George & George
[2021] FamCA 583
•29 June 2021
FAMILY COURT OF AUSTRALIA
George & George [2021] FamCA 583
File number(s): BRC 4444 of 2020 Judgment of: HOWARD J Date of judgment: 29 June 2021 Catchwords: FAMILY LAW – PROPERTY – Interim property application – where applicant, first respondent and second respondents all own a single property as tenants in common – where the second respondents sought to transfer the wife’s 1/5th share to themselves – where the property was the subject of an injunction made by the Supreme Court – where any dealing with the property could only be done with the consent of the applicant in the Supreme Court proceedings – where the second respondents asserted they had such consent supporting their application – where such consent was not clear and did not support their application – where the latest valuation evidence was one year old – application dismissed – costs in accordance with the scale.
FAMILY LAW – SUMMARY DISMISSAL – Application for summary dismissal of the wife’s application as against the sixth respondent – where the sixth respondent is a company in which the husband formerly held an interest – where the husband transferred his interest to one of the Second Respondents – where the wife pleads that the husband continued to manage the company, act as a de facto director of the company and receive dividends – where there is a reasonable cause of action – serious legal question to be determined – application for summary dismissal dismissed – costs in accordance with the scale.
Legislation: Family Law Act 1975 (Cth) ss 45A, 79, 117
Family Law Rules 2004 (Cth)
Cases cited: Lindon v Commonwealth (No. 2) (1996) 70 ALR 541
Ritter & Ritter and Anor [2020] FamCAFC 86
Stativa & Stativa [2015] FamCAFC 170
Number of paragraphs: 31 Date of last submission/s: 29 June 2021 Date of hearing: 29 June 2021 Place: Brisbane Counsel for the Applicant: Mr Balzamo Solicitor for the Applicant: Browns Lawyers Counsel for the Second and Sixth Respondents: Mr Galloway Solicitor for the Second and Sixth Respondents: Simpson Family Lawyers ORDERS
BRC 4444 of 2020 BETWEEN: MS GEORGE
Applicant
AND: MR GEORGE
First Respondent
MR B GEORGE, MS C GEORGE AND MR D GEORGE
Second Respondents
MR E GEORGE (and others named in the Schedule)
Third Respondent
ORDER MADE BY:
HOWARD J
DATE OF ORDER:
29 JUNE 2021
THE COURT ORDERS UNTIL FURTHER ORDER:
1.That the Second Respondents’ interim application contained in the Amended Response filed 14 December 2020 and further Amended Response filed on 25 June 2021 is dismissed.
2.That Second Respondents pay the Applicant wife’s costs of and incidental to aforementioned application in paragraph 1 in accordance with the scale contained in Schedule 3 to the Family Law Rules 2004 (Cth).
3.That the Sixth Respondent’s application for summary dismissal of the Applicant wife’s application as against them (also contained in the Amended Response filed 14 December 2020 and further Amended Response filed on 25 June 2021) is dismissed.
4.That the Sixth Respondent pay the Applicant wife’s costs of and incidental to the aforementioned application in paragraph 3 in accordance with the scale contained in Schedule 3 to the Family Law Rules 2004 (Cth).
THE COURT FURTHER ORDERS:
5.That all outstanding applications be adjourned for Mention before a Registrar at 2:15pm on 24 August 2021 in the Family Court of Australia at Brisbane.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym George & George has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
A. These reasons were delivered ex tempore on 29 June 2021 and have been settled and corrected for grammatical errors in order to convey the precise intention of the Court.
HOWARD J:
In the matter currently before the Court, the applicant wife is Ms George. The first respondent is the husband, Mr George. The second respondents are Mr B George (the paternal grandfather) Ms C George (I understand is his wife) and Mr D George (a brother of the husband). There’s a third respondent named Mr E George (another brother of the first respondent husband). There has not been much reference to him. There are fourth and fifth respondents, who are not relevant for today’s applications. The sixth respondent is G Pty Ltd.
Mr Galloway of counsel appears today on behalf of the second respondents and the sixth respondent. Mr George is present in Court today, although it seems he is not actually represented today by counsel – however, he made it plain to the Court that the submissions made by Mr Galloway on behalf of the second respondents accord with his own wishes, and there is no conflict between his position – that is, the first respondent’s position – and the position of the second respondents in relation to the orders sought in respect of the applications today. In respect of today’s matter, it is indeed the second respondents and the sixth respondent who are the applicants. The second respondents seek orders for the transfer of part ownership of a property at Suburb H. The sixth respondent seeks an order for summary dismissal of the applicant’s claim against it.
