Kendling and Kendling (No. 3)

FAMILY COURT OF AUSTRALIA

KENDLING & KENDLING (NO. 3)

[2007] FamCA 1249

FAMILY LAW – INJUNCTIONS

Family Law Act 1975 (Cth)

Cardile & LED Builders Pty Limited (1999) 162 ALR 294
Glover & Walters (1950) 80 CLR 172

APPLICANT:

Mrs Kendling

RESPONDENT:

Mr Kendling

SECOND RESPONDENT:

T Pty Ltd

THIRD RESPONDENT:

Jeremy Kendling

FOURTH RESPONDENT:

Penelope Kendling

FIFTH RESPONDENT:

L Pty Ltd

SIXTH RESPONDENT:

A Pty Ltd

SEVENTH RESPONDENT:

Mr Z

EIGHTH RESPONDENT:

B Ltd

NINTH RESPONDENT:

I Pty Ltd

TENTH RESPONDENT:

Mr PS

FILE NUMBER:

SYF

2903

2003

ORDERS MADE:

27 September 2007

DATE PUBLISHED:

17 October 2007

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

O'Ryan J

HEARING DATE:

6, 14 and 19 September 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Richardson of Senior Counsel and Mr Beaumont

SOLICITOR FOR THE APPLICANT:

Michael Conley Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Baran and Mr Gardiner

SOLICITOR FOR THE RESPONDENT:

Dorrough Smart

COUNSEL FOR THE INTERVENOR:

Mr Burreket

SOLICITOR FOR THE INTERVENOR:

Broun Abrahams Burreket

ORDERS

Until further order T Pty Ltd is restrained from selling, transferring or disposing of any and all real property which it owns or has any beneficial interest in.
Until further order T Pty Ltd is restrained from further encumbering by mortgage or charge or otherwise any and all real property which it owns or has any beneficial interest in.
Liberty be granted to T Pty Ltd and the Wife to apply in relation to Orders 1 and 2 hereof.
Until further order T Pty Ltd is restrained from making any loans or advances to or for the benefit of any person or persons or any other entity.
Until further order T Pty Ltd provide to the Husband and to the Wife within the first week of each calendar month a cash flow statement providing particulars of all cash receipts and cash payments received and made by the company during the previous calendar month and the first such statement to be provided by 4.00 pm on 12 October 2007 and such statement to be verified by each of the directors of T Pty Ltd.
Until further order B Ltd is restrained from selling, transferring or disposing of any and all real property which it owns or has any beneficial interest in.
Until further order B Ltd is restrained from further encumbering by mortgage or charge or otherwise any and all real property which it owns or has any beneficial interest in except for the purpose of obtaining an overdraft/line of credit up to a level not exceeding $3,300,000 to meet the general requirements of the company identified in the affidavit of the Husband sworn on 13 September 2007.
Liberty be granted to B Ltd and the Wife to apply in relation to Orders 6 and 7 hereof.
Until further order B Ltd is restrained from making any loans or advances to or for the benefit of any person or persons or any other entity.
Until further order B Ltd provide to the Husband and to the Wife within the first week of each calendar month a cash flow statement providing particulars of all cash receipts and cash payments received and made by the company during the previous calendar month and the first such statement to be provided by 4.00 pm on 12 October 2007 and such statement to be verified by each of the directors of B Ltd.
Until further order the Husband is restrained from selling, transferring or disposing of any and all real property which he owns or has any beneficial interest in.
Until further order the Husband is restrained from further encumbering by mortgage or charge or otherwise any and all real property which he owns or has any beneficial interest in.
It be NOTED that B Ltd will forthwith register the mortgage granted by T Pty Ltd to B Ltd executed on 31 August 2007.
It be NOTED that T Pty Ltd may apply and seek a discharge or modification of Orders I and 2 hereof so as to commence construction of 53 residential units on what is described as the R location and the renovation of two substantial residences also in R.
It be NOTED that B Ltd may apply and seek a discharge or modification of Orders 6 and 7 hereof so as to commence construction of a 58 residential unit development at G2.
Orders 1, 2, 4, 6, 7, 9, 11 and 12 are made on the basis of an undertaking as to damages by the Wife such undertaking to be filed and served by 4.00 pm on 2 October 2007.
Order 1 made on 4 December 2007 be discharged.
Orders 1, 2, 3, 4, 5 and 6 made on 6 September 2007 be discharged.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2903 of 2003

Mrs Kendling

Applicant

And

Mr Kendling

Respondent

And

T Pty Ltd

Second Respondent

And

Jeremy Kendling

Third Respondent

And

Penelope Kendling

Fourth Respondent

And

L Pty Ltd

Fifth Respondent

And

A Pty Ltd

Sixth Respondent

And

Mr Z

Seventh Respondent

And

B Ltd

Eighth Respondent
And

I Pty Ltd

Ninth Respondent

And

Mr PS

Tenth Respondent

REASONS FOR JUDGMENT

Introduction

Before me for hearing is an application for injunctions. The applicant is Mrs Kendling who I shall refer to as the Wife. The First Respondent is Mr Kendling who I shall refer to as the Husband.
The other parties to the present application are B Ltd and T Pty Ltd.
The Wife sought the following:
1.     Until further order the Husband, [Mr Kendling] born on […] December 1932, be restrained from departing the Commonwealth of Australia and the Australian Federal Police and the Police of various Australian states and territories are requested to assist in implementation of these Orders.
2.     The Husband surrender his passports, Australian and Dutch and any other passport he holds, to the Registrar of the Family Court of Australia, Sydney Registry by 4.00 pm on Monday 10 September 2007 where they shall remain until further order of this Court.
3.     The Australian Federal Police forthwith place the name of the Husband, [Mr Kendling] born on […] December 1932, on the Airport Watch List, in force at all international points of arrival and departure in the Commonwealth of Australia and maintain the Husband’s name on the Watch List (PASS system at all points of arrival and departure in the Commonwealth of Australia) until further order of the Court.
4.     Until further order [T] Pty Ltd is restrained from selling, transferring, disposing of, mortgaging, charging or further encumbering any and all real property which it owns or has any beneficial interest in without the consent in writing of the Wife, first had and obtained or order of this Court.
5.     Until further order the Husband be and is restrained from doing any act or thing that has the effect of selling, transferring, disposing of, mortgaging, charging or further encumbering any and all real property which he owns or has any beneficial interest in, including but not limited to the property known as [G Property] without the consent in writing of the Wife, first had and obtained or order of this Court.
6.     Until further order [B] Ltd be and is restrained from doing any act or thing that has the effect of selling, transferring, disposing of, mortgaging, charging or further encumbering any and all real property which it owns or has any beneficial interest in, including but not limited to the property known as [G2 Property] without the consent in writing of the Wife, first had and obtained or order of this Court.
9.     The Wife be granted leave to amend the terms of the order sought in paragraph 9 of her amended response filed 9 August 2007 by adding the words: “together with all mortgages between [B Ltd] as mortgagee and [T Pty Ltd] as mortgagor” at the end of the existing paragraph.
10.    The Wife file and serve by 4.00 pm on 10 September 2007 an application together with any further affidavit material in support.
11.    The Wife file and serve by 4.00 pm on 10 September 2007 a written undertaking as to damages.
12.    Each of the Husband, [T] Pty Ltd and [B] Ltd file and serve by 10.00 am on Thursday 13 September 2007 a response together with any affidavit material on which they would seek to rely.
13.    The matter be adjourned to 10.00 am on Friday 14 September 2007.
The Husband and B Ltd and T Pty Ltd sought that the Wife’s application be dismissed and that orders I made on 4 and 6 September 2007 be discharged.
On 27 September 2007 I made the following orders and these are my reasons for doing so:
1.     Until further order [T] Pty Ltd is restrained from selling, transferring or disposing of any and all real property which it owns or has any beneficial interest in.
2.     Until further order [T] Pty Ltd is restrained from further encumbering by mortgage or charge or otherwise any and all real property which it owns or has any beneficial interest in.
3.     Liberty be granted to [T] Pty Ltd and the Wife to apply in relation to Orders 1 and 2 hereof.
4.     Until further order [T] Pty Ltd is restrained from making any loans or advances to or for the benefit of any person or persons or any other entity.
5.     Until further order [T] Pty Ltd provide to the Husband and to the Wife within the first week of each calendar month a cash flow statement providing particulars of all cash receipts and cash payments received and made by the company during the previous calendar month and the first such statement to be provided by 4.00 pm on 12 October 2007 and such statement to be verified by each of the directors of [T] Pty Ltd.
6.     Until further order [B] Ltd is restrained from selling, transferring or disposing of any and all real property which it owns or has any beneficial interest in.
7.     Until further order [B] Ltd is restrained from further encumbering by mortgage or charge or otherwise any and all real property which it owns or has any beneficial interest in except for the purpose of obtaining an overdraft/line of credit up to a level not exceeding $3,300,000 to meet the general requirements of the company identified in the affidavit of the Husband sworn on 13 September 2007.
8.     Liberty be granted to [B] Ltd and the Wife to apply in relation to Orders 6 and 7 hereof.
9.     Until further order [B] Ltd is restrained from making any loans or advances to or for the benefit of any person or persons or any other entity.
10.    Until further order [B] Ltd provide to the Husband and to the Wife within the first week of each calendar month a cash flow statement providing particulars of all cash receipts and cash payments received and made by the company during the previous calendar month and the first such statement to be provided by 4.00 pm on 12 October 2007 and such statement to be verified by each of the directors of [B] Ltd.
11.    Until further order the Husband is restrained from selling, transferring or disposing of any and all real property which he owns or has any beneficial interest in.
12.    Until further order the Husband is restrained from further encumbering by mortgage or charge or otherwise any and all real property which he owns or has any beneficial interest in.
13.    It be NOTED that [B] Ltd will forthwith register the mortgage granted by [T] Pty Ltd to [B] Ltd executed on 31 August 2007.
14.    It be NOTED that [T] Pty Ltd may apply and seek a discharge or modification of Orders I and 2 hereof so as to commence construction of [a residential facility] on what is described as the [R] location and the renovation of two substantial residences also in [R].
15.    It be NOTED that [B] Ltd may apply and seek a discharge or modification of Orders 6 and 7 hereof so as to commence construction of [a residential facility] at [G2].
16.    Orders 1, 2, 4, 6, 7, 9, 11 and 12 are made on the basis of an undertaking as to damages by the Wife such undertaking to be filed and served by 4.00 pm on 2 October 2007.
17.    Order 1 made on 4 December 2007 be discharged.
18.    Orders 1, 2, 3, 4, 5 and 6 made on 6 September 2007 be discharged.
There are pending proceedings for parenting orders and settlement of property. Proceedings were commenced by application filed by the Husband on 28 November 2005. The pending proceedings for settlement of property were commenced by an amended Response filed by the Wife on 10 March 2006.
In the property proceedings the Wife seeks the following:

