Holden and Hemmingway

[2008] FamCA 763

FAMILY COURT OF AUSTRALIA

HOLDEN & HEMMINGWAY [2008] FamCA 763

FAMILY LAW – PROPERTY – Value of property – Multiple corporate entities
FAMILY LAW – COSTS – Assessment – Stay until final settlement

Family Law Act 1975 (Cth)

Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; (1981) FLC 91-000
Dovey;  Ex parte Ross (1979) FLC 90-616
Waugh (2000) FLC 93-052; 27 Fam LR 63

APPLICANT: Ms Holden

RESPONDENT: Mr Hemmingway

FILE NUMBER: MLC 7174 of 2008

DATE DELIVERED: 25 August 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 25 August 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr A.G. Robinson

SOLICITOR FOR THE APPLICANT: Clancy & Triado

THE RESPONDENT: In person

Orders

1. The husband contribute the sum of $5150 towards the costs of the wife this day, such costs be stayed until the settlement of all property proceedings between the parties.

2. Make an order in terms of paragraphs 2 and 3 of the husband's application.

IT IS NOTED that publication of this judgment under the pseudonym Holden & Hemmingway is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER:  MLC 7174 of 2008

MS HOLDEN

Applicant

And

MR HEMMINGWAY

Respondent

REASONS FOR JUDGMENT

1. Mr Hemmingway and Ms Holden were in a relationship which commenced in 1991 and they married in 2002.  Sadly, they do not seem to be able to agree on many things at the moment, including when they separated.  The husband says that it was in May of 2008 and the wife says that by agreement, the relationship was over in July 2008.  Nothing significant turns on that for the purposes of these proceedings, although it does add to some of the concerns that I have about what has been going on.

2. There are no children of this marriage.  The husband is almost 62 years of age, in a few weeks' time, and the wife is 52 years of age.   There have been already some proceedings in the state Magistrates Courts in relation to intervention orders.  The wife received an interim intervention order but that ultimately ended up with both parties signing mutual undertakings in relation to their particular behaviour towards the other.

3. Importantly for my purposes today, the husband filed an application on 7 August this year to effectively start the proceedings in this court.  It is significant to note that he sought 50 per cent of the net assets.  Whilst that does not comply, strictly speaking, with the Rules of the Court, one can perhaps understand it at this stage, having regard to the early stages of the litigation that he may not be entirely clear on what the assets were.

4. However, I pause to say here that when I look at the financial statement that was filed with the application, the husband noted in the assets as owning 100 per cent of the shares in E Pty Ltd, albeit that he showed it had no value.

5. The business in dispute in this case is E Pty Ltd and from what I can glean, it exports and imports various specialised stock.  According to the wife, it does not seem to have any assets.  However, E is the lessee of the premises from which another company of the parties trades.  There is some dispute about whether in fact it is the lessee and as it will become apparent, I am not particularly fazed about just exactly what the legal position is.  The jurisdiction of the Family Law Act 1975 (Cth) (“the Act”) is extremely wide. The major question is just exactly what the parties are doing and what interests they have in various assets. I will return to the position about the company that actually operates the business from the premises which seems to have become the real dispute.

6. The evidence from the wife was that she was not in 2007 significantly involved in the business and she puts that at the encouragement of the husband.  For a variety of reasons that are not relevant to my determination, she returned to the business in March of 2008.  She makes some fairly significant allegations, to the extent that the rental of the premises was $54,000 in arrears and that there were debts of about $180,000. 

7. At paragraph 8 of her affidavit, she made comment that the shop was mostly closed, that the husband was borrowing money from people and she expressed concern about the state of the books of accounts.  She said in the affidavit that she took over those responsibilities and has made quite significant and satisfactory arrangements with the bank.

8. I mentioned earlier about the business premises.  There, the second entity, S Pty Ltd trades as S.  The wife says that this company is conducted with her son, but it seems common ground that it is in her son's name and he holds those shares for at least the wife, if not the husband and wife.  The husband certainly uses the word "we" in paragraph 6 of his affidavit.

9. S is also the trustee of the family trust of which the husband and wife are not only beneficiaries but also the appointors.  In March of 2008 the wife says she found that the husband had commenced a new entity called G Pty Ltd.  The document she relied on is annexed to her affidavit.  If that letter is an indication of the husband's intentions - and I am not prepared to make any finding about that at this stage - it shows that he was distancing himself from S, that he wanted to alter the telephone details of the business, and that he was declining to be responsible for the debts of S.  That also seems to suggest that he was looking at moving E away from the S premises.

