Karbines and Karbines

[2007] FamCA 441

FAMILY COURT OF AUSTRALIA

KARBINES & KARBINES [2007] FamCA 441

FAMILY LAW - PROPERTY -  Interim Orders – Costs order

Family Law Act 1975 (Cth), Section 117

APPLICANT: Mrs Karbines

RESPONDENT: Mr Karbines

INTERVENORS:

B Pty Ltd (In Liquidation) – 1^st O/Party

C Pty Ltd (In Liquidation) – 2^nd O/Party

Mr Winzer – 3^rd O/party

Ms J Karbines – 4^th O/Party

Mr P Karbines – 5^th O/Party

FILE NUMBER: MLF 2479 of 2005

DATE DELIVERED: 4 May 2007

PLACE DELIVERED: Mt Gambier Circuit Sittings

JUDGMENT OF: Dawe J

HEARING DATE: 4 May 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Jordan

SOLICITOR FOR THE APPLICANT: Maddens Lawyer

COUNSEL FOR THE RESPONDENT: N/A

SOLICITOR FOR THE RESPONDENT: Self - Represented

SOLICITOR FOR THE INTERVENOR:

Mr Ryan
For B Pty Ltd (In Liquidation) – 1^st O/Party

Mr McGrath
For C Pty Ltd
(In Liquidation) – 2^nd O/Party

Mr Bersee
For Mr Winzer – 3^rd O/party

Ms J Karbines – 4^th O/Party – self-represented

Mr P Karbines – 5^th O/Party – self-represented

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Court delivered this day will for all publication and reporting purposes be referred to as  Karbines and Karbines

AND UPON NOTING undertaking given by the husband that he will participate in appropriate negotiations for the sale of the properties at M1 and M2 in the State of South Australia involving the sale of the husband and wife’s interest to Mr & Mrs Winzer or to other parties in the market at a reasonable price to be negotiated

Orders

1. The wife’s application for interim orders filed on the 2 May 2007 is dismissed.

1. Subject to any final order for costs between the husband and wife the wife pay the costs of B Pty Ltd (in liquidation) of and incidental to today’s attendance such costs to be agreed or taxed.

1. Subject to any final order for costs between the husband and wife the wife pay the costs of C Pty Ltd (in liquidation) of and incidental to today’s attendance such costs to be agreed or taxed.

1. The enforcement of the orders for costs are suspended until after the delivery of judgment in the final Family Court proceedings.

FAMILY COURT OF AUSTRALIA AT ADELAIDE

FILE NUMBER: MLF 2479  of 2005

Mrs Karbines

Applicant

And

Mr Karbines

Respondent

And

B Pty Ltd (In Liquidation) – 1^st O/Party

And

C Pty Ltd (In Liquidation) – 2^nd O/Party

And

Mr Winzer – 3^rd O/party

And

Ms J Karbines – 4^th O/Party

And

Mr P Karbines – 5^th O/Party

EX-TEMPORE REASONS FOR JUDGMENT

1. I have before me today a list of orders sought by the wife.  As I understand it the wife is seeking these orders both by way of final orders and by way of interim orders today.  I have heard argument from counsel for the wife and I have heard the husband who appears in person.  I have also heard submissions from Mr P Karbines who is the person who controls the company K Pty Ltd now known as P Pty Ltd.  I have heard submissions from counsel Mr McGrath and Mr Ryan, representing the liquidators of two companies C Pty Ltd and B Pty Ltd, both in liquidation. I have also heard the submissions of Mr Bersee who appears for Mr and Mrs Winzer.  I have heard submissions from the husband's mother who appears unrepresented and I have heard the husband who speaks with authority for D Pty Ltd, another company, the husband being the managing director of that company and indicating that he has authority to speak on its behalf.

2. The final orders sought by the wife and the interim orders sought by the wife are:

   “1.That the husband do forthwith appoint the wife as the trustee of the [K] Family Trust and do execute such documents as shall be necessary to give effect thereto.

   2.Thereafter and until further order the husband be restrained from exercising his power of appointment in the [K] Family Trust.

   3.A declaration that the [K[Family Trust is the beneficial owner as to one undivided third part of the property commonly known as [S] (hereinafter referred to as “the [S] property”)/

   4.That the wife forthwith do all things necessary to effect the sale of the [S]  property as soon as practicable.

   5.That [K] Pty Ltd and [Mr Winzer] do execute all such documents as shall be necessary and desirable to effect the sale of the [S] property.

   6.That upon the ale of the [S] property the net proceeds of sale then due to the [K] Family Trust be paid to the trust account of Maddens Lawyers.

   7.That the husband and the wife forthwith do all things to effect the sale of the property known as [E] in the State of Queensland (hereinafter referred to as the Queensland property).

