Grattan and Grattan and Anor (No. 6)
[2014] FamCA 1118
•11 December 2014
FAMILY COURT OF AUSTRALIA
| GRATTAN & GRATTAN AND ANOR (NO. 6) | [2014] FamCA 1118 |
| FAMILY LAW – INJUNCTIONS - Injunction sought by wife to enable joint control of large number of corporate entities in circumstances where there were allegations of improper use of funds, breach of an injunction and irregularities in company accounts – Discussion about ordinary course of business and whether where there is a large sum of money involved in assets, the balance of convenience favours a refusal of such an injunction – Consideration of the approach of the Court to the granting of the injunction where there are significant corporate entities involved – Injunction granted. |
| Corporations Act 2001 (Cth) Family Law Act 1975 (Cth) |
| ASIC v Triton Underwriting Insurance Agency [2003] NSWSC 1145 Jackson v Sterling Industries [1987] HCA 23; (1987) 71 ALR 457 Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300 |
| APPLICANT: | Mr Grattan |
| RESPONDENT: | Ms Grattan |
| INTERVENER: | B Pty Ltd |
| FILE NUMBER: | MLC | 4259 | of | 2013 |
| DATE DELIVERED: | 11 December 2014 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 4, 5, 8 & 10 December 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Ackman QC with Mr Werner |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE RESPONDENT: | Mr Glick QC with Mr Strum |
| SOLICITOR FOR THE RESPONDENT: | Lander & Rogers |
| SOLICITOR FOR THE INTERVENOR: | Mr C, C Law Firm |
Orders
That on or before 4.00pm on Friday 12 December 2014, the husband and the wife sign all documents and do all acts and things necessary to open a cheque account with Westpac Banking Corporation in their joint names.
That the husband cause or direct all monies hereafter payable or paid to, and/or receivable or received by him, and any of the Grattan Entities as defined in Annexure A to these orders (whether in the form of cash, cheque, bank transfer, credit card payment or howsoever otherwise) to be forthwith deposited into the joint Westpac account without deduction howsoever.
That the husband be prohibited, whether by himself, his servants or agents from:
(a)Causing, authorising, permitting or abiding or howsoever otherwise preventing any monies receivable or received by or payable or paid to him and any of the Grattan Entities (whether in the form of cash, cheque, bank transfer, credit card payment or howsoever otherwise) to be dealt with other than by immediate payment into the Joint Westpac Account; and
(b)Drawing upon or in any manner dealing with or causing, authorising, permitting or abiding by any other person drawing upon or dealing with any accounts in his name or in the name of any of the Grattan Entities or in any other accounts to which he is a signatory other than in the ordinary course of business PROVIDED ALWAYS THAT the written consent of the wife is first obtained in relation to any such business drawings or dealings.
That the husband and the wife, by themselves, their servants and agents, be prohibited from drawing upon or in any manner dealing with or causing, authorising, permitting or abiding by any other person drawing upon or dealing with the Joint Westpac Account other than upon the joint signature of the Husband and the Wife.
That any and all liabilities incurred by the Husband or any of the Grattan Entities by reason of the use of any credit cards (whether in his name or that of any of the Grattan Entities) only be paid by the husband from the sum of $150,000 paid to him pursuant to the next paragraph hereof AND for the avoidance of doubt, the husband not use or abide the use of any existing accounts in his name or that of any of the Grattan Entities to pay such credit card liabilities.
That notwithstanding any other provisions of these orders, the husband and the second respondent forthwith execute all documents and do all acts and things necessary to cause two sums of $150,000 each (a total of $300,000) to be drawn down in favour of and paid to each of the husband and the wife from the NAB facility in the name of the second respondent and secured over Business F, such sums to be specifically acknowledged by the parties and treated at trial as part-property settlements in respect of each of their ultimate entitlements and to be specifically adjusted against their respective entitlements.
That:
(a) National Australia Bank Limited;
(b) ANZ Banking Corporation Limited; and
(c) Westpac Banking Corporation Limited,
each be restrained from permitting or abiding any drawing upon or dealing with, any accounts in the names of the husband and of any of the Grattan Entities save as may be properly owing from time to time to each of those banks.
