Kruger and Kruger & Ors

[2012] FamCA 760

FAMILY COURT OF AUSTRALIA

KRUGER & KRUGER AND ORS [2012] FamCA 760

FAMILY LAW – PROCEDURAL – Whether Court to grant leave under s440D(1)(b) of the Corporations Act 2001 (Cth) for the husband to proceed with his application in relation to property including property owned by a company under administration – Leave not granted – Husband’s application refused

FAMILY LAW – PROPERTY & INJUNCTIONS– Husband seeking declaration of equitable proprietary interest in property in reliance upon previous Court Order – Husband seeking his liability to the bank under loan facilities be limited to a certain proportion in reliance upon previous Court Order– Husband seeking injunctions against the bank and administrators dealing with certain property

Family Law Act 1975 (Cth)
Corporations Act 2001 (Cth)

Foxcroft v The Ink Group Pty Ltd (1994) 15 ACSR 203
Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1305
Oliver v Malanos [2011] FCA 1354

APPLICANT: Mr Kruger

RESPONDENT: Ms Kruger

INTERVENOR: Administrators for Company 1 and Company 2

INTERVENOR: St George Bank

FILE NUMBER: PAC 174 of 2007

DATE DELIVERED: 13 August 2012

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Collier J

HEARING DATE: 9 August 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Jarrett

SOLICITOR FOR THE APPLICANT:

Mr Leather

Barringer Leather Lawyers

COUNSEL FOR THE RESPONDENT: Mr de Robillard

SOLICITOR FOR THE RESPONDENT:

Mr Kent

Kent Attorneys

COUNSEL FOR THE INTERVENORS Mr Bellamy

SOLICITOR FOR ADMINISTRATORS

Mr Cheung

Gadens Lawyers

SOLICITOR FOR ST GEORGE BANK

Mr Soon

Gadens Lawyers

Orders

1. That I dismiss the husband’s Application in a Case filed 13 July 2012 as amended on 6 August 2012 and as further amended on 9 August 2012.

2. That any parties seeking costs shall file an Application to that effect within twenty-one (21) days of this date.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kruger & Kruger and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 174 of 2007

Mr Kruger

Applicant Husband

And

Ms Kruger

Respondent Wife

And

Administrators for Company 1 and Company 2

Intervenor

And

St George Bank

Intervenor

REASONS FOR JUDGMENT

Introduction

1. This is an application by the husband for leave to proceed against the administrators of two companies, Company 1 (in administration) and Company 2 (in administration), pursuant to the relevant sections of the Corporations Act2001 (Cth). The effect of leave being granted, as I understand it, would be that the administrators of those two companies would be joined in the current Family Law proceedings and orders would then be sought as against them in relation to the husband’s alleged entitlements, particularly in respect of Company 1.

2. The husband would seek to restrain the administrators from dealing with property known as Residential Facility 1.  It seems to me, however, that thereafter, what is sought is that the administrators do all things to effect a sale of  Residential Facility 1.  The other part of the husband’s application relates to St George Bank and I will return to that shortly in these reasons for Judgment.

3. What was sought in the course of submissions, as I understood it, was that further orders were sought against the administrators of Company 1 (in administration) for or as to a declaration that Orders made in this Court on 27 November 2008 created an equitable proprietary interest in the husband and that Company 1 (in administration) was a bare trustee for the husband.

4. A further order was sought at the same time that the proceeds of sale of real property be distributed to the husband, net of sale costs.

5. As I have said, the husband also sought orders against St George Bank and those orders were in quite detailed terms.  He sought that, pursuant to various sections of the Family Law Act1975 (Cth), the husband’s liability to St George Bank under loan facilities, which were set out in detail, was to be limited to 25 per cent of those outstanding debts. Further, he sought that St George Bank be restrained from use of any net proceeds derived from the sale of various properties over and above the husband’s 25 per cent liability pursuant to the loan facilities.

6. Then, the application went on to say that pursuant, again, to various sections of the Family Law Act, St George Bank was to be restrained from doing any act or thing to sell various properties. Those properties were the properties Property P, Property K and Property Q, provided that the properties were listed for sale by auction and were listed at reasonable sale prices. Thereafter, again pursuant to various sections of the Family Law Act, an order was sought restraining St George Bank from doing any act or thing in relation to the properties without further order of the Court. Finally, pursuant to various sections and regulations, the husband sought St George Bank be ordered to properly sign all necessary documents as may be required by the husband to effect the sale of any of the properties referred to above.