The [T] Pty Ltd interests

1.     Declaration that each of [Jeremy Kendling] and [Penelope Kendling] hold his and/or her interest in the issued share capital of [T] Pty Ltd ACN […] (“[T Pty Ltd]”) together with any credit loan accounts with [T] Pty Ltd wholly upon trust for the husband.
2.     Consequential upon order 1, within 14 days each of [Jeremy Kendling] and [Penelope Kendling] shall sign all documents and do all acts and things necessary to transfer and assign to the husband all of their respective right title and interest in the issued share capital of [T] Pty Ltd and any credit loan account with [T] Pty Ltd to the husband.
3.     Declaration that Mr [Z] in his capacity as trustee for the infants [David Kendling] and [Marc Kendling] holds their interest in the issued share capital of [T] Pty Ltd together with any credit loan account with [T] Pty Ltd wholly upon trust for the husband
4.     Consequential upon order 3, that within 14 days Mr [Z] shall sign all documents and do all acts and things necessary to transfer and assign to the husband all of his and the said infants right title and interest in the issued share capital of [T] Pty Ltd and any credit loan account.
In the event that the relief sought in paragraphs 1 to 4 inclusive be refused then in the alternative:
5.     Declaration that all assets, liabilities and undertakings of [T] Pty Ltd are held upon trust for [B] Ltd ACN […] (“[B] Ltd”).
6.     Consequential upon order 5, that within 14 days [T] Pty Ltd and the directors thereof shall do all acts and things necessary to transfer and assign to [B] Ltd all of the assets, liabilities and undertakings of [T] Pty Ltd.
In the event that the relief sought in paragraphs 5 and 6 also be refused then in the alternative:
7. Orders pursuant to s.106B Family Law Act or alternately s.37A Conveyancing Act (NSW) that the following transactions be set aside:
7.1the payment of $12,650,000 by [B] Ltd to [T] Pty Ltd in June 2006;
7.2all payments made [B] Ltd either to [T] Pty Ltd or for the benefit of [T] Pty Ltd applied to the funding of the cost of improvements upon property owned by [T] Pty Ltd;
7.3the payment to [T] Pty Ltd pursuant to the agreement for sale of the [P Business] of such part of the sum of $6,500,000 as was in excess of the fair market value of the business.
7.4the transfer in approximately April, 2001 from [B] Ltd to [T] Pty Ltd of the property comprised in Certificate of Title Folio Identifier […] .
7.5the payment of funds or provision of services applied to the construction of any improvements constructed on the property referred to in 7.4.

8. Consequential upon order 7:
8.1within 28 days [T] Pty Ltd shall pay to [B] Ltd such sum as may be determined in these proceedings as being the aggregate of payments set aside together with interest thereon at the rate prescribed by the Family Law Rules calculated from the date that funds or benefit were received by [T] Pty Ltd until this order is complied with; and
8.2within 28 days [T] Pty Ltd shall do all acts and things necessary to cause to be transferred to [B] Ltd the property described in order 7.4 above, or alternatively shall pay to [B] Ltd the fair market value of that property in such sum as this court may determine.

9. That pursuant to s.106B Family Law Act the provisions of all loan agreements as between [B] Ltd as lender and [T] Pty Ltd as borrower which set a time for repayment of moneys advanced by [B] Ltd other than “on demand” shall be and are hereby set aside.
10. In the alternative to the order sought in paragraph 9, order pursuant to s.90AE, Family Law Act, that notwithstanding the contrary terms of any loan agreement between [B] Ltd as lender and [T] Pty Ltd as borrower, all moneys advanced by [B] Ltd to [T] Pty Ltd shall be due and repayable by [T] Pty Ltd to [B] Ltd within 28 days and [T] Pty Ltd is hereby ordered to repay such moneys within that period.
That in the alternative to the relief sought in paragraphs 7 to 10:
11. That pursuant to s.106B Family Law Act or alternatively s.37A Conveyancing Act (NSW):
11.1all allotments and transfers of shares in [T] Pty Ltd to each of [Jeremy Kendling], [Penelope Kendling] and Mr [Z] as trustee for the infants [David Kendling] and [Marc Kendling] be and hereby are set aside;
11.2[Penelope Kendling] shall transfer her 1 “A” class share in [T] Pty Ltd to the husband within 7 days;
11.3[T] Pty Ltd shall forthwith rectify its register and cancel the relevant share certificates so as to extinguish all shareholdings other than one “A” class share held by the husband.

That in the event that the relief sought in paragraphs 1 to 11 inclusive be refused then in the alternative:
12. That the property and undertakings of [T] Pty Ltd be declared to be subject to an equitable charge in favour of [B] Ltd in such sum as this court may determine and [T] Pty Ltd shall pay all monies and do all acts and things necessary to satisfy the charge within 28 days.
13. That the shares held by each of [Penelope Kendling], [Jeremy Kendling] and Mr [Z] on behalf of [David Kendling] and [Marc Kendling] be declared to be subject to an equitable charge in favour of the husband in such sum as this court may determine and each of the said chargees shall pay all monies and do all acts and things necessary to satisfy their respective charges within 28 days.

The property in [the Netherlands]

14.    That it be declared that the purported transfer of the beneficial interest of the husband in the property situated in [the Netherlands] (“the [Netherlands] property”) to [A] Pty Ltd ACN […] (“[A Pty Ltd]”) is a sham.
15.    Consequential upon order 14 herein [A] Pty Ltd shall within 14 days sign all documents and do all acts and things necessary to transfer the legal title of the [Netherlands] property to the husband and deliver up all instruments of title.
That in the event that the relief sought in paragraph 14 and 15 is refused then in the alternative:
16.    Declaration that [A] Pty Ltd holds all of its right title and interest in the [Netherlands] property upon trust for the husband, or in the alternative, [B] Ltd.
17.    Consequential upon order 16, within 7 days [A] Pty Ltd shall sign all documents and do all acts and things necessary to transfer and assign to either the husband or [B] Ltd, as the terms of these orders may require, all of its right title and interest in the [Netherlands] property and deliver up all instruments of title.
That in the event that the relief sought in paragraphs 14 to 17 inclusive is refused then in the alternative:
18. Order pursuant to s.106B Family Law Act or alternatively s.37A Conveyancing Act (NSW) that the transfer from the husband to [A] Pty Ltd of the husband’s interest in the [Netherlands] property be and hereby is set aside.
19.    Consequential upon order 18 herein [A] Pty Ltd shall within 14 days sign all documents and do all acts and things necessary to transfer and assign all of its right title and interest in the [Netherlands] property to the husband and deliver up all instruments of title to him.

The [MX] property

20. That within 28 days the husband shall pay all moneys and do all acts and things necessary to cause all encumbrances upon the property known as “[R1]” and situate at [MX], being the property comprised in Folio Identifier […] (“the [MX] property”) to be discharged.
21. That [B] Ltd shall within 7 days deliver up to the solicitors for the wife a discharge of mortgage in registrable form in respect of the registered second mortgage held by [B] Ltd on the [MX] property.

22.    That within 28 days the husband shall sign all documents and do all acts and things necessary to cause all of his right title and interest in the [MX] property, together with the contents thereof, to be transferred and assigned to the wife unencumbered.
23.    Declaration that all artwork presently located in the [MX] property is at the date of these orders the unencumbered property of the husband and/or the wife (“the artwork”) free of any interest, liability or charge of [B] Ltd.
24.    That the husband shall forthwith sign all documents and do all acts and things necessary to transfer and assign to the wife all of his right title and interest in the artwork.

[Penelope] & [Jeremy]

25.    That the payment from [B] Ltd to [Penelope Kendling] on 10 April 2003 in the sum of $2,094,727.33 be and is hereby set aside.
26.    Consequential upon order 25, that [Penelope Kendling] shall forthwith pay to [B] Ltd the sum of $2,094,727.33 together with interest thereon calculated in accordance with the Family Law Rules from 10 April 2003 until her compliance with this order.
27. That pursuant to s.106B Family Law Act or alternatively s.37A Conveyancing Act (NSW) the transfer dated 15 March 2002 from [B] Ltd to [Penelope Kendling] of the property comprised in Folio Identifier 2/SP[…] be and hereby is set aside.
28.    In the alternative to order 27 it is hereby declared that at all relevant times [Penelope Kendling] held the property comprised in Certificate of Title Folio Identifier 2/SP[…] upon trust for [B] Ltd.
29.    Consequential upon either of orders 27 and 28 [Penelope Kendling] shall:
29.1forthwith pay to [B] Ltd the sum of $1,950,000 together with interest thereon calculated at the rates prescribed pursuant to the Family Law Rules from 31 March 2003 until the date of her compliance with this order;
29.2forthwith account to [B] Ltd for all profits received by her arising from her having held the property described in Folio Identifier 2/SP[…] in such sum as the court may determine.

30. That pursuant to s.106B Family Law Act or alternatively s.37A Conveyancing Act (NSW) the transfer in or about 2002 from [B] Ltd to [Penelope Kendling] of the land comprised in Folio Identifier 2/SP[…] shall be and hereby is set aside.
31. That in the alternative to proposed order 30 herein, declaration that [Penelope Kendling] has at all material times held the property comprised in Folio Identifier 2/SP[…] upon trust for [B] Ltd.
32. Consequential upon either of orders 30 or 31 herein [Penelope Kendling] shall:
32.1forthwith sign all documents and do all acts and things necessary to transfer and assign all of her right title and interest in the property comprised in Folio Identifier 2/SP[…] to [B] Ltd; and
32.2forthwith account to [B] Ltd for all profits received by her arising from her holding the property described in Folio Identifier 2/SP[…] in such sum as the court may determine.

33. That pursuant to s.106B Family Law Act or alternatively s.37A Conveyancing Act (NSW) the transfer on or about 15 March 2002 from [B] Ltd to [Jeremy Kendling] of the land comprised in Folio Identifier 1/SP[…] shall be and hereby is set aside.
34. That in the alternative to proposed order 33 above, declaration that at all relevant times [Jeremy Kendling] has held all of his right title and interest in the property described in Folio Identifier 1/SP[…] upon trust for [B] Ltd.
35. Consequential upon either of orders 33 and 34 herein [Jeremy Kendling] shall:
35.1forthwith sign all documents and do all acts and things necessary to pay to [B] Ltd the sum of $1,750,000 together with interest thereon calculated at the rates prescribed pursuant to the Family Law Rules from 15 August, 2003 until the time of his compliance with this order; and
35.2shall forthwith account to [B] Ltd for all profits received by him arising from his holding the property described in Folio Identifier 1/SP[…], in such sum as the court may determine.

The Subdivision

36.    That each of the husband, [B] Ltd and [T] Pty Ltd shall forthwith do all acts and things necessary to proceed to completion with the proposed subdivision as sought in Development Application No. […]/2004 and upon completion to cause the subdivision to thereafter be immediately registered and forthwith upon registration shall transfer to the wife, without cost to her, the land situated and identified as Lot […] of Plan […] and pending compliance with this order each of the husband, [B] Ltd or [T] Pty Ltd (as the case may be) shall hold that portion of the land known as Lot […] upon trust for the wife save that in the event that this order is not complied with within 12 months, thereafter at the option of the wife, she may at any time serve notice in writing upon the husband, [T] Ltd and [B] Pty Ltd requiring them to complete compliance within 21 days failing which she may at her election seek such further orders as she may be advised or be entitled to payment of the sum of $900,000 from the husband and [T] Ltd or [B] Pty Ltd, as the case may be, jointly and severally, whereupon the trust shall be extinguished.
37.    That the husband shall pay all moneys and do all acts and things necessary to discharge any encumbrance upon the lot to be transferred to the wife pursuant to proposed order 36.
In the event that the relief sought in paragraphs 36 and 37 inclusive is refused then in the alternative:
38.    The wife shall within 21 days:
38.1sign all documents and do all acts and things necessary to transfer and assign to the husband all of her right title and interest in the issued share capital of [W Pty Ltd] ACN […] (“[W Pty Ltd]”) and any credit loan account that she has with [W Pty Ltd] to the husband;
38.2resign as a director of [W Pty Ltd];
38.3deliver up all books of account in respect of [W Pty Ltd];
38.4deliver up possession of the premises to [T] Pty Ltd;
38.5execute any documents prepared by and at the expense of the husband that may be necessary to seek to transfer any licence or approval in respect of the preschool business that is personal to her to the husband or his nominee.

