Lake and Brand (No 2)

[2014] FamCA 743

FAMILY COURT OF AUSTRALIA

LAKE & BRAND (NO 2) [2014] FamCA 743

FAMILY LAW – PROPERTY – Application for proportion of sale proceeds of former matrimonial home to be applied in reduction of mortgage liability secured over property in which wife and child reside - Application for orders pursuant to s 106B – whether transactions entered into by the husband were intended to defeat and were likely to defeat anticipated orders - Orders made setting aside transfers and applying sale proceeds to the reduction of the mortgage liability

Family Law Act 1975 (Cth) ss 106B, 114

In the Marriage of Gould (1993) FLC 92-434

APPLICANT: Ms Lake

RESPONDENT: Mr Brand

FILE NUMBER: MLC 5385 of 2013

DATE DELIVERED: 9 September 2014

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Johns J

HEARING DATE: 6 August 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Smallwood

SOLICITOR FOR THE APPLICANT: Wightons Lawyers

RESPONDENT: In person

Orders

1. That order 2(c) of the orders of the Federal Circuit Court made 13 August 2013 be varied to provide that the balance of the proceeds of sale of the property situate at B Street, C Town be applied as follows:

   (a)First as to the sum of $170,000 to reduce the mortgage liability to the Commonwealth Bank of Australia secured over the title of the property at D Street, E Town; and

   (b)Second, the balance then remaining to be held on behalf of the parties in an interest-bearing trust account by the solicitors for the wife until further order.

2. That pursuant to s 106B of the Family Law Act1975 (Cth) the instrument by which the husband, Mr Brand transferred to Ms A Brand one ordinary class share in I Pty Ltd (ACN …) be set aside.

3. That pursuant to s 106B of the Act the instrument by which the husband, Mr Brand resigned as a director of I Pty Ltd (ACN …) and of J Pty Ltd (ACN …) be set aside.

4. That pursuant to s 106B of the Act the instrument by which the husband resigned as a guardian and/or appointor of the Mr Brand Family Trust be set aside.

5. That the husband personally, and in his capacity as a director of I Pty Ltd and J Pty Ltd do all such acts and things and sign all such documents as may be required to:-

   (a)Rectify the Register of Members of I Pty Ltd to reinstate him as a member of that entity;

   (b)Be reinstated as a guardian and appointor of the Brand Family Trust; and

   (c)Be reinstated as a director of I Pty Ltd and of J Pty Ltd.

6. That until further order the husband by himself, his servants or agents be and is hereby restrained from transferring, selling or otherwise dealing with his shareholding in I Pty Ltd or any other corporate entity in which he holds a share, and from resigning any office held by him in any company or trust.

7. That within 14 days the wife file written submissions in support of her application for costs.

8. That the husband file any submissions in response to the wife’s application for costs within 7 days of service of the wife’s submissions.

9. That the wife’s application in a case filed 4 June 2014 and the husband’s response to an application in a case filed 18 July 2014 be otherwise dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lake & Brand (No 2) 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 MELBOURNE

FILE NUMBER: MLC 5385 of 2013

Ms Lake

Applicant

And

Mr Brand

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. On 6 August 2014 the wife’s Application in a Case was listed for hearing in the Judicial Duty List, having been adjourned from its original listing on 2 July 2014.  On that previous occasion, Macmillan J made orders to facilitate the withdrawal of a caveat lodged by the husband over the former matrimonial home at C Town (“the C Town property”).  At the time of those orders a settlement of the sale of the C Town property was imminent, orders having been made for its sale by Judge Hartnett in the Federal Circuit Court on 13 August 2013. 
2. In accordance with those orders the caveat was withdrawn.  Settlement of the sale of the C Town property has now occurred.  The orders of 13 August 2013 provide that upon the sale of the C Town property and after discharge of certain liabilities, the balance of proceeds of sale be held on behalf of the parties in an interest-bearing trust account by the solicitors for the wife until further order. 
3. The wife now seeks that the orders of 13 August 2013 be varied to provide that a proportion of the sale proceeds be applied to the reduction of the mortgage liability secured over the property in which she and the child of the marriage reside at E Town.
4. In addition to those orders, the wife seeks orders pursuant to s 106B, the effect of which will be to set aside:-

·the transfer by the husband of his share in I Pty Ltd (“I Pty Ltd”) to his mother, Ms A Brand;

·the husband’s resignation as a director of I Pty Ltd and J Pty Ltd (“J Pty Ltd”); and

·the husband’s resignation as guardian and appointor of the Brand Family Trust.