7. It is submitted by Counsel for St George Bank that this was an application that ought also have attracted leave to proceed under section 440D(1) of the Corporations Act. It is submitted by Counsel for St George Bank that, if I decide leave is required, then as such leave was not sought, the proceedings against St George Bank must be stayed.

The law to be applied

1. The relevant statutory background is to be found within the Corporations Act. The relevant part is Part 5.3A. Section 435A of that Act deals with the responsibilities of administrators and is in these terms:-

   The object of this Part is to provide for the business, property and affairs of the insolvent company to be administered in a way that:

   (a)maximises the chances of the company, or as much as possible of its business, continuing in existence; or

   (b)if it is not possible for the company or its business to continue in existence – results in a better return for the company’s creditors and members than would result from any immediate winding up of the company.

2. Relevantly then, section 440D (1) is in these terms:-

   During the administration of a company, a proceeding in a court against the company or in relation to any of its property cannot be begun or proceeded with, except:

   (a)      with the administrator’s written consent; or

   (b)with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

3. It is clear that the administrators have not given any form of consent. Where subsection (b) refers to “leave of the Court”, Court in that context includes the Family Court of Australia (see section 58AA of the Corporations Act).

Brief history

1. A procedural history of this matter is instructive and necessary to put the matter in some perspective:-

   ·    The husband was born in 1944 and the wife in 1948.

   ·    The parties married in 1967 and separated in January 2006.

   ·    On 12 January 2007, the wife instituted these proceedings, that is, the proceedings in the Family Court of Australia.

   ·    On 20, 21 and 22 of May 2008, Coleman J heard the matter and reserved Judgment.

   ·    On 27 June 2008, his Honour delivered a reserved Judgment and made Orders for property settlement.

   ·    On 7 October 2008, his Honour made interim consent Orders in respect of the matter.

   ·    On 24 October 2008, following a further day of hearing, his Honour made further Orders, particularly in relation to interim distributions.

   ·    On 11 November 2008, his Honour delivered further Judgment and made further Orders in relation to the parties’ property settlement.

   ·    On 27 November 2008, his Honour delivered further Judgment.  In my mind, this is the principle Judgment in that suite of Judgments.

   ·    On 24 December 2008, the wife filed a Notice of Appeal against his Honour’s Orders of 27 November 2008.

   ·    On 30 December 2008, the wife filed an application for stay of his Honour’s Orders of 27 November 2008.

   ·    On 20 March 2009, his Honour dismissed the stay application.

   ·    On 26 March 2009, his Honour delivered a cost Judgment.

   ·    On 30 November 2010, the Full Court of the Family Court dismissed the wife’s appeal and made Orders for costs.

   ·    On 2 May 2011, the husband filed an Application in a Case, seeking some form of enforcement.

   ·    On 22 November 2011, Coleman J heard the matter and disqualified himself, noting the matter was to be listed before a judge other than himself.

   ·    On 8 December 2011, the matter was before me for mention and was set down for hearing in February 2012 and directions were made.

   ·    On 13 February 2012, I heard the matter for one day; the matter was then stood over in relation to the issue of the husband’s accreditation with the relevant department.

   ·    On 31 May 2012, the matter was again before me for further interim hearing.  The matter was again stood over, noting that the Residential Factility 1 had been closed down and the husband’s license to operate the home had been refused by the appropriate department.  The parties appeared to be looking to sell the properties to satisfy the outstanding debt to the bank.

   ·    On 22 June 2012, joint administrators Mr B and Mr G were appointed in relation to Company 1.

   ·    On 5 July 2012, the same joint administrators were appointed to Company 2.

   · On 19 July 2012, the matter came before me in respect of an Application in a Case filed on 13 July 2012 on behalf of the husband, which is indeed the forerunner of the application presently before me. The matter was adjourned as no leave had been sought pursuant to section 440D of the Corporations Act and time was allowed for that to be attended to.

   ·    On 2 August 2012, the matter returned before me but was unable to proceed because of illness of the husband’s Counsel.

   ·    The matter then came before me for determination on 9 August 2012.

The respective applications/responses before me

1. The applications before the Court and the responses to them are:-

   ·The husband’s Application in a Case filed 13 July 2012;

   ·An Amended Application in a Case, received by the Court on 6 August 2012. 

   ·During submissions, a minute of additional orders was handed up on behalf of the husband.

   ·The administrators filed a Response to the Application in a Case on 24 July 2012.