That the wife’s application for interim orders is otherwise dismissed.
That all outstanding applications for final hearing are adjourned to 10.00am on 18 February 2015.
ANNEXURE “A”
CORPORATE ENTITIES COMPRISING THE GRATTAN GROUP
AA Street Partnership / AA Street, Suburb BB Joint Venture
AA Street Pty Limited
CC Unit Trust
DD Pty Limited
DD Trust
EE Unit Trust
FF Pty Limited
GG Pty Limited
HH Unit Trust
JJ Pty Limited
JJ Unit Trust
KK Australasia Pty Limited
KK Australasia Trust
KK Pty Limited
LL Pty Limited
MM Pty Limited
MM Unit Trust
Grattan I Street Pty Limited
Grattan I Street Trust
Grattan Equity Holdings Pty Limited
Grattan Equity Unit Trust
Grattan Family Extended Trust
Grattan Family Trust
Grattan Finance Pty Limited
Grattan Finance Trust
Grattan Group Investments Pty Limited
Grattan Group Nominees Pty Limited
Grattan Holdings Pty Limited
Grattan Holdings Trust
Grattan Investment Trust
Grattan Nominees Pty Limited
Grattan Nominees Pty Limited and NN Nominees Pty Limited Partnership
Grattan Technologies Pty Limited
OO Distribution Trust
PP Finance Pty Limited
PP Finance Trust
QQ Pty Limited
QQ Trust
RR Family Trust
SS Trading Trust
TT Unit Trust
UU Pty Limited
UU Pty Limited and VV Pty Limited Partnership
WW Grattan Family Trust
XX Unit Trust
YY Management Pty Limited
YY Management Unit Trust
YY Pty Limited
YY Unit Trust
ZZ Pty Limited
ZZ Unit Trust
AB Pty Limited
BC Pty Limited
CD Unit Trust
B Pty Limited
DE (Int) Limited
EF Pty Limited
FG Pty Limited
GH Pty Limited (previously HI Pty Limited)
GH Trust
IJ Pty Limited
JK Pty Limited
KL Pty Limited
KL Unit Trust
LM Trust
MN Pty Limited
MN Unit Trust
Business F Unit Trust
NO Pty Limited
OP Pty Limited
IT IS NOTED that publication of this judgment by this Court under the pseudonym Grattan & Grattan and Anor (No. 6) 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 MELBOURNE |
FILE NUMBER: MLC 4259 of 2013
| Mr Grattan |
Applicant
And
| Ms Grattan |
Respondent
And
| B Pty Ltd |
Intervener
REASONS FOR JUDGMENT
The property dispute between Mr Grattan (“the husband”) and Ms Grattan (“the wife”) to which B Pty Ltd has been joined has been adjourned to February. The wife now seeks orders relating to the daily control of the finances of the Grattan Group of companies of which there are 70 (“the companies”). Of the various orders canvassed between the husband and wife, only the determination of one issue is required of the Court. To make sense of the determination, some context is necessary.
B Pty Ltd
B Pty Ltd is a party to these proceedings but has not taken part in the various interim disputes before the Court this week. The solicitor who acts for and indeed has appeared for B Pty Ltd was aware of the continued dispute and the Court was told that he had attended but had chosen not to participate. To the extent that it is necessary to say so, I am satisfied that B Pty Ltd has had an opportunity to be heard.
The proposed orders
It was common ground between the husband and wife for the orders set out at the start of these reasons but the husband’s position was that there should be a variation on them. The husband’s proposed words are set out below in paragraph 25 of these reasons. The distinction between the positions is really about whether the husband should have the opportunity to continue doing business as he has always done and justify what he is doing to the wife. It is significant in this case that there is an extant injunction in place under which the husband operates the various entities in the ordinary course of business.
