H and Parsons & Ors

[2014] FamCA 718

FAMILY COURT OF AUSTRALIA

H & PARSONS AND ORS [2014] FamCA 718

FAMILY LAW – PROPERTY – Interim – Injunction – Where the applicant is the beneficiary of a judgment debt – Where the applicant seeks a Mareva injunction restraining the wife from dealing with her interest in three properties – Where the substantive proceedings have been delayed indefinitely as the husband was not able to prosecute the proceedings – Where there is a legitimate basis for a claim on behalf of the applicant for relief under the Family Law Act in the context of the parties’ s 79 proceedings – Where the application is granted until further order, except for the reference to the property that the respondent wife currently lives in.

Family Law Act 1995 (Cth) ss 79, 106B

Blue Seas Investments Pty Ltd & Mitchell and McGilvray (1999) FLC 92-856;

APPLICANT: Mr H

RESPONDENT:	Ms Parsons
RESPONDENT:	Mr Masters

FIRST INTERVENERS: Mr B & Mr C

FILE NUMBER: SYC 2726 of 2013

DATE DELIVERED: 21 August 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 21 August 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Loewenstein

SOLICITOR FOR THE APPLICANT: Mr Barry

RESPONDENT IN PERSON (BY PHONE): Mr Masters

RESPONDENT IN PERSON (BY PHONE): Ms Parsons

SOLICITOR FOR FIRST INTERVENERS (BY PHONE): Mr C

Orders

IT IS ORDERED THAT:

1. Orders are made in the terms of the orders sought at paragraph 1 of the Application in a Case filed on 29 July 2014 until further order, deleting from the order paragraph A of Schedule 1 of paragraph 1.1 of that order, as follows:

1.      Upon the Second Intervener by his solicitor giving the usual undertaking as to damages the Court, until further order, orders that:

1.1The respondent wife by herself, her servants and agents be restrained from transferring, alienating, mortgaging, further encumbering or otherwise dealing with the real property described in Schedule 1 except in so far as it involves leasing of or licensing to tenants of any of the properties in the ordinary course of business as a landlord.

Schedule 1

A.…..

B.The land known as [D Street, E Town] being the land contained in Certificates of Title Folio Identifier … and Folio Identifier … ;

1.2The respondent wife by herself, her servants and agents in her capacity as sole director of [M] Pty Limited be restrained from causing or permitting [M] Pty Limited to transfer, alienate, mortgage, further encumber or otherwise deal with the real property described in Schedule 2 except in so far as it involves leasing of or licensing of the property to tenants in the ordinary course of business as a landlord.

Schedule 2

The Strata Title home unit known as Unit [A], [P] Street [Suburb Y] being Lot … Strata Plan …

1.3The respondent wife by herself, her servants and agents be restrained from transferring, alienating, mortgaging further encumbering or otherwise dealing with the shares in the corporation described in Schedule 3.

Schedule 3

[M] Pty Limited ACN …

1. The Application is adjourned generally with liberty to any party to restore the Application to the list on giving 14 days’ notice to the Court and to each other.  In the event that the Application is restored by the applicant the restoration should be accompanied by an amended Application setting out precisely any different terms proposed in relation to the relief sought.

1. Those orders are made on the undertaking as to damages provided by the applicant through his solicitor in the affidavit sworn on 25 July 2014.

1. The costs of the parties of and incidental to the proceedings today are reserved.

IT IS NOTED that publication of this judgment by this Court under the pseudonym  H & Parsons and Ors 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 SYDNEY

FILE NUMBER:  SYC 2726 of 2013

Mr H

Applicant

And

Ms Parsons

Respondent

And

Mr Masters

Respondent

And

Mr B and Mr C

First Intervener

REASONS FOR JUDGMENT

INTRODUCTION

1. These are proceedings for interlocutory injunctions that are associated with proceedings for settlement of property.  Mr H brings an Application, filed 29 July 2014, for certain injunctions restraining Ms Parsons, the wife in the substantive proceedings.  This is the first return date of the application.  Perhaps I should say the context of these proceedings is that the substantive proceedings have been stayed indefinitely, and that has been done on the basis that it has become apparent – and I found on an earlier occasion, I think 28 May, that the husband was not able to prosecute the substantive proceedings, and in those circumstances, the parties have a choice of appointing a case guardian or moving forward. 

2. But there is no option but to stay the proceedings in those circumstances.  There has been a raft of interlocutory proceedings including, relevantly, an application made by Mr Masters that I disqualify myself.  He was not in a position to prosecute that application on 28 May 2014 and he is not in a position to prosecute that application today.  Ms Parsons has made a similar application but has not as yet prosecuted it.

