Jacobs and Jacobs and Ors (No 2)

[2015] FamCA 880

FAMILY COURT OF AUSTRALIA

JACOBS & JACOBS & ORS (NO 2) [2015] FamCA 880

FAMILY LAW – PROCESS AND PROCEDURE – entities (“the Entities”) be joined as parties to these proceedings – Obligations of entities detailed.

Family Law Act 1975 (Cth); s 117(1), s 117(2A)

D & D (Costs) (No. 2) (2010) FLC 93-435

Colgate-Palmolive & Cussons (1993) 46 FCR 225

APPLICANT: Ms Jacobs

1st RESPONDENT: Mr Jacobs

2nd RESPONDENT: Mr A Jacobs

3rd RESPONDENT: Ms B Jacobs

4th RESPONDENT: Mr Johns and Mr Chatham as trustees of the Bankrupt Estate of Mr Jacobs

FILE NUMBER: BRC 798 of 2013

DATE DELIVERED: 16 October 2015

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Hogan J

HEARING DATE: 15 October 2015

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Mr Wedgwood, Barry.Nilsson Lawyers

1ST RESPONDENT: No appearance

2ND RESPONDENT: No appearance

3RD RESPONDENT: No appearance

SOLICITOR FOR THE 4TH RESPONDENT: Ms Smith, Allens

5^TH RESPONDENT: No appearance

6^TH RESPONDENT: No appearance

7^TH RESPONDENT: No appearance

8^TH  RESPONDENT: No appearance

9^TH RESPONDENT: No appearance

Orders

IT IS ORDERED UNTIL FURTHER ORDER THAT

1. The following entities (“the Entities”) be joined as parties to these proceedings:

   a.E Pty Ltd;

   b.P Pty Ltd;

   c.Jacobs SA Pty Ltd;

   d.N Pty Ltd;  and

   e.O Pty Ltd,

   referred to in these Orders as “the Entities”.

2. By 4.00 pm on Monday, 19 October 2015, the First, Second and Third Respondents do all things necessary to cause the Entities to execute contracts in terms identical, but for the amendments to the same particularised in Annexure “MW-1” to the Affidavit of Mr DD filed by leave on 15 October 2015, to the five (5) contracts annexed to the Affidavit of Mr EE and marked Annexure “MDD-16” (“the Contracts”) and return those signed original contracts to Barry.Nilsson Lawyers.

3. Each of the First, Second and Third Respondents and the Entities do all acts and things and sign and/or execute all documents required to effect the terms of the Contracts in accordance with the terms of these Orders and do nothing to hinder the effecting of the Contracts.

4. The First, Second and Third Respondents and the Entities do all acts and things and sign and/or execute all documents required to cause the proceeds of sale to be received by the Entities pursuant to the Contracts to be deposited into the trust account of Barry.Nilsson Lawyers, to be held on trust on account of each of the Entities and not to be released except pursuant to an Order of this Court or the written consent of all parties to these proceedings.

5. Within seven (7) days of the proceeds of sale being received by Barry.Nilsson Lawyers in accordance with Clause (4), the sum of $20,166.64 be paid into the trust account of Bennett & Philp Lawyers.

6. Leave is granted to the solicitors for the Applicant to provide a copy of these Orders to Bennett & Philp Lawyers.

7. As from the date of these Orders, the First, Second and Third Respondents and the Entities are restrained from doing any act or thing or signing or executing any document that causes any franchise agreement or licence between any of the Entities and any other person or entity to be terminated or assigned.

8. In the event that any party refuses or neglects to do any act or sign any document required to be signed or executed in compliance with the provisions of these Orders, then pursuant to s 106A of the Family Law Act 1975 (Cth), the Registrar or Deputy Registrar of the Family Court of Australia at Brisbane is hereby appointed to execute all deeds and documents in the name of the defaulting party or parties and to do all acts and things necessary to give validity and operation to these Orders and an affidavit of the solicitor for the non-defaulting party shall be sufficient evidence of such non-compliance. The party in default is ordered to pay the non-defaulting party’s costs associated with this Clause of these Orders on an indemnity basis, or in the event of more than one party defaulting, each of the defaulting parties shall share equally in paying the non-defaulting party’s costs so incurred on an indemnity basis.