8.That the wife have the conduct of the sale of the Queensland property.

9.That a Registrar of the Court do execute all documents on behalf of the husband in relation to the sale of the Queensland property.

10.That upon the sale of the Queensland property the net proceeds of sale be paid to the trust account of Maddens Lawyers.

11.That the husband and the wife forthwith do all things necessary to effect the sale of the properties commonly known as [M1] and [M2] (hereinafter referred to as the “[M1]” and the “[M2] property”).

12.That the wife have the conduct of the sale of the [M1] property and the [M2] property.

13.That a Registrar of the Court do execute all documents on behalf of the husband in relation to the sale of the [M1] property and the [M2] property.

14.That [Mr and Mrs Winzer] do execute all such documents as shall be necessary and desirable to effect the sale of the [M1] property and the [M2] property.

15.That the net proceeds of sale of the [M1] property and the [M2] property as are due to the husband and the wife be paid to the trust account of Maddens Lawyers.

16.That the husband and his servants or agents and [D] Pty Ltd do forthwith vacate the property situated at [Y] (hereinafter referred to as “the [Y] property”).

17.That the husband and wife do forthwith cause [T] Pty Ltd to effect the sale of the [Y] property.

18.That the wife do have the conduct of the sale of the [Y] property.

19.That a Registrar of the Court do execute all documents on behalf of the husband in relation to the sale of the [Y] property.

20.That the net proceeds of sale of the [P] property after discharge of Mortgage No […] to Westpac Banking Corporation be paid to the trust account of Maddens Lawyers.

21.That the husband do forthwith remove his caveat lodged in respect of the property at [O] (hereinafter referred to as “the [O] property”) and the wife be at liberty to effect the sale of the same and the next proceeds of such sale be paid to the trust account of Maddens Lawyers on account of the wife’s legal fees and disbursements.

22.That a Registrar of the Court is authorised to execute the withdrawal of the husband’s caveat referred to in paragraph 21 above on behalf of the husband.

23.That the husband do forthwith transfer to the wife all his estate and interest in the former matrimonial home situated at [N] being the land comprised in Certificates of Title Register Books Volume […] Folio […] and Volume […] Folio […].

24.That a Registrar of the Court do execute all documents on behalf of the husband necessary to give effect to the transfer of the former matrimonial home to the wife.

25.That the sums paid to the trust account of Maddens Lawyers hereinbefore referred to (save and except for the net proceeds of sale of the [O] property) be disbursed as follows:

(i)in discharge of Mortgage Nos […] and […] to Westpac Banking Corporation registered in respect of the former matrimonial home;

(ii)in payment of any personal liability of the wife arising from the liquidation of [C] Pty Ltd;

(iii)in payment of the balance as the Court shall direct.

26.That the wife do have as her sole property and free from any claim or entitlement of the husband the following:

(i)the [O] property;

(ii)the entitlement of the parties to recover the sum of $45,000 lent to [F] Pty Ltd (and the husband do forthwith withdraw his caveat lodged over the title(s) to the [F property]);

(iii)the wife’s Honda Legend motor vehicle;

(iv)the Mazda and Ford motor vehicles registered nos […]  and […]  presently in the possession of the children;

(v)the wife’s savings;

(vi)the wife’s superannuation entitlement;

(vii)the contents of the former matrimonial home presently in her possession;

(viii)the wife’s jewellery and personal effects

27.That the husband do indemnify the wife in respect of all the debts of the companies and trusts comprising the [K] Group.

28.That the husband pay the wife’s costs of and incidental to these proceedings fixed in the sum of $141,000 or as may be taxed by the Court.

AND FURTHER TAKE NOTICE THAT IF YOU WISH TO BE HEARD BY THE COURT AS TO WHY SUCH ORDERS SHOULD NOT BE MADE OR AS TO ANY OTHER RELEVANT MATTER THEN YOU SHOULD APPEAR AT THE COURT IN PERSON OR BY LEGAL REPRESENTATIVE AT THE COURTHOUSE, BAY ROAD, MT. GAMBIER SOUTH AUSTRALIA AT 10.00 AM ON FRIDAY 4^TH MAY, 2007.”

1. In summary, the first set of orders that the wife seeks is that she be appointed the trustee of the K Family Trust and restrain the husband from appointing any further trustee for the trust.  She seeks a declaration that the family trust is the beneficial owner of one-third of the property at S and that she be authorised to do all things necessary to effect the sale of the property as soon as possible.  She also sought orders that K Pty Ltd and Mr Winzer execute documents to give effect to the sale of the property and that upon sale of the property, the net proceeds of sale be paid into her solicitor's trust account.