5.The husband opposes the orders sought by the wife.  In addition, the husband  seeks orders that:-

·     the caveat withdrawn pursuant to the orders made by Macmillan J be “reinstated”; and

·    The husband have “access” to any resultant sale proceeds to enable him to arrange accommodation for himself and the parties’ son.  

6.    The husband did not appear before Macmillan J on 2 July 2014 when her Honour made orders to facilitate the withdrawal of the caveat over the C Town property.  That day her Honour made orders adjourning the proceedings to 6 August 2014 and requiring that the husband file and serve any response to the wife’s application by 18 July 2014.

7.    Whilst the husband did not appear before Macmillan J on 2 July 2014 the husband’s sister was present at Court on that occasion.  At paragraph 7 of her Honour’s Reasons for Judgment she noted:-

Although there was no appearance by or on behalf [of the directors of [J Pty Ltd], [I Pty Ltd] or the husband’s mother], or for that matter on behalf of the husband, the husband’s sister was present in the body of the Court.  This might be coincidental although it seems more likely than not that the outcome of the proceedings will be brought to the attention of at least some of the named respondents.

8. The husband did file material in response in compliance with Macmillan J’s orders of 2 July 2014.  In addition, he appeared before me and was accompanied to Court by his parents, brother and sister who remained in Court throughout the hearing. 

BACKGROUND

9. The wife is aged 54 years.  She is engaged in full-time employment as a manager.
10. The husband is aged 56 years.  He is qualified in a technical profession, although is currently unemployed and in receipt of Centrelink benefits.
11. The parties commenced cohabitation in 1981 and married in 1984.  There is a conflict between the parties as to when separation occurred, the wife alleging that separation occurred in March 2012 when the husband left the home to embark on an extended trip, and the husband alleging that separation occurred in March 2013.
12. The parties have one child under the age of 18, F who is aged 16 years and is in Year 11 at G Town College.  The parties also have two adult children who live independently. 
13. The child F lives with the wife and it is her evidence that she has been solely responsible for payment of his fees for attendance at G Town College, being between $5,000 and $6,000 per term, since the parties’ separation.   The husband does not challenge that evidence. 

MATERIAL RELIED UPON BY THE WIFE

14. The wife relies upon the following material in support of her application:-

·Application in a Case filed 4 June 2014;

·Affidavit of the wife filed 4 June 2014;

·Affidavit of the wife filed 4 August 2014; and

·Affidavit of Ms L filed 24 June 2014.

15. The orders sought by the wife are set out at Annexure "SL4” of the wife’s affidavit filed 4 August 2014.  That annexure contains a letter forwarded to the husband by the wife’s solicitors dated 31 July 2014 enclosing the Minute of Proposed Order to be sought upon the hearing of her Application in a Case.  The orders sought by the wife as set out in that annexure are as follows:-

1.That paragraph 2(c) of the Orders of the Federal Circuit Court dated 13^th August, 2013 be varied to provide for the balance of sale proceeds to be paid:-

(i)firstly, as to the sum of $170,000.00 to reduce the mortgage liability to the Commonwealth Bank of Australia in respect of the property at [D Street, E Town]; and

(ii)secondly, the balance to be held on behalf of the parties in an interest bearing trust account by the Solicitors for the wife until further Order.

2.That the transfer by [Mr Brand] of one (1) ordinary class share in [I Pty Ltd] (ACN …) to [Ms A Brand] dated 9 July, 2013 be set aside.

3.That [Mr Brand] do all acts and sign all documents necessary to enable the Director/s of [I Pty Ltd] to rectify the Register of Members.

4.That until further Order, [Mr Brand] be and is hereby restrained from transferring, selling or otherwise dealing with his shareholding in [I Pty Ltd] or any other corporate entity, from resigning any directorship in any corporate entity and from resigning as guardian and/or appointor of any trust.

5.That the resignation of [Mr Brand] as Director of [I Pty Ltd] (ACN …) and of [H Pty Ltd] (ACN  …) dated the 29^th November, 2013 be set aside and [Mr Brand] be reinstated as Director of the said corporation.