10. None of those matters concern me terribly because they may be all pieces of a jigsaw puzzle that will later unfold.  What I have found somewhat disturbing is a note purportedly written by the husband that reads:

    [T] advises you to take stock from [S] and leave a note to [the wife] - need legal advice on this.

11. The wife says that around this time, although she was devastated by what she read, she was still hopeful of a reconciliation of what was then obviously a troubled marriage.  This was certainly well before either party says that the marriage had come to an end but both parties indicate that they were not terribly happy with one another.

12. The wife says that since March of 2008, the husband has not worked in the business.  That does not seem to be particularly contested by the husband.  On 31 July this year, the solicitors for the wife received a letter from the husband relating to his plans about G Pty Ltd.  The wife says that the husband told her that if she did not give him what he wanted, he would evict her, and that was said during the month of July 2008.

13. On 30 July, if there was any dispute about what had been said earlier in the month, it was certainly abundantly clear what the husband wanted to do because on that day, he sent a document headed Notice to Quit to the wife's solicitors.  The wife responded, objecting to that course of action.

14. On 11 August the husband repeated the statement in relation to the notice to quit when he received the wife's response.  This time, he said it was on the advice of a financial adviser.  In the letter which is annexed to the wife's affidavit and under the husband's hand, the following appears:

    We -

    and I interpolate here that I asked the husband about who the "we" was and he said he had a number of friends assisting him -

    are frustrated by what appears to be a clear attempt by your client to take the business and my livelihood with no compensation to myself.  We are also concerned that your client continues to delay discussions and by her litigious approach, this adversarial approach, rather than rational discussion and fair negotiation on family assets will diminish family assets through legal fees and wasted energies.

15. The same letter has the final paragraph which reads:

    We are happy to discuss this with you but are unable to comply with your demand.  Please be clearly advised that the notice to quit stands as ordered.

16. The husband says that on 13 August he disposed of his shares and directorship in E to "unrelated parties" for a consideration of $1250 each.  That is somewhat puzzling because on 7 August, only some six days before, he said in a document to the court that E was of no value.  It may very well be, and I draw no adverse conclusion about this, that he saw an opportunity to make some money and good luck to him if that is what his intention was.  I just highlight the inconsistency in approaches.

17. More importantly, it looks remarkably like a unilateral action by a back-door method to do what the husband could not otherwise achieve by discussion with the wife.  More importantly, it flies in the face of what he told the court in both his application filed only days before and, as I said, the financial statement.

18. He sets out in his affidavit really what is behind all of this.  This is the affidavit that was filed on 21 August.  At paragraph 23 he says:

    To my knowledge, I have never made personal threats to [the wife].  I have voiced my opinion that if I was to be left destitute with no resources, I would have no recourse but to evict [S] as the lease which [E] holds has commercial value to [E] without [S] occupying the premises.  This was not a threat but a statement of fact.

19. That statement also seems to be somewhat inconsistent with his statement that E is of no real value.  Be that as it may, it is the unilateral action which is strongly discouraged by this court, no matter how frustrated parties are with negotiations and discussions and regardless of the questions of what costs may be involved.

20. The position of unilateral action, however, is clearer when I look at what the husband said in paragraph 27 of his affidavit:

    I have sought reasonable commercial conditions and information to withdraw the notice to quit.  We have never received any reply, except the application for this hearing and threats of costs against me.

21. He also reinforces his own dilemma by the following statement which is in paragraph 36:

    We have requested mediation and conciliation as late as this week.  We have had no satisfactory response from [the wife] or her advisers other than for me to pay her costs.  Given my financial circumstances, this request is ridiculous.  The only facts that were sent to [the wife]'s solicitors were necessary communications which always aimed to provide an opportunity to resolve the situation without further costs.  Please refer my notes on this meeting.

22. I indicated that I was not prepared to allow people to simply elaborate on the material and therefore notes of the meeting were really not there.

23. The application that started the proceedings today was brought by the wife and she sought a variety of orders, most of which I have not canvassed in these reasons because when the husband filed his response, he indicated that he did not oppose those orders.  What is abundantly clear when one compares the two documents is that the dispute is really about the company to which I have just referred and the other entities involved.