In respect of the background to this matter, the husband, who suffered a catastrophic injury in 2007, is here today, and he is in receipt of NDIS support. After his injury in 2007, he met the applicant wife, Ms George, in 2009. They married in 2010. They have two children: X, aged eight and a half, and Y, aged six. The children, it seems, attend J School. The children live with their mother primarily, and, I understand, see their father from time to time. The parties separated in March 2020. I’m told there are parenting proceedings on foot. Before the Court today are property proceedings made pursuant to section 79 of the Family Law Act 1975 (Cth) (‘the Act’). The proceedings were commenced by an Initiating application filed by the wife on 22 April 2020.
As I have mentioned, today’s application has two aspects to it. The primary matter for the Court’s determination today relates to a property situated at K Street, Suburb H. I am told this property comprises approximately 2.4 acres. There is a dwelling on the property. In that dwelling lives Mr B George and Ms C George, and in another building situated on that acreage property lives another family member. Neither the husband in this case nor the wife in this case live on that property, but that property is owned by five separate people. The wife in this case has a one-fifth share as a tenant in common, as does the husband, as well as the second respondents owning a one-fifth share each – Mr B George, Ms C George and Mr D George.
The primary application sought today on behalf of the second respondents is for an order from this Court to the effect that the wife be required to transfer her one-fifth share in the property to Mr B George – and indeed, an order would not be resisted if a similar order was made in respect of the husband to transfer his one-fifth share in the property. The wife’s interest, primarily, is the focus of the application. It is sought that her interest is transferred to one of the Second Respondents, Mr B George. Such an application, on the current evidence, is problematic for a large number of reasons. To start with, it is proposed that an amount of $220,000 would be the consideration for the wife in respect of her one-fifth interest, and I apprehend that a similar estimate would be used in respect of a consideration reflecting the husband’s one-fifth interest. The idea would be that the $220,000 to be paid to the wife and the $220,000 to be paid to the husband would be held in a trust account pending a finalisation of the section 79 proceedings.
It seems there’s two valuations. One is definitely in evidence. The other one, I am not certain if it is. The higher valuation was obtained in July 2020. It was prepared by L Real Estate. Mr M apparently has sworn an affidavit, which after some discussion about it during argument – I think it has been read in the application today. Mr M’s valuation in respect of this 2.4 acres with a dwelling on it at Suburb H was $2,260,000. This, therefore, would make a one-fifth share valued at $452,000. There is a registered mortgagee in respect of the property – namely, N Company, who are owed, it seems, $1,150,000. As to whether that is up to date, I’m not certain – but it appears in a balance sheet handed to the Court by Mr Galloway, which I’m essentially using as an aide-mémoire. I do not know whether the amount of that mortgage has been contested.
But taking that mortgage into account, it is said on behalf of the second respondents that 40 per cent of the debt, representing the husband’s share and the wife’s share, would total $449,600. That leaves a net for the husband and the wife of $454,400, which in broad terms (and Mr Galloway, to be fair, was only speaking in broad terms) divided by two, is about $227,000. Mr Galloway had mentioned a figure of $220,000. The problem with proceeding down that path is as follows. Firstly, it is opposed by the wife. That, of course, would be no reason to avoid making the order, but the amount is based on a valuation from 7 July 2020 – almost one year old. I would not be prepared to make an order of the kind sought by the second respondents without an up-to-date valuation.
One of the primary motivations for the second respondents is that they no longer wish to be joint owners of this property. I fully understand that desire. They would prefer to stay living in the property – Mr B George and Ms C George. The situation is somewhat clouded or mired by a further significant complication – namely, the existence of an injunction obtained in the Supreme Court of Queensland on 3 June 2020. On that date, Dalton J of the Supreme Court made an order, with the consent of these parties – that is to say, the five who are the owners of the Suburb H property – in the following terms:-
THE ORDER OF THE COURT IS BY CONSENT THAT:-
1. That until trial or earlier order the respondents are restrained from selling, encumbering, further encumbering or further drawing on an existing encumbrance, or in any other way dealing with the property located on Lot … on … bearing Title Reference …, more particularly described as K Street, Suburb H in the State of Queensland without the applicant's written consent or the leave of the court.