6.That Notice of Resignation of [Mr Brand] as guardian and appointor of the [Brand Family Trust] dated 29^th November, 2012 and [Mr Brand] be reinstated as Guardian and Appointor.

7.That the husband pay the wife’s costs of this Application in the sum of $5,650.

8.Such further and other Orders as this Honourable Court deems appropriate.

MATERIAL RELIED UPON BY THE HUSBAND

1. The husband relies upon the following material in support of his response:-

   ·Response to an Application in a Case filed 18 July 2014;

   ·Affidavit of the husband filed 18 July 2014;

   ·Further affidavit of the husband filed 18 July 2014;

   ·Affidavit of the husband filed 5 August 2014;

   ·Further affidavit of the husband filed 5 August 2014; Affidavit of Dr M Brand filed 5 August 2014; and

   ·Affidavit of the husband filed 2 September, 20013.

2. In his response the husband sought orders for the following relief:-

   ·That the wife’s Application in a Case be dismissed;

   ·That the caveat withdrawn pursuant to the orders of Macmillan J on 2 July 2014 “be reinstated”;

   ·That the wife be responsible for any costs arising from her breach of the contract of sale of the C Town property;

   ·That the proceeds of sale of the C Town property be held on behalf of the parties in an interest bearing account “acceptable to both parties”, the husband asserting in his response that the trust account of the wife’s lawyers “shall be deemed as not acceptable”;

   ·That the parties be directed to attend mediation; and

   ·That the husband have “access” to any resultant proceeds of sale of the C Town property to enable him to “arrange suitable accommodation” for the husband and the child F.

THE HEARING

1. The husband represented himself at the hearing. At the commencement of the hearing I informed the husband as to the manner in which the proceedings would be conducted, that counsel for the applicant would make submissions on behalf of her client, that the husband would then have an opportunity to respond to those submissions, and that the applicant would then have a right of reply.  I informed the husband that the matter would proceed “on the papers” and that his submissions should be directed towards the facts or matters and the law upon which he relied and which supported the orders he seeks. 

2. Prior to the commencement of the hearing, I provided the husband with the opportunity to attend upon the duty lawyer present at Court.  The matter was stood down for a period of approximately one hour to enable the husband to attend upon the duty lawyer.  Notwithstanding that the matter was stood down for that purpose I was informed at the commencement of the hearing that in fact the husband had not attended upon the duty lawyer.

3. The parties relied upon the affidavit material identified above.  That evidence was not tested and the matter proceeded by way of submissions.  Accordingly, I cannot make findings of fact insofar as there are factual disputes between the parties’ respective evidence. 

WITHDRAWAL OF CAVEAT

1. The husband sought an order that the caveat previously withdrawn pursuant to orders made on 2 July 2014 should be “reinstated”.  At the commencement of the hearing I informed the husband that I was not in a position to make such an order.  I informed the husband that as the caveat had been withdrawn and the property sold no order could be made the effect of which was to “reinstate” the caveat previously lodged by him.  Further, in circumstances where the C Town property had been sold to bona fide arms-length purchasers, who did not have notice of these proceedings, and that the sale was made pursuant to orders made in August 2013 which were not the subject of an appeal, the remedy sought by the husband with respect to that sale simply was not available to him. 

2. In light of that information, the husband did not seek to press that part of his application.

MEDIATION

1. The husband sought orders that the parties be directed to attend a mediation.  A conciliation conference was ordered in this matter by Judge Hartnett on 30 October 2013.  The parties attended a conciliation conference conducted by Registrar Mestrovic on 4 March 2014.  The matter did not resolve that day.

2. In light of that history I informed the husband that I would not direct the parties to attend a further conciliation conference.  The husband did not make any further submissions in support of that part of his application.

THE APPLICATION OF THE PROCEEDS OF SALE

1. A withdrawal of caveat was lodged with the Registrar of Titles in accordance with the orders made by Macmillan J on 2 July 2014.  Following the lodgement of that withdrawal, settlement of the sale of the C Town property was effected on 15 July 2014. 

2. After discharge of the mortgage secured over the title to the C Town property and reduction of the mortgage secured over the E Town property by the sum of approximately $132,000, which was required by the Commonwealth Bank of Australia, the net proceeds of sale of the C Town property was $294,040.56.  Those funds have been held upon trust for the parties in an interest bearing account by the wife’s lawyers since settlement.