39. The husband shall henceforth indemnity and keep indemnified the wife in respect of all and any actions, claims or demands as may be made against her by any person, corporation or entity by reason of her having been a shareholder or director of [W Pty Ltd] or by reason of her having guaranteed the payment of any monies or the performance of any duties by or on behalf of [W Pty Ltd].

Indebtedness

40. That the husband shall forthwith pay all moneys owed by each of the wife and [W Pty Ltd] to [T] Pty Ltd and/or [B] Ltd or any subsidiary of either company, on any account whatsoever and he shall thereafter indemnify and keep indemnified each of the wife and [W Pty Ltd] in respect of any actions, claims or demands against either of them, by any such corporation in respect of any such indebtedness.
41. That pursuant to s.90AE(1)(b) Family Law Act [B] Ltd shall forthwith do all acts and things necessary to cause any joint indebtedness of the husband and the wife to [B] Ltd and/or of the wife to [B] Ltd to be substituted by the sole indebtedness of the husband.

[L Pty Ltd]

42. Declaration that [Penelope Kendling] has at all material times and does hold all of her right title and interest in the issued share capital of and any credit loan account with [L Pty Ltd] ACN […] (“[L Pty Ltd]”) upon trust for the husband.
43. Consequential upon proposed Order 42 that [Penelope Kendling] shall:
43.1within 7 days sign all documents and do all acts and things necessary to cause all of her right title and interest in the issued share capital of [L Pty Ltd] and any credit loan account with [L Pty Ltd] to be transferred to the husband;
43.2shall account to and pay to the husband all moneys that she has received as profits as a consequence of her holding shares in [L Pty Ltd], including but not limited to dividends received, to the husband, in such sum as this court may determine.

In the event that the relief in paragraphs 42 and 43 is refused then in the alternative:
44. That the shares held by [Penelope Kendling] in [L Pty Ltd] be declared to be subject to an equitable charge in favour of the husband or [B] Ltd (as this court may determine) and she shall pay all monies and do all acts and things to satisfy that charge within 28 days.

[I] Pty Limited and Mr [PS]

45.    Declaration that Mr [PS] holds his shares in [I] Pty Limited ACN […] (“[I Pty Ltd]”) upon trust for the husband.
46.    Consequential upon order 45, that Mr [PS] shall forthwith sign all documents and do all acts and things necessary to transfer and assign to the husband all of his right, title and interest in the issued share capital of [I Pty Ltd].
47.    That [I Pty Ltd] do all acts and things necessary to register any share transfer executed pursuant to order 45.
In the event that the relief sought in paragraphs 45 to 47 is refused then in the alternative:
48.    Declaration that all assets, liabilities and undertakings of [I Pty Ltd] are held upon trust for [B] Ltd.
49.    Consequential upon order 48, that within 14 days [I Pty Ltd] shall do all acts and things necessary to transfer and assign to [B] Ltd all of the assets, liabilities and undertakings of [I Pty Ltd].
Shares in [T] Pty Ltd held on trust for [David] and [Marc] – Winding up of [T] Pty Ltd
In the event that the relief sought in paragraphs 3, 4, 5, 6 and 11 be refused, then in the alternative:
50.    That Mr [Z] be removed as trustee of any shares and loan accounts in [T] Pty Ltd beneficially owned by each of [David Kendling] and/or [Marc Kendling] and the wife shall be appointed as the sole trustee thereof in his stead and the husband shall be restrained from doing any act or thing in exercise of his power to appoint or remove trustees pursuant to either of the settlements described in Schedule 2.
51.    Subject to order 50 first being made, that pursuant to s.233 or alternately s.461 Corporations Act [T] Pty Ltd shall be wound up.
52.    That Mr [MG] be appointed as liquidator of [T] Pty Ltd.
53.    That in the event that the application to wind up [T] Pty Ltd is refused, then in the alternative, pursuant to s. 233 Corporations Act, [Jeremy Kendling] and [Penelope Kendling] shall, in such proportions as this court determines, purchase the shares held by each of [David Kendling] and [Marc Kendling], at fair market value determined in these proceedings unencumbered by any discount for lack of control, marketability or minority interest.

Real Estate held on Trust for [David] and [Marc]

54. That the husband be removed as one of the joint trustees for each of [David Kendling] and [Marc Kendling] of properties held by them at [T] such that the wife shall thereafter be the sole trustee thereof.
55. That consequential upon order 54, the husband shall sign all documents necessary to acknowledge and effect a transfer of any legal title as trustee from him to the wife in respect of the properties situate at [T] and comprised in Folio Identifiers:
(a)9/SP […] – [Marc]
(b)1/SP […1] – [David]

And further, he shall within 28 days account to the wife for all income and payments received and made by him in respect of such properties, in writing, delivered to her solicitors and shall pay to her as trustee all monies held by him and derived from the trust properties.

Indemnities, Liabilities and Injunctions

56.    That [T] Pty Ltd shall be and is hereby restrained from doing any further act or thing or taking any step in proceedings in the Supreme Court of New South Wales being suit No. […] of 2005 instituted by [W Pty Ltd] and the wife other than consenting to an order for the dismissal of those proceedings.
57.    That the husband shall henceforth indemnify and keep indemnified each of [W Pty Ltd] and the wife in respect of all loss, damages and amounts that either of them may suffer as a consequence of the proceedings referred to in order 56 including the consequence of any costs order made against either of them.
58.    That the husband shall henceforth indemnify and keep indemnified the wife in respect of all and any actions claims or demands as may be made against her by any person, corporation or entity by reason of her having been paid any moneys, or provided with any benefits, or being deemed to have been provided with any benefits by any company associated with the husband including but not limited to [B] Ltd and [T] Pty Ltd resulting in the issue of any assessment or amended assessment of taxation to her.
59.    That the husband shall henceforth indemnify and keep indemnified [W Pty Ltd] in respect of any action claim or demand made against [W Pty Ltd] by [B] Ltd or [T] Pty Ltd or any other person, corporation or entity as a consequence of the alleged indebtedness of [W Pty Ltd] to [B] Ltd and the subsequent assignment of that debt to [T] Pty Ltd or to any other person or entity.
60.    That the husband shall henceforth indemnify and keep indemnified the wife in respect of any action claim or demand made against her by any of [B] Ltd, [T] Pty Ltd, any subsidiary of either, or any other company in which the husband has at any time had an interest, been a shareholder of, or a director of, in respect of any indebtedness or alleged indebtedness of the wife to such company pursuant to any loan account or pursuant to any act or event or omission arising prior to the date upon which these orders are made.

Cash Payment

61. That within two calendar months the husband shall pay or cause to be paid to the wife or as she may direct in writing such cash sum as this court may determine is a proper adjustment having regard to all assets and notional assets of the parties as to result in the wife receiving assets in specie together with such cash payment equating to 45% of the net property (inclusive of notional property of the parties).

Other Property

62. That other than is dealt with specifically by these orders it be declared that each of the husband and the wife are solely entitled at law and equity to all items of property in their respective possessions.

Security

63.    That all property of the husband as identified and described in schedule 1 hereto shall be and hereby is subject to a charge in favour of the wife to secure his compliance with all obligations imposed upon him pursuant to these orders, including but not limited to the payment of the cash sum pursuant to order 61 herein, such charge to confer upon the wife all rights of a chargee as set out in s.109 Conveyancing Act (NSW) and further he shall execute within 7 days a deed or charge in favour of the wife, in the form exhibited in these proceedings, providing security over all of his shares in [B] Ltd and he shall pay all duties, if any, arising in respect of such charge.
64.    That pending the husband’s compliance with all obligations to the wife pursuant to these orders he shall be and hereby is restrained from doing any act or thing to charge or encumber his interest, including shares, in each of [T] Pty Ltd and [B] Ltd, other than encumbrance limited to the sole purpose of raising funds to satisfy his obligation to the wife pursuant to these orders and shall be restrained from doing, causing or permitting any act or thing to be done that has the effect of allotting further shares in either company or causing or permitting anything to be done that diminishes the value of his interest in either company.
65.    The wife shall have liberty to apply in respect of the implementation of these orders on 7 days notice.

Costs

66. That within 28 days of service of an account by the solicitors for the wife, the husband shall pay to the wife a sum equivalent to the totality of the costs and disbursements that both she and [W Pty Ltd] incurred in proceedings No. […] of 2005 instituted by [W Pty Ltd] in the Supreme Court of New South Wales.
67. That the husband shall pay the wife’s costs of and incidental to these proceedings on an indemnity basis, including those costs reserved from interlocutory proceedings.

Schedule 1

The husband’s interest in [B] Ltd.
The husband’s interest in [T] Pty Ltd.
The husband’s interest in the property situated at and known as the [G] property.
The husband’s interest in the [Netherlands] property.
All other property of the husband.

Schedule 2

1. The settlement described as the “[David T Pty Ltd] Trust” constituted by deed dated 23 October 2003 between [Jeremy Kendling] as settlor and the husband as trustee.
2. The settlement described as the “[Marc T Pty Ltd] Trust” constituted by deed dated 23 October 2003 between [Penelope Kendling] as settlor and the husband as trustee.

In the property proceedings the Husband seeks the following:
NOTATIONS
1. The following definitions are noted for the purposes of these Orders:
A.1."[Apartment in Germany]” means the bedsitter apartment situated in [Germany] of which the husband is the owner and which is subject to a protected tenancy;
A.2."[W Pty Ltd]" means the company [W Pty] Limited ACN […] of which the wife is the sole director and shareholder;
A.3."[B] Ltd" means the company [B] Limited ACN […] of which the husband is a director and in which the husband holds 40,500,005 fully paid ordinary shares;
A.4."[B] Ltd loan" means the loan secured under unregistered mortgage to [B] Limited, secured upon the title to the [R1] property as second mortgage;
A.5."[G] property" means the property situated at and known as the [G] property in the State of New South Wales being the whole of the land contained in Folio Identifier 1/[…]0 together with the improvements, fixtures and fittings erected on and attached to it, of which the husband is the registered proprietor;
A.6."[G] property loan" means the loan secured under mortgage registered number U[…] to Westpac Banking Corporation and secured upon the title to the [G] property;
A.7."[G] property furniture and effects" means the furniture and household effects located at the [G] property and owned by the husband;
A.8."[R1] property" means the property situated at and known as “[R1]” in [MX] in the State of New South Wales being the whole of the land contained in Folio Identifier […] together with the improvements, fixtures and fittings erected on and attached to it, of which the husband and wife are the joint registered proprietors;
A.9."[R1] furniture and effects" means the household furniture and effects at the [R1] property owned by the husband but excluding the artworks and large screen TV at that property which is the property of [B] Ltd.
A.10"Westpac home loan" means the loan secured under mortgage registered number A[…] to Westpac Banking Corporation, secured upon the title to the [R1] property.

