Laws and Laws & Anor

[2016] FamCA 396

FAMILY COURT OF AUSTRALIA

LAWS & LAWS AND ANOR [2016] FamCA 396

FAMILY LAW – PROPERTY – PRACTICE AND PROCEDURE – where the wife claims an injunction under s106B of the Family Law Act1975 (Cth)- where respondent seeks an adjournment of proceedings due to medical reasons – where applicant has to demonstrate there is a serious question to be tried – where balance of convenience favours grant of injunction – where wife claims the purpose of the transfer of shares was to defeat her claims – whether damages are an adequate remedy – where no statutory right to damages is created under that provision – where injunction granted – where respondent has liberty to apply to dissolve injunction on 48 hours’ notice.

FAMILY LAW – PROPERTY – PRACTICE AND PROCEDURE – where respondent seeks transfer of proceedings to the Federal Circuit Court – where s106B of the Family Law Act 1975 (Cth) introduces complexity – where matter retained in the Family Court of Australia.

FAMILY LAW – PROPERTY – where husband seeks the wife vacate the matrimonial home – where wife has paid to discharge present arears – where it is a matter of commercial judgement of the bank whether the property should be vacated.

FAMILY LAW – CHILDREN – Parenting orders – where husband asserts no substantial matters are left in dispute – where magnitude of differences between the parties is not yet apparent – where it is premature in the proceedings to make an order

Family Law Act (1975) ss 106B, 114(3)

APPLICANT: Mr Laws

RESPONDENT: Ms Laws

SECOND RESPONDENT: Mr H Laws

FILE NUMBER: TVC 618 of 2014

DATE DELIVERED: 16 May 2016

PLACE DELIVERED: Townsville

PLACE HEARD: Townsville

JUDGMENT OF: Tree J

HEARING DATE: 16 May 2016

REPRESENTATION

THE APPLICANT: In person

COUNSEL FOR THE FIRST RESPONDENT: Mr Fellows

SOLICITORS FOR THE RESPONDENT: J Hamilton & Associates

THE SECOND RESPONDENT: No appearance

Orders

IT IS ORDERED BY CONSENT THAT:

1. On or before 4:00pm Monday 30 May 2016 both the husband and wife make file and serve an updated Financial Statement.

2. On or before 4:00pm Monday 23 May 2016 the wife’s solicitors, J Hamilton & Associates, disclose to the husband their general and trust account ledgers in relation to the wife.

3. On or before Monday 6 June 2016 the wife make file and serve a Points of Claim in the proceedings against the husband and Mr H Laws, setting out all material facts and circumstances upon which her claim under s 106B of the Family Law Act is based.

AND IT IS FURTHER ORDERED THAT:

1. Until 4:30pm on Wednesday 15 June 2016, Mr H Laws be restrained from selling, disposing or transferring the 45 Ordinary Class, Fully Paid shares that he holds and which were transferred to him by the husband in 2015 (“the 45 shares”) in the entity of I Pty Ltd ACN …, pending the written agreement of the wife and the husband and failing an agreement, an order of the Court.

2. Until 4:30pm on Wednesday 15 June 2016, Mr H Laws be restrained from altering or amending the rights attaching to the 45 shares or issuing further shares in the entity I Pty Ltd ACN …, pending the written agreement of the wife and the husband and failing an agreement, an order of the Court.

3. The further hearing of the wife’s Amended Application in a Case filed 16 March 2016 is listed for 2:00pm on Wednesday 15 June 2016 with all parties having leave to appear by telephone.

4. Mr H Laws have liberty to apply on 48 hours’ notice to seek to dissolve or vary the terms of the injunctions in Orders 4 and 5 hereof.

1. On or before 4:00pm Monday 30 May 2016 the wife make file and serve a Further Further Amended Response detailing the children’s orders which she will seek at any final trial of these proceedings.

2. Otherwise the husband’s Application in a Case filed 3 May 2016 be dismissed.

1. Costs of today’s hearing are reserved.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Laws & Laws and Anor 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 TOWNSVILLE

FILE NUMBER: TVC618/2014

Mr Laws

Applicant

And

Ms Laws

Respondent

And

Mr H Laws
Second Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. On 16 May 2016 I made the orders as set out at the commencement of this judgment.  I reserved my reasons for doing so.  These are those reasons.

BACKGROUND FACTS

1. Mr Laws (“the husband”) was born in 1975 and hence is presently 41 years of age.  In May 2004 when he was 19 years of age, he commenced a relationship with Ms Laws (“the wife”) who was born in 1975, and hence is presently 40 years of age.  They finally separated on 19 November 2013 after a relationship of a little over nine years.  There are two children of the relationship, J, born in 2007 and hence presently 8 years of age, and K, born in 2009 and hence presently 7 years of age.