3. The wife seeks that of that sum, a further amount of $170,000 be applied in reduction of the mortgage secured over the E Town property occupied by the wife and the child F.  The wife seeks orders that the balance then remaining, being the sum of approximately $125,000 continue to be held upon trust for the parties in an interest-bearing trust account by the wife’s lawyers.

4. The wife seeks orders in those terms in order to reduce her monthly commitment to service the mortgage liability on E Town.  The wife currently has two jobs, a full-time position with N Services and a part-time position with E Health.  Her income from her employment is approximately $2,050 gross per week.  From that income she is servicing the mortgage liability secured over the E Town property which prior to the settlement of the sale of the C Town property had a balance of approximately $768,000 (which has now been reduced to approximately $636,000).  In addition, the wife is solely responsible for the payment of school fees to enable the child F’s attendance at G Town College.  The wife deposes that the fees for F’s attendance at that school are between $5,000 and $6,000 per term.  Simply put, the wife’s case is that the application of $170,000 towards the reduction of the mortgage liability on E Town will significantly reduce her monthly commitment to service repayments on that loan.  The wife submits that the consequential increase in her available monthly income will be of significant benefit to her and F. 

5. It was conceded by counsel for the wife that it is likely that the E Town property will have to be sold by the parties in order finalise their property proceedings.  It is said on behalf of the wife that funds applied to reduction of the mortgage will increase the parties’ equity in that property.  The wife submits that those funds will be secured in the equity of the property and there will be a direct benefit to the wife and F insofar as it will reduce her mortgage commitment and provide greater income for application in their household. 

6. The husband in response, opposed the release of funds for reduction of the mortgage.  Further, the husband made an oral application that the sum of $250,000 should be released to him to enable him to establish a home for himself and the parties’ child, F.  The husband submitted that he currently has no fixed address, that he lives at the homes of his mother, sister and brother.  Further, he submitted that his only source of income is a Centrelink benefit in the sum of approximately $256 per week.  The husband submitted that a release of funds to him would enable him to provide for the parties’ son, F. 

7. The difficulty with the husband’s position, is that a release of funds to him in those circumstances would inevitably result in a depletion of the funds rather than a preservation of them pending a final determination of the parties’ competing property applications.  The husband submitted that he would be in a position to buy himself a flat for $250,000. 

8. During the course of his submissions it was my impression that the husband was formulating his position “on the run”.  That view is supported when the husband’s oral application is considered in the light of the affidavits sworn on his behalf.  The husband produced no evidence to support his application.  Whilst the husband has filed four affidavits since the wife’s Application in a Case was filed on 4 June 2014, none of the affidavits filed on his behalf address his current proposal.

9. The husband’s response in relation to the wife’s application is set out at paragraph 29 of his affidavit filed 18 July 2014.  He there states:-

   29.As the applicant was granted sole access to both properties by court order August 2013.  These same orders required her to meet all mortgage payments and expenses.  She should be held responsible for her own financial commitments. 

   30.If the applicant needs proceeds of the sale, then I have an equal or greater call and require at least half of the net proceeds, to provide accommodation for F & I.

10. In essence, the order sought by the wife is an order which will have the effect of protecting and preserving the property of the parties.  She seeks a variation of orders previously made with respect to the preservation of the balance of proceeds of sale of the C Town property.  What is sought by her now is that that property be preserved in the equity in the parties’ E Town property, which she acknowledges is likely to be sold in the course of these proceedings, rather than in a trust account held by the wife’s lawyers.  The advantage to her of preserving the property in that form is the consequential reduction in her monthly mortgage liability. 

11. Section 114(1) of the Act provides that the Court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate.  Such matter may include an injunction in relation to the property of a party to the marriage. 

1. I am satisfied that the orders sought by the wife will have the effect of protecting and preserving the property of the parties.  It was submitted on behalf of the wife and I accept, that there is no prejudice to the husband in the event that I make orders as sought by the wife.  The effect of those orders will be to transfer the funds held upon trust for the parties in the lawyer’s trust account to another account, the effect of which will be to increase the parties’ equity in the property held by them.

2. The husband adduced no evidence in support of his application for a release of funds to him.  Given his submissions to the effect that he required the funds in order to house himself, and in circumstances where there is no evidence that he would be in a position to apply the funds for the purpose of the acquisition of another asset in which those funds could be preserved, I do not accept the husband’s submissions.

