant portions of that valuation in due course so far as it relates to the present application.
On 18 March 2022, the wife filed an Application in a Proceeding in which she sought orders for partial property settlement and the distribution of funds. This application was not opposed by the husband in principle, however there was a dispute between the parties as to the quantum to be distributed. That application was ultimately resolved by consent on 8 April 2022 by Judge Parker, who made a partial property settlement order dispersing $100,000 to the husband and $140,000 to the wife.
On 29 April 2022 Judge Parker again made orders at the request of the parties. Those orders included orders for the parties to:
(a)Obtain separate accounting advice in relation to a number of issues raised by the Mr R report, including, their mutual taxation affairs, capital gains tax from the sale of the property at M Street, Suburb N and Division 7A loans and taxation liabilities; and
(b)Participate in a mediation by 29 July 2022.
On 12 July 2022, the wife filed an Application in a Proceeding seeking orders for detailed discovery by the husband in relation to two entities (“[S Company]” and “[T Company]”), including financial documents and information pertaining to those entities (which included details of cryptocurrency held by those entities), together with the husband’s personal cryptocurrency holdings. The wife additionally sought orders to delay any mediation until such time that the husband made full disclosure.
The husband responded to that application on 8 August 2022, and sought orders that the application be dismissed. In his affidavit in support filed the same day, the husband asserted that “the wife’s application is misconceived, the information on which she relies appears dated and it has had the effect of denying the parties the mediation”.[2] The husband went on to depose that S Company and T Company had been “abandoned”.[3]
[2] Husband’s affidavit filed 8 August 2022, paragraph 4.
[3] Husband’s affidavit filed 8 August 2022, paragraph 11.
Some three months after filing this material on 10 November 2022, and prior to the hearing of this interlocutory dispute, the husband’s solicitor ceased acting for him. The husband was then self-represented from that time until very recently.
On 18 November 2022 the wife caused two affidavits to be filed. Those affidavits were each sworn by two different “investigators” instructed by the wife to “investigate the financial position of the husband and his companies”,[4] including accessing information found on a computer that had been left by the husband in the former matrimonial home and data located in a desktop computer box located in the former matrimonial home. To that end:
[4] Affidavit of Mr U filed 18 November 2022, paragraph 3; Affidavit of Ms V filed 18 November 2022, paragraph 3.
(a)An investigator by the name of Mr U had received and analysed a computer that had been left at the former matrimonial home by the husband, together with making separate enquiries of publicly available web-based sources of information. As a result of those investigations the investigator variously deposed that:
(i)It was common knowledge between the parties that “one of the Husband’s companies created a [product] referred to as [T Product], and [another product], also called [T Product]”.[5]
[5] Affidavit of Mr U filed 18 November 2022, paragraph 4.
(ii)Information obtained from various web-based sources indicated that the husband and or companies he controlled held a cryptocurrency wallet holding coins identified as “wallet […]”.[6]
(iii)As at 17 November 2022 the value of “wallet […]” is “US$8,894,944.36”.[7]
(iv)The value of “wallet […]” had “fluctuated significantly with the variations in the cryptocurrency market, including peaking at the value of US$112,670,506.00 on 11 March 2022.”[8]
(v)From material obtained by the wife through a subpoena she issued to W Finance, it is now understood that the husband created a W Finance account on 18 March 2020 to hold cryptocurrency, and that there had been various transactions in that account, and importantly the initial “liquidity […]”.[9]
(b)An investigator by the name of Ms V had “reviewed a significant volume of documentation” provided to her by the wife, “including data located on a desktop computer box” which was located at the former matrimonial home.[10] In addition, the investigator undertook searches of publicly available sources (ASIC, the Apple App Store and other web-based sources). As a result of the same the investigator variously deposed information which it was asserted conflicted with information previously deposed by the husband. In particular:
(i)That on 8 April 2022, S Company held “[around 50,000] fully paid Class A shares acquired for the sum of $79,950.00 on 8 April 2022 in [Z Pty Ltd]”.[11] This conflicted with the husband’s assertions made in his affidavit filed 8 August 2022 that S Company had been abandoned.