9. Each party has liberty to apply as to the implementation and enforcement of these Orders upon the giving of twenty-four (24) hours’ notice in writing to each party to these proceedings.

10. The Applicant’s costs of and incidental to the Application in a Case filed 12 October 2015 are reserved.

AND IT IS FURTHER ORDERED THAT

1. Until the Second and Third Respondents file a Notice of Address for Service, service on each of them will be effected if documents are sent to either:

   a.FF Street, GG Town, Queensland, …;  or

   b.by email addressed to ....

NOTATION

A.It is noted that the Applicant intends to seek an order that the First, Second and Third Respondents pay her costs of and incidental to the Application in a Case filed 12 October 2015 when the matter returns on 26 October 2015.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Jacobs & Jacobs 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 BRISBANE

FILE NUMBER: BRC 798 of 2013

Ms Jacobs

Applicant

And

Mr Jacobs

First Respondent

And

Mr A Jacobs

Second Respondent

And

Ms B Jacobs

Third Respondent

And

Mr Johns and Mr Chatham as trustees of the Bankrupt Estate of Mr Jacobs

Fourth Respondent

And

E Pty Ltd

Fifth Respondent

And

P Pty Ltd

Sixth Respondent

And

Jacobs SA Pty Ltd

Seventh Respondent

And

N Pty Ltd

Eighth Respondent

And

O Pty Ltd

Ninth Respondent

REASONS FOR JUDGMENT

1. By Application is a Case filed 12 October 2015 the wife seeks that the Court join a number of named entities and make orders in the form of mandatory injunctions directing the husband and the Second and Third Respondents (his adult children) to cause the entities to be joined to the proceedings to execute contracts in terms identical (save as to minor changes outlined in correspondence, which is annexure “MW1” to the affidavit of Mr DD filed by leave 15 October 2015) to those contracts which are “MDD16” to an affidavit of Mr EE filed 12 October 2015. 

2. As is made clear by the contents of the correspondence exhibited to Mr DD’s affidavit, save for the matters referred to therein, the contracts the wife proposes the husband and the Second and Third Respondents cause the entities to execute are identical to those which were executed by those entities in September of this year. 

3. I accept the submissions made by Counsel for the wife to the effect that the minor changes as outlined in the correspondence exhibited to Mr DD’s affidavit are immaterial to my consideration of whether the orders sought by the wife are necessary to be made to do justice. 

4. In addition to the relief already mentioned, the wife seeks that the Court make further mandatory injunctions directing the husband and Second and Third Respondents to cause the named entities to cause the proceeds of sale, to be received by them pursuant to the contract of sale, to be held in her solicitor’s trust account on trust for each entity and not to be dealt with, save pursuant to order of the Court or written agreement between all of the parties to these proceedings. 

5. The wife also seeks that her solicitors cause the sum of $20,166.64 to be paid from the proceeds of sale held by them in trust to the trust account of Bennett & Philp Lawyers.  She further proposes that the Court restrain the husband and the Second and Third Respondents and the entities from doing anything that causes any franchise agreement or licence between any of the entities and any other person or entity to be terminated or assigned. 

6. By way of broad summary, the purpose for which the wife seeks the orders outlined is to prevent any further diminution in the value of the property of the parties amenable to the property settlement proceedings on foot between them by selling that property now;  further, to prevent the husband and the Second and Third Respondents from dissipating funds received from the sale of that property. 

7. Her proposal for the sale by the entities of assets particularised in the contracts referred to occurs in circumstances where, in June 2015, the First Respondent husband offered those assets for sale to persons within the class of major franchisors within the Jacobs Group and, in September 2015, contracts for sale were executed but terminated on the day for settlement - being the day after Justice Kent made orders on an ex parte basis restraining the husband from dealing with any proceeds of sale and directing that the same be paid into and held on trust by the solicitors for the wife. 