3. I am satisfied that there is significant benefit to the wife if the funds are applied to the reduction of the mortgage liability.   In circumstances where the husband pays no child support for the child of the marriage and the wife is solely responsible for the support of that child as well as for payment of school fees and servicing of the mortgage on the parties’ property, I am satisfied that the orders sought by the wife are reasonable and just in the circumstances of this case.  Accordingly, I will make orders as sought by the wife with respect to the application of the proceeds of sale of the C Town property.

SECTION 106B APPLICATION

1. Section 106B of the Act provides the Court with a discretionary power to set aside transactions or restrain the making of an instrument that may defeat an existing or anticipated order. Such transactions may include those that affect the interests of third parties. It provides as follows:-

   (1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

   (1A) If:

   (a)a party to a marriage, or a party to a de facto relationship, is a bankrupt; and

   (b)the bankruptcy trustee is a party to proceedings under this Act;

   the court may set aside or restrain the making of an instrument or disposition:

   (c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the bankrupt; and

   (d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

   (1B) If:

   (a)a party to a marriage, or a party to a de facto relationship, is a debtor subject to a personal insolvency agreement; and

   (b)the trustee of the agreement is a party to proceedings under this Act;

   the court may set aside or restrain the making of an instrument or disposition:

   (c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the debtor; and

   (d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.

2. In order to succeed in her application to set aside the share transfer and resignations executed by the husband the wife must establish that:-

   ·There is an existing or completed proceeding;  An instrument or disposition has been made or proposed; 

   ·That instrument or disposition was made by or on behalf of a party or at the direction of a party or in the interests of a party;

   ·That the instrument or disposition was made or proposed to be made in order to defeat an existing or anticipated order in the proceedings or which irrespective of such intention was likely to defeat an order of the Court.

   The Full Court held In the Marriage of Gould (1993) FLC 92-434 that a claim under s 106B may be established if it is shown that the disposition would have the effect of diminishing the pool of assets available to meet anticipated orders.

3. The onus of proof with respect to the above matters rests with the wife. 

4. There can be no dispute that the first element is established as there are pending property proceedings before the Court.

5. The wife’s case is that the husband and his family operate a number of companies in order to conduct the family business. To that end a number of entities were established on or after 1986.  The husband, who is a qualified specialist, was a director and shareholder of a number of entities within the group of companies conducting that type of business.  In addition to those companies, there were a number of trusts also established so as to provide avenues for distribution of income and profit from the businesses. 

6. The wife alleges that the husband, by virtue of his qualifications, was instrumental in the development of the family business.  The husband worked in the business from 1986 until the time of the parties’ separation. 

7. The wife alleges that the parties separated in or about March 2012.  It is her case that the parties separated upon the decision of the husband to embark on an extended trip.  She deposes that he left the matrimonial home at about that time.  It is common ground that the husband was absent from the matrimonial home between March and about October 2012 whilst he embarked on his trip. 

8. At the time of his departure in March 2012, the husband was:-

   ·a director and shareholder of I Pty Ltd;

   ·director of J Pty Ltd; and

   ·guardian and appointor of the Brand Family Trust. 

9. The wife commenced proceedings in the Federal Circuit Court on 4 July 2013.  That application sought inter alia, disclosure by the husband in relation to the companies and trusts in which he had an interest including I Pty Ltd, J Pty Ltd and the Family Trust.  Hence, from the commencement of the proceedings the wife squarely raised the husband’s interests and their value as matters for consideration in the context of the property proceedings.

10. On 2 September 2013, the husband filed an affidavit in support of his response to the wife’s application in those proceedings.  In that affidavit, the husband provided a history of the engineering business.  That history is largely consistent with the matters alleged by the wife.  At paragraph 7 of that affidavit the husband deposes:-

    7.In 1986, the Brand family engaged the services of Andrews & Backhouse Barristers and Solicitors to establish a simple unit trust and discretionary family trust structure with an incorporated company, [I Pty Ltd] to act as trustee and business operator.  My father [Mr O Brand], brother [Mr P Brand] and myself were appointed as directors and shareholders of [I Pty Ltd] the trustee company.

    8.This structure forms a legal entity and all business decisions and financial operations are controlled by this entity.  I was employed in my capacity as an engineer to effect these decisions and financial operations and at no time has [Ms Lake] been entitled to or has made any decisions with respect to these entities.  My remuneration for this employment was via a salary paid through [J Pty Ltd] and distributions made to me through the Brand Family Trust only.