(ii)That the T Product and related products had been developed by T Company. This conflicted with the husband’s assertions made in his affidavit filed 25 March 2021 that the same had been developed by B Group Pty Ltd.
(iii)That the computer hardbox revealed that on 3 April 2019 the husband had “accessed and bookmarked the [AA Portal], being the online banking portal of [AA Bank], using the username ‘[T Company] admin’, and that the username ‘[T Company] admin’ holds or held a bank account with that institution.”[12]
[6] Affidavit of Mr U filed 18 November 2022, paragraph 13.
[7] Affidavit of Mr U filed 18 November 2022, paragraph 14.
[8] Affidavit of Mr U filed 18 November 2022, paragraph 14.
[9] Affidavit of Mr U filed 18 November 2022, paragraph 16.
[10] Affidavit of Ms V filed 18 November 2022, paragraph 3.
[11] Affidavit of Ms V filed 18 November 2022, paragraph 6.
[12] Affidavit of Ms V filed 18 November 2022, paragraph 10.
On 21 November 2022 Judge Parker heard the wife’s application for discovery and was satisfied to make detailed orders for discovery by the husband of documents relating to both T Company and S Company, together with cryptocurrency held by the husband or any entity the husband held an interest in from 1 January 2012. The orders also required the husband to file an affidavit in the following terms:
2.That to the extent, if any, that the husband asserts that any of the documents referred to at order 1 hereof are not in his possession, power or control or cannot otherwise be provided he file and serve an affidavit setting out the details of that assertion and annexing any documents that exist to support the assertion within twenty-eight (28) days.
In accordance with that order, the husband ultimately filed an affidavit on 23 December 2022 setting out amongst other things that there were no discoverable documents in relation to T Company or S Company, and that there were no further documents to be disclosed by him in relation to “[…] crypto currencies owned by myself or any company or trust that I have been a shareholder or beneficiary of”.[13]
[13] Husband’s Affidavit filed 23 December 2022, paragraph 3.
On 2 February 2023 Judge Parker made orders transferring the proceedings to the Federal Circuit and Family Court of Australia (Division 1).
Following the transfer of the proceedings to this court, a Judicial Registrar called the matter on, and on 23 February 2023 procedural orders were made in an attempt to progress the litigation and the outstanding discovery issues. As a result, a raft of orders were made directing the wife to file any application for discovery by 7 April 2023, with the husband to file responding documents by 21 April 2023.
THE WINDING UP APPLICATION
The orders made by the Judicial Registrar on 23 February 2023 did not result in the anticipated discovery application. Rather, the orders resulted in the Application in a Proceeding filed by the wife on 14 April 2023 (“the winding up application”) the subject of these reasons, in which she sought orders for the winding up of B Pty Ltd in the following terms:
1. The Wife be granted leave of the Court to make this application.
2.Pursuant to s461(k) of the Corporations Act 2001 (Cth), [B Pty Ltd] (“the Company”) be wound up and [Mr C] and [Mr D] be appointed as joint and several Liquidators (the Liquidators) of the Company forthwith.
3.In accordance with the relevant sections of the Corporations Act 2001 (Cth), the Liquidators have the powers to do all things necessary or convenient to:
a.Secure and take into their possession any and all assets of the Company;
b. Realise the assets of the Company;
c. Effect the sale of the assets of the Company; and
d.Pay the net proceeds from the realisation and/or sale of the Company’s assets into a trust account controlled by the Court, less the Liquidators costs, expenses and remuneration.
4.The Liquidators be empowered to do all things necessary to investigate and report to the Court on voidable transactions in accordance with Part 5.7B of the Corporations Act 2001 (Cth).
5.The Liquidators be entitled to be paid from the Company’s assets their costs, expenses and remuneration in respect of work undertaken as Liquidators at the rates set out in annexure “[MSF]3” in the affidavit of [Ms Fujimori] dated 14 April 2023.