   ·St George Bank filed a Response to the Application in a Case on that same day.

2. The responses of the administrators and St George Bank each sought dismissal of the husband’s Application in a Case.  St George Bank also sought an order for costs.

The material relied upon

1. The affidavit material is as follows:-

   ·The affidavit of Gregory Leather, solicitor for the husband, sworn 12^th of July and filed 13 July 2012.

   ·For St George Bank, the affidavit of Mr G sworn 26^th of July, filed 30 July 2012 and a further affidavit of the same deponent sworn 18^th of July, filed 24 July 2012.

   ·In respect of the administrators, there was an affidavit of Mr G sworn 18^th of July, filed 24 July 2012 and a further affidavit of that same deponent, sworn the same date and filed the same date.

2. The parties made available to me written submissions which they spoke to.  I am grateful to Counsel for the preparation of those submissions and the assistance they have given me.

The hearing before me

1. The Applicant Husband submits that Order 1 of the Orders of Coleman J made on 27 November 2008 confers upon him an equitable interest and that accordingly, Company 1 is a bare trustee for the husband in respect of the Residential Facility 1.  It appears that it is against the administrators of Company 1 that the husband seeks to assert a proprietary interest.

2. The husband relies on a number of decisions, one of which is the reported decision of Oliver v Malanos[1] in the Federal Court of Australia.  The purpose, as I understand it, of reliance upon that decision was to establish that the making of a section 79 order creates, in the person who has the benefit of that order, an equitable interest in relevant property.

   [1] [2011] FCA 1354

3. It is submitted that the Orders of Coleman J thus make the husband the beneficiary of the Residential Facility 1.  The husband, however, has been unable to put himself in a position to require compliance with his Honour’s Orders.  Having not been able to call for a transfer of the property and the various ancillary matters that would be required to affect the transfer, it has now come to pass that the company which controls the Residential Facility 1, Company 1, has been placed into administration, as has the company having control of the Residential Facility 2, Company 2.

4. His Honour’s Orders made on 27 November 2008 required a good deal more to be done than a mere transfer to the husband of the Residential Facility 1.  The husband, having been unable to place himself in a position where he could call for that transfer, seeks an acknowledgement that he has an equitable interest in the nursing home.  The husband asserts that is the interest that he claims.  However, in formulating the interest that he claims, there is no attempt to set out the terms of the trust or even to clearly identify it.

5. Certainly, there is no material that I am aware of that deals with whether that trust might, in any way, be the subject of any rights to other parties to indemnity or otherwise.  This, to my mind, is particularly relevant, having regard to the totality of the Orders of Coleman J and their complexity, and the requirement upon the husband to do things at the same time as he was to have the benefit of the Orders made by his Honour.  I am satisfied that the husband’s interest cannot be made out in the manner he contends for in his present application.

6. That application, as I say, fails to deal with or address matters as to the terms of any trust and any liability or indemnity required to be paid or met by the trust.  It is therefore not possible to determine precisely or with any certainty what the equitable interest that the husband contends for actually is.  Thus, the husband’s case for relief that would establish a proprietary right and might therefore render the requirement for the grant of any leave unnecessary is not made out.

7. Accordingly, in my view, this is a situation where I must examine whether or not there ought to be a grant of leave pursuant to the relevant section, being s440D of the Corporations Act. Again, a number of cases were referred to.

8. One of those cases was the decision of Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd[2].  His Honour Hammerschlag J found that, in granting leave to commence proceedings under the relevant section, that the previously held view expressed by Young J (as he then was) in Foxcroft v The Ink Group Pty Ltd[3] that leave would only be granted in rare cases, was not correct.  Hammerschlag J said:-

   An approach which commences with an assumption that leave will only rarely be granted or that the court must approach this type of application with a degree of caution greater than that with which it would approach the exercise of any other discretion within a particular statutory context where it must be satisfied that appropriate circumstances exist for the making of an order imposes upon the applicant a standard higher than that which the section requires. 

   [2] [2011] NSWSC 1305

   [3] (1994) 15 ACSR 203

9. His Honour found this was an unwarranted confinement of discretion.  His Honour went on to say that:-

   While the discretion under s 440D must be exercised with the objects of the part in mind, it remains one at large. A stay is the starting point. There must be circumstances which warrant its displacement. Every application must be considered on its own circumstances. There are infinite possible scenarios. There may be a flurry or a dearth of meritorious applications. Those circumstances need have no particular quality of rarity.