11. Having regard to that evidence, there can be no dispute as to the husband’s role within the companies, nor the manner in which the Family Trust was used as a vehicle for distributions.  My impression from the husband’s affidavit and his oral submissions is that he sought to emphasise his role in those entities and minimise the wife’s contributions to those entities.

12. At paragraph 15 of that affidavit the husband deposes that he tendered his resignation as a director of I Pty Ltd and J Pty Ltd on 29 November 2012.  Hence, I am satisfied that an instrument or disposition has been made by the husband, the effect of which is to remove him from control of entities which he has conducted (in conjunction with his brother and father) since 1986 or thereabouts. 

13. The husband seeks to provide an explanation for his resignation from those roles, citing ill-health together with issues arising from “excessive loan account monies outstanding”.  The wife challenges those assertions.  I am not in a position to make any findings with respect to those matters. 

14. In his affidavit filed 18 July 2014 the husband alleges at paragraph 3a that his resignation from I Pty Ltd and J Pty Ltd occurred three months prior to the parties’ separation.  Further, he states that he tendered his resignation as appointor and guardian of the Brand Family Trust on 29 November 2012.  At the conclusion of that paragraph the husband asserts:-

    Notwithstanding this makes absolutely no difference to the current or former status of entities with respect to the property pool.

15. The husband’s resignations were not lodged with ASIC until 21 February 2013.

16. In his affidavit filed 12 August 2013 the husband concedes at paragraph 18 that:-

    I sold my share in [I Pty Ltd] to [Ms A Brand] circa June 2013, The shareholding was sold by me to satisfy Centrelink eligibility criteria for Disability Support Pension application made by myself (sic).  I have also made a trust “declaration” renouncing all future beneficial interest in the [Brand Family Trust].

17. Again, in light of the husband’s evidence, there can be no dispute that he has executed an instrument or disposition as alleged by the wife.

18. Notwithstanding the husband’s sworn evidence, the share transfer form executed by him (annexure SL2 of the wife’s affidavit filed 4 June 2014) transferring the share to his mother bears the date 9 July 2013.  Hence, the share transfer was affected some five days after commencement of the wife’s property application.  The share transfer notes the consideration paid by the husband’s mother for that share was $1.

19. What is clear from the parties’ evidence and submissions is that there is a real and live dispute as to the value of the husband’s interests in those entities both in terms of the value of the interests as well as the income-earning potential of those interests.

20. The question for the wife to establish is that the instruments or dispositions so executed by the husband were made or proposed to be made in order to defeat an existing or anticipated order in the proceedings.  Alternatively, irrespective of such intention, the wife must establish that such dispositions were likely to defeat an order of the Court.

21. Based on the husband’s evidence I am satisfied that he has executed instruments which have the effect of disposing of his interests the subject of the instruments and removing them from the reach of the Court. 

22. Based on the husband’s evidence I am satisfied that the act of executing those instruments and disposing of his interests are actions likely to defeat the wife’s property claim.  The husband’s evidence would suggest that the purpose of the share transfer was to reduce his asset base and/or income so as to be eligible for Centrelink benefits.  At the hearing before me the husband maintained that the purpose of those dispositions was twofold; firstly, due to his incapacity to perform his role due to his failing health and second, to satisfy Centrelink requirements to prove his eligibility for a disability support pension.[1] 

    [1] Paragraph 8 of the husband’s affidavit filed 18 July 2014.

23. Throughout his affidavit filed 18 July 2014 the husband seeks to emphasise that the entities within the Brand group of companies and trusts do not form part of the parties’ interests available for consideration as part of their property dispute.    The husband has been on notice as to the wife’s claim to an interest in those entities since the commencement of the proceedings.

24. It was submitted by the wife that during the course of the marriage the parties enjoyed a comfortable standard of living.  The parties owned their home, drove luxury motor vehicles and their children were educated at private schools.  Since separation, the husband has ceased gainful employment and has disposed of his interests in the aforementioned entities.  The former matrimonial home has been sold.  The remaining interests of the parties which will be considered in the context of their competing property applications are:-

    ·the balance of the proceeds of sale of the C Town property;

    ·the E Town property;

    ·the parties’ interest in the Brand group of companies; and

    ·the parties’ superannuation entitlements.