6. Any further orders this Honourable Court deems fit.
(As per the original)
The husband filed a Response to the winding up application on 11 May 2023. By that Response, the husband sought an order dismissing the winding up application, together with additional orders in the following terms:
1. The Application in a Case filed by the Wife to be dismissed.
2.That the restraints in relation to the Orders made by this Honourable Court on 31 March 2023 specifically in relation to paragraph 11.1 as it relates to [B Pty Ltd] are removed.
3. That further mediation attempts be dispensed with.
4. That the matter be placed in the trial listing.
5. Such further or other Order as the Court sees fit.
(As per the original)
The proceedings came before a Judicial Registrar on 12 May 2023 and orders were made channelling the parties’ competing interlocutory applications to a hearing on a date to be fixed not before 22 August 2023.
Ultimately, the applications were given a hearing date before me on 19 September 2023.
At the hearing before me on 19 September 2023 an adjournment was ultimately ordered until 16 November 2023, taking into account the husband’s stated desire of wanting to obtain legal representation, and the wife’s stated desire of wishing to pursue “ongoing enquiries in relation to the Husband’s financial circumstances and dealings, which may lead to the filing of an Amended Application in a Proceeding”.[14] Procedural orders were also made to ensure that the matter could proceed on the adjourned date.
[14] Order 19 September 2023, Notation C.
On 13 November 2023 new solicitors acting for the husband filed a Notice of Address for Service.
The interlocutory dispute was fully argued on 16 November 2023 and judgment was reserved. Despite having foreshadowed the possibility of filing an amended application, the wife did not do so. Instead the wife relied on the Application in a Proceeding filed 14 April 2023 and the orders sought therein.
The interlocutory proceedings were recalled at the request of the wife on 19 December 2023, and, without objection, further evidence was received and submissions made.
DOCUMENTS RELIED UPON
In preparation for the interim hearing on 16 November 2023, both parties filed a Case Outline. With regard to those outlines and the matters adduced at the hearing on 19 December 2023:
(a)The wife relied on the following documents:
(i)The Outline of Case filed 16 November 2023;
(ii)Her Application in a Proceeding filed 18 April 2023;
(iii)The wife’s affidavit filed 14 April 2023;
(iv)An affidavit of Mr D filed 17 July 2023;
(v)The wife’s affidavit filed 17 July 2023;
(vi)The wife’s costs notice filed 18 December 2023; and
(vii)An affidavit of the wife’s solicitor, Ms Pllana filed 8 January 2024 (sworn 4 December 2023).
(b)The husband relied on the following documents:
(i)The Outline of Case filed 16 November 2023;
(ii)His Response filed 11 May 2023;
(iii)The husband’s affidavit filed 11 May 2023;
(iv)The husband’s affidavit filed 15 September 2023; and
(v)The husband’s costs notices filed 16 November 2023 and 19 December 2023.
I have had regard to all the documents relied upon by each of the parties.
THE LEGAL PRINCIPLES
The wife asks that the Court exercise power to wind up B Pty Ltd pursuant to s 461(k) of the Corporations Act 2001 (Cth) (“the Corporations Act“), which relevantly provides:
461 General grounds on which company may be wound up by Court
(1) The Court may order the winding up of a company if:
(a) the company has by special resolution resolved that it be wound up by the Court; or
(c) the company does not commence business within one year from its incorporation or suspends its business for a whole year; or
(d) the company has no members; or
(e) directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members; or
(f)affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or
(g)an act or omission, or a proposed act or omission, by or on behalf of the company, or a resolution, or a proposed resolution, of a class of members of the company, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was or would be contrary to the interests of the members as a whole; or
(h)ASIC has stated in a report prepared under Division 1 of Part 3 of the ASIC Act that, in its opinion:
(i) the company cannot pay its debts and should be wound up; or
(ii)it is in the interests of the public, of the members, or of the creditors, that the company should be wound up; or
(k) the Court is of opinion that it is just and equitable that the company be wound up.