2. Mr P Karbines on behalf of K Pty Ltd now known as P Pty Ltd opposes that sale.  He is not a party to the proceedings but at my direction was given notice of the orders sought, such notice being short notice, on the basis that the court was only recently made aware that the wife was pressing these orders at the commencement of this trial in the Family Court.  Mr Winzer, who appears represented, does not oppose the sale of the S property but through his counsel calls into question what amount might be received by his client on the sale of the property due to an adjustment he says will be necessary because of the failure to pay rent for the property for a period of time, thus incurring further indebtedness by way of mortgage payments.

3. The liquidators of C Pty Ltd and B Pty Ltd (In Liquidation), are both interested in the sale of the S property because it is the company C Pty Ltd which is the registered legal owner of a one-third interest in the S property.  B Pty Ltd (In Liquidation) is interested because the documents indicate that sometime before C Pty Ltd went into liquidation, B Pty Ltd was appointed the trustee of the K Family Trust and it is asserted that the X property was owned by C Pty Ltd as trustee of the family trust.

4. Both of those liquidators were therefore directed by me to be given notice of the orders sought by the wife.  I appreciate that such notice was provided to them very late indeed for a hearing on a matter of such complexity.  The liquidators do not necessarily oppose the sale of the S property but oppose the net moneys received, if any, being paid to the wife's solicitor's trust account.  They propose that the net proceeds of sale, if any, are put in escrow in an independent account until such time as appropriate claims are decided in relation to the liquidation of those companies.  I say "the net proceeds if any" because there is an issue, not quite clarified, as to whether Westpac would also be entitled to claim any of the remaining proceeds of sale of the C Pty Ltd interest in the property in payment of other debts owed by C Pty Ltd to Westpac.

5. In relation to the sale of the S property, I can understand from a practical point of view why it would be wise to bring about the sale of the property to bring to an end the risk of Westpac effecting a mortgagee sale which may reduce the benefit available to all of the owners of the property.  In view, however, of the opposition of Mr P Karbines on behalf of K Pty Ltd, one of the owners of the property, it would be necessary for the owners who wish to sell the property to take Supreme Court proceedings to force the sale of the property.

6. If the liquidators and the wife can come to some agreement in relation to the proposed sale of the S property and commencement of Supreme Court proceedings against Mr P Karbines, in my view that is an arrangement they reach outside of the auspices of the Family Court of Australia. The Family Court of Australia does have the power to make orders which affect third parties' rights in properties, but the ability to do so is limited to the conditions set out in the provisions of the Family Law Act. The forced sale of the S property in these circumstances does not fall into that category.

7. The next property which is the subject of the request for sale is the Queensland property.  This is a property which is registered in the names of the husband and wife.  I have heard some evidence from the wife and the husband in relation to this property.  This property is also mortgaged, in this instance, to the Commonwealth Bank.  The husband's mother appears before me today and opposes the sale.  She made remarks from the bar table that she was the occupier of the property.  I have heard evidence that moneys were provided to the husband and wife by the husband's mother, which moneys were used by the husband and wife towards the purchase of the Queensland property.

8. There remains, however, in my view, a problem in relation to the exact nature of the indebtedness to the husband's mother in relation to the purchase of the Queensland property and in relation to her interest, if any, in that property, whether as someone entitled to be paid by way of a debt only due by the husband and wife and whether those moneys provided represent any interest of the husband's mother in the Queensland property.  I am yet to hear the evidence of the husband's mother and on that basis, I am not satisfied it is appropriate to make an order for the sale of the Queensland property at this stage, pending the determination of the husband's mother's right, if any, to make a claim in relation to that property.

9. Similarly, in relation to the question of the liquidators of C Pty Ltd and B Pty Ltd, the liquidators have in my view quite properly and on extremely short notice raised the issue of the claim that the liquidators may have against the proceeds of sale of the Queensland property, it being property that on the face of it is owned by the husband and wife in their own right.  The questions about disposal of the proceeds of sale means that any of the net proceeds of sale would not necessarily be available other than to be placed in an escrow or trust account pending the outcome of the liquidations and the final orders of the Family Court.

10. In relation to the properties at M1 and M2, these are properties which the husband and wife have purchased together with Mr and Mrs Winzer.  I have heard from the bar table the husband give his undertaking that he will participate in appropriate negotiations for the sale of those properties involving either a sale of the husband and wife's interest to Mr and Mrs Winzer or the sale of those properties to outside purchasers at a reasonable price, to be negotiated.  I do not propose therefore, to make any order by way of interim order in relation to the properties at M1 or M2.