THE HUSBAND SEEKS AN ORDER UNDER SECTION 79 OF THE FAMILY LAW ACT, 1975, IN TERMS OF THE FOLLOWING PARAGRAPHS 2 TO 10 AND FURTHER ORDERS IN TERMS OF PARAGRAPHS 1 AND 11 TO 13 FOLLOWING THAT:

1. That the Orders sought in paragraphs 1 to 15 of annexure A under the heading Property in the Response to an Application for Final Orders filed on 10 March 2006 by the wife be refused and that the Response in respect of all Orders sought under the heading Property be dismissed.

2. That the husband within 3 months of the date of the making of this order do all acts and things and execute all documents necessary to:
2.1Transfer to the wife all his right, title and interest in the [R1] property free from all encumbrances;
2.2Simultaneously with the transfer of his interest in the [R1] property to the wife cause both the [R1] property and the wife to be released as the security for and from liability in respect of all monies owing under the Westpac home loan and under the [B] Ltd loan;
2.3Transfer to the wife all his right, title and interest in the [R1] furniture and effects;

2.4Pay or cause to be paid to the wife an amount equal to 20% of the net asset pool of the parties as determined by this Honourable Court less the net value of all other assets retained by or transferred to the wife pursuant to this order.

3.     That the wife may continue to occupy the [R1] property until the transfer to her of the husband’s interest in the [R1] property pursuant to this order but shall be responsible for and shall pay all outgoings including but not limited to statutory rates and charges and land tax, telephone, gas and electricity accounts in relation to the [R1] property up to the date of transfer of the husband’s interest in the [R1] property to her.
4.     That within 14 days of the date of this Order the wife transfer and assign to the husband any and all interests she has with [B] Ltd, including the loan account in the name of the wife.
5.     Except as specifically provided for by this Order to the contrary, as against the husband, the wife is the sole owner of and the husband has no interest in:
5.1the wife’s shareholding in [W Pty Ltd];
5.2all other personal property (including choses in action) of whatsoever nature and kind in the possession of the wife at the date of the making of this Order.

6. Except as specifically provided for by this Order to the contrary, as against the wife, the husband is the sole owner of and the wife has no interest in:
6.1the [G] property;
6.2the [G] property furniture and effects;
6.3the [Apartment in Germany];
6.4the husband’s shareholding in [B] Ltd;
6.5all other personal property (including choses in action) of whatsoever nature and kind in the possession of the husband at the date of the making of this Order.

7.     Both parties do all acts and things and execute all documents, authorities and writings as are necessary to give effect to all or any of this Order.
8.     That as and from the date of this Order, the wife shall indemnify and keep the husband indemnified in relation to any action, claim or demand made against the husband by any person, corporation or entity by reason of the husband having any interest in [W Pty Ltd].
9.     Except as specifically provided for by this Order to the contrary:
9.1the husband indemnify the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to all liabilities in the name of the husband;
9.2the wife indemnify the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to all liabilities in the name of the wife.

10.    Except as specifically provided for by this Order to the contrary, each of the husband and the wife release the other from all debts owing from one to the other.
Other Orders
11. In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these Orders then the Registrar of the court be appointed pursuant to Section 106A of the Family Law Act 1975 to execute such deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the deed or instrument.
12.    Each party have leave to apply further in respect of the implementation of any of these Orders on seven (7) days' notice to the other party.
13.    The wife pay the husband's costs of and incidental to these proceedings.

In the property proceedings there is a substantial dispute as to the extent and value of the assets to be considered. The Wife contends that the matrimonial asset pool is very significant and includes interests in businesses, companies, real estate, artwork, furniture and personalty. The Wife contends that the parties own assets of considerable value however their financial affairs are complex. The Wife contends that she is unable to determine the asset pool although the value is probably in excess of $100,000,000. The Husband contends that the property interests have a value in excess of $40,000,000.
The proceedings have been before the court on numerous occasions. Both the Wife and the Husband have incurred very significant legal costs and disbursements.
In the property proceedings there are a number of respondents. The Second Respondent is T Pty Ltd. The Third Respondent is Jeremy Kendling who is the Husband’s son from a previous marriage. The Fourth Respondent is Penelope Kendling who is the Husband’s daughter from a previous marriage. The Fifth Respondent is L Pty Ltd. The Sixth Respondent is A Pty Ltd. The Seventh Respondent is Mr Z. The Eighth Respondent is B Ltd. The Ninth Respondent is I Pty Ltd. The Tenth Respondent is Mr PS.
T Pty Ltd was incorporated in New South Wales on 5 February 1971. The Husband was appointed a director on 5 February 1971. The directors are Jeremy Kendling and Penelope Kendling. There are 50,0001 issued shares. Penelope Kendling holds one “A” class share. Each of Penelope Kendling and Jeremy Kendling held 25,000 “B” class shares. However, Penelope Kendling and Jeremy Kendling acknowledged that 50 per cent of the “B” class shares were held in trust for the two children of the marriage.
In earlier proceedings it was contended that the directors were Jeremy Kendling, Penelope Kendling and Mr Z. Further, that Penelope Kendling holds one “A” class share and each of Penelope Kendling and Jeremy Kendling hold 12,500 “B” class shares. It was contended that Mr Z holds 25,000 “B” class shares on trust for the two children of the marriage.
Penelope Kendling swore an affidavit on 12 September 2007 and she said that there are two directors being herself and Jeremy Kendling. She also said that Mr Z holds 12,500 “B” class shares on trust for the child Marc and 12,500 “B” class shares on trust for the child David.
Penelope Kendling contends that the principle business activities of T Pty Ltd are the development and operation of residential accommodation facilities; the purchase, development and sale of real estate including, residential strata accommodation, commercial/retail premises; the operation of a hotel, motel and caravan park and the lease of real estate for holiday lettings, commercial/retail use and residential accommodation.
T Pty Ltd owns the following real estate:
·      E1 property
·      GM property
·      Q1 property
·      Q2 property
·      Q3 property
·      Q4 property
·      QE5 property
·      QE6 property
·      QE7 property
·      QW1 property
·      QW2 property
·      QW3 property
·      QW4 property
·      QW5 property
·      QW6 property
·      QW7 property
·      QW8 property
·      QW9 property
·      F1 property
·      F2 property
·      F3 property
·      RA property
·      RB property
·      RC property
·      RD property
Penelope Kendling contends that the real estate is valued in total at $66,226,000.
B Ltd was incorporated in New South Wales in March 1983. The Husband was appointed a director on 5 March 1983 and he remains a director. The other current directors are Mr S and Mr AH. There are 40,500,005 ordinary fully paid issued shares. There are 763 redeemable preference shares and 22,837,611 “premiums received on redeemable preference shares”. The ordinary shares participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held. At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The redeemable preference shareholders are not entitled to vote, nor do they participate in any dividend entitlements payable by the company.
B Ltd owned and operated the B Facility at KS in New South Wales.
In an earlier judgment I said that it was apparent to me from the history of the litigation and in particular on occasions when the matter has been before me that, prima facie there may have been attempts by the Husband and others to demonstrate that there is no relevant relationship between B Ltd and T Pty Ltd.
The Husband said that the relationship between B Ltd and T Pty Ltd is continuous, going back many years. At one time the Husband was a director and shareholder of T Pty Ltd. The Husband contends that he is now a consultant for T Pty Ltd.
The Wife contends that T Pty Ltd is the alter ego of the Husband. In an earlier judgment I said that the Wife provided particulars which she contended support this allegation. I said that the evidence prima facie supports an argument that the Husband has controlled and still controls T Pty Ltd. I said that the issue is how this company should be treated for the purposes of the property settlement proceedings and that on one view, it is a financial resource of the Husband and the issue is whether it is more than that.
The current proceedings arise out of the following transactions. B Ltd sold the B Facility. T Pty Ltd owed $30,081,322 to Members Equity Ltd. Members Equity Ltd had security for that debt that included mortgages registered on the title of the B Facility. B Ltd needed Members Equity Ltd to give up its security over B Facility to permit settlement of the sale. Contemporaneously with completion of the sale of the B Facility, T Pty Ltd borrowed $30,081,322 from B Ltd. T Pty Ltd provided a mortgage in favour of B Ltd securing the debt. T Pty Ltd contemporaneously applied the funds borrowed from B Ltd to repay all of its debt to Members Equity Ltd thereby discharging all of the registered mortgages in favour of Members Equity Ltd including the mortgage secured on the B Facility. T Pty Ltd also owed $13,000,000 to National Australia Bank. The National Australia Bank held registered mortgages on title to the E, Q (East) and R properties. T Pty Ltd also borrowed $1,000,000 from B Ltd and applied the funds in partial repayment of the National Australia Bank debt thereby obtaining from the National Australia Bank priority in favour of B Ltd up to $30,000,000. The advance of $30,081,322 and $1,000,000 and the existing debt of T Pty Ltd to B Ltd were consolidated and the subject of a written loan agreement for a five year term with interest accruing at a rate of 7 per cent per annum.

