HWF v JLC
[2023] WASC 438
•16 NOVEMBER 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: HWF -v- JLC [2023] WASC 438
CORAM: HOWARD J
HEARD: 2 OCTOBER & 3 NOVEMBER 2023
DELIVERED : 16 NOVEMBER 2023
FILE NO/S: CIV 2419 of 2021
BETWEEN: HWF
First Plaintiff
JINGLE HOLDINGS PTY LTD
Second Plaintiff
DDJ
Third Plaintiff
AND
JLC
First Defendant
MNG
Second Defendant
WESTBURY INVESTMENTS PTY LTD
Third Defendant
BOMBER (WA) PTY LTD
Fourth Defendant
WND
Fifth Defendant
NXF
Sixth Defendant
Catchwords:
Practice and procedure - Dispute concerning trust investments and assets - Application to transfer matter to the Family Court of Western Australia under Jurisdiction of Courts (Cross-vesting) Act 1987 (WA) - Whether a determination of this court could place trust assets beyond the reach of the Family Court - Transfer application granted
Legislation:
Family Court Act 1997 (WA)
Jurisdiction of Courts (Cross-vesting) Act 1987 (WA)
Result:
Transfer application granted
Category: B
Representation:
Counsel:
| First Plaintiff | : | C L Hollett |
| Second Plaintiff | : | C L Hollett |
| Third Plaintiff | : | C L Hollett |
| First Defendant | : | I R Gillon |
| Second Defendant | : | I R Gillon |
| Third Defendant | : | I R Gillon |
| Fourth Defendant | : | No appearance |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Solomon Hollett Lawyers |
| Second Plaintiff | : | Solomon Hollett Lawyers |
| Third Plaintiff | : | Solomon Hollett Lawyers |
| First Defendant | : | Lawton Gillon |
| Second Defendant | : | Lawton Gillon |
| Third Defendant | : | Lawton Gillon |
| Fourth Defendant | : | No appearance |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | No appearance |
Case(s) referred to in decision(s):
BHP Billiton v Schultz (2004) 221 CLR 400
HOWARD J:
Most of the parties’ names have been ‘anonymised’ in these reasons so as to comply with the provisions of the Family Court Act 1997 (WA).
This is an application on the part of the plaintiffs to transfer this proceeding to the Family Court of Western Australia pursuant to s 5(4)(b)(i) or (iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (WA).
The matter came before me on 2 October 2023 at which time the fifth defendant was appointed the first plaintiff's next friend.
The matter was otherwise adjourned so that it could be urgently re‑mediated.
The proceeding had settled once (well before this application) at a mediation in this Court with a deed being executed. The summary of that settlement was at [11] in the judgment of O'Brien J made in [2023] FCWA 167. I was told that settlement had subsequently fallen over.
Although not a party to this proceeding, HWF’s (the first plaintiff’s) former spouse, the other party to the Family Court proceedings, was invited to, and did, attend the mediation in this Court.
That further mediation occurred on 20 October 2023, but unfortunately that was unsuccessful.
The matter then came back before me on 3 November 2023.
As I understand from what I was told from the bar table, the Business Property (defined below), at the least, is mortgaged to a bank.[1] No doubt the disputes in this Court and the Family Court have not assisted with commercial certainty. It appears that the underlying loan secured against that property is in arrears and the bank is taking steps to realise its security. It is unclear to what degree such enforcement action on the part of the bank may render this application moot.
[1] See, eg, 2 October 2023 ts at page 57.
It is unfortunate the parties could not settle the matter when it appears there is a real risk that the bank's enforcement action may take matters out of their control - at least in respect of what appears to be the most significant property of the Family Trust (discussed below).
In the proceeding, the current pleadings are a statement of claim dated 7 July 2022 (statement of claim) and a defence of the first to third defendants dated 1 September 2022 (defence). It does not appear that the fourth to sixth defendants have filed defences, nor are taking an active role in the proceeding.
The principles to be applied are well established and are not seriously in dispute between the parties.