2. At the time of separation, the parties had two major assets, being the husband’s 45 per cent shareholding in I Pty Ltd and the former matrimonial home.  The other shareholders in I Pty Ltd were the husband’s father, Mr H Laws (“Mr Laws senior”) who is now the second respondent to these proceedings, who also held a 45 per cent shareholding, and a Mr L, who held the balance of 10 per cent.

3. In about May 2015 the husband sold his 45 per cent interest in I Pty Ltd to his father for, it seems, the sum of $574,596.00. However under the share sale agreement, it appears as though no actual cash changed hands, but rather payment of most, or all, of the price was deferred. At about the same time the husband’s remuneration in respect of his employment with the company reduced substantially. The wife says that the sale was at an undervalue, and alleges that it was a transaction to defeat her claim in these proceedings, contrary to s 106B of the Family Law Act.  The husband and Mr Laws senior deny that, and say that it was an arms’ length sale for reasonable value, and the fact that the sale price was markedly lower than earlier valuations, simply reflected the state of the economy in which the relevant business operates.

4. After separation, and at the time of hearing of the various applications before me in May 2016, the wife and the children remained living at the former matrimonial home, albeit that steps are currently afoot by the mortgagee to sell the property as the husband, who is the sole registered proprietor of the property, is not presently meeting the mortgage repayments.

5. On 25 September 2015, on application of the wife, I made an order that she be appointed trustee for sale of the former matrimonial home, and made various orders dealing with the disposition of the net proceeds of sale.  Since then the wife has listed the property with one or more agents, but apparently no contract has been signed for its sale.

6. On 19 April 2016 I made orders in relation to substituted service of various materials upon Mr Laws senior, with a view to making him a party to these proceedings.  On 11 May 2016, Mr Laws senior filed a Notice of Address for Service, together with an affidavit.

MR LAWS SENIOR’S APPLICATION TO ADJOURN

1. One of the documents served upon Mr Laws senior was the wife’s Amended Application in a Case filed 16 March 2016.  It sought various injunctive relief in relation to Mr Laws senior, particularly restraining him from selling, disposing or transferring the shares which he holds in I Pty Ltd.  However in Mr Laws senior’s affidavit filed 11 May 2016, he noted that he had undergone rotator cuff surgery on 15 April 2016, and annexed a medical certificate from the relevant orthopaedic surgeon certifying that Mr Laws senior “will be unfit for [his] usual occupation for the period of 15 April 2016 until 15 July 2016 inclusive.  It is preferable and advisable that the patient restrains himself from all forms of undue duress.”

2. On this basis, by paragraph 5 of his affidavit, Mr Laws senior contended “any application against me needs to be adjourned until I am in a position to seek the appropriate advice and respond.”  However he did not seek to involve himself in the application before me, nor did he appoint solicitors to appear to argue for the adjournment.

3. That was particularly concerning in light of the fact that by paragraph 9 of his affidavit, he deposed that he had “been in negotiations with the other shareholder of I Pty Ltd .. to sell the business” and he and the other shareholder have “taken the decision to seriously consider” any offer to purchase the business, from buyers seeking “to purchase impaired assets.”

4. Mr Laws senior’s affidavit did not depose to any intention not to sell his shares before the wife’s application seeking to restrain him from doing so could be heard, or at least until Mr Laws senior was in a position to respond to the application.  In the event that he were to effect the transfer to his shares prior to the wife’s application being able to be heard, then any valid claim which she may have in relation to those shares could be rendered nugatory.

5. Whilst it is unfortunate that Mr Laws senior chose not to involve himself in the proceedings before me other than by filing an affidavit seeking an adjournment, I am satisfied that the interests of justice require the wife’s Application in a Case to be dealt with, save that any orders which are made will need to be fashioned in a way as to minimise the disruption to Mr Laws senior, and any injustice to him arising from his asserted inability to properly respond to the application.

6. I therefore declined to adjourn the hearing of the wife’s Amended Application in a Case filed 16 March 2016.

THE WIFE’S APPLICATION FOR AN INJUNCTION

1. The wife’s application was brought under s 114(3) of the Family Law Act.  It provides that the Court may grant an injunction “in any case in which it appears to the Court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the Court considers appropriate.”

2. It is well recognised that interlocutory injunctions of the kind sought here traditionally require the applicant to demonstrate that there is a serious question to be tried, that the balance of convenience favours the grant of the injunction, and that it is not just to confine the applicant to any remedy they may have in damages.  Finally, civil courts will ordinarily require an applicant to proffer an undertaking as to damages, as a condition of the exercise of the discretion in their favour.