3. The point of this application is, in summary, that Mr H is the beneficiary of a judgment debt which he says is of the order of $632,400 as at 17 July of this year and increasing at the rate of about $121 a day.  From evidence available to him through the course of the proceedings and otherwise, he has made a calculation about the assets in the hands of Ms Parsons and I think it is probably an agreed fact that Ms Parsons currently has the legal title to virtually all of the assets in which she and the husband, Mr Masters have an interest. 

4. There has yet to be a decision as to how those assets should be divided as between Ms Parsons and Mr Masters.  The calculation made relates to three properties at Suburb R, in the Central West at E Town, and a property at P Street in the city and is based on the estimates of value, whether agreed or valuations provided earlier.  The known liabilities secured on those properties and estimates in relation to the possible cost of selling the properties, sales commission, interest on Mr H’s judgment debt; importantly, land tax, but also another debt, which I think may have been the debt that gave rise to the applicant’s cost judgments, which is said to be of the order of $327,000 as at 23 May 2014, and interest on that debt. 

5. In this way a calculation has been made that there is a shortfall on the assets referred to above. The substantive claims of the applicant and of the other interveners, are that there was a transaction between husband and wife to defeat creditors that they would seek to impugn under s 106B of the Family Law Act.  If not, they have a claim under the part of the Family Law Act that deals with the interaction between the rights of the parties to a marriage and third parties - Part VIIIAA.

6. The application seeks to restrain the wife in relation to dealing with her interest in an entity that owns the city apartment and in relation to real estate at E Town in the Central West and in relation to a further property at Suburb L.  The latter property is one that the wife asserts that she bought into the marriage with the husband. I do not think there is any challenge to that contention.  The application is in the nature of a Mareva injunction, to preserve for the purposes of the substantive proceedings, the subject matter of those proceedings. 

7. It was put by Mr Loewenstein on behalf of the applicant that there would be a Pyrrhic victory if the applicant was to succeed on his claim under Part VIIIAA of the Family Law Act or under s 106B and there were insufficient assets to meet the claim. Courts grant injunctions of this type in aid of their own jurisdiction so that the process of the Court are not frustrated by the removal from the jurisdiction, in the case of the Mareva case itself, removal from the physical jurisdiction of the Court; and in this case, the destruction or erosion of the assets involved.

8. An applicant needs to demonstrate that he or she has a strong case to argue in relation to their claim and to deal with the balance of prejudice between the parties.  The application is opposed by the wife and husband.  I think there is a case for a Mareva injunction.  Although both Ms Parsons and the husband strongly oppose the granting of the injunction, much of the support for the applicant’s case has been provided by the husband’s evidence about the profligate, ill-advised actions of the wife in relation to her stewardship of these properties. 

9. A particular concern about the application is that its reach is beyond that which is necessary to protect the claim of the intervener.  In my view that is fatal in relation to the Suburb L property.  Mr Loewenstein kindly invited me to tailor the orders as I might, but, even if that was my role, I do not have the evidence to do it.  There is no agreed value of the Suburb L property, nor is there an assertion about the value of any secured encumbrance on the property.

10. There were a number of options for the applicant.  An order can be sought for a restraint on doing certain sorts of things without notice.  That is not proposed here.  A restraint could be sought on dealing with a property in a certain way that increased its exposure by a specific amount.  That is not proposed here.  I do not have the evidence on the basis of which I could make a calculation about what fixed amount would either secure the protection that the applicant seeks or would provide reasonable room for the needs of Ms Parsons, and through her, the husband to have access to their own property for their own needs in the period before there can be a final trial. 

11. As to the other issues which I have referred to briefly.  There is an application for me to disqualify myself or recuse myself.  The husband is not in a position to agitate that today.  I cannot volunteer, much as I would like to, to abandon the proceedings to someone else.  Prerogative writs are available to stop a judicial officer doing such a thing and I have taken an oath to undertake the work within my jurisdiction, so that cannot be done.  When there is an application ready to be argued, I am obliged to hear it, and I will do that. 

12. Nextly, it is asserted that there cannot be an undertaking as to damages from a foreigner.  I do not know that that is right.  Certainly, injunctions can be granted without an undertaking as to damages.  There is a decision of this Court of Blueseas from about 1999 to that effect.  The usual undertaking as to damages is undertaking that an applicant would meet damages found to have been caused by the injunction granted which the Court subsequently finds should be met by the applicant.  Those damages could be damages incurred by the respondent or anybody else.  That undertaking is offered today.  Mr Masters relies on the vibe – that it is obvious that you cannot take an undertaking from a person who is not an Australian entity or person.  I do not know that that is true.  He cites no authority for it.  No authority is cited to the contrary.  I suspect it cannot be true because every Mareva injunction or every second Mareva injunction in the true spirit of that authority, is a foreigner.  So I doubt that it is possible that a foreigner can never obtain an injunction on an undertaking as to damages, but there it is.  Certainly, the Court has power, as I say, to grant an injunction without an undertaking or without being assured that the damage could ultimately be met or that the undertaking would be enforceable. 