Background

I have delivered a number of judgments in the proceedings and in particular a judgment in relation to an application by the Wife for costs. In a previous judgment I set out some of the relevant background facts and history of proceedings and it is necessary to consider what I said in that judgment. I incorporate in this judgment what I said in my earlier judgment in relation to the background facts, the history of the proceedings and the issues that have to be adjudicated upon at the hearing of the applications for final orders.
What I am going to set out is what the evidence reveals has happened since the hearing that concluded on 21 May 2007. However to put the current proceedings into context I will include some of that I previously said and as well I will refer to some additional evidence that may form part of the previous history.
By deed dated 28 October 2003 the Marc T Pty Ltd Trust was established. The settlors were Penelope Kendling and the trustee was the Husband. It was recited that Penelope Kendling desired to transfer 12,500 shares in T Pty Ltd to the trustee in trust for the child Marc. The power of appointment of the trustee was vested in the original trustee.
On 13 September 2005 Penelope Kendling wrote to the child Marc. The letter was titled gift of 12,500 shares in T Pty Ltd to be held in trust by the Husband until “you have reached the age of 30”. It was said that the gift was conditional upon the child reaching the age of 30.
By deed dated 28 October 2003 the David T Pty Ltd Trust was established. The settlor was Jeremy Kendling and the trustee was the Husband. It was recited that Jeremy Kendling desired to transfer 12,500 shares in T Pty Ltd to the trustee in trust for the child David. The deed is similar to the trust deed establishing the Marc T Pty Ltd Trust.
On 13 September 2005 a letter was written by Jeremy Kendling to David Kendling. It is similar to the letter dated 13 September 2005 which Penelope Kendling wrote to the child Marc.
On 17 September 2004 I Pty Ltd purchased the F1 property for $340,000.
On 29 October 2004 I Pty Ltd purchased the F3 property for $350,000.
On 29 October 2004 I Pty Ltd purchased the F2 property for $663,000.
The Wife contends that on 16 November 2004 B Ltd sought from Members’ Equity Ltd approval for a $1,000,000 interest only cash advance “… to purchase two parcels of land situated at [F], NSW” and this loan was approved. The memorandum which was considered by the credit risk committee of Members’ Equity Ltd noted the following regarding the F properties:
All properties are being purchased under a newly formed corporate entity [I] Pty Ltd whose sole shareholder is a [Mr PS] and directors of [Mr PS] and [Mr LP]. Mr [Kendling] is the ultimate owner of this company with a separate agreement and signed transfer of share notice held by Mr [Kendling] (executed by Mr [PS]).
It will be seen later that on 3 May 2007 the then solicitors for the Husband advised the solicitors for the Wife that the Husband had no interest in I Pty Ltd.
A tax invoice dated 6 June 2005 was sent by T Pty Ltd to B Ltd. The amount charged in the invoice was $12,000,000 being a fee of $11,500,000 plus goods and services tax of $1,150,000. The document was transmitted to the Wife’s lawyers at 11.12 pm on 28 March 2007.
In July 2005 a mortgage was granted by T Pty Ltd to Industry Funds Management (Nominees 2) Pty Ltd securing an advance of $30,500,000 and it was guaranteed by the Husband.
On 16 November 2005 T Pty Ltd drew down $8,030,576.55 from a facility with Members' Equity Ltd being account no. 9…. Penelope Kendling contends that this facility was pursuant to a letter of offer from Members' Equity Ltd dated 12 May 2005. Penelope Kendling contends that the funds have principally been used to acquire further parts of Q (West) locations, make advances to I Pty Ltd in relation to the F location, fund development of what she called the G location and fund the day to day operations of T Pty Ltd.
On 28 August 2006 T Pty Ltd entered into a contract to purchase the RC property for $4,100,000. The settlement occurred in September 2006.
The Husband exhibited to his affidavit of 13 September 2007 a bundle of what he described as quotations and agreements from a number of sub-contractors who have been engaged by B Ltd to carry out work on the development at G2. A number of these documents are addressed to Jeremy Kendling and at least one of the documents being an agreement dated 6 December 2006 between B Ltd and … Excavations Pty Ltd was signed by Jeremy Kendling on behalf of B Ltd. The Husband exhibited a tender document from … Lifts Pty Ltd with respect to the development and contended that the tender has not been accepted by B Ltd. I note that it was sent to the company for the attention of Jeremy Kendling.
On 13 March 2007 B Ltd entered into a contract to sell the property on which the P Business is situated for $4,500,000. The Husband said “I understand” that the P Business, which he contends was owned by T Pty Ltd, was sold for $6,500,000. He went on to say that on completion of the sale the proceeds would be paid to Members Equity Ltd to reduce a loan facility of $14,500,000 to $10,000,000. As well, B Ltd had a debt to the National Bank for $2,400,000.
The Husband swore an affidavit on 20 March 2007 in which he gave evidence as to his financial circumstances. He gave no evidence about any negotiations to sell the B Facility.
In his affidavit of 20 March 2007 the Husband contends that B Ltd provides contract services to T Pty Ltd by way of project management and construction of development projects. The basis of the contractual services is that B Ltd carries out and is responsible for design costs, council applications, building approvals and permits and provides the project management with construction services and is paid on conclusion and sale of each project. The Husband contends that this arrangement has operated satisfactorily to the benefit of B Ltd over a number of years. The Husband said that B Ltd is the project manager and construction company for a development being conducted by T Pty Ltd at RA. He went on to say that T Pty Ltd and B Ltd “are not group entities” and that T Pty Ltd is not controlled by him, nor is he a director or shareholder of the company. He could not recall signing a letter dated 22 March 2004 in relation to a change of borrowing entities but said that he may have done so on the advice of an accountant. He said that he does not know and cannot admit how the two companies are treated by Members Equity Ltd and that the role of B Ltd in relation to the R project is solely as project manager of the construction company and that he has been informed it is being financed by the National Australia Bank.
On 18 April 2007 the then solicitors for the Husband wrote to the solicitors for the Wife and advised that they were instructed to advise the Wife of the proposed sale of the business and the property known as the B Facility. Further, the solicitors advised that the agreed terms of the sale were as follows:
·The parties to exchange contracts for sale with a settlement date by 31 October 2007.
·A purchase price of $39,000,000.
·The purchaser to pay a deposit of $1 upon exchange of contract.
·B Ltd would remain liable to pay the redeemable preference shareholders for the next 15 years and after that period the purchaser would be responsible for the payment of any such amounts.
·B Ltd would obtain a bank guarantee of $5,000,000 to be topped up each year for 15 years to meet its commitments to the redeemable preference shareholders and such guarantee to be maintained at that level.
·Adjustments of land rates, land tax and leave entitlements to employees.
Further it was said “We are instructed [B] Ltd will pay the existing mortgage to Members’ Equity Bank. The balance of the monies will be invested (emphasis added)”.
On 19 April 2007 the Husband swore an affidavit and said that he had effectively negotiated a sale of the B Facility operated by B Ltd to the purchaser of the P Business.
The Husband said that B Ltd and T Pty Ltd have a long commercial association primarily as a result of his relationship to the directors of T Pty Ltd. He said that he is the sole director of B Ltd and makes decisions in respect of the company’s activities. He said that he has been involved with the company since its inception. He was responsible for the establishment of the residential accommodation facility and he has had “the primary operation for the establishment” of the business over the past 24 years and he has developed considerable expertise in the business. He went on to say that T Pty Ltd is engaged in the same industry; that is, the residential accommodation industry and the like. He contends that his children Jeremy Kendling and Penelope Kendling have sought his advice regarding various matters relating to T Pty Ltd and its various businesses such as the P Business, the D Business and the ML Facility. He said that he has at all times been willing to provide that advice and assist and support them in the operation of the company’s various businesses and he has encouraged and supported them in their operation of their company and their various businesses.
I refer to my earlier judgment as to what transpired subsequent to 19 April 2007. On 1 May 2007 a contract for sale was entered into between B Ltd as vendor and PC Holdings Ltd in its capacity as responsible entity of the P Property Trust as purchaser. B Ltd agreed to sell properties at S on which was erected the facility known as the B Facility together with business assets identified in the contract.
On 1 May 2007 B Ltd entered into a conditional agreement with Mr KJ and PC Holdings Ltd whereby Mr KJ agreed to acquire certain redeemable preference shares in B Ltd representing each residence at the B Facility that as at the date of completion were vacant, for which the outgoing resident had given a notice of redemption of his or her shares and for which B Ltd had paid the relevant redemption amount to the outgoing resident.

