Juliet and Juliet (No. 2)

[2011] FamCA 250

FAMILY COURT OF AUSTRALIA

JULIET & JULIET (NO. 2) [2011] FamCA 250

FAMILY LAW – PROPERTY – Orders against third parties

Family Law Act 1975 (Cth)

APPLICANT: Ms Juliet

RESPONDENT: Mr Juliet

FILE NUMBER: BRF 6571 of 2002

DATE DELIVERED: 11 April 2011

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Murphy J

HEARING DATE: 11 April 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Alexander

SOLICITOR FOR THE APPLICANT: Wiltshire Lawyers

SOLICITOR FOR THE RESPONDENT: Mr Brandon of Evans & Company Family Lawyers

Orders

IT IS ORDERED UNTIL FURTHER ORDER

1. That Y Pty Ltd be joined as a Respondent to these proceedings.

2. That the Director/s of Y Pty Ltd shall notify the Applicant’s solicitors in writing not less than fourteen days prior to resigning as a Director of Y Pty Ltd and provide details of whomever is resuming such role thereafter.

3. That within twenty-four hours of receiving a Contract for Sale of the land at C more particularly described as Lot … on SP… County of … Parish of … and Title Reference … (or any subdivided lot created by a subdivision) the director/s of Y Pty Ltd will inform the solicitors for the Applicant and provide a copy of the contract for Sale, together with any proposed Settlement Statement.

4. That within twenty-four hours of either Y Pty Ltd and/or any director/s receiving a Contract for Sale or notice of any other disposition of any shares in Y Pty Ltd, the Director/s and/or Shareholder/s of Y Pty Ltd will inform the solicitors for the Applicant and provide a copy of the Contract for Sale or any other writing evidencing any other disposition.

5. That the Director/s of Y Pty Ltd will not distribute the Sale Proceeds received from a sale of any and/or all of the company assets, in particular the land at C more particularly described as Lot … on SP… County of … Parish of … and Title Reference … (or any subdivided lot created by a subdivision), without first having obtained the consent in writing of the Applicant (excluding mortgage, rates and applicable land tax).

6. That the Director/s of Y Pty Ltd authorise and direct the payment of all proceeds, dividends or other payments to be received by Mr Juliet in his capacity as shareholder of Y Pty Ltd to the husband’s solicitor’s trust account.

7. That the Director/s and/or Shareholder/s of Y Pty Ltd be restrained by injunction from doing any act or thing that may cause any real property of Y Pty Ltd to be sold, transferred, assigned, encumbered, alienated or leased in any manner whatsoever, without having first obtained the prior written consent of the Applicant.

8. That the Director/s and/or Shareholder/s of Y Pty Ltd be restrained by injunction from doing any act or thing in their capacity as director and/or shareholder which may cause the husband’s and wife’s interest, control or entitlement in Y Pty Ltd being diluted or reduced, including the appointment of new directors and/or shareholders and/or trustees or the resignation as director and/or shareholder and/or trustee of any company and/or trust, without having first obtained the written consent of the other party.

9. That costs be reserved.

IT IS NOTED THAT

(a)For their part, each of the parties consent to orders being made as against the corporation and Mr B in the above terms.

IT IS DIRECTED THAT

1. The solicitor for the wife shall serve a copy of these orders and the Reasons for Judgment of Justice Murphy given today, on Y Pty Ltd and its Director, Mr B.

2. Should the corporation and/or Mr B seek orders different from those made today, an Application accompanied by an Affidavit, shall be filed and served within 28 days of today and thereafter the Application shall be listed for hearing at the earliest opportunity and, if reasonably practicable, by Justice Murphy.

3. In the event that no Application of the type foreshadowed or an Application to extend that time is received by 4.00pm on Monday 9 May 2011, then the orders, insofar as the corporation or Mr B are bound, shall continue to apply until further order.

IT IS FURTHER ORDERED THAT

1. The corporation and/or Mr B are granted liberty to apply.

IT IS FURTHER ORDERED BY CONSENT AS BETWEEN THE HUSBAND AND WIFE THAT

1. Each of paragraphs 2-8 inclusive of these orders, shall apply mutatis mutandis to each of the parties as if each was a director of Y Pty Ltd in respect of any information and/or documentation received by them either in their individual capacities or in their capacities as shareholders pertaining to each and all of the matters referred to in the said paragraphs.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Juliet & Juliet (No. 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRF 6571 of 2002

Ms Juliet

Applicant

And

Mr Juliet

Respondent

EX TEMPORE

REASONS FOR JUDGMENT

1. On 29 March 2011, the wife filed, in property proceedings in this court, an Application in a Case that sought a series of orders as against a corporation, Y Pty Ltd, and its director or directors.  In broad compass, the context for that application can be seen to be the fact that property, which is apparently of some considerable value, is being developed by that corporation of which the husband was a director and that, recently, development approval was received by the corporation in respect of that property.