In summary, the husband and wife agreed that:
· They would open a joint bank account;
· The husband was to direct all money be deposited in the bank account;
· The husband be restrained from dealing with the bank account monies other than in the ordinary course of business ( and as otherwise agreed);
· They would be restrained from using the funds only by joint signature;
· They would each have $150,000 from a specific facility and such funds be treated as part property settlement; and
· If the husband or the companies used credit cards, they were to be paid from the husband’s $150,000;
· The various banks of the companies and the husband be restrained from permitting or abiding any drawing upon or dealing with the relevant accounts save as to money owed to them.
Jurisdiction and power to make the orders was not disputed.
The contentious point
The area of contention concerned the question of whether or not the husband needed to consult with the wife about virtually every payment or drawing or whether the payments could be made under the rubric of ordinary course of business with the wife being told after the payment was made.
Much (but not all) of the dispute revolved around a contested fact concerning a sum of about $1.3 million.
The wife’s argument
The wife’s position was that the husband had money in Australia (notwithstanding his denials that that was so) and, contrary to the injunction earlier mentioned, had sent it off shore. The vehicle for the transfer of the funds was an international exchange dealer. On 3 October 2014, senior counsel for the husband told the Court when the wife’s allegation was made, the documents relied upon by the wife showed that a “request” had been made for the delivery of money off shore but that it did not mean that the money was sent from Australia. Reference was made to the fact that this money was already offshore. It was said that the money had gone to the husband’s sister and there was no money left in the account. Much of this dispute also concerned matters which the wife now alleges she had not been told about notwithstanding the husband’s disclosure obligations. That is concerning bearing in mind the trial was imminent. The exchange dealer with whom the husband was dealing made clear in a number of statements to the husband that it was bound by the Australian anti-money laundering legislation and that the husband had to make a decision about what was to happen to this money as the dealer had reporting obligations.
The wife said that the only inference open was that the husband well knew that the money was in Sydney but when the issue came before the Court, he disingenuously made a call to the dealer to say that he was surprised and had misunderstood the position only to find out the money had always been in Australia. It is now common knowledge that all of these conversations were recorded by the dealer as part of their reporting obligations.
The husband’s position about the off shore money
The husband, through his senior counsel, said that the allegation that the Court was misled could not be accepted because there was no evidence that the husband contrived anything.
It is not necessary to make any determination about what the husband did or did not know or about whether he was deliberately setting up the conversation with the dealer. Indeed, with the final trial pending, it is not appropriate that I make any such finding. It is sufficient to say that the wife had not been told about the fund movement nor about what seems to be the prima facie explanation for the money being in the Philippines, namely to acquire a business. If that was happening, the evidence and protestations of the wife suggest she did not know about it. Again, I observe that this was only weeks out from a final hearing but also at a time when there were two experts examining the financial positions of the companies to determine what the parties had to divide.
Ms D
The evidence which was relied upon by the wife was a statement by forensic accountant Ms D as follows:
I have serious concerns as to the accuracy of the financial statements prepared by the [Grattan] Group, however in the absence of any other information I have necessarily relied on this information as a basis for my opinion.
In her “unconcluded” report, Ms D referred to her uncertainty about loan balances “despite repeated requests for clarification”. Pertinent to the wife’s submission about not trusting the husband, Ms D said that there were significant discrepancies of approximately $750,000 in the wages accounts of one of the businesses. Senior Counsel for the wife observed that in relying upon that evidence, it was noted that the husband’s expert had not disagreed about the discrepancy. I am not in a position to make any findings about whether or not there is a simple and innocent explanation for all of this but it must be kept in mind that the final hearing was to commence in December and this “information” (or lack of it) from Ms D was contained in her report dated 25 November.