In BHP Billiton v Schultz (2004) 221 CLR 400 Gleeson CJ, McHugh and Heydon JJ said that a transfer decision under the cross‑vesting legislation was a 'nuts and bolts' management decision.[2]
[2] BHP Billiton v Schultz [14].
The principal issue in my view is whether, and to what degree, there is an overlap between the proceeding Court and proceedings in the Family Court of Western Australia.
The proceedings in the Family Court are between the first plaintiff in this Court and their former spouse.
The parties took quite different positions as to the degree of overlap between the proceeding and the Family Court proceedings.
The properties, Family Trust and business in dispute
To assist with understanding the degree, if any, of overlap, I set out by subject matter, the following.
The real properties
The properties which appear to be, or were, in dispute are:
1.located at Mooliabeenee Road, Lennard Brook, Gingin: this is defined as the First Gingin Property in the statement of claim [2];[3]
2.located at Great Northern Highway, Upper Swan - on which is located the Business: this is defined in the statement of claim [11][4] which I will define as the Business Property;
3.located at Mooliabeenee Road, Lennard Brook, Gingin: this is defined at [11.2] of the statement of claim as the Second Gingin Property.
[3] This was referred to by O'Brien J as the 'Gingin land': [3] of [2023] FCWA 167 at page 55 to the Substituted Hollett affidavit.
[4] O'Brien J in the Family Court referred to this: [3] of [2023] FCWA 167 at page 55 of the Substituted Hollett affidavit.
It is common ground that:
(1)HWF and their former spouse were the registered proprietors of the First Gingin Property: statement of claim [2]; defence [2]. It is common ground that this property has now been divided between them pursuant to orders of the Family Court.
(2)the Family Trust includes as assets the Business Property and the Second Gingin Property: statement of claim [11]; defence [2]. The first defendant says that the primary asset of the Family Trust (defined below) is the Business Property.
The Family Trust
Control of the Family Trust (Family Trust) is at the heart of the proceeding.
Jingle Holdings (the second plaintiff) was the original trustee of the Family Trust.
There are two deeds which are significant to control of the Family Trust; being:
1.Deed of Appointment of New Trustee dated 30 June 2019, which is defined at [22] of the statement of claim as the June 2019 Deed; and
2.Deed of Appointment of New Appointor and Successor Appointor dated 2 July 2019, defined at [23] of the statement of claim as the July 2019 Deed.
The business in dispute
The business run from the Business Property is defined at statement of claim [12] (Business). It is pleaded that initially, it was run by the third plaintiff. The statement of claim pleads that:
1.the Business was largely managed by HWF’s former spouse;
2.after they and HWF separated (in December 2018), the former spouse ceased working in the Business and HWF attempted to take that over;
3.HWF had difficulty in running the Business which is pleaded as leading to the first defendant’s alleged and contested actions in relation into the Family Trust including his causing the making of the June and July 2019 Deeds.
It is pleaded in the statement of claim that the June 2019 Deed and July 2019 Deed had the consequences of substantially diminishing HWF’s powers of control over the Family Trust and providing the first defendant with powers which could be potentially exercised to HWF’s detriment: statement of claim [25].
It is pleaded that the Business Property and the Second Gingin Property were likely to be regarded by the Family Court as assets of the spousal partnership for the purposes of property division: statement of claim [26.1].
The principal relief claimed is the setting aside of the June 2019 Deed and the July 2019 Deed and then consequential orders (in effect) to put HWF and Jingle Holdings back as if the June and July 2019 Deeds had not been entered into.
The matters in dispute in the Family Court
The following summary is taken from the judgment of O'Brien J in [2023] FCWA 167 (delivered 15 August 2023):
1.the most significant properties in dispute in the Family Court between the former spouses are (to adopt the defined terms above) the First Gingin Property and the Business Property: [3];
2.although in dispute in May 2023, by 11 August 2023 the former spouses had agreed as to the distribution between them of the proceeds of the First Gingin Property: [15];
3.a question before the Family Court was whether orders should be made that on receiving an offer of purchase for the Business Property, Jingle Holdings be able to accept a reasonable offer for sale of not less than $8 million exclusive of GST: [17].