2. An Initiating Application was filed by the wife on 11 November 2002.  A number of orders were made by Barry J in August 2003, in essence preserving the property and injuncting the parties from dealing with property.  The circumstances of what occurred between 2003 and 2010 are unexplained on the material before me, but it seems a reasonable inference that the delay is explained in part by the (then future) potential for the development of the land to which I have just referred.

3. On 3 November 2010 the matter again came before this court, and at that time orders were made by consent between the parties.  Again, those orders pertain to the restraint by injunction of actions that might be seen to affect the land (or indeed other property that might form the basis of an application pursuant to section 79).

4. It seems that the catalyst for the instant application, in respect of which time has been abridged, was the development approval earlier referred to.  It is to be noted that the husband was, it seems, a director of the corporation in the period from 2003 until about six months before the orders of November 2010 were made. 

5. The evidence reveals that the husband resigned as a director of the corporation on 16 April 2010.  The wife is not a director of that corporation.  The wife deposes in her affidavit to the fact that “The husband is endeavouring to sell the [land at C] with the director, [Mr B].”  She goes on to depose that the land is being “… marketed at A$10 million in Australia and China.” 

6. The husband is a 50 per cent shareholder in the corporation.  The wife, it seems, is not a shareholder.  Mr B is the corporation’s sole director at the present time.

7. The husband had previously indicated, in February of this year, that he would,:

   Obtain the consent of [Mr B] to be bound by an order that he not effect a disposal of the asset by signing a contract … without the giving of notice to the solicitors for the wife.  He has informed me that he has no issue with this occurring. 

8. The current application seeks orders, it needs to be noted, against third parties.  The High Court has made it clear that the court’s power to affect the substantive rights of third parties is significantly curtailed.  No application, of which I have been made aware, currently seeks orders pursuant to Part VIIIAA of the Act, nor does any application of which I have been made aware, seek, in terms, orders that might see property ostensibly owned by a third party become “Property of the parties or either of them” within the meaning of section 79 of the Act.

9. There are, then, significant issues associated with seeking orders that seek to join, and subsequently bind, a third party corporation and/or its director. 

10. That position is further complicated by the fact that as at today, the court has received a facsimile from Mr B, dated 7 April 2011. I gather it has been sent by Mr B to the husband’s solicitors and forwarded by them to the wife’s solicitors on Friday, 8 April. 

11. I should record what that document says.  It is handwritten.  It is addressed to the Registrar of the Family Court at Brisbane, and bears an address in its top right-hand corner, “[F Hospital].”  The document is signed, apparently, by Mr B, but it seems the intention is to sign on behalf of Y Pty Ltd, because the signature appears above that name.  The document reads:

    Re [Juliet & Juliet].  It is advised that I am hospitalised suffering from severe “bronchitis” [? perhaps cellulitis] and under [?] heavy medication and am unable to attend court or obtain legal advice in regards to the above matter until I fully recover.  Thanking you. 

12. An application is made then to join the corporation and, I gather, Mr B, in default of his appearance in the circumstances just described. 

13. An acknowledgment of service was signed by Mr B on 31 March 2011, and is annexed to an affidavit of service filed 7 April 2011.  I am satisfied, by reference to those documents, and the letter from Mr B just referred to, that he and the corporation have notice of these proceedings.

14. Axiomatically, Mr B and the corporation would be given an opportunity to be heard in respect of this application, and all the more so in circumstances where, on its face, it seeks orders against third parties to the marriage, with all of the considerations that this implies. 

15. However, the context for the application includes a significant piece of evidence exhibited to the affidavit of the wife filed 29 March 2011 at exhibit JLJ11. 

16. That exhibit is a letter dated 11 March 2011 which indicates that Mr B is the managing director of the corporation and is, “currently acting for the company” in respect of this matter.  It is plain on the face of that letter and its annexures that communication had been forwarded to the corporation from the solicitors for the wife relating specifically to the orders that are now sought as against the company.

17. In that document Mr B, very significantly, sets out, in effect, orders (or undertakings) that he says are orders that the company would agree to.  The proposed orders (or undertakings) annexed start by saying: 

    That I, [Mr B], as sole director and managing director of [Y Pty Ltd], and due to this position, I do not wish to favour either a particular shareholder (or wife of the shareholder) in preference to the other shareholder as I could be held in breach of the company’s articles of association or the Companies Act and risk prosecution by the ASIC and any undertaking to the court has to be of strict and clear context to save such occurrence. However, in taking account of the above particulars, I undertake to the court …

18. There then follows a series of “undertakings” that are, in very broad terms, similar to orders of the type sought by the wife as against the corporation (and, I infer, Mr B). 