On 1 May 2007 Mr KJ and PC Holdings Ltd as guarantor entered into a guarantee and indemnity agreement with B Ltd whereby the guarantor agreed to guarantee and indemnify B Ltd for the payment of various payments referred to in applications for shares referred to in the conditional contract.
The contract for sale had a completion date of 30 October 2007 although it was envisaged by the purchaser under the contract that settlement may be completed earlier than the completion date provided for in the contract.
Z Lawyers were the solicitors for B Ltd in relation to the sale.
On 1 May 2007 the Husband wrote to Mr Z instructing him to write to the solicitor for the purchaser agreeing that the deposit of $2,000,000 would be paid at exchange of contracts and the settlement date may be advanced to 31 August 2007 “as funds are available to make full payment by that date”.
On 2 May 2007 Madgwicks Lawyers, who acted for the purchaser of the B Facility, wrote to Z Lawyers in relation to the sale of the B Facility. It was said that while the purchaser was prepared to use all reasonable endeavours to settle the purchase by 31 August 2007 it was intended that settlement would be contemporaneous with the transfer of the approved places of the P Business and that accordingly the solicitors were instructed to advise that the settlement date in the contract should remain as 31 October 2007 and that the purchaser would endeavour to settle on an earlier date namely 31 August 2007 or the date upon which the P Business places were transferred to the purchaser if it was later than 31 August 2007.
On 3 May 2007 the then solicitors for the Husband advised the solicitors for the Wife that the Husband “has no interest in ‘[I] Pty Ltd’”.
On 3 May 2007 the solicitor for B Ltd sent a facsimile transmission to the solicitors for the Wife attaching a copy of the counterpart contract for sale of land for the sale of the B Facility dated 1 May 2007 and also the conditional agreement.
On 25 May 2007 I made the following orders:
1.     The Husband pay into the trust account of the Wife’s Solicitors, Messrs Michael Conley Solicitors the sum of $1,100,000 such sum to be paid as follows:
1.1 by 4.00 pm on 20 June 2007 the amount of $550,000.
1.2by 4.00 pm on 28 July 2007 the amount of $550,000.
2      The determination as to whether the sum referred to in Order 1 hereof be treated as part of the Wife’s entitlement to property settlement, the provision of maintenance for the Wife, or in payment by the Husband of the costs of and incidental to these proceedings, be reserved to the trial judge at the final hearing of these proceedings.
3      Any monies received by or on behalf of the Wife pursuant to Order 1 hereof be utilised on account of the Wife’s costs in prosecuting her claims in these proceedings, including costs (outstanding and future) in relation to solicitors, counsel, accountants, valuers, and other legal costs and disbursements including process servers fees and conduct money.
4.     The Wife shall account at the final hearing for monies so received and disbursed.
On 25 May 2007 Mr Z sent an email to the solicitor for the purchaser in which he confirmed that the deposit of $2,000,000 was deposited on 2 May 2007 “into the trust account I hold for [T] Pty Ltd”. It related to the deposit paid for the sale by B Ltd of the B Facility and Mr Z put the deposit into a trust account for T Pty Ltd.
The Wife contends that in accounts for previous years T Pty Ltd was recorded as owing B Ltd approximately $18,000,000. It is submitted that without explanation that amount was dramatically reduced. It is contended that to justify this on 1 June 2007 an invoice was faxed by Mr M to Mr V purporting to charge for fees. The invoice is dated 6 June 2005 and the amount charged in the invoice is $12,650,000. It is said to be a charge for:
·Subcontractor labour services including supervision and on costs to building sites during the financial years ended 30 June 2003 to 30 June 2005.
·Provision of laundering services including wages component and on costs for the ten year period ended 30 June 2005.
·Fees for night staff accommodation for the ten year period ended 30 June 2005.
·Supervision and emergency calls for the ten year period ended 30 June 2005.
On 6 June 2007 Penelope Kendling wrote to Mr V of Members Equity Bank Ltd and advised in relation to three identified loan accounts that:
·It was intended to pay Members’ Equity the sum of $21,000,000 on 31 August 2007.
·That interest payment due to be issued in the normal manner on 7^th of month.
·The mortgage still on the Q property be released.
·Leaving the D Business security (E) with Members’ Equity Ltd.
·That the National Australia Bank retain a second mortgage over E leaving a sum of $9,000,000 as the mortgage debt.
This letter was written on the letterhead of T Pty Ltd. In summary, on 6 June 2007 Penelope Kendling advised Members’ Equity Ltd that on 31 August 2007 T Pty Ltd would pay $21,000,000 to Members Equity Ltd in relation to the three identified loans accounts in the name of T Pty Ltd.
On 6 June 2007 the Husband wrote to Mr V of Members’ Equity Ltd in relation to the B Ltd mortgage for $10,000,000 from Members’ Equity Ltd. The Husband advised Mr V that it was intended to “repay this amount on the 31 August 2007”. The inference to be drawn from the letters of 6 June 2007 that the Husband and Penelope Kendling wrote to Members’ Equity Ltd is that it was anticipated by the Husband, Penelope Kendling, T Pty Ltd and B Ltd that settlement of the sale of the B Facility would take place on 31 August 2007 and that the whole or a significant portion of the debt of T Pty Ltd would be repaid.
On 7 June 2007 Mr Z wrote to Westpac Bank seeking a transfer of $2,003,479.56 from the T Pty Ltd/Q settlement account to a term deposit account headed “[T] – CM – [B Ltd]/[PC Holdings Ltd]”.
On 12 June 2007 the then solicitors for the Husband wrote to the solicitors for the Wife and advised that they were instructed by the Husband that he had unsuccessfully sought to borrow money against his shareholding in B Ltd. The solicitors enclosed copies of correspondence. It was said that the Husband was therefore unable to borrow funds to meet his obligation to comply with the interim costs order. Further that the solicitors were instructed that the Husband had sought expressions of interest in respect of a sale of 10 per cent of his shares in B Ltd to fund payment of the interim costs order and to meet his ongoing legal costs and disbursements. Copies of various correspondence was also enclosed which was said to be in respect of that possible sale. It was said that the Husband had no means other than by way of the sale of part of his shares in B Ltd to meet his obligations under the order. Further, that if no objection was received from the Wife to the proposed sale the Husband intended to proceed with the sale at 5.00 pm on Friday 15 June 2007 and enter into a contract for sale on Monday 18 June 2007.
On 18 June 2007 the solicitors for the Wife wrote to the solicitors for T Pty Ltd and stated that in order to ensure that there was no ambiguity the solicitors wished to make it clear that in the claims concerning T Pty Ltd the Wife will pursue a number of fundamental findings in the alternative. Thereafter there is set out what the Wife’s contentions will be. I do not propose to refer to all of what is in the letter however, I will identify some matters. The Wife contends that the Husband is the true owner of the whole of the issued share capital of T Pty Ltd. The Wife contends that T Pty Ltd is the alter ego or puppet of the Husband. In the event that these contentions are unsuccessful then the Wife will contend that B Ltd is the true owner of all of the property and liabilities of T Pty Ltd including subsidiary companies as a consequence of the operation of the principal in Barnes & Addy (1874) LR 9 Ch App 244. Further, that T Pty Ltd holds all of its property upon trust for B Ltd. It was further contended that in the event that the Barnes & Addy contention was unsuccessful then there were certain transactions between B Ltd and T Pty Ltd or outlays by B Ltd for the benefit of T Pty Ltd whereby T Pty Ltd has been the recipient of value and such transactions ought to be set aside pursuant to s 106B of the Family Law Act1975 (Cth) or s 37A of the Conveyancing Act 1919 (NSW).
On 18 June 2007 the solicitors for the Wife wrote to the solicitors for Penelope Kendling, Jeremy Kendling and L Pty Ltd and others. This letter was very similar to the letter of the same date that was written to the solicitors of T Pty Ltd. It was stated that at the hearing the Wife proposed to pursue a number of fundamental findings in the alternative including that the Husband is the true owner of the whole of the issued share capital in T Pty Ltd; that T Pty Ltd is the alter ego or puppet of the Husband and so on. I am not going to repeat all of what is set out in some detail in the letter.
On 26 June 2007 the then solicitors for the Husband wrote to the solicitors for the Wife and advised that they were instructed that the Husband had no means to meet his obligation to comply with the interim costs order unless he disposed of some assets. It was said that the Husband had no option but to proceed with a sale of part of his shareholding in B Ltd and as previously indicated he was hopeful of being able to sell a 10 per cent parcel of his shareholding for $2,500,000. It was stated that the Husband was hopeful that the sale could be completed on or before 4 July 2007.
On 21 June 2007 an application was filed which came before Cohen J on 4 July 2007. On that day his Honour made the following order:
1. That pending further or final the husband is hereby restrained from assigning, transferring, selling, encumbering by mortgage, charge or by any means dealing with or disposing of his interest or any part of his interest at law or in equity in [B] Ltd and from doing or failing to do any act, or thing, or executing any document which has the effect of diminishing the value of [B] Ltd except in the course of managing the day to day business of the said company.
The Husband put into evidence a fee agreement dated 26 June 2007 between U Architect Pty Ltd and VM Consulting in relation to structural engineering services to be supplied with respect to the development of the G2 property.
The Husband put into evidence a copy of a valuation report dated 30 June 2006 which valued the G2 property at $4,150,000.
On 2 July 2007 Mr V of Members’ Equity Ltd wrote to the Husband referring to a recent request by the Husband and said that no formal investigations were undertaken as to the ownership of the land at F as it was not taken as security. Mr V said it was the bank’s understanding that the land was acquired from a third party and that the Husband was not a shareholder or director of I Pty Ltd. Mr V said that had the bank been advised that the Husband was a director or shareholder, or B Ltd or T Pty Ltd were shareholders of I Pty Ltd then under normal banking practice the bank would have most likely requested additional security in the form of a guarantee from I Pty Ltd.
Penelope Kendling exhibited to her affidavit of September 2007 a copy of a valuation report dated 12 July 2007 of the F2 property. She also exhibited a copy of a valuation report dated 10 July 2007 of the F1 property
There was put into evidence a copy of a Members’ Equity Ltd credit risk committee meeting summary dated 18 July 2007. I am not going to repeat all of what is in this document. It refers to a credit assessment memorandum dated 9 July 2007 on behalf of the “[B Ltd]” seeking approval for some three identified matters which included the release of security over the B Facility following the sale of the facility and that $31,000,000 be applied towards permanent reduction of Members’ Equity Ltd credit facilities and $8,000,000 towards National Australia Bank credit facilities. This amount of $31,000,000 to be applied in reduction of credit facilities with Members’ Equity Ltd could only be the $10,000,000 debt of B Ltd which the Husband referred to in his letter of 6 June 2007 to Members’ Equity Ltd and the amount of $21,000,000 referred to in the letter of 6 June 2007 written by Penelope Kendling. The inference to be drawn is that as at 18 July 2007 Members’ Equity Ltd had the expectation that B Ltd would lend $21,000,000 to T Pty Ltd and T Pty Ltd would then use this money to reduce the amount of its indebtedness to the bank.
On 20 July 2007 Mr Z wrote to the solicitor for the purchaser of the B Facility and advised that he was preparing for settlement of the sale and requested that the solicitor for the purchaser forward a draft copy of the bank guarantee that the purchaser intended to supply to B Ltd. Mr Z said “we will need to obtain instructions on the draft bank guarantee to ensure that it is consistent with the terms of the contract for sale”.
On 20 July 2007 the Husband wrote to Mr M in relation to the sale of the B Facility.
The Husband put into evidence a fee agreement dated 25 July 2007 between U Architect Pty Ltd and a firm of quantity surveyors and project control services called VM Partnership with respect to quantity surveying services to be supplied in relation to the development of G2.
On 31 July 2007 the Husband wrote to Mr Z and said “1. Ref proposed Loan [T Pty Ltd] please cancel request of 30/7/07 and return or shred the letter”.
On 1 August 2007 the National Australia Bank wrote to Penelope Kendling, care of B Ltd. The author of the letter referred to “our discussions regarding continuance of your approved $13,000,000 dollar facility following the release of this being second mortgage security of the real estate that comprises [B Ltd]”.
The Husband contends that in early August 2007 he had a conversation with Mr V of Members’ Equity Ltd. The Husband contends he requested that Members’ Equity Ltd consent to a discharge of the mortgage secured on properties owned by B Ltd for the benefit of T Pty Ltd. The Husband contends that he requested consent to a discharge against payment of $10,000,000.
On 8 August 2007 the solicitors for the Wife wrote to the then solicitors for the Husband in relation to the sale of the B Facility and related matters. A request was made that by 5.00 pm on 10 August 2007 advice be provided as to the progress of the sale and the anticipated settlement date, particulars of how the Husband and/or B Ltd intended to deal with the proceeds of sale specifying the amounts intended to be directed to mortgagees and other places and in the event of a significant payment to any mortgagee whether B Ltd had the capacity to redraw that facility or any part of it. It was further said that the Wife was anxious to ensure that a substantial part of the proceeds of sale were preserved in order to be available to the Husband to properly meet the Wife’s claim and that in the event that an appropriate accommodation could not be reached between the parties then it would inevitably be a matter upon which the Wife would seek appropriate orders. A request was made that the Husband put forward a proposal that he would see as appropriate for consideration by the Wife and the protection that the Husband was willing to afford the Wife. Further it was said that the solicitors for the Husband should not respond by suggesting that all or a part of the enquiry ought to be made to the solicitors for B Ltd because it has been acknowledged repeatedly in the proceedings including by the solicitors for B Ltd that their instructions come from only one source, being the Husband. As it transpired this request was ignored.
On 9 August 2007 an amended response was filed on behalf of the Wife.
On 10 August 2007 a sealed copy of the Wife’s amended response filed on 9 August 2007 was served on an employee of M & Co who accepted service on behalf of I Pty Ltd. M & Co was the registered office of I Pty Ltd.
On 13 August 2007 Mr Z wrote to the Husband in relation to the sale of the B Facility and advised that the Wife’s solicitors had “…requested updated disclosure advice, regarding how the proceeds of sale would be dealt with, mortgagee, costs etc”. Mr Z said:
Please confirm that we are to instruct Mr Wenden to inform Mr Conley the following:
In general terms:
1.     All registered securities will be paid out, followed by;
2.     All outstanding redemptions, followed by;
3.     Certain debts yet to be determined;
4.     Balance as directed by the company.
Mr Z must have then received instructions from the Husband because on 13 August 2007 Mr Z wrote to Mr Wenden the solicitor for B Ltd in relation to the sale of the B Facility and confirmed that the Husband’s instructions were:
…[y]ou are to inform the wife’s solicitors the following:
In general terms:
1.     All registered securities would be paid out, followed by;
2.     All outstanding redemptions, followed by;
3.     Certain debts yet to be determined;
4.     Balance as directed by the company.
Mr Z also said that he would be on leave until 20 August 2007 and that he expected to be in receipt of “all cheque directions by the end of next week”. The inference is that by 13 August 2007 Mr Z was expecting that the settlement would be imminent.
Then in accordance with the instructions Mr Wenden received on 13 August 2007 from Mr Z, on the same date Mr Wenden wrote to the solicitors for the Wife referring to the letter of 8 August 2007 addressed to the solicitors for the Husband. It was stated that the solicitor for the Husband had referred the letter to the solicitor for B Ltd as the solicitor for the Husband did not act for the company. Mr Wenden said that his instructions were that the settlement was subject to government approval of the transfer of the business and that the company had not as yet been notified as to a settlement date. Mr Wenden said:
The proceeds of sale will be dealt with as follows, namely payment of the current Mortgagee, payment of all outstanding Redemptions followed by the payment to trade creditors of [B] Limited of current debts incurred in the ordinary course of business, yet to be determined with the balance of approximately $35M to be invested with the National Australia Bank to meet the payments due to Redeemable Preference Shareholders as they fall due in the future”.
Mr Wenden said that details of the redemptions could not be given until such time as applications are made. He also said that the amount due to trade creditors in the normal course of business cannot be determined except on a specific date. Finally Mr Wenden said that “The Facility owed by [B] Limited to its Mortgagee will be paid out in full and the Mortgage will be discharged”.
Pausing there, the Wife contends that B Ltd has indemnity from the purchaser of the B Facility with respect to ongoing liabilities to redeemable preference shareholders and that the agreement was that incoming purchaser would provide a $5,000,000 bank guarantee. This was varied without notice to the Wife.
The Husband contends that as at 13 August 2007 he did not know the settlement date of the sale of the B Facility or that the proceeds of sale would be disbursed other than in accordance with paragraph 2 of the letter dated 13 August 2007 written by the solicitor for B Ltd to the solicitors for the Wife. The letter of 13 August 2007 was written on the instructions of the Husband to Mr Z.
There was put in evidence a three page summary of the costs of completion of the building works prepared by U Architect Pty Ltd on 13 August 2007. The Husband contends that the document reveals that the cost of the building works relating to the development at G2 is $23,830,500 including goods and services tax. The Husband however, expects the final construction costs to be $21,664,091 including goods and services tax. The Husband contends that to date approximately $6,500,000 has been spent on the site which includes the purchase costs of $4,500,000 and $1,500,000 being allocated to design, development application, building application, permits, drainage and payment of employees and subcontractors. He contends that the amount spent to date was paid from the cash flow received by B Ltd from its past construction operations, its facility operations and the loan from the National Australia Bank of $2,400,000. The loan from the National Australia Bank was repaid from the proceeds of sale of the B Facility.