13. The husband has raised the fact that he would seek to impugn the debts themselves.  The quick answer to that is it is not likely that he will.  He has had years and years to do it.  His health is failing.  He has not been able to do it in the jurisdictions where those debts arose so I am not sanguine about that. Nevertheless that is an argument he is entitled to make.  He thinks that the reach of the Family Law Act is such that the Court can go behind judgments of another Court.  I am not sure that that is true.  The courts are obliged to give faith and credit to each other. 

14. The task under s 79 is a little different to the ones that the parties have articulated and there are issues without impugning the integrity of a particular debt, about what debts are included in establishing the net pool of assets.  For example, there have been decisions where there is a tax debt and the Court has decided that the tax debt should not be included in calculating the pool of assets for the purposes of s 79 proceedings, and a distribution is made before that debt is dealt with.  That does not mean the debt does not still exist and that the parties are not left with their rights and obligations at law. 

15. So there are a whole lot of issues about that and it is not for me to presume to give the parties a lesson about those things. 

16. Importantly, it is not for me today to either automatically enforce the debt of the third parties in advance of the hearing at which that would be an issue, or, on Mr Masters’ application, to find that those debts should not be recoverable in these proceedings.  That is certainly beyond the scope of these proceedings today.  It is suggested in his case that costs have been wrongly incurred, that the costs judgments can be impugned and there are set-offs and so on. 

17. There are mechanisms for all of those things to be addressed and they have not been taken up.  I would strongly encourage the parties, if there is something else to be done in another jurisdiction, they should do it.  But, as I say, just as a lay observation, for debts that are said to be outrageous and disgraceful and so on, that have been on foot for years, there is no basis for me to be sanguine that there is going to be meaningful action in another jurisdiction.  Especially now that I have stayed the property settlement proceedings because Mr Masters’ health is, sadly, so bad.

18. So there is a costs obligation ultimately resulting in a District Court judgment.  That means that there is a legitimate, arguable basis for a claim on behalf of the applicant for relief under the Family Law Act in the context to the parties’ s 79 proceedings.  The husband and wife, as Mr Loewenstein has said, have – in their thrashing around against each other, demonstrated that they are not in robust financial health.  That was said to be the reason for the transfer between husband and wife originally. 

19. Some progress has apparently been made in that regard.  The husband and wife have squared away the HSBC (bank).  And Ms Parsons says to me – and I have no reason not to accept her – that she has been able to maintain the recurrent instalments on the facilities that exist on the properties that she owns. 

20. I should say, perhaps out of order, a solicitor, one of the other interveners is on the phone.  He does not oppose the orders sought by Mr H.  He submitted that he would have no objection – and I think this position was put on his behalf in earlier proceedings – to the sale of one or more of the properties. 

21. That would certainly be excluded by the orders I am being asked to make, so that is a consideration, I suppose.  The practical thing is that there could only be a sale if everybody agreed, and if everybody agreed, then, no doubt, there could be some amendment to the orders.  However, a sale would literally be excluded by the orders I am being asked to make. 

22. There is merit in the application.  It reaches too far in relation to the Suburb L property because I have not been assisted in terms of what would be a reasonable restraint in respect of the Suburb L property.  Ms Parsons tells me that she resorts to the equity in the Suburb L property.  She says that she is meeting the outgoings on the other properties and she is meeting her obligations to the husband, in part from that source.  In the latter regard that is obviously important.  The husband is dying.  He lives in rented premises and has health expenses.  Because of that prejudice and because I do not know that it is necessary, indeed it is not even asserted that it is necessary to restrain all access to the Suburb L equity I cannot make that order and should not make that order.  I have not been provided with the evidence that would enable me to do anything more sophisticated.  There is sense in securing the position in relation to E Town and M Pty Ltd, the P Street property. 

23. No particular prejudice was identified in respect of those properties.  There is a level of restraint already in the form of an injunction made in December 2011 in relation to the E Town property, but only in respect of one facility.  This injunction would vacate the earlier one, from today’s date, but would provide a more fulsome protection.  I propose to grant the application until further order except for the reference to the Suburb L property in order 1.11 at number A in the schedule and to adjourn the proceedings with liberty to any party to restore the proceedings on giving 14 days’ notice to the Court and to each other party in writing.  I will rely on the undertaking as to damages given. 

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 21 August 2014.

Associate: 

Date:  28 August 2014