11. The other property concerned is the property at Y which is a property owned by T Pty Ltd, one of the companies controlled by the husband and wife.  The property at Y has been the premises from which the company or group of companies has conducted business (along with the S property).  The property at Y is also subject to a mortgage to Westpac Pty Ltd, securing the debts of the company and was therefore the subject of steps being taken by Westpac to obtain vacant possession and the sale of the property.

12. The husband opposes the sale of the Y property for reasons which he gives on behalf of D Pty Ltd, a company of which he is a managing director, and on his own behalf, saying that the reason he opposes the sale is because it would mean that the employees of the businesses now operated at those premises would be disadvantaged.  From the bar table he tells the court that the businesses previously operated by C Pty Ltd by way of a powder coating and electroplating business have now been taken over by Mr H on those same premises, and that the lighting business previously operated by C Pty Ltd, previously carried on those premises, is now being carried on, since February 2007, by D Pty Ltd, using the name C Australia as a business name.

13. The question of the payment of rent for the property at Y is a matter which appears to be in dispute and the ongoing responsibility for meeting the debts to Westpac Banking Corporation still a matter to be resolved.  In relation to the sale of the Y property, the difficulty in relation to that are the unresolved claims in relation to the businesses which may arise out of the liquidations of C Pty Ltd and B Pty Ltd.  Any proceeds of sale of the properties would, in my view, after meeting the payment of the amounts due to Westpac, need to be held in trust in an appropriate account pending the outcome of the liquidators' claims.  In my view there is nothing to stop the parties considering the sale of Y to meet the debt to Westpac other than the claims asserted by Mr Karbines that this would affect D Pty Ltd's occupation of the premises and Mr H’s occupation of the premises.

14. Until such time as I receive sufficient evidence upon which to make a conclusion about the facts asserted by the husband, I do not consider it to be proper in interim proceedings to make orders for the sale of the Y property.  That, of course, does not mean that such orders may not be made after I have heard all of the evidence and considered all of the factors.  It may be that the delayed sale of that property and the costs arising out of any delayed sale or forced sale by Westpac may also be a factor that I will take into account in relation to the overall distribution of the assets, if any remaining, of the husband and wife.  I therefore do not propose that the Family Court should make an order directing the sale of the Y property at this stage.

15. The wife also seeks an order that the husband remove the caveat lodged over the O property, which is a property she inherited from her aunt.  She wishes to sell the property and use the net proceeds in payment of her solicitor's legal fees.  I have yet to hear conclusive evidence or make findings in relation to the husband's claimed interest in the O property.  At this stage in view of the possible claims of the liquidators, it would be inappropriate to give the wife's lawyers any priority for the payment of their legal fees and disbursements over the possible claim by other persons connected with the liquidation of both of the companies.

16. The other orders sought by the wife are orders which are all incidental to the payment of the proceeds of sale and in view of the findings I have made, I do not deal further with those.

17. Of significance in my view, in relation to these proceedings, is the possible claim by the liquidators of the two companies on the assets not only of the group of companies carried on by Mr Karbines (and to a lesser extent the wife in these proceedings) but also against the properties which are registered in their personal names, such claims being foreshadowed to arise out of the issues of whether the directors were permitting the companies to trade whilst insolvent and also issues which arise from constructive trust arguments.  There is also the significant issue of which of the assets, if any, are owned by the family trust and which of the liabilities were incurred by the companies in liquidation on behalf of the family trust.

1. I therefore dismiss the wife's application for interim orders.

2. This is the application of B Pty Ltd (In Liquidation) for the costs of their attendance to respond to the orders sought by way of interim orders for the wife.  I take into account the provisions of section 117.  The wife has been wholly unsuccessful in the orders sought.  It was appropriate for B Pty Ltd's liquidator to be heard in these proceedings as it affected the possible interests of the liquidator.  The application was brought by the wife.  However, the complications in relation to the structure of the companies and the ownership of the assets is a matter which is yet to be determined in these Family Court proceedings or indeed in the liquidation of both of the companies.

3. I therefore consider it to be appropriate for the costs of the liquidator of B Pty Ltd to be costs to be paid by the wife, such costs to be agreed or taxed, but I propose to delay the collection of any amount until such time as judgment is delivered in the Family Court proceedings on the basis that the question of overall costs may be an issue which determines other adjustments in due course.  So there is an interim order that the wife pay the costs of B Pty Ltd (In Liquidation) of today's attendance, such costs to be agreed or taxed.  I suspend the enforcement of the order for the collection of costs until after the delivery of my judgment in the final Family Court proceedings.

4. The order in relation to the liquidator of C Pty Ltd will be the same as the order in relation to the costs of B Pty Ltd, similarly suspended as to enforcement.

I certify that the preceding twenty three (23) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dawe

Associate: 

Date:  17 May 2007