…
So the parties were restrained from selling and/or encumbering the property etcetera, without the applicant’s written consent or the leave of the Court. Well, there has been no leave of that Court obtained at this stage. But the applicant in the Supreme Court was one Mr P. Mr P, it is said on behalf of the first and second respondents, lent to the parties $400,000 to enable them to purchase the property at Suburb H in 2016. In addition, it seems that Mr P not only lent the initial amount of $400,000, but apparently a further amount.
Mr P is a person very much interested in the sale of that property. He sought and obtained a restraint – that is to say, an injunction from the Supreme Court of Queensland. It is said on behalf of the second respondents that there is a written consent from Mr P to the sale of the property, and I was taken to an affidavit of Mr B George.
I note paragraph 13 of that affidavit of Mr B George filed 24 March 2021 – where he says that on 28 October 2020 at 3.10 pm, he received a written consent with conditions from Mr P, via an email received from Mr P’s lawyer, Q Solicitors. And the paragraph quoted from the email was:
I confirm my client consents to the listing of the property for auction on the basis set forth in your previous correspondence, subject to the terms of this email.
Well, to be honest, that is a rather convoluted way of providing a consent, to start with. The consent is apparently:
…on the basis set forth in your previous correspondence…
When one looks at the relevant emails contained in annexure BG4 of the affidavit filed by Mr B George on 24 March 2021 – it frankly, is not altogether clear on what basis this man is providing his consent. Which previous correspondence, precisely, is being referred to? What are the terms from his email? Well, the documents are here. It is possible to trace through and try to discern precisely on what terms Mr P is giving his consent, but I must say I do agree with a submission made by Mr Balzamo on behalf of the wife – there really needs to be a much clearer consent provided by Mr P, given that there is in place an injunction of the Supreme Court of Queensland. That is a significant stumbling block to the application.
The primary application sought by the second respondents is for the transfer of the wife’s share and the husband’s share to the second respondents in the property at Suburb H. It has always been part of the wife’s application that the Suburb H property should be sold. I understood the submissions from Mr Galloway to be along these lines – but I sought clarification on this. Mr Galloway’s primary position on behalf of his client is to seek an order that the wife’s share in the Suburb H property be transferred to the second respondents and that they be permitted to keep that property.
Firstly, I am not satisfied with the valuation – which is almost one year old. Secondly, I am not satisfied that there is clear enough consent from Mr P – and on what terms he consents to this sale or this transfer. In fact, at paragraph 13, on a closer consideration, it provides from Mr P his consent to the listing of the property for auction, which is altogether different to the application brought today by the second respondents. And indeed, that is what has been said in BG4 – an email from Mr Q, who apparently is, or certainly was as at that date last year, the lawyer for Mr P:
We confirm that our client consents to the property being listed for sale by auction with a reserve price of 1.5 million.
It confirms my view that what’s being put forward on behalf of the second respondents as the consent of Mr P is not a consent in the terms that the second respondents have submitted. It is a different type of consent altogether. I understood, from the submissions from Mr Galloway, that one of the primary outcomes (and I said this earlier) sought by the second respondents is to disentangle themselves from the property ownership, joint as it is with the wife in this case. And I understood from Mr Galloway that in the event I was against the second respondents in respect of their main application, that nonetheless, those parties would not object to an order for the sale of the property. It did occur to me that Mr Galloway, when making his submissions, had frankly made a sensible point. His instructions, though, were clarified by the second respondents, and I certainly accept that – upon clarification of those instructions – Mr Galloway does not have instructions to agree to the sale of the property by public auction. The only orders that he wanted the Court to make today on behalf of the second respondents were an order for the transfer of the shares from the wife to the second respondents.
So Mr Galloway has clarified that the only order sought in respect of transfer of shares is the share owned by the wife, and that it be transferred to Mr B George. For the reasons that I have provided, that application is dismissed. The injunction in the Supreme Court required consent from the applicant in the Supreme Court proceedings – Mr P – before there could be any sale. The document that’s put forward as evidence of Mr P’s consent to this transfer of shares, as I said earlier, is not in fact a consent in the terms of the order sought by the second respondents. All that Mr P consented to was a sale by public auction. That is not sought by the second respondents today. The application would fail for that reason alone. But apart from that, there is the valuation. It seems to me there could be rendered an injustice to the wife if I were to agree to make the order requiring her, halfway through section 79 proceedings, to relinquish, at a price or at a value which is already one year old, what may end up being or forming a significant part of the net pool. It seems to me not consistent with justice and equity. The application, therefore, is dismissed.