The wife’s submission
The submission of the wife was expansive but there is a sufficient basis to make the order sought by the wife and to reject that of the husband because s 286 of the Corporations Act 2001 (Cth) which is designed inter alia to make company finances transparent to avoid insolvency, creates obligations relating to books of account. The insolvency presumption can be found in s 588E of that same Act which triggers the injunctive power of the courts to appoint receivers. In this case, I am not now asked to appoint a receiver although that had been the wife’s earlier position. What I am now asked to make is what might loosely be described as an asset protection order. Put simply, the wife seeks to be involved and to make the corporate activities transparent and not to simply leave the husband to decide what should be paid out in the ordinary course of business. It was submitted that the wife feared fictitious payments would be made by the husband. She pointed to an argument which will apparently unfold about money being received by the husband’s sister overseas in what was suggested was not an appropriate use of the Australian taxation system. She pointed to the evidence of Ms D about the unexplained inconsistencies in the wages area just mentioned. All of that, it was submitted, put her in a position where she could not trust the husband at all.
The husband’s submission
Senior Counsel for the husband strongly submitted that this was an inappropriate order having regard to a number of matters. First, the wife knew of the position about the overseas money in the middle of November but chose not to take any action. Secondly, Ms D put the value of the business at $42 million yet here, she was seeking an order that could stop the husband paying out anything. The example used was the payment of an electricity account. Senior counsel described this application as having an element of hysteria. On the husband’s view, the business was worth $20 million despite the fact that his own accountant had said it was much less. One way or the other, there was plenty of money here and the wife’s protection lay in other property and, there were significant real property assets. Thirdly, it was submitted, the business was complex and to take this course of action would make it unworkable. By that, I understood that the husband’s position was that he was expected to conduct business with a person whom his senior counsel described as hostile. Against that however, it must be said that the wife had agreed to a liberty to apply provision which could be quickly used if she was being unreasonable.
In respect of the underlying premise about the overseas money transactions, senior counsel for the husband submitted that there was no evidence to suggest that the husband had lied. He said that all that the wife could point to showed that two days before an October hearing in this Court, the husband gave instructions to say that he did not know that the money had come into Australia. I refer back to the fact that it not necessary for me to make any determination about that nor should I. Does the other evidence produced immediately before trial which is said to be as uncertain and incomplete as it would appear to be, justify the wife’s proposed order? Are the circumstances sufficient to justify the Court accepting that the wife should have the same control as that of the husband even where there is plenty of money that might otherwise be used to rectify anything that the husband might do or be found to have done, inappropriately?
The legal issues
The injunctive power to make the disputed order lies in ss 34 and 114 of the Family Law Act 1975 (Cth) (“the Act”). Here, s 114 is sufficient foundation.
Whilst there was discussion about corporate issues and receivership, the orders sought by both sides are personal. Section 114 provides power to make an order protecting assets as much as it permits the restraining of their use. That provision requires the Court to be satisfied that it is proper to make the requested order. Because of the structure and entities used by the parties, the corporations’ law provides guidance as to what is proper and how the discretion of this Court should be exercised.
A similar provision to s 114 of the Act is found in s 1324 of the Corporations Act which provides that where a person has engaged, is engaging or is proposing to engage in conduct that constitutes a contravention of that Act (and here the wife points to s 286 of that Act) the court may grant an injunction as the Court thinks appropriate (which I interpret to mean proper) restraining the conduct if it considers it desirable.
In ASIC v Triton Underwriting Insurance Agency [2003] NSWSC 1145, Barrett J observed that the statutory nature of the s 1324 injunction and the words of the legislation itself meant that the court was not constrained by the traditional methods of equity but that they represented a sound basis for undertaking a preliminary assessment which should be reviewed inter alia against the wider question of what was “desirable” in the statutory context. That is relevant here because the husband argued that regardless of the disputed mischief alleged against him, there was an ample asset base to satisfy any entitlement of the wife. That argument ignores the corporate statutory governance and responsibility issues. Here, the wife seeks control over the financial situation which has been conducted throughout the relationship through corporate arrangements but she has not asked for the removal of the husband from all control nor that the companies be placed in receivership.
Equity would normally look to such things as the balance of convenience which in this case, is the husband’s strongest argument but applying the wider context as discussed by Barrett J above, the Court should not ignore that, at a preliminary level, there is evidence of an expert (Ms D) expressing concern about corporate governance issues. It is also significant to observe that the basis underlying the wife’s allegation about the off shore money was that it occurred in what she claims was a breach of an injunction of this Court. Without the necessity to make any significant findings, the Court’s obligation is to look at protection of assets based on the preliminary evidence.