10. His Honour went on to talk of an arbitral award, which was not the case here.

11. I have already dealt with the nature of the husband’s claim.  It is, in my view, not something that is clear cut or easily defined.  Nor, I am satisfied, has the husband made any attempt to do that.  He has merely asserted that because of one Order of his Honour Coleman J, that he has the benefit of an equitable interest.

12. In this case, I am also satisfied that the husband has in mind that he seeks to promote his position over that of other creditors in the administration.  I do not accept the assertion made on behalf of the husband that the interests of others are not affected by this application.

13. I am satisfied that to allow the husband the leave he seeks would be to distract the two administrators in their duties of administration.  I am satisfied that the grant of leave could well cause time limits imposed by their appointments to be interfered with and unnecessarily extended.  I am satisfied that the issue that remains is a substantial dispute about the matter in respect of which the husband seeks relief.  I am satisfied that the husband has not done all he could, in a timely fashion, to put the property Orders that were made by Coleman J into effect.

14. I am further concerned that there appears little chance that the husband would be able to meet any costs that may be incurred in the proceedings he seeks to pursue; this arises from material that appears in the affidavit of his solicitor at paragraph 31.

15. I therefore am of the view that the husband ought not be granted leave to commence proceedings against the administrators pursuant to section 440D(1) of the Corporations Act. I refuse him leave to do so.

16. The husband also seeks to join St George Bank; that joinder is to the current Family Law proceedings. He does not seek leave to proceed, in that regard, pursuant to section 440D of the Corporations Act. He seeks relief as against St George Bank, pursuant to sections 114(1)(e), 90AE and 90AF of the Family Law Act so as to limit his exposure to outstanding debt to St George Bank in respect of certain properties and loan arrangements and securities. He further seeks relief preventing St George Bank dealing with those properties, subject to the properties being listed for auction at reasonable prices. I must say, I find those two orders somewhat contradictory.

17. I return again to section 440D(1) of the Corporations Act, set out earlier in these reasons for Judgment. In my view, what is relevant in respect of St George Bank are the words of section “or in relation to any of its property”.

18. The properties in respect of which relief is sought are Property P and properties that the wife is to transfer to the husband.  As far as I can ascertain, those properties have never been transferred.  The property at Property P is the premises at which the Residential Facility 1 conducts its business.  It is for the purpose of the relevant section the property of the company, Company 1 (in administration).

19. I am satisfied, therefore, that any proceedings brought by any person or corporate entity in respect of the property Property P are stayed unless leave is granted pursuant to s440D(1) of the Corporations Act.

20. The remaining properties, as I say, are the subject of Orders made by Coleman J for transfer to the husband.  The difficulty, as I perceive it, in respect of these properties is that they are the subject of collateralised security with Property P and other properties offered by the husband and the wife as security for their indebtedness.

21. The husband seeks as against St George Bank an order involving the proportions in which St George Bank can recover its moneys.  It seeks that St George Bank deal with the real estate in a prescribed fashion by not doing anything and then being required to sell, by auction, at a reasonable price.

1. I am satisfied that there is a difference between the property Property P and the other properties.  I have already found that in respect of Property P leave is required for proceedings to be commenced affecting that property.

2. So far as the remaining parcels of real estate are concerned, I am concerned that if they are the subject of an application as it were in isolation, this would result in further complication and difficulty being caused to the work of the administrators and could potentially impact upon their capacity to deal with the matter in accordance with proper time limits.  The two matters, that is the action against the administrators and St George Bank, are interlinked.  I am satisfied that if one would impact upon the other, I am entitled to take it into account in determining whether or not leave should be granted.

3. I am satisfied that the concern about the husband’s capacity to meet any costs order should his application, if it were to proceed, prove unsuccessful is a matter that I am entitled to take into account.

4. Leave is not sought by the husband to commence proceedings against St George Bank.  In any event, I am not prepared to grant that leave.

5. Accordingly, and so far as I am concerned, the stay imposed by the statutory prohibition of section 440D(1) of the Corporations Act remains in place and that action, that is to say the action by St George Bank, cannot proceed.

6. That is not to say that when administration of both companies is concluded, a further application could not be made, at which time it would be dealt with on its merits.

Conclusion

1. I accordingly dismiss the husband’s Application in a Case filed 13 July 2012, as amended on 6 August 2012 and as further amended on 9 August 2012.

2. I order that any parties seeking costs file an application to that effect within 21 days of this date.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Collier delivered on 13 August 2012.

Legal Associate:      

Date:    5 September 2012