Summary dismissal
In respect of the application by the sixth respondent for summary dismissal of the claim against it, that application is also dismissed, for the following reasons. As pointed out in many cases, including by Kirby J in Lindon v Commonwealth (No. 2) (1996) 70 ALR 541 – it is indeed a serious matter to deprive a party of access to the Courts. The party seeking summary dismissal:-
… must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.
That a case appears weak and unlikely to succeed is of itself not sufficient to satisfy summary dismissal. As Kirby J went onto say in Lindon:
If there is a serious legal question to be determined, it should ordinarily be determined at a trial.
The claim against the sixth respondent relates to the issue of shares in that company, G Pty Ltd. Half of those shares, it seems, were previously owned by the husband, Mr George. In 2018, he transferred his interest to his father, Mr B George. It is said on behalf of Mr George and Mr B George that Mr B George took over some debts for the husband. For present purposes, the important point to note is – is there a reasonable prospect of success on a cause of action that has been identified against the company? It is said by Mr Galloway that in fact if what is sought is a transfer of shares, the correct respondent, then, would be Mr B George, to transfer his shares back to Mr George. Mr Galloway’s primary submission is that the company is not the correct respondent in respect of that claim. But I do note that in respect of this aspect, there has been a direction made by a Senior Registrar for a delivery of pleadings in the form of “Points of Claim.”
It is said in the wife’s material – in particular, the outline of case document and indeed, I think, in the amended initiating application – that the husband in this current case received dividends from G Pty Ltd, as one would expect a shareholder to receive, after the date of the transfer. This much is pleaded in paragraph 8 of the applicant wife’s Points of Claim against the sixth respondent filed 19 February 2021. Paragraph 8 says that:
Following 30 May 2018, the Husband continued to control or manage G Pty Ltd
PARTICULARS
(a) The Husband continued to manage or control the business.
(b) The Husband acted as the defacto Director of G Pty Ltd.
(c) The Husband continued to receive payments from G Pty Ltd effectively derived from net profits of the business.
The ‘payments’ are of course, otherwise known as dividends – which a shareholder would receive, and they are referred to as dividends in another part of the wife’s claim. That is the claim made by the wife.
The application for summary dismissal in this case is an application made under section 45A of the Act. The points made by Kirby J in Lindon were taken up and adopted by the Full Court of the Family Court – in broad terms, but essentially in the same terms – in cases such as Stativa & Stativa [2015] FamCAFC 170 and Ritter & Ritter and Anor [2020] FamCAFC 86. I am required, according to those authorities, to take the wife’s case on this application at its highest and then determine, taking her case as its highest, whether it establishes that the wife has no reasonable prospect of success with that case. I cannot say that at this point in time. There are so many contested facts and issues.
I do not know precisely what has occurred with G Pty Ltd. On behalf of the wife in the pleading, it is said that the husband continued to manage the business, and he acted as the de facto director of the business, and he received dividends. In those circumstances, it seems to me that G Pty Ltd is properly a respondent. It seems to me that they need to be heard in relation to these matters. Officers of that company would need to make disclosure in respect of who was managing the company, what decisions were made and by whom. Were dividends paid by the company to the husband, as alleged by the wife? That information could only be provided, it seems to me, by the company. That information as to the payment of a dividend could only be provided by the company.
And in essence, then, it seems to me that it is not as clear-cut as it would have to be for the Court to make an order for summary dismissal. The reality is that the parties are rarely bound by the precise terms of pleadings, as one would expect in other civil jurisdictions. It may be that what is sought is a declaration that Mr B George holds those shares on trust for the husband, or it may be that a declaration is sought that Mr B George holds those shares on trust for the wife, or it may be an order directing that Mr B George and the company effect a transfer of the shares and require registration of that transfer in the records of the company. Mr Galloway has submitted that the Court would not make an order if that sort of action is required by Corporations law in any event. I am not so certain about that. I do not think it is as clear-cut as stated by Mr Galloway in the submissions, and I certainly don’t think that it is clear-cut in relation to what orders may, should, could or ought be sought or obtained in respect of the company itself.
The question in relation to the company could, for instance, include declarations that the company paid dividends to the husband for which there needs to be an accounting, so there could well be orders or declarations against the company. It seems to me that it’s possible. To put it another way, it seems to me that the current state of the evidence and the pleadings is far from complete and the Court has to be cautious, at an interlocutory stage, before making a summary dismissal order. I know of no rule in the Family Law Rules 2004 (Cth) – or precedent, for that matter – that would necessarily, in the context of a section 79 proceeding, bind a party to a point of claim delivered in terms of orders sought.