(Emphasis added)
As discussed by Cronin J in Leadarn & Leadarn (No 2) [2015] FamCA 895, s 461(k) of the Corporations Act:
76.…is often used by family members who are shareholders in corporate entities where, as a result of the breakdown in their respective relationships, an impasse occurs relating to the effective governance of the corporate entity…
77.Brereton J in Catombal Investments Pty Ltd [2012] NSWSC 75 opined that the decided cases about the use of this provision were recognised as falling into a number of classes including misconduct by the directors, the deadlock or disagreement in the management of the company’s affairs or the lack of confidence, fairness and public interest and commercial morality. Whilst his Honour thought that the words “just and equitable” were general words and I respectfully agree, the focus must be on the relationship between the applicant seeking the winding up order and the company or shareholdings…
McMillan J considered an application pursuant to s 461(k) in Eblin & Eblin and Ors [2020] FamCA 1. At [32-33] her Honour helpfully surmised:
32.There are various factual categories which have been considered relevant to the question of whether it is just and equitable to wind up a company. They include but are not limited to the following categories:
a) Where the substratum of the company is gone;
b) Where the company is fraudulent from inception;
c) Where the company is unable to carry on profitably;
d)Where there is a complete deadlock in management of the company’s affairs;
e)Where the company is in a quasi-partnership whose members are unable to co-operate;
f)Where there is fraud, misconduct or oppression in management; and
g)Where there is a matter of corporate paralysis such as an absence of directors and no prospects of any being appointed;
33.However, as However, as Brereton J said in Catombal Investments Pty Ltd [2012] NSWSC 775 at [20]:
“However, the court is not restricted in exercising its discretion to particular factual categories [Re Straw Products Pty Ltd [1942] VLR 222 at 223]. And, the question whether it is just and equitable is a question of fact, in respect of which each case must depend on its own circumstances [Re Bleriot Manufacturing Aircraft Co Ltd (1916) 32 TLR 253 at 255].”
Jurisdiction
As discussed by the Full Court of the Family Court in Gallieni & Gallieni and Ors [2012] FamCAFC 205 (at [79]):
… The court has jurisdiction in relation to companies in two ways; through the operation of s 1337C of the Corporations Act and by reason of s 33 of the Family Law Act 1975 (Cth) (“the Family Law Act”)…
Whilst s 33 of the Family Law Act (1975) (as it then applied) conferred jurisdiction upon the Family Court (as it then was) in respect of “associated matters”, the same jurisdiction has now been conferred upon the Federal Circuit and Family Court of Australia (Division 1) (“Division 1”) pursuant to s 29 of the Federal Circuit and Family Court of Australia Act 2021 (Cth).
Here however, the wife is not seeking to invoke the Court’s associated jurisdiction, rather she is seeking to invoke the original jurisdiction expressly conferred upon Division 1 pursuant to s 1337C of the Corporations Act which provides:
1337CJurisdiction of Federal Circuit and Family Court of Australia (Division 1) and State Family Courts
(1)Jurisdiction is conferred on the Federal Circuit and Family Court of Australia (Division 1) with respect to civil matters arising under the Corporations legislation.
…
A “civil matter” is defined in s 9 of the Corporations Act as a “matter other than a criminal matter”.
Accordingly, there can be no question that the Court has jurisdiction to make orders pursuant to s 461 of the Corporations Act, as sought by the wife.
Standing
Section 462 of the Corporations Act identifies those with standing to bring an application to wind up a company pursuant to s 461 of the Corporations Act.
Here, the wife has standing as a “contributory” to bring the application pursuant to s 462(c) of the Corporations Act, noting that a “contributory” is defined in s 9 to include a holder of fully paid shares in the company, and on the husband’s own evidence the wife holds 49% of the shares in B Pty Ltd. In any event, I am satisfied that this is the case when regard is had to the company search referred to later in these reasons.
Procedure
Rule 1.18 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), prescribes that the Federal Court (Corporations Rules) 2000 (Cth) (“the Corporations Rules”) apply to any application made under the Corporations Act.
Division 5 of the Corporations Rules are the relevant rules. This is because s 461(k) of the Corporations Act falls within Part 5.4A of that Act, and r 5.1 prescribes Division 5 as applicable to such applications.