8. Previous orders containing orders of an injunctive nature were, as I have said, made by Justice Kent on 18 September 2015 and by me on 21 September 2015.  I am easily persuaded that neither the husband nor the Second and Third Respondents have complied with the restrains imposed upon them by the terms of those orders.  I am also satisfied that their non-compliance, as established by the evidence relied upon by the wife, which I accept, is of such significance that the wife is entirely justified in seeking the urgent hearing of the Application in a Case.  She is entirely justified in her expressed concerns and, I consider, entirely justified in proposing the relief she proposes and that the actions proposed, as outlined in the relief sought by the Application in a Case, occur within the timeframes particularised in the orders sought by her. 

9. I accept entirely the thrust of the submissions made by Counsel for the wife both orally and as contained within the Outline of Submissions provided to the Court during the hearing yesterday.  I consider that the evidence relied on by the wife for the purpose of this Application, which I accept for this purpose, provides clear foundation for those submissions.

10. I consider that the entities particularised in paragraph 1 of the Application in a Case filed 12 October 2015 are necessary parties to the proceedings and that the joinder of them to the proceedings is necessary given the structure of the Jacobs Group, the property of those entities and that the orders sought by the wife pertain to contracts it is proposed that those entities enter into with entities controlled by Mr EE. 

11. Consequently the entities particularised in paragraph 1 of the Application in a Case filed 12 October 2015 are joined as parties to the proceedings. 

12. Having regard to the evidence relied upon by the wife and the contents of the submissions prepared on her behalf, I am persuaded that it is necessary to make the orders sought by paragraphs 2 to 4 and 7 to 9 inclusive of the Application in a Case filed 12 October 2015, substantially in the terms particularised in that Application in a Case, to do justice. 

13. Two matters need particular reference, however.  The first is the timeframe with which it is proposed that the First, Second and Third Respondents do all things necessary to ensure that the entities execute the contracts to which I have already referred. 

14. It seems to me that, given it is now four o’clock on Friday, a more appropriate timeframe would be to require that the actions be taken and completed by 4.00 pm on Monday, 19 October 2015:  noting, as I do, that the orders sought requires that the original contracts be delivered to the offices of the wife’s solicitors. 

15. The other issue is that the orders to be made will reflect that the contracts to be executed will be in the terms as amended in the manner outlined in the correspondence exhibited to Mr DD’s affidavit. 

16. I arrive at the conclusion I have reached – namely, that the orders I propose to make are necessary to do justice - for the reasons which follow.

17. It is clear that, despite the terms of Clause 9 of the Order made 21 September 2015, the husband and Second and Third Respondents have purported and attempted to and have dealt with the assets and liabilities and other property of at least some of the entities particularised within that Order. 

18. As was the position noted by Justice Kent at paragraph 5 of the Reasons for Judgment delivered by his Honour on 18 September 2015, information provided to the wife about matters relevant to the ongoing operation of the Jacobs Group has again come to her via sources other than the husband and/or the Second and Third Respondents, notwithstanding their ongoing duty of disclosure in the proceedings and notwithstanding the operative terms of the Order made 21 September 2015. 

19. As was the position when the matter was before Justice Kent, the evidence provided by the wife supports a conclusion that, again, without her knowledge, consent or any other information, the husband and the Second and Third Respondents have continued to attempt to embark upon a course designed to remove assets of the parties from the proper purview of the Court in determining the final property settlement proceedings. 

20. It is clear to me that this has occurred brazenly and despite clear orders restraining them from so acting.  Absent the drastic measure of requiring the sale of the assets held by the entities now joined to the proceedings, in the manner proposed by the wife, it is much more likely than not that, as has occurred (even after Orders were made on 21 September 2015) the husband and Second and Third Respondents will continue to act in a manner likely to diminish the value of those assets and/or which is likely to increase the risk of litigation by franchisees, with the consequent risk to the value of the Jacobs Group as a whole. 

21. In this respect, and by way of example only, regard need only be had to:

    a)the contents of correspondence by the husband, found at pages 106 and 107 of the annexures to the wife’s affidavit, filed 14 October 2015;  and

    b)the annexures at pages 19 to 31 of the annexures to the affidavit of Mr HH, filed 15 October 2015, and paragraph 20 of his affidavit and those documents which are associated with the contents of that paragraph and which are also exhibited to his affidavit;  and

    c)the contents of the affidavits of Messrs II and JJ. 