There was put into evidence a copy of an email dated 13 September 2004 from the National Australia Bank to Penelope Kendling in which it was stated that the terms and conditions of the loan agreement and mortgage between T Pty Ltd and B Ltd “are satisfactory to the bank as the proposed second mortgage over the properties we currently hold a mortgage over, known generally “The [QE]”, “[D Business]” and “[ML Facility]”.
On 14 September 2007 a response to an application in a case was filed on behalf of B Ltd seeking that the application in a case of the Wife filed on 10 September 2007 be dismissed and that Orders 1 made on 4 September 2007 be discharged and Order 8 made on 6 September 2007 be discharged.
The Husband exhibited to his affidavit of 13 September 2007 what he described as the summary of wages and salaries paid in August 2007 totalling $103,951.39 and also subcontractors of $89,847.93. I observe that Jeremy Kendling was not identified as a person to whom wages and salaries were paid or as a subcontractor.
The Husband contends that he estimates that B Ltd will be required to pay by the end of September 2007 wages and salaries and further construction costs and other expenses he identified of not less than $300,000. He contends that averaged over the length of time it will take to complete the development the average monthly expenditure will be at least $1,000,000. He contends that if B Ltd is not able to encumber the site and in the event that he is not able to borrow against the $3,300,000 on deposit with the National Australia Bank the G development will cease. He contends that as well B Ltd would be prevented “from enhancing its financial position to further secure its redeemable preference shareholders” and that this would mean that no further subcontractors would be able to be engaged by the company and the company would not be able to direct any of its current subcontractors to carry out any work on the development because there would be no funds to pay them. He also contends that if work ceases on the development the site will physically deteriorate and significant costs would be incurred “to restart it”. He also contends that if the development cannot be completed then the company would be exposed to claims for breach of contract with respect to professional services agreements. He contends that the profit the company stands to make is an estimated $5,623,909 and he gave evidence showing how this estimate was calculated. He said that as a result of the sale of the B Facility, B Ltd has essentially concluded its residential facility business and the development is the only business that the company is currently engaged in.
On 14 September 2007 I made the following orders:
1.     The proceedings are adjourned to 10.00 am on Wednesday 19 September 2007.
2.     It be NOTED that the injunctions made on 6 September 2007 will continue.
3.     Grant leave to [B] Ltd and [T] Pty Ltd to inspect documents produced to the Court in response to subpoena by [X] Lawyers.
4.     It be NOTED that the lawyers for [B] Ltd and [T] Pty Ltd will advise the lawyers for the Wife by 12.30 pm today whether or not it is intended that an application will be made in relation to whether or not the Wife and her legal representatives be granted leave to inspect those documents. In the event that the lawyers for the Wife are advised that no such application will be made by [B] Ltd and/or [T] Pty Ltd then the Wife and her legal representatives also have leave to inspect those documents.
5.     In relation to the subpoena issued on behalf of the Wife to Members’ Equity Ltd that subpoena be adjourned to 10.00 am on 19 September 2007.
6.     The costs of all parties of and incidental to the proceedings today be reserved.
7.     All parties are granted liberty to apply.
On 17 September 2007 the National Australia Bank wrote to Penelope Kendling in relation to the borrowing for the R development and confirmed that the facility was being serviced to the bank’s complete satisfaction and that interest on the loan was being met.

Relevant principles

The Wife seeks orders for the preservation of property. In the result I must be satisfied that there is a serious question to be tried; that there is a real risk of the defeat of the Wife’s claimed interest and that the balance of convenience supports the making of the injunctions. I had the benefit of detailed written and oral submissions and I was referred to a number of authorities including Cardile & LED Builders Pty Limited[1] and Glover & Walters [2].
[1] (1999) 162 ALR 294 at 310-311
[2] (1950) 80 CLR 172 at 175-6

Conclusion

The net proceeds of sale on settlement of the sale of the B Facility were approximately $35,000,000. The Husband and others contend that Members Equity Ltd would not release the title deeds to the S property owned by B Ltd until replacement security was provided in respect of the loan granted by Members Equity Ltd to T Pty Ltd of approximately $30,000,000.
In about 2003 T Pty Ltd borrowed about $30,000,000 from Members Equity Ltd, and B Ltd gave to Members Equity Ltd as security for that loan a first mortgage over the S property. The Wife contends that this was an uncommercial transaction for no apparent consideration.
The minutes of the meeting of directors of B Ltd held on 27 August 2007 record that Members Equity Ltd required a $15,000,000 bank guarantee be given as replacement security for the S property before the title deeds to the S property would be given up, in order to secure the $30,000,000 loan from Members Equity Ltd to T Pty Ltd. The loan is for a period of five years. The reason why Members Equity Ltd only required $15,000,000 is that Members Equity Ltd already held first mortgages over other property of T Pty Ltd.
The Wife contends that a vendor in the position of B Ltd acting arms length, commercially and bona fide, would in those circumstances have required T Pty Ltd to provide that bank guarantee itself. If necessary, T Pty Ltd might have to sell some or all of its assets to pay off the debt, but this should have been the problem of T Pty Ltd and not B Ltd.
The Wife contends that as a far less desirable and still uncommercial alternative, B Ltd could at least have invested $15,000,000 with, say, National Australia Bank to be used as a security for a bank guarantee in favour of Members Equity Ltd on behalf of T Pty Ltd on the basis that T Pty Ltd would rapidly take over that liability. The Wife contends that this would be in itself uncommercial and undesirable but not as extremely so as what in fact occurred. The investment of money was offered by Members’ Equity Ltd and perhaps accepted by the Husband but later rejected by B Ltd. It appears to have been rejected by B Ltd because of the family law proceedings and not an unrelated commercial reason. In any event the Wife contends that any costs would have appropriately been met by T Pty Ltd not B Ltd. The justification in the minutes for what occurred is that the bank guarantee would cost B Ltd an amount of $225,000 a year. On behalf of the Wife it is submitted that this is a spurious justification and should be seen, prima facie, as such. The amount of $225,000 is a cost that must have been borne by T Pty Ltd since the guarantee is for its benefit.
On behalf of the Wife it is submitted that likewise, the justification in paragraph 12 of the letter of 5 September 2007 from Mr Wenden is spurious. It is submitted that one cannot compare an interest rate offered by National Australia Bank or Westpac Bank at 6.7 per cent with an interest rate offered by T Pty Ltd of 7 per cent on a loan to T Pty Ltd.
On behalf of the Wife it is submitted that the best evidence of the creditworthiness of T Pty Ltd in an arms length context is the attitude taken by Members Equity Ltd. It was unwilling to hold its position with T Pty Ltd, being a loan to T Pty Ltd of $30,000,000, without replacement security on the sale of the S property. This is despite the present property of T Pty Ltd being worth $66,000,000 (less $12,000,000 owed to National Australia Bank) according to Penelope Kendling.
On behalf of the Wife it is submitted that if as claimed, T Pty Ltd has assets which comfortably exceed its liabilities, then the obvious arms length, commercial answer, is for T Pty Ltd either to obtain funding from a bank to take over the loan from T Pty Ltd or to sell off some of these assets to discharge that liability. It is submitted that there is no commercial reason at all for B Ltd to step in and act as a bank for T Pty Ltd in these circumstances, especially where it is going where banks “fear to tread”.
On behalf of the Wife it is submitted that B Ltd had until 30 October 2007 to settle the transaction. That would have given T Pty Ltd ample time to try to obtain finance, or alternatively to sell such of its assets as it needed to sell to pay off its loan. On behalf of the Wife it is submitted that the internal contradictions in the approach of B Ltd and the Husband are clear. On behalf of the Wife it is submitted that if it was a good investment then there is no reason why T Pty Ltd should not have discharged its own liability on settlement of the sale by B Ltd to the PL Group.
On behalf of the Wife it is submitted that prima facie, and in due course at the trial the Wife will submit that the final conclusion that should be reached about the payment by B Ltd to Members Equity Ltd of $30,000,000 from the net proceeds of sale of the settlement of the B Facility is a blatant impoverishment of the assets of B Ltd to the benefit of T Pty Ltd. On behalf of the Wife it is submitted that is particularly so in light of the history of uncommercial loans, unexplained dealings between T Pty Ltd and B Ltd and others, including loans simply disappearing from balance sheets, very substantial work in progress write offs and inter-company charges from T Pty Ltd with no explanation or supporting documents and a number of other uncommercial transactions including sales of land by B Ltd to T Pty Ltd at an under value.
On behalf of the Wife it is submitted that all of this occurs in a context in which there has been repeated deception, non-disclosure and concealment on the part of B Ltd, T Pty Ltd, the Husband, and associated parties. It is submitted that one example of the lengths to which the Husband, B Ltd, and others are prepared to go in perpetuating such deception appears in the complete reversal of the position taken with respect to the proceeds of sale of the B Facility. Up until recently, it has been the consistent refrain of the Husband, B Ltd and others, that the net proceeds of that sale of approximately $35,000,000 could not be available as a resource to the Husband to fund the Wife in her litigation, and was not a resource available to the Husband and the Wife. In short this was said to be because it had to be invested and held to meet payments due to redeem the preference shares as and when they fall due. Yet when settlement occurred this money was immediately paid by bank cheque to Members’ Equity Ltd to reduce by no less than $30,000,000 the loan owing by T Pty Ltd to Members’ Equity Ltd. It is submitted that while I would make no credibility findings at this stage, prima facie, I should find that it is seriously arguable that the purported position taken by B Ltd, and the Husband, about its supposed solemn obligation to redeemable preference shareholders was spurious. It was submitted that it had the effect of removing any grounds for concern that the money might be paid out in a wholly uncommercial transaction, to benefit T Pty Ltd, and impoverish B Ltd, since the Husband and B Ltd were purportedly saying they had ongoing obligations to redeemable preference shareholders notwithstanding the indemnity from the purchaser to retain that money. On behalf of the Wife it is submitted that there was no disclosure to the Wife of the replacement of the ongoing top-up bank guarantee with a second mortgage over the B Facility instead.
On behalf of the Wife it is submitted that conversely T Pty Ltd in these circumstances takes the benefit of what it must know to be a wholly uncommercial loan made for the improper purpose of impoverishing B Ltd and hence in turn ultimately the matrimonial pool. It is submitted that there is a serious question to be tried as to whether that this is a breach of the duties of the Husband as a director of B Ltd. It is submitted that there is likewise a serious question to be tried that T Pty Ltd is the knowing recipient of funds obtained through a breach of director’s duties for an improper purpose and as such, liable to repay them to B Ltd.
In conclusion on behalf of the Wife it is submitted that the orders sought are no more than what is clearly necessary to preserve the matrimonial pool of assets and that any prejudice to B Ltd or T Pty Ltd arises from the making of the improvident $30,000,000 loan, for prima facie improper purposes. The remedy to the prejudice lies in B Ltd immediately obtaining full repayment of the loan.
I am of the view that there clearly are serious questions to be tried and the submissions on behalf of the Husband, B Ltd and T Pty Ltd do not contend otherwise. The current issues are whether there is a real risk of defeat of the Wife’s claimed interest and the hardship caused to T Pty Ltd and B Ltd by not allowing them to continue to trade in the ordinary course.
On behalf of the T Pty Ltd it is submitted that there is no real risk to the defeat of the Wife’s claim by allowing T Pty Ltd to continue to trade in the ordinary course in the manner set out in the evidence of Penelope Kendling. In particular:
·By the loan to [T] Pty Ltd there has been no diminution in the net assets of [B] Ltd
·To date [T] Pty Ltd has serviced loans in the same amount and it has a demonstrated capacity to service loans in this amount.
·[T] Pty Ltd is not taking on any additional liability that it did not already have.
·[T] Pty Ltd has granted to [B] Ltd first priority security over assets worth $56,350,000 or at 63 per cent comprising:
·       [Q] (West) possibly worth $15,000,000;
·       [R] possibly worth $11,350,000; and
·       [Q] (East), [E], [G] possible worth $38,850,000 but with priority for only $30,000,000.
·The most recent complete trading figures for [T] Pty Ltd show a loss in 2006 of ($649,359) during a period it was servicing the debt to Members Equity Ltd.
·Yet there were in that year extraordinary expenses of:
·       the construction expenses for [G]; and
·       the one-off rental expense of $1,236,630.
·Also there were assets which were not then deriving income or substantial income that are now deriving income, namely:
·       $97,572 per annum that is now being earned from the Caravan Park retail and restaurant sites;
·       $333,000 per annum that is now being earned from the [G] site; and
·       significantly greater rent from the [Q] site.
On behalf of the Wife Mr V swore affidavits on 14 and 18 September 2007. He raised a number of matters which at this stage I can only treat as contentions. However, he did point out that there is an absence of what he described as profit projections or cash flow forecasts or other financial analysis. On behalf of T Pty Ltd it is submitted that, contrary to assertions made by Mr V, T Pty Ltd has demonstrated both an ability to service the debt and to repay it. It is submitted that in relation to the evidence of Mr V he ignores, among other things, the substantial income flowing from the residential facilities of T Pty Ltd.
It is submitted that it follows that there is no ‘real’ risk to the Wife. Alternatively, what risk there is between now and a final hearing is amply protected by the registered first mortgages in favour of B Ltd. In any event if I found that notwithstanding the first mortgages there was further real risk to the Wife, that risk when balanced against the hardship to T Pty Ltd would be so small as to cause me to refuse the injunction.
It is submitted that Penelope Kendling gave evidence of transactions which T Pty Ltd will in its ordinary course enter into and which it will no longer be able to enter into if the injunction sought by the Wife is made. It is submitted that almost every trading activity of T Pty Ltd will cease and this will place T Pty Ltd in an unfair and untenable position and it will fall immediately into liquidation.
It is submitted that neither is it clear that the undertaking the Wife offers as to damages could be enforced to the level of damage that T Pty Ltd might suffer. It is impossible to quantify the total damage T Pty Ltd might suffer if it ceased trading but it would be substantial.
It is submitted that the Wife seeks by the injunctions to hamstring T Pty Ltd from trading in its ordinary course in circumstances where the debt to B Ltd is already amply secured between now and a final hearing. It is submitted that the convenience substantially favours the rejection of the relief sought by the Wife.
Notwithstanding the submissions on behalf of T Pty Ltd, B Ltd and the Husband I am satisfied that in all the circumstances there is prima facie a real risk of the defeat of the Wife’s claimed interest. There are a multitude of issues which at this stage I am unable to resolve and presumably they will be dealt with at the hearing of the applications for final orders. As I said before there are issue as to disclosure which involve, among other things, the relationship between B Ltd and T Pty Ltd and the extent of the Husband’s interest in T Pty Ltd. As a result of what has happened since 21 May 2007 there are further issues that presumably will be considered and, among other things, they include whether there has been deliberate non disclosure of various transactions and lack of commerciality. However if it transpired that what the Wife contends as to the solvency of T Pty Ltd is established then it is difficult to see how the Husband could readily satisfy the prospective claims of the Wife. In fact there may be issues about whether the Husband could satisfy what he seeks. The Wife is concerned to maintain what I describe as a status quo in relation to the financial circumstances of the parties pending the final hearing and I accept that prima facie she has established that this latest series of transactions may prejudice that status quo.
As I understand the Husband’s evidence work has commenced on the construction of a development at the G2 site. An amount of $6,500,000 has been spent to date of which $4,100,000 was paid by B Ltd from its own resources. The Husband said that the company needs $3,300,000 to meet its general requirements and it seeks to borrow this amount. As well, the Husband contends that over a two year period B Ltd will receive $4,800,000 from T Pty Ltd as interest. In fact, over the five year term of the advance B Ltd will receive $12,000,000. As well, B Ltd currently has $3,300,000 on a three month deposit with the National Australia Bank.
The Husband contends that B Ltd will then require a further $13,000,000. I am not prepared at this stage to allow B Ltd to borrow the amount of $13,000,000. Obviously however, in the future when the point is reached where B Ltd can demonstrate that it has an immediate need for this amount then assuming the proceedings in this Court are still current B Ltd can make an application to vary the injunctions I propose to make. At this stage, I can see no reason why the G project cannot continue into the foreseeable future given what the Husband has said about the current available resources of the company.
I am also going to require that until further order B Ltd provide to the Husband and the Wife on a monthly basis a cash flow statement. This will enable the Wife and those advising her to better understand the financial position of B Ltd. Further, it will enable B Ltd to better explain its financial position if and when it seeks to discharge or modify the injunctions I propose to make.