Division 5 sets out a range of procedural requirements that must be met by the applicant. Each separate procedural requirement shall accordingly be considered, namely:
(a)Rule 5.4 Affidavit in support of application for winding up;
(b)Rule 2.4 Supporting Affidavits;
(c)Rule 5.5 Consent of Liquidator; and
(d)Rule 5.6 Notice of application for winding up.
Rule 5.4 of the Corporations Rules requires an affidavit to be filed within 7 days of the filing of any originating process seeking that a company be would up. The wife complied with this requirement when filing her Application in a Proceeding and affidavit in support of the same simultaneously on 14 April 2023.
So far as the affidavit is concerned, Rule 2.4 requires the affidavit to set out the “facts in support” and that an ASIC search of the company carried out no earlier than 7 days prior to the originating process is to be annexed. I am satisfied that the wife’s affidavit dated 14 April 2023 sets out the facts in support of her application, and that an ASIC search conducted 11 days prior on 3 April 2023 has been annexed to that affidavit (Annexure “[MSF]-1”). No issue was taken by the husband in relation to the ASIC search being outside the time limit provided for in the rule, and accordingly I do not see this as problematic and to the extent that is necessary an extension of time is granted in this regard.
That ASIC Search confirms that which the husband had initially deposed, and which was uncontroversial between the parties that:
(a)The Husband is the sole Director of B Pty Ltd (and secretary);
(b)There are 100 fully paid shares on issue;
(c)The wife holds 49 fully paid shares; and
(d)The husband holds 51 fully paid shares.
Rule 5.5 requires that the consent of an official liquidator to act as liquidator of the company must be filed in accordance with Form 8 (of the Corporations Rules), and that the same must be served on the company at least 1 day before the hearing.
It is undisputed that at the time of the hearing on 16 November 2023, r 5.5 of the Corporations Rules had not been complied with so far as the prescribed form of consent is concerned. This was one of the reasons that the wife sought to re-open the proceedings.
On 19 December 2023 a further hearing took place and further submissions were made by each of the parties. At the conclusion of that hearing an order was made (without objection on the husband’s part) granting leave for the wife to rely on a further affidavit of her solicitor sworn on 4 December 2023. That affidavit was ultimately filed on 8 January 2024 and served as the vehicle to, among other things, annexe the prescribed consent of the proposed liquidators Mr D and Mr C (Annexure “DP-3”). Whilst the hearing was reopened for that to occur, I am satisfied that in the absence of an objection as to this procedural irregularity, and where the hearing was re-opened to allow any further submissions, that r 5.5 of the Corporations Rules is now the subject of compliance.
Rule 5.6 of the Corporations Rules requires a prescribed notice of the winding up application to be “published in a daily newspaper circulating generally in the State of Territory where the company has its principal, or last known place of business”, with that notice to published at least 3 days after service of the originating application upon the company, and at least 7 days before the date fixed for hearing.
Dealing firstly with the topic of service of the originating application:
(a)No affidavit of service was filed by the wife dealing with the issue of service.
(b)The rule requires that the company be served.
(c)I consider that I can infer that the husband was served with the winding up application given he filed a Response to the application on 11 May 2023. Incidentally another Response was filed by him on 15 September 2023, which was dismissed on 19 September 2023 as it was an unnecessary duplication.
(d)In circumstances where service on the company would result in service being affected on the husband (as he is the sole Director), I am satisfied (much as McMillan J was in Eblin & Eblin and Ors [2020] FamCA 1 at [48], and the Full Court were in Gallieni & Gallieni & Ors [2012] FamCAFC 205 at [94]) that service upon the company has been affected.
(e)I am additionally satisfied that there are no service irregularities in circumstances where no submissions were made by the husband’s counsel taking issue over whether service upon the company had been effected.
Turning to the topic of the publication of a Notice:
(a)Again, it is uncontroversial that the wife did not comply with r 5.6 at the time of the hearing on 16 November 2023, and that this was a further reason that she asked the proceedings to be re-opened.