25. It is said on behalf of the wife that the husband’s interests in the Brand Group the subject of the s 106B application will form an important element in the consideration of the parties’ competing property applications; that in the context of what is otherwise a modest pool of $500,000 or less, the parties’ interests in the Brand Group entities represents a significant asset and or income stream.

26. The husband’s own evidence is that he transferred his share in I Pty Ltd to ensure that he satisfied the relevant eligibility criteria for Centrelink.  It would appear that his interest in that entity provided him with assets and or income that would otherwise preclude him from receiving that benefit. 

27. The wife has engaged Q Valuers, who have undertaken a preliminary assessment in relation to the value of the entities.  The preliminary report prepared by the valuer is annexed to the wife’s affidavit filed 4 June 2014 at “SL4”.  That report, dated 3 March 2014 identifies that further disclosure is required before the valuations can be completed.  However, it notes that I Pty Ltd (in which the husband held one of three issued shares) is the sole shareholder of J Pty Ltd, which as at 30 June 2012 had retained earnings of $1,075,649.  In his affidavit in response, the husband does not challenge that evidence.  On the face of it, the transfer by the husband of his one third interest in the entity which owns J Pty Ltd, has had the effect of removing an asset valued at in excess of $300,000 from the parties’ interests.  On the basis of that evidence coupled with the admission by the husband that he disposed of his interests in order to meet Centrelink eligibility criteria, I am satisfied that the transfer of his share in that entity was an action which had the effect of diminishing the pool of assets available to meet orders of this Court.  Given that property proceedings were on foot prior to the share transfer and that the wife in her application sought orders for disclosure and valuation in relation to those entities, I am satisfied that it could be objectively foreseen that that disposition was likely to defeat an anticipated order.

28. The husband’s actions in executing the instruments of disposition have also had the effect of frustrating the wife’s endeavours to obtain disclosure in relation to those entities and to have them valued.  For example, notwithstanding requests by the wife to the husband as to the identity of the appointor and guardian of the Family Trust since the husband’s resignation from those positions, the husband has failed to provide that information, instead “advising the wife as per protocol to apply to the Trustee for this information”[2].   

    [2]  Paragraph 13 of husband’s affidavit filed 18 July 2014.

THE POSITION OF THE HUSBAND’S PARENTS AND BROTHER

1. Section 106B(3) of the Act provides:

   The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.

2. The wife’s solicitor, Ms L, filed an affidavit on 24 June 2014 setting out the history of service of the wife’s application upon the interested parties in the matter.  At paragraph 4 of that affidavit, Ms L deposes that she caused a sealed copy of the Application in a Case and affidavit in support to be served upon the directors of J Pty Ltd at its registered office on 12 June 2014.  Further, a sealed copy of the Application in a Case and affidavit in support was served upon the director of I Pty Ltd at its registered office on 12 June 2014. 

3. In addition, Ms L confirmed that a sealed copy of the Application in a Case and affidavit in support was served upon Ms A Brand, the husband’s mother and transferee of the share in I Pty Ltd by registered post on 12 June 2014.  At paragraph 8 of the affidavit Ms L confirmed that she received confirmation from Australia Post that Ms A Brand collected the registered letter serving the Court documents upon her at 12.20 pm on 13 June 2014.

4. Hence, I am satisfied that the husband’s mother, brother and father have been on notice in respect of this application since 12 and 13 June 2014 respectively.  Further, it is clear from the Reasons for Judgment delivered by Macmillan J that the husband’s sister was present at Court during the proceedings before her Honour on 2 July 2014.

5. As the hearing before me progressed, it became clear that members of the husband’s family wished to be heard in relation to the wife’s s 106B application.

6. In light of the indication from the husband during the proceedings that his family wished to be heard in relation to the application, I invited the interested parties to consider their position over the luncheon adjournment and confirmed that I would provide them with an opportunity to be heard upon a resumption of the hearing at 2.15 pm.

7. At the resumption of the hearing Dr M Brand, the husband’s sister, sought to make submissions on behalf of her mother, Ms A Brand.  I permitted Dr Brand to make those submissions on behalf of her mother.   During the course of those submissions Dr Brand confirmed that:-

   ·her mother was served with the Court application on 13 June 2014; and

   ·her parents and brother had obtained legal advice in relation to that application. 