It is clear enough that it is alleged that the company paid dividends to Mr George. In those circumstances, I can foresee the possibility of orders having to be made against the company or declarations made in respect of what occurred. I do not think it can be said there is no reasonable prospect of success. The Court is not actually in a position to reach such a conclusion. There would need to be cross-examination of so many different people – Mr B George, Mr George, anyone else who worked in that business – to ascertain what the facts are and what findings should be made.
It is said that Mr P is owed at least $400,000 in respect of money he advanced for the purchase initially of the Suburb H property. Well, Mr Balzamo says that’s not conceded, and Mr Galloway says there’s a joint venture document. This will all require cross-examination, findings from the Court and so on. It seems to me that both applications made today on behalf of the second respondents and the sixth respondent should be dismissed, for the reasons stated. There was sought a direction for an updated valuation. Unless that is by consent I am not inclined to make an order. Nothing can happen. No transfer of the wife’s share can occur without the written, clear consent of Mr P. In any event, this matter now goes back to a Registrar for further case management.
Costs
In relation to the costs applications, the Court, of course, has to have regard to section 117 of the Act. Section 117(1) provides the general rule as to costs; section 117(2) provides that if the Court is of opinion that there are circumstances that justify it in doing so, the Court can make an order for costs as it considers just. Section 117(2A) sets out what the Court has to take into account in making such a costs order. I have taken all those factors into account.
An application for summary dismissal was brought today by the sixth respondent. It has been dismissed. A pleading in the form of the Points of Claim document was filed 19 February 2021 by the wife. As I tried to indicate in the reasons for the substantive applications –“Points of Claim”, of course, are merely an invented name by Judges and Registrars of this Court when trying to get some clarity in respect of a claim. This is not a jurisdiction where pleadings are required, but what that document does show, particularly in paragraph 8, is that the company has done certain things – namely, pay dividends to the husband, it is alleged, after a time when the husband had apparently relinquished his shares in the company to his father. It is said that there is no sworn testimony about it, but the point is – there is this Points of Claim document which makes the claim or frames a cause of action to this extent: the company has done something contrary to the state of affairs which the company maintains exists – namely, that the only shareholder is Mr B George. And Mr Galloway points out – and I think he’s probably correct – that any additional costs (incurred today by the wife in respect of the sixth respondent’s application) would be limited. But nonetheless, it was an application for summary dismissal. It has been successfully opposed, and I do think that there should be a costs order made on the Family Court scale.
In respect of the costs application relating to what I would call the primary reason for today’s Court appearance –where the second respondents sought a transfer of a share of a property which is the subject of a Supreme Court injunction. The injunction is in the terms:-
That until trial or earlier order the respondents are restrained from selling, encumbering, further encumbering or further drawing on an existing encumbrance, or in any other way dealing with the property…without the applicant’s written consent or the leave of the Court
Written consent of Mr P was required for the dealing. Mr P’s consent was not in respect of the transfer of a share owned by the wife. Mr P’s consent was in respect of listing the property for sale by public auction. There was never any proper written consent obtained by Mr P in the terms sought by the second respondents for the order they asked the Court to make. It seems to me that Mr Balzamo is correct. On that point alone, the application was highly unlikely to succeed. I do not consider it is appropriate for the Court to look at a one-year-old valuation and then draw some inferences as to what Mr P might or might not have been consenting to. In the face of a Supreme Court order, the consent would have to be very clear. There is no consent to the transfer of a one-fifth interest. Costs will be paid by the second respondents. In respect of the fact that they might be paying a mortgage, Mr Balzamo makes another excellent submission – that being that the second respondents, or some of them, live in the property. In respect of the complaint that they have to pay the mortgage, they would, of course, be relieved from payment of the mortgage if they had agreed to the sale of the property altogether. But that is not what they wanted and they are perfectly entitled not to agree to such an order. But they do remain in these proceedings and to a very large extent, as I have just indicated, that is their own doing. For the reasons stated, the second respondents will also pay the costs in respect of the application they brought today, on the scale applicable in the Family Court.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Howard. Associate:
Dated: 6 August 2021
SCHEDULE OF PARTIES
BRC 4444 of 2020 Respondents
Fourth Respondent:
R PTY LTD ACN …
Fifth Respondent:
MR DOLBEY
Sixth Respondent:
G PTY LTD ACN …
0
2
2