As I have observed, at a preliminary level, it would appear that there may be a problem for the companies because of s 286 of the Corporations Act which is designed to ensure that a company can accurately ascertain its financial position at all times. The fact that a company acts as a trustee of a trust is irrelevant.
In Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300 a case concerning receivership, Warren J (as her Honour then was) observed that the purpose of the appointment was the safeguarding of property for the benefit of those entitled to it. Her Honour looked at the basis upon which a receiver should be appointed. Her Honour saw one reason where such an order should be made was where the property was in jeopardy through such things as misconduct, improper disposition and the like. That is the allegation here by the wife but she is not asking the Court to take that receivership step. Her Honour said that the evidence to make such a serious order had to be “strong” but in assessing the “risk to the trust”, the court should apply a “qualitative judgment”. Her Honour then repeated what all of the authorities have said which is that the purpose of such interference is to preserve the benefit of a person who had an interest in the trust.
Authorities such as the High Court’s decision in Jackson v Sterling Industries [1987] HCA 23; (1987) 71 ALR 457 also provide guidance. There, for example, Deane J said:
There may have been a time when it would have been strongly arguable that the making of an interlocutory order to preserve assets of a defendant pending the determination of proceedings against him could not properly have been seen as "appropriate" to be made by a court in relation to the exercise of the jurisdiction to entertain the substantive proceedings. If that be so, that time has passed. Orders preventing a defendant from disposing of his assets so as to create a situation in which any judgment obtained against him would not be satisfied may be of comparatively recent development. They have, however, become an accepted incident of the jurisdiction of superior courts throughout most of the common law world. In this country, the jurisdiction to make such orders, commonly referred to as "Mareva injunctions", has been progressively asserted and exercised by the Supreme Courts of Victoria, New South Wales, Western Australia, Queensland, the Australian Capital Territory and South Australia.
The qualitative judgment to which Warren J referred can only be on the evidence presented. The wife relied upon the affidavit of Ms D but also on a series of documents produced under subpoena from the foreign exchange dealer which included the correspondence with the husband. It is evidence which is not tested but neither was it explained other than by a denial of wrongdoing. The wife pointed to the allegations of those unexplained transactions even if the husband’s version about misunderstanding what the exchange dealer was doing was found to be correct. The wife had not been told of these transactions. Thus, there is a prima facie case to justify the orders she seeks.
The husband’s position whilst agreeing to the various orders sought was that there should be an overriding control by him which, if put in place, would mean that the wife could watch what he was doing and seek assistance of the Court if dissatisfied. The position can be seen in the following draft proposal of the husband about the ordinary course of business:
(Such course to include the application of income to meet all usual outgoings, including mortgage payments, ATO instalments and those outgoings currently met by way of internal bank transfers) provided always that any other payments shall require the written consent of the wife first obtained and provided further that the husband shall provide documents verifying any payments made pursuant to this order.
The additional words proposed by the husband were rejected by the wife simply on the basis that she had no confidence even if the proposal was fulfilled because of the evidence of Ms D which she said, indicated that the husband would use fictitious names.
Conclusion
I am satisfied that the wife has established a prima facie case for the injunction she seeks and the evidence justifies a conclusion that the proposal of the husband is not necessarily transparent. I am further satisfied that whilst the balance of convenience points to any damage being adjusted in the final trial, the balance actually favours the wife by virtue of her concern about the state of the financial documents which may not be satisfying the corporations law. I am also satisfied that whilst the balance of convenience might also indicate that this will create a management problem if the wife is, as was submitted, hostile to the husband, but that too can be overcome by the liberty to apply provision. It is difficult to understand why the wife would, as the husband’s senior counsel described it, “kill the goose that laid the golden egg”.
The orders should be made in the terms proposed by the wife.
I certify that the preceding Twenty Eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 11 December 2014.
Associate:
Date: 11 December 2014
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