As to T Pty Ltd there are various allegations and counter allegations about its current financial position. Senior counsel for the Wife provided an analysis that he contends demonstrates that T Pty Ltd is insolvent. On behalf of T Pty Ltd submissions were made to demonstrate that it is solvent. Penelope Kendling gave evidence that T Pty Ltd is solvent.
Penelope Kendling contends that T Pty Ltd has real estate including a facility at E of a gross value of $66,226,000 being the real estate which I have earlier identified. Penelope Kendling contends that T Pty Ltd has the following liabilities:
$
·National Australia Bank overdraft account  203,000
·National Australia Bank loan  12,000,000
·Mortgage to [B] Ltd  35,611,581
Total  $47,814,581
Penelope Kendling contends that T Pty Ltd derives income from the following sources:
·[T] ([E]) Pty Ltd
·[T] ([G]) Pty Ltd
·Rental of 19 units at the [G] site
·[L Pty Ltd]
·Rental of units in homes at [Q] (East) and [Q] (West)
·Rental of three properties at [F]
·Rental from a motel at [R]
·Rental from two residential properties at [R]
·Food supply contract with [PL Group] for the [P Business]
The audited profit and loss statement of T Pty Ltd for the financial year ended 30 June 2006 revealed a total income of $15,478,057 and a net loss of ($649,359). Penelope Kendling however contends that the situation has dramatically changed and that there is now:
·Additional income of $330,000 per annum from the 18 units at [G].
·Additional income of $97,572 per annum from the restaurant and rental space at the caravan park at [Q] (West).
·The rental income from units at [Q2] and [Q3] which has significantly increased since [T] Pty Ltd took over management of the units from Raine & Horne.
As well, Penelope Kendling contends that the expenses of T Pty Ltd have decreased and she gave examples of some of the previous expenditure.
In the result Penelope Kendling contends that T Pty Ltd has significant net assets and that its income significantly exceeds its expenses.
As well, Penelope Kendling contends that T Pty Ltd was able to pay as and when they fell due all repayments required in respect of the loans from Members’ Equity Ltd. Further, that T Pty Ltd was able to meet all its obligations to National Australia Bank in respect of the indebtedness of the company which is now reduced by $1,000,000 to $12,000,000.
However notwithstanding the above it is not clear to me why Penelope Kendling also contends that T Pty Ltd may need to borrow funds to meet the interest commitments in respect of the current loans from B Ltd and the National Australia Bank.
As senior counsel for the Wife submitted, there is no reason why T Pty Ltd could not have refinanced all its loan requirements from a source other than B Ltd given the evidence of Penelope Kendling about solvency of T Pty Ltd and its capacity to meet its commitments which has significantly improved, according to her evidence. In fact the result of what has happened is that B Ltd, according to the Husband, is now going to have to borrow funds to meet the costs of its construction development at G2. The Wife has made very clear over a long period of time her concerns about the financial circumstances of the parties and her contentions that the Husband has failed to make a full and frank disclosure. If what the Husband and Penelope Kendling contend is correct then the loan was not for the benefit of B Ltd and in fact may have been to it’s disadvantage. On one view of the current evidence the requirements of Members Equity Ltd could have been easily met.
It is not possible for me to reach any concluded view about the financial circumstances of T Pty Ltd or B Ltd. However until that issue can be resolved I am of the opinion that the balance of convenience favours making the orders sought by the Wife.
In the future when the point is reached where T Pty Ltd can demonstrate that it has a immediate need for the sale of assets or the further encumbrance of assets then assuming the proceedings in this Court are still current it can make an application to vary the injunctions I propose to make. At this stage, I can see no reason why, given the evidence of Penelope Kendling, T Pty Ltd cannot meet its ordinary business commitments.
I am also going to require that until further order T Pty Ltd provide to the Husband and the Wife on a monthly basis a cash flow statement. This will enable the Wife and those advising her to better understand the financial position of T Ltd. Further, it will enable T Pty Ltd to better explain its financial position if and when it seeks to discharge or modify the injunctions I propose to make.
Subject to the examination of the parties and others I also accept the submissions on behalf of the Wife that the remedy to any prejudice to B Ltd and or T Pty Ltd lies in B Ltd obtaining full repayment of the loan. According to the evidence of Penelope Kendling there is no reason why T Pty Ltd could not obtain finance from another source.
As to the injunctions sought in relation to the Husband leaving Australia I am not satisfied that given the injunctions I propose to make there is still a real risk of defeat of the Wife’s claimed interest. The effect of the injunctions will ensure that the equity in all ascertained assets is maintained until the final hearing and in those circumstances I do not accept that if the Husband were free to leave Australia this may pose a real risk of the Wife’s claimed interest being defeated.
As to an undertaking as to damages I am satisfied that the Wife is able to provide such an undertaking given the final property settlement order the Husband proposes. I also take into account the evidence of Penelope Kendling and my acceptance of the submissions that the remedy to any prejudice to B Ltd and or T Pty Ltd lies in B Ltd obtaining full repayment of the loan.

I certify that the preceding 195 paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Ryan

Associate

Date: 17 October 2007

[2007] FamCA 1249

17 October 2007

Key Legal Topics

Areas of Law

Family Law

Civil Procedure

Equity & Trusts

Legal Concepts

Injunction

Costs

Remedies

Stay of Proceedings

Procedural Fairness