24. However, as a result of the actions of the husband subsequent to the proceedings being commenced, an amended application was filed this morning by the wife, seeking a further application which is under s 106B of the Act. That application seeks to set aside the transaction that the husband concedes that he undertook on 13 August. Although I have been told that one of the recipients of the shares is in the court or around the court today, that person is not a party to the proceedings and therefore it is not appropriate that I take any steps other than to determine whether or not the oral application for injunctions in relation to the disposal of those shares by the third party occurs before the court can hear from them as well as look at the matter in some greater detail.

25. The application for injunctions is based upon s 114 of the Act. That particular provision has stood the test of time. What it says is:

    In proceedings of the kind referred to in paragraph (e) of the definition of "matrimonial cause" in subsection (4), the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including -

    and I interpolate here that the only one that is relevant is -

    an injunction relating to the property of a party to the marriage.

26. This is a case in which the wife seeks an order that I prevent the third parties, as I will call them, from taking any action until the court can examine the matter in some further detail.  The court has looked at this sort of injunction in the Full Court's decision in Waugh (2000) FLC 93-052; 27 Fam LR 63, where a number of principles were enunciated. One of those principles was that the injunction should only be granted if it is necessary for the parties to effectively protect the assets, pending some further determination. What the Full Court said is you have to establish that the injunction is necessary based upon the evidence and the evidence must relate to the disposal of assets. What the Full Court said is:

    The fundamental question is whether there was any evidence of an intention by the husband to dispose of any assets pursuant to any scheme to defeat any judgment which the wife might obtain in the substantive proceedings or whether he really wished to continue to trade, as he always had, prior to and since the separation of the parties.

27. There can be no doubt in this case that what the husband has done is distributed assets which may or may not have any value but he certainly has not done it with the consultation of the wife.

28. The Full Court of the High Court in Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; (1981) FLC 91-000 has also looked at the question of the power of the court to make orders against persons who were not parties to the marriage, that is without even looking at Part VIIIAA of the Act. I have also in mind the High Court's decision in Dovey;  Ex parte Ross (1979) FLC 90-616 and all of those cases say that if there is a prospect that this court's jurisdiction may be affected by the third parties taking some action, then the court has got power to, at least on a temporary basis, halt those parties from taking steps that would diminish the pool of assets.

29. In this case, the only question that I am really concerned about is whether it is proper to make the injunction and in my view, having regard to the fact that the husband has adopted a position of not consulting the wife, for whatever reason, those orders should be made.

DISCUSSION

1. Mr Robinson, on behalf of the wife, has now made an application for costs.  He says that those costs are about $5900 for solicitor-client costs and $1300 for his brief fee.  Whilst the application is for indemnity costs, I have indicated to the parties that it is unusual to make an order for indemnity costs because the Full Court has time and time again in virtually all jurisdictions said that the circumstances have to be exceptional and in this case, I do not find anything unusual about the case.

2. However, the wife has signed a costs agreement and Mr Robinson very sensibly and properly has indicated to me that on his estimate, there is about 20 hours of work been done since 5 August.  As I have indicated to the husband, that does not surprise me very much.  But on the basis of the scale at around $192.90 per hour, it comes out at $3850 plus $1300, which is a total of $5150.

3. As I have indicated to the parties, s 117 of the Act says that each party shall bear their own costs unless there are circumstances which justify the court departing from the rule and if the court does so decide to depart from the rule, the matters set out in s 117(2A) are to be taken into account.

4. In this case, the husband was put on notice by the practitioners for the wife about the nature of the orders that the wife would seek if he continued not to give an undertaking about his conduct which I might describe as commercial work, and notwithstanding that, he has done what I have set out in the earlier reasons for judgment.  On that basis, it is my view that there would certainly be a justification for departure from the normal rule.

5. As I have also indicated to the parties, it is not the function of an order for costs to punish someone, it is simply to try and ameliorate the expenses that that person has incurred by having to come to court. For the purposes of s 117(2A), I say that I have looked at the financial circumstances of each of the parties and I am satisfied that neither of them is in a very strong financial position. Neither party is in receipt of legal aid, as I understand it.

6. In respect of the conduct of the parties, my reasons for judgment set out clearly what my views were about what had been going on and it is quite clear that for the purposes of these particular proceedings, the husband has been wholly unsuccessful.  The letter of offer in writing is also clear as set out in annexure number 5 to the wife's affidavit.

7. In this case, it is appropriate to make an order for costs.  Mr Robinson, on behalf of the wife, very sensibly in my view has agreed that the costs will be stayed until the settlement of the property proceedings.

I certify that the preceding Thirty Six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate: …

Date:  3 September 2008