19. The position of the parties and the corporation can be described, again expressed in very broad terms, I think, as follows. The corporation, for itself and the benefit of its shareholders, seeks to exploit to the maximum extent possible the business opportunity which has at its centre what is described as the land at C.  So much is understandable.  To the extent that any such land or any interest in such land (or, perhaps more accurately, any interest in the corporation) might be seen to be, “property of the parties or either of them” within the meaning of section 79, it seems to me to be to the advantage of both parties that this business opportunity be exploited to the maximum extent possible.

20. On the other hand, it is plainly in the interests of both parties, and one might think more particularly the wife, that full disclosure in accordance with the Rules (which, it should be noted, relates to the provision of documents and information) should relate to any such property that might reasonably form the basis of any application pursuant to section 79 of the Act or otherwise.

21. Secondly, and as a result of that, any transactions involving any such property should be conducted in ways that are fully transparent.  So much is clear, in any event, in respect of the corporation, by reference to the duties it owes to its shareholders.  Similar duties are owed to this court in circumstances where property might become the subject of orders to be made by the court.

22. Thirdly, in circumstances where an asset, particularly an asset of significant value, or an interest in an asset of significant value, or shares with a significant value, might become the subject of orders made pursuant to section 79, then the relevant asset should be preserved with a view to allowing settlement between the parties, or orders of the court, to facilitate a just and equitable distribution of the property between parties to the marriage.

23. It seems to me that such a position is, broadly speaking, intended by Mr B on behalf of the company, by reference to JLJ11 to which I have just referred. 

24. Moreover, there seems to me to be a clear intention manifest by that document, that Mr B would, as it were, abide the orders of this court, provided any such orders were seen by him to be consistent with the interest of this corporation and his duties as a director of it.

25. Accordingly, I am prepared to act upon the basis of that document insofar as it exhibits an intention on the part of the corporation to submit to the jurisdiction of this court and to be bound by orders, at least to the extent of preserving assets in the manner to which I have just referred.

26. However, orders are being made in circumstances where the corporation, through its managing director, has not had an opportunity to be properly heard.  No one challenges the contention evident in the facsimile to which I have earlier referred, that Mr B is unwell and unable to attend the court.  However, the potential for significant prejudice to the parties to the marriage, and it might be thought particularly to the wife, if orders injuncting dealings with property under the control of the corporation were not made, is potentially very significant indeed.

27. Balancing those two matters, it seems to me that I should make orders that preserve those assets by way of injunctive relief of the type foreshadowed, which, I emphasise, is in broad compass, envisaged by the “undertakings” referred to in JLJ11, but at the same time provide an opportunity for Mr B, when he is well, to have the opportunity to be heard in respect of the orders made.

28. With that in mind, I have ordered that a copy of my orders and these short ex tempore reasons be provided to Mr B (and the corporation), and have given liberty for him to apply to the court to seek orders different to those which have been made today. 

29. It seems to me that those orders strike a balance between the potential for prejudice to the respective parties, the respect which should be accorded to the interests of the third parties in this court and, at the same time, to take account of the director of the third party corporation being unable to attend by reason of an illness being suffered by him. 

30. I will then make orders in terms of those earlier foreshadowed in respect of the corporation.

31. The minutes of order handed to the court are said to be “by consent”. But those orders are, with a minor exception within paragraph 5, all orders which bind a third party corporation and/or its director.  As such, in a sense, the consent of the parties is irrelevant to the making of those orders, save to record that, for their part, the parties are each agreeable to the injunctive relief that lies at the heart of the application. I will then frame those orders as not being by consent in circumstances where it is not known if Mr B and/or the corporation consent.

32. A separate issue arises, however, and it is this: that each of the parties, either in their respective individual capacities, or perhaps in the husband’s case, in his capacity as a shareholder, may become possessed of information and/or documents to which the general duty of disclosure applicable to them would apply. As importantly, the appropriate bona fides which should attach to actions by parties involved in litigation in this court, would dictate these documents or that information be communicated to the other party. 

33. Each of the parties recognise this fact, and each consents to orders that bind them in a fashion similar to those which binds the corporation and its managing director as earlier referred to.

34. Accordingly, the order in that respect will be framed by consent that the parties are bound mutatis mutandis to orders in the same terms as those applicable to the corporation and its director, as if they, too, were directors of that corporation.

35. For those reasons I make the orders earlier referred to.

36. This is the final paragraph of each judgment.

I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy delivered on 11 April 2011.

Associate: 

Date:  13 April 2011