O'Brien J recited that HWF’s former spouse had filed an application in the Family Court on 11 August 2023 seeking a number of matters, namely:
1.that the first defendant and second defendant each be joined as second respondents to those proceedings;
2.that 'the parties do all such acts and things to effect the transfer of the Supreme Court Action CIV 2419 of 2021' to this Court;
3.that in the event the orders sought are opposed, HWF, the first defendant and second defendant are to file responding documents within 28 days; and
4.that an injunction be granted restraining the first defendant and second defendant from dealing with any of the assets or funds of the Family Trust other than in the ordinary and proper course of business and for the purpose of selling the Business Property and or the Business with the express written consent of the primary parties, and 'on the basis that the parties are appointed as joint trustees for the sale of the Trust land.'
His Honour declined to make the orders sought: [23] - [27], [33] - [36].
O'Brien J regarded HWF’s former spouse’s application seeking to compel parties to effect the transfer of this proceeding to the Family Court was, essentially, beyond jurisdiction of the Family Court: [2023] FCWA 167 [33] - [36].
O'Brien J said:
[45]The primary parties now need to more carefully consider the intersection between the proceedings in this [Family] Court, and the Supreme Court proceedings …
[46]The parties would do well to carefully consider the implied proposition on behalf of [HWF’s former spouse] that it is 'more appropriate' for the proceedings presently before the Supreme Court to be determined in this Court … No doubt they will also give consideration to the timeframe within which the proceedings in the Supreme Court might be completed, whether or not the rules and procedures of the Supreme Court are better suited to the circumstances of the case, and how (if the proceedings were to be transferred) the litigation would progress in this Court in terms not only of the primary dispute involving third parties, but the overall outcome and determination of what orders for property settlement are just and equitable as between the primary parties. It is not clear, to me at least, whether for example it would be proposed that ongoing proceedings in this Court should be bifurcated so that the third parties' involvement was limited to the determination of the disputes presently before the Supreme Court; I express no view at this point as to whether if such a proposal was made it would be accommodated.
Disposition
As would be expected, I have given very careful consideration to the observations of O'Brien J in his judgment of 15 August 2023 in [2023] FCWA 167 - especially [45] and [46].
I further take into account the likelihood that this proceeding, through management in the CMC List, is likely to be capable of resolution prior to a resolution in the Family Court if the matter were to be transferred.
The determination of matters in this proceeding would have the effect of determining control of the Family Trust, including, at the least, control of the Business Property and, effectively, the Business.
If I were to determine, for example, that the June 2019 Deed and July 2019 Deed ought not be set aside (cf, the plaintiffs' claim in the proceeding) then the first defendant (or his (alleged) affiliates) would retain control of the Family Trust and its assets.
If, subsequently, the Family Court were to hold that, notwithstanding the interposition of the Family Trust, the underlying assets were assets of the marriage, then this Court's determination may, effectively, place the underlying assets beyond the reach of the Family Court. That may occur unless the Family Court intervened to restrain the first defendant and his affiliates from dealing with the underlying assets of the Family Trust.
That scenario was (properly) accepted by counsel for the first to third defendants as possible.
I am not expressing any view as to the likely outcome of the proceeding. It is also possible that if this Court found for the plaintiffs that the potential cutting across I have set out would not occur.
Further, I could not exclude the possibility that one or more of the defendants in this Court might need to be joined later in the Family Court proceedings to give effect, possibly, to the eventual disposition of property between the spouses.
Although there is a real possibility, indeed likelihood, that the proceeding could be heard and determined in this Court much earlier than the Family Court proceedings, and that a determination by this Court may not cut across or interfere with the dispute in the Family Court, the latter is (as I have endeavoured to set out above) by no means assured.
In the circumstances, I consider that it is in the interests of justice that the proceeding be transferred to the Family Court of Western Australia as per the plaintiffs' application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JR
Associate to Hon Justice Howard
20 NOVEMBER 2023
0
1
2