(b)The affidavit of the wife’s solicitor ultimately filed on 8 January 2024 additionally served as the vehicle to address the wife’s publication of a Notice pursuant to r 5.6 (Annexures “DP-1” and “DP-2”).
(c)That Notice was dated late 2023 and identified the hearing date of 19 December 2023. It was published in the newspaper on the same date.
(d)I am satisfied that I can take judicial notice of the fact that the newspaper is published in South Australia, which with reference to the ASIC search is the state in which B Pty Ltd has its registered office.
(e)I am now satisfied that r 5.6 is the subject of compliance.
For all of these reasons, I am satisfied that the necessary procedural requirements prescribed by the Corporations Rules have been complied with, enabling the Court to consider exercising discretion to wind up B Pty Ltd.
DISCUSSION
As the sole Director, the husband is in complete control of B Pty Ltd.
The wife contends that B Pty Ltd is insolvent, and this is the basis upon which she has bought the winding up application.
As identified in the Outline of Case filed by the wife on 16 November 2023, the wife relies on two separate expert opinions as to the perilous state of B Pty Ltd’s financial affairs:
(a)Firstly, the opinion of the single expert Mr R, who relevantly has concluded [at 36] that it is “appropriate to liquidate the company”.
(b)Secondly, the opinion of the proposed liquidator Mr D, who has identified that B Pty Ltd has accumulated losses of $438,392, total assets of $509,925 and total liabilities of $799,887.
The wife is principally concerned that B Pty Ltd has significant taxation liabilities and that the company tax returns are not up to date.
The wife’s concerns about the parlous state of B Pty Ltd have not been assisted by her general mistrust and scepticism over the husband’s financial affairs and dealings, arising from information she has obtained throughout the course of these proceedings (some of which has been alluded to when discussing the history of the litigation earlier in these reasons).
Relevant to this application, and in relation to B Pty Ltd, the wife deposes in her affidavit filed on 14 April 2023 that:
(a)The husband’s assessment that B Pty Ltd was worth “$0.00” as deposed in his Financial Statement filed 24 December 2020 was “demonstrably false”;[15]
(b)The husband’s failure to disclose B Pty Ltd’s ownership of Motor Vehicle 1, which was subsequently valued at $55,000.
[15] Wife’s Affidavit filed 14 April 2023, paragraph 10.1.
In addition, the wife deposes to her concerns:
(a)Over the husband’s asserted insufficient disclosure in these proceedings.
(b)That whilst the husband asserts his personal impecuniosity as the reason for being self‑represented in these proceedings, he otherwise appears able to afford rental accommodation at a cost of $950 per week.
(c)That the husband has failed to disclose all of his financial dealings, and in particular and as a result of documents produced more recently pursuant to subpoena issued at the request of the wife, she has discovered that:
(i)B Pty Ltd owns an account with BB Finance created on 21 January 2021, which has maintained a balance not exceeding $50,000 at any given time, but which has disbursed total transactions of approximately $1,300,000 USD over a two year period.
(ii)Transactions from the BB Finance account have been credited into a Commonwealth Bank Account operated by B Group Pty Ltd.
(iii)At the time that Mr R prepared his report he noted that the funds in the said Commonwealth Bank Account were nil, but the wife understands that “before 30 June 2021 all funds were disbursed from the Account, but then the amount of $40,000 was credited back into the account on 6 July 2021”.[16]
[16] Wife’s Affidavit filed 17 July 2023, paragraph 54.
It is the wife’s position that because the husband cannot be trusted as a result of his conduct in these proceedings, his opaque financial dealings, and because B Pty Ltd appears to be insolvent, someone other than the husband should be charged with securing, collecting and realising B Pty Ltd’s assets for the benefit of its creditors. The wife also considers that an independent liquidator charged with maximising return to creditors will also investigate the financial affairs of B Pty Ltd and any voidable transactions, thus maximising not only any return to creditors but also the assets available for division in these proceedings. The wife puts the $1,300,000 transacted through the BB Finance account squarely into the category of transactions that are ripe for investigation by any liquidator that is appointed.
