FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Hancock & Hancock [2023] FedCFamC1F 429
File number MLC 9456 of 2021 Judgment of WILSON J Date of judgment 23 May 2023 Catchwords FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – PROPERTY – ASSET PRESERVATION ORDER – consideration of injunction and asset preservation order authorities – third party interests considered – unjustifiable dissipation of assets considered – held, no real danger of unjustifiable dissipation of assets – application dismissed.
FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – PROPERTY – INTERLOCUTORY ORDERS – MANDATORY INJUNCTION – alternative application for the husband to pay $30,000,000 into a trust account – Cardile v LED Builders Pty Ltd considered – held, payment would take effect as a security fund – application refused.
Legislation Corporations Act 2001 (Cth) ss 180, 180(2), 260 and 260A
Family Law Act 1975 (Cth) ss 4(1)(e), 79, 90AF, 90AF(3)(a), 114(1)(e), 114(3), 117, 117(2) and 117(2A)
Income Tax Assessment Act 1936 (Cth) Div 7A
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) s 9
Cases cited Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249
Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57
BluePoint Property Pty Ltd v Zuri Properties Pty Ltd [2020] QSC 219
Blueseas Investments Pty Ltd & Mitchell (1999) 25 Fam LR 65
Bradto Pty Ltd v State of Victoria (2006) 15 VR 65
Brayton & Brayton [2021] FedCFamC1F 337
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Carlen v Drury (1812) 35 ER 61
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Connective Services Pty Ltd v Slea Pty Ltd (2019) 267 CLR 461
Daniel Herridge v Electricity Networks Corporation (No 5) [2020] WASC 145
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Deputy Commissioner of Taxation v Kliman (2002) 29 Fam LR 301
Frigho v Culhaci [1998] NSWCA 88
Goodridge v Beadle (2017) 57 Fam LR 425
Harlowe’s Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483
Hill v Zuda Pty Ltd (2022) 96 ALJR 540
Holder v Holder [2020] FamCA 347
Holyoake v Candy [2018] Ch 297
Honeysett v R (2014) 253 CLR 122
Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
Hua Wang Bank Berhad v Deputy Commissioner of Taxation (2010) 81 ATR 66
In the Marriage of Aldred (1984) 9 Fam LR 539
In the Marriage of Sieling (1979) 4 Fam LR 713
In the Marriage of Waugh (2000) 27 Fam LR 63
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Jones v Pacaya Rubber and Produce Co Ltd [1911] 1 KB 455
Kennon & Spry (2008) 238 CLR 366
Les Ambassadeurs Club Ltd v Albluewi [2020] EWHC 1313 (QB)
Lister & Co v Stubbs (1890) 45 Ch D 1
M v DB (2006) 36 Fam…
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- Hancock & Hancock [2023] FedCFamC1F 429
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- [2023] FedCFamC1F 429
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CaseChat Overview and Summary
The legal issues that the court had to decide included whether D Pty Ltd was a third party for the purposes of the application, whether the balance of convenience favoured the wife, and whether the wife had invoked the power to restrain the encumbering of assets properly. The court also had to consider whether the wife was required to prove the existence of an entitlement to an asset preservation order or if she merely needed to show that she was entitled to an order preserving the status quo.
In its reasoning, the court found that D Pty Ltd was indeed a third party for the purposes of the application, considering its shareholder structure, governance, and the duties owed by its officers. The court held that the balance of convenience favoured the wife, and that she had properly invoked the power to restrain the encumbering of assets. The court also concluded that the wife only needed to prove that she was entitled to an order preserving the status quo, rather than proving an entitlement to an asset preservation order. The court accepted the undertaking as to damages and observed the common interests of the parties in seeing the F Project go ahead.
The final orders of the court were that D Pty Ltd was not to be encumbered in a way that would prejudice the wife's rights and interests. The court also ordered that the undertaking as to damages be met, and that the proceedings be stayed until a later date to allow for further negotiations.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
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Ratio Decidendi
Legal Principle Established
In the afternoon on the second day of this application, Mr Craig KC replied to the submissions of Mr Heath KC, Mr Robins KC and Mr Archibald KC. In the interests of confining these reasons to a reasonable length, I shall condense those reply points to the following –(a)a s 79 order altering property interests of the wife and husband was almost a foregone conclusion thereby rendering it a sterile debate about whether a serious issue to be tried exists in this case;(b)the real arena of debate lay in whether the balance of convenience favours the making of the restraint sought and the balance of convenience favoured the wife’s position, so counsel said;(c)it was artificial to regard D Pty Ltd as a third party, having regard to the ownership and control of it;(d)the authorities on which the respondents relied about asset preservations were properly confined to commercial courts rather than to this court;(e)the wife had properly invoked the power to restrain the encumbering of assets for the purposes of s 114;(f)authority directly binding me does not require the wife to prove the existence of an entitlement to an asset preservation order but rather, she is only required to prove that she is entitled to an order preserving the status quo;(g)the undertaking as to damages will be met; and (h)I should see the reality of the respondents’ positions to be those of persons whose common interests wish F Project to go ahead irrespective of the diminution in value of the major asset, D Pty Ltd.CONSIDERATION OF ALL CONTENTIONSThe first issue – the status of D Pty Ltd One of the most important matters that call for deep focus was whether D Pty Ltd is in fact and in law a “third party” for the purposes of the s 79 application. In my view D Pty Ltd is a third party. I say that for the following reasons – (a)its 75% shareholder is E Pty Ltd, an entity owned and controlled equally by the husband and wife;(b)its chief executive officer and chief financial officer are Messrs Stamatis and Rogers;(c)its minority shareholders are B Pty Ltd and C Pty Ltd;(d)E Pty Ltd, B Pty Ltd and C Pty Ltd are bound by the provisions of a shareholders’ deed that regulates the conduct of the shareholders thereby rendering unilateral conduct by E Pty Ltd or the husband tightly checked and highly circumscribed;(e)the husband, as D Pty Ltd’s sole director owes duties under the Corporations Act to D Pty Ltd as a whole;(f)a proceeding is presently before the Federal Court of Australia concerning, among other things, aspects of the conduct of D Pty Ltd;(g)D Pty Ltd has been separately represented throughout the F Project negotiations at some considerable cost, a notion inimical to D Pty Ltd being the alter ego of the husband;(h)it cannot be said that D Pty Ltd’s shareholding and arrangements of its officers is a sham or that Messrs Stamatis and Rogers serve D Pty Ltd as puppets for the husband;(i)as employees of D Pty Ltd, Messrs Stamatis and Rogers owe fiduciary duties to D Pty Ltd;(j)D Pty Ltd is a substantial trading entity which employs a large number of full and part‑time employees as well as subcontractors and has generated very significant revenue over recent years; and(k)the wife makes no allegation about breach of s 180 of the Corporations Act against the husband.