22. Unless the value of the Jacobs Group is crystallised in a sense by the sale of the assets of the entities joined to the proceedings by the Order made today, there is a very real risk that the property of the parties, properly within the purview of the Court in determining the final property settlement proceedings between them, will be significantly diminished in value and/or otherwise dissipated. 

23. Save for the decrease in purchase price by an amount of $125,000.00, (the total now proposed being $650,000.00 as opposed to the total of $775,000.00 - as would have been achieved had the September 2015 contracts been completed) and the matters adverted to already, the terms of the contracts it is proposed that the named entities enter into, with entities controlled by Mr EE, are the same as those which the husband and the Second and Third Respondents caused them to enter into on 11 September 2015, again with the same entities controlled by Mr EE.

24. It is clear that the husband and the Second and Third Respondents were all notified by the wife’s solicitors by email correspondence sent on 8 October 2015 that Mr EE was prepared to enter into contracts for sale in the same terms (save as to price) as the September 2015 contracts. 

25. I think it is more likely than not that the term of the 18 September 2015 Order made by Kent J – which, relevantly, required that, upon the husband receiving any consideration from the sale of property, those sale proceeds be placed into the wife’s solicitor’s trust account - was at least one of the matters which precipitated the vendor’s decision to purport to terminate the September 2015 contracts, with such conduct ultimately resulting in Mr EE terminating the same. 

26. I take into account, also, that the First Respondent husband sent a text message to Mr II on the afternoon of 18 September 2015 (after the September 2015 contracts had been terminated) saying, amongst other things:

    We will just sell it next month.

27. On the evidence before the Court, Mr EE is the only person prepared to purchase the assets dealt with by the terms of the contracts intended to be signed by the entities joined to these proceedings. 

28. Whilst there is no independent evidence of value of those assets, I take into account that, before the various actions and conduct of the husband and the Second and Third Respondents recounted in the affidavits of the wife and Mr HH, Mr II and Mr JJ, the husband himself offered, in June 2015, to sell “the whole Jacobs [Group]” to master franchisors individually or as a group for a total price of $780,000.00, noting in that correspondence that “the price to the master group will be discounted to the open market price should that be needed”. 

29. Whilst a term of each of the contracts intended to be signed by the entities binds the husband personally by way of restraint of trade, these terms are the same in the contracts proposed to be executed as they were in the September 2015 contracts. 

30. Whilst the orders for sale will result in the disposal of assets of the Jacobs Group, or at least some of them, the sale proceeds received from such sales will be held in trust, and, as such, the parties will have the opportunity, either through further application or by agreement, to determine the further dissipation of the same. 

31. I consider that the husband and the Second and Third Respondents have, by their actions, as demonstrated in the evidence before me, demonstrated a willingness to ignore, completely, significant terms of previous Court orders, including those which impose restraints upon them. 

32. For example, neither the Second or Third Respondents have filed a Notice of Address for Service despite the requirement imposed upon them by the Order made 21 September 2015 to file the same within 48 hours of service.  They clearly determined to act in this matter, contrary to an order, despite correspondence forwarded to them which made available to them a copy of the Order made that day. 

33. More importantly, however, in clear disregard of the terms of Clause 9 of the Order made 21 September 2015, the husband, the Second and Third Respondents have, as I have said, clearly purported to deal with assets of entities particularised within that clause.  For example, see that which is contained at pages 226 and 240 to 244 of the annexures to the wife’s affidavit, filed 14 October 2015. 

34. There is nothing in the material before me to suggest that, absent the making of orders as sought substantially by the wife, there is likely to be any change to the future behaviour of the husband or the Second and Third Respondents. 

35. In fact, both the husband and the Second Respondent, Mr A Jacobs, make it clear in the evidence they relied on for the purpose of this Application that their intention is to use and/or apply any proceeds received from the sale of assets to fund the growth of any other new businesses.  It is difficult to conceive of a clearer expression of an intention to dissipate proceeds received from the sale of assets. 

36. Additionally, such assertions must be considered in the context of the husband’s clearly established failure to inform the wife of the existence of the September 2015 contracts and the totality of his actions and those of the Second and Third Respondents from about mid-August 2015 to date as established on the evidence. 