Conversely, the husband asserts that the taxation affairs of B Pty Ltd are not as concerning as the wife asserts. He deposes that “all tax returns were completed in March 2023”,[17] and that as a result B Pty Ltd has entered into a payment plan which as at 11 May 2023 consisted of outstanding taxation liabilities of $141,368, comprised of $120,451 “on the company’s Activity Statements” and $20,917 “of outstanding superannuation payable”.[18]
[17] Husband’s Affidavit filed 11 May 2023, paragraph 5.
[18] Husband’s Affidavit filed 11 May 2023, paragraph 6.
In addition the husband asserts that:
(a)His assessment that B Pty Ltd had no value is supported by the single expert opinion of Mr R.
(b)He did not fail to disclose Motor Vehicle 1, and that the wife had always been aware of the same as it had been garaged at the former matrimonial home since its purchase in 2008. Moreover, he asserts that the wife identified the existence of the vehicle in her affidavit filed 15 March 2021, and that he acknowledged the same in his affidavit filed 23 March 2021.
(c)His contribution to the rental premises in which he currently resides is a sum of $400‑$500 per week, with the balance met by his partner.
It is the husband’s position that any winding up of B Pty Ltd would be a draconian and excessive step in particular because:
(a)Having earlier investigated the potential liquidation of B Pty Ltd, he was advised that Division 7A company loans would become due and payable, meaning that the parties themselves would be forced to repay a sum of $433,000, which each of the parties are presently unable to meet.
(b)There is a risk that either or both of the parties would be forced into personal bankruptcy if the Division 7A loan to the company was called in.
(c)He proposes to sell Motor Vehicle 1 to apply the same to the outstanding taxation liability, and to that end the husband seeks the release from the injunction made 31 March 2021 (Order 11) to enable this to occur.
(d)He denies that B Pty Ltd holds an account with BB Finance and instead asserts that this account is held by B Group Pty Ltd.
As identified earlier in these reasons, there is significant mistrust between the parties. Whilst not entirely clear to the Court, one of the ongoing disputes between the parties is the extent of the husband’s disclosure of his financial affairs and those of the entities which he controls and/or has an interest in. The wife asserting that the husband has not made fulsome disclosure and the husband asserting that he has disclosed all that he can. This resolution of this dispute is likely to be one traversed at trial, with a warning clarion to the husband, that if the wife makes good on this allegation, then the court is likely to be asked to make not only credit findings against the husband, but additionally to draw inferences against the husband in light of his non-disclosure of the kind discussed by the Full Court of the Family Court in Weir & Weir (1993) FLC 92-338.
The difficulty however for present purposes is that on any view, and particularly so taking into account the husband’s own assessment of B Pty Ltd, is that its financial circumstances are parlous. The husband accepts that the company has no value. In addition, and by virtue of the existence of the payment plan with the ATO, B Pty Ltd is unable to pay its liabilities as and when they fall due. A reality that is inherent in the husband himself seeking advice as to the option of putting B Pty Ltd into voluntary liquidation.
Whilst I accept that any winding up of B Pty Ltd may well crystalise the parties’ personal liabilities to B Pty Ltd, and may well result in their separate personal bankruptcy, these are not reasons to stave off winding up B Pty Ltd, rather these are reasons which in my view support that course of action.
Moreover, given the present liabilities to the ATO, I do not consider that any sale by the husband of Motor Vehicle 1 will stabilise the financial affairs of B Pty Ltd, as the value of the same is far less than that which is owed to the ATO.
For all of these reasons, I am satisfied that is it just and equitable to make orders as sought by the wife.
I do however consider it appropriate to vary the orders sought by the wife to provide for:
(a)The Liquidators to control any trust account as provided for in Order 2(d); and
(b)Liberty to the Liquidator to apply for any consequential orders.
I consider these orders to be appropriate, respectively because:
(a)The Court does not have the capacity to control any trust account; and
(b)There may be a need for further orders to be made in relation to the winding up of the company and any other actions taken by the Liquidators.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kari. Associate:
Dated: 8 April 2024
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