8. Although a family member, Dr M Brand conceded that she has no interest in the entities the subject of the current dispute. 

9. The position put by Dr Brand on behalf of her mother was that her mother opposed the setting aside of the share transfer.  She stated that her mother was concerned that she would lose “voting rights” in that entity if the share transfer was to be set aside.  Further, Dr Brand submitted that the other directors of the companies, being her father and brother were concerned as to the husband’s conduct in the operation of the engineering business,  that the husband was suffering ill-health and that there were issues as to loans taken by him during the period when he was a director and shareholder in those entities.  She stated that it was for these reasons that the husband resigned the positions held by him and transferred the share to his mother. 

10. Mr Brand Senior also made submissions, adopting the submissions made on behalf of his wife by Dr Brand.

11. No affidavits have been filed on behalf of the husband’s parents or brother in response to the wife’s application.

12. The difficulty with the position taken by the husband’s family is that notwithstanding the concession made on their behalf that they have obtained legal advice with respect to the wife’s application, they have not sought to put any evidence before the Court which would support their position, nor have they sought to intervene in the proceedings.  They have been aware of the wife’s application for a period of approximately seven weeks.

13. The orders sought by the wife will restore the husband to the positions he held prior to his execution of the instruments.  Those positions do not give him control of the entities.  He will be one of three directors in I Pty Ltd and J Pty Ltd.  Hence, the concerns articulated by or on behalf of his family as to the potential damaging consequences of him being restored to that role are mitigated. 

14. In all of the circumstances, I am satisfied that the actions of the husband, in resigning his positions as director, guardian and appointor and transferring his share had the effect of removing those entities from the scope of the interests of the husband and the wife otherwise relevant to consideration of the parties competing property applications.  I am satisfied that such actions by the husband are likely to defeat orders of this Court in those proceedings. 

1. Accordingly, I propose to make orders pursuant to s 106B to set aside those instruments and restore the husband to the positions held by him prior to his execution of those instruments.

2. The wife also seeks orders restraining the husband from dealing with his interest in the entities once the dispositions have been set aside.  Given the conduct admitted by the husband with respect to the tendering of his resignations and the transfer of the share held by him, as detailed herein, I am satisfied that it is appropriate to restrain him from dealing with those interests until further order.   

THE ORDERS

1. That order 2(c) of the orders of the Federal Circuit Court made 13 August 2013 be varied to provide that the balance of the proceeds of sale of the property situate at B Street, C Town be applied as follows:

   (a)First as to the sum of $170,000 to reduce the mortgage liability to the Commonwealth Bank of Australia secured over the title of the property at D Street, E Town; and

   (b)Second, the balance then remaining to be held on behalf of the parties in an interest-bearing trust account by the solicitors for the wife until further order.

2. That pursuant to s 106B of the Family Law Act1975 (Cth) the instrument by which the husband, Mr Brand transferred to Ms A Brand one ordinary class share in I Pty Ltd (ACN …) be set aside.

3. That pursuant to s 106B of the Act the instrument by which the husband, Mr Brand resigned as a director of I Pty Ltd (ACN …) and of J Pty Ltd (ACN …) be set aside.

4. That pursuant to s 106B of the Act the instrument by which the husband resigned as a guardian and/or appointor of the Brand Family Trust be set aside.

5. That the husband personally, and in his capacity as a director of I Pty Ltd and J Pty Ltd do all such acts and things and sign all such documents as may be required to:-

   (a)Rectify the Register of Members of I Pty Ltd to reinstate him as a member of that entity;

   (b)Be reinstated as a guardian and appointor of the Brand Family Trust; and

   (c)Be reinstated as a director of I Pty Ltd and of J Pty Ltd.

6. That until further order the husband by himself, his servants or agents be and is hereby restrained from transferring, selling or otherwise dealing with his shareholding in I Pty Ltd or any other corporate entity in which he holds a share, and from resigning any office held by him in any company or trust.

7. That within 14 days the wife file written submissions in support of her application for costs.

8. That the husband file any submissions in response to the wife’s application for costs within 7 days of service of the wife’s submissions.

9. That the wife’s application in a case filed 4 June 2014 and the husband’s response to an application in a case filed 18 July 2014 be otherwise dismissed.

I certify that the preceding eighty-two (82) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johns delivered on 9 September 2014

Associate:

Date:  9 September 2014