37. Having regard to the content of the correspondence at page 132 of the annexures to the wife’s affidavit filed 14 October 2015 and to the submissions made at paragraphs 29 to 32 of the Outline of Submissions provided by Counsel for the wife (which I accept), I consider that it is necessary to make orders substantially in terms of paragraphs 5 and 6 of the Application in a Case filed 12 October 2015 to avoid the winding up of P Pty Ltd and foreshadowed litigation consequent upon that.  Such orders are, I consider, necessary to make to do justice. 

1. It is proposed I appoint a Registrar or Deputy Registrar of the Court to sign documents necessary to be signed to give effect to the terms of the orders which will be made.  It is clear, from a perusal of the evidence before the Court, that it is highly likely that there may well be an issue in relation to the signing of the contracts.  It is appropriate in the circumstances as established by that evidence and the behaviour of the husband and the Second and Third Respondents, as already adverted to, that orders be made empowering a Registrar or Deputy Registrar of the Court to sign the necessary documents in order to implement the terms of the order and that proof of non-compliance be established by an affidavit provided by the solicitors for the wife. 

2. In relation to the proposed order that for costs in the event it is necessary for the wife to enlist the assistance, as it were, of a Registrar or Deputy Registrar of the Court, it is clear and obvious that, if such a course is required, it will have occurred as a consequence of non-compliance by the husband, the Second and Third Respondents with terms of the order to be made today. 

3. Whilst s 117(1) of the Family Law Act1975 (Cth) provides that each party to proceedings under the Act bear his or her own costs, subsection (2) of that section provides that, if the Court is satisfied there are circumstances which justify it, the Court may make such order as to costs as it considers just. In considering what order, if any, as to costs should be made, the Court must have regard to the matters set out in s 117(2A) of the Act.

4. The husband is bankrupt.  There is no evidence before the Court in relation to the financial situation of either the Second Respondent or the Third Respondent.  The evidence before the Court establishes that the wife’s financial circumstances are such that she has been required to borrow funds in order to prosecute this litigation.  I take into account that neither party is in receipt of legal aid.  I also take into account, though, that if the wife has to call upon a Registrar to sign documents to give effect to the orders that will be entirely as a consequence of non-compliance by the husband and the Second and Third Respondents with a term of the order. 

5. In those circumstances, I am persuaded that the circumstances justify the making of an order that, in that event, the husband and the Second and Third Respondents be responsible for the costs the wife will incur in having the terms of the order put into effect. 

6. Authority such as D & D (Costs) (No. 2) (2010) FLC 93-435, in which the Full Court reviewed earlier authorities, including Limousine, Kohan and the decision of Sheppard J in Colgate-Palmolive & Cussons, makes it clear that, unless there are exceptional circumstances, an order for costs should be made on a party and party basis. In the circumstances of this case, given my conclusions as to the non-compliance by the husband, and the Second and Third Respondents, with the terms of the Order made 21 September 2015, I am persuaded that, in the event that the wife has to utilise, as it were, a Registrar or a Deputy Registrar of the Court to execute documents on behalf of the entities, that action would easily, in my view, amount to, and constitute, the exceptional circumstances spoken of in the authorities to which I refer. 

7. For those reasons then, I am persuaded that, in that circumstance, the circumstances are such as to justify the making of an order for costs on an indemnity basis as sought.

8. As I have already said, despite the Orders of 21 September 2015 requiring that the Second and Third Respondents file a Notice of Address for Service in the Court, they have not done so.  I intend, therefore, to order that, until those parties file a Notice of Address for Service, service of each of them will be effected if documents are sent to either FF Street, GG Town, Queensland or by email to .... 

9. I make a further order reserving the wife’s costs of and incidental to the Application in a Case filed on 12 October 2015. I will include a Notation on the order in these terms:  It is noted that the wife intends to seek an order that the husband and Second and Third Respondents pay her costs of and incidental to the Application in a Case filed 12 October 2015 when the matter returns on 26 October 2015.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 16 October 2015.

Associate:                 

Date:    16 October 2015