3. The wife argues that there is a serious question to be tried here, arising from the circumstances of the sale.  Particularly she points to the fact that as at 31 December 2013 the balance sheet valuation of the husband’s shareholding was $5.562 million, which a valuer discounted by 40 per cent (reflective of the fact that the husband’s shareholding was a minority interest only) and on that basis on 14 April 2014 valued the husband’s 45 shares at $3.337 million.

4. Further, the wife points to the somewhat cryptic valuation undertaken for the purposes of fixing the sale price in 2015, which apparently attributed a value to the husband’s shares of $1.930 million, but then by a means which is not clear on the face of the valuation, discounted that sum to only $574,596.00, again seemingly reflective of the fact that the husband’s shareholding was a minority interest only.  There does not appear to be any consideration in that accountant’s valuation for the fact that Mr Laws senior thereby became a majority shareholder.

5. Moreover the wife points to the fact that, apparently, under the share sale agreement, no cash changed hands between Mr Laws senior and the husband, but rather payment was deferred until a later time, and moreover, since then, something in excess of $300,000.00 appears to have been credited against the balance due under the share sale agreement, so that the amount of money ultimately payable by Mr Laws senior to the husband has now significantly reduced.

6. Finally the wife points to the difficulties which have been placed in her path in trying to understand the nature of, and rationale for, the share sale, which have seen her only able to obtain the relevant documentation with considerable effort, and in the face of what she contends is real resistance by both the husband and Mr Laws senior, and their advisers.

7. Ultimately the wife’s argument is that an asset which had a book value of $5.562 million as at 31 December 2013, has been transferred by the husband out of his control, in circumstances which will likely see him with little, if indeed any, actual financial return to him.  The wife therefore says that there is a reasonable inference to be drawn from those facts that the purpose of the transfer was to defeat her claim for property division, or irrespective of any such intention, is likely to defeat any such claim. 

8. That is the serious question which she seeks to be tried.  I am satisfied that indeed there is a serious question to be tried in relation to whether the transfer, irrespective of intention, is likely to defeat an anticipated order in the wife’s favour in these proceedings.

9. I turn then to consider the question of balance of convenience. Correctly the wife identifies that in the event that Mr Laws senior were to transfer the 45 shares which she obtained from the husband to a third party, the wife’s claim under s 106B as against the father and Mr Laws senior, is likely to be rendered nugatory. She therefore contends that in order to preserve the utility of her claim, pending its determination the status quo should be preserved.  For his part Mr Laws senior asserts that any such restraint would impede the operation of the business, and would restrain the prospect of the business being able to sold, either to the remaining shareholder or to a third party. 

10. I frankly do not understand how an order restraining the disposition of shares in a company would somehow or other adversely affect its operation.  The husband went so far in his submissions to describe the effect of the injunction as to be to place a “stranglehold” on the business, but not only did his father’s affidavit not so depose, it is difficult to conceive how that could be correct. 

11. As to the restraint on transfer potentially frustrating a sale, it seems to me that that can be adequately addressed by the injunction being for a fixed period, and requiring the application to be mentioned shortly before its expiry to enable the wife to press for its renewal, or for Mr Laws senior to argue against its renewal, combined with giving Mr Laws senior liberty to apply on 48 hours’ notice.

12. Turning finally to the question of whether damages are an adequate remedy, it does not appear as though there would be a claim for damages available to the wife in circumstances where s 106B is satisfied. That is because the power of the court under that provision is to set aside the disposition, and no statutory right to damages is created. Whilst one could conjecture that the wife may have a tortious claim for conspiracy or the like, the elements of that claim would be markedly different to those required to establish a claim under s 106B, which on its face allows the court to set aside a transaction irrespective of any intention to defeat the wife’s claim. In those circumstances I cannot identify an adequate remedy which the wife has sounding in damages.

13. Finally there is the question of whether the wife should be required to proffer an undertaking as a condition for the grant of any injunction. Mr Fellows candidly conceded that in fact the value of any such undertaking is strictly limited given the poor financial circumstances of the wife. Moreover he points to the fact that there is no precondition established by s 114(3) for the imposition of an undertaking. The question for the imposition of conditions is whether or not the Court considers them appropriate.

14. In my view, so long as the injunction is for a short, fixed period (albeit potentially subject to renewal) and there is liberty to apply to dissolve the injunction given to Mr Laws senior on 48 hours’ notice, there are no circumstances which satisfy me that it is presently appropriate to also require the wife to proffer an undertaking as to damages.

15. I am satisfied that the elements for the grant of an interim injunction have been satisfied, and I am satisfied that it is just and convenient to restrain Mr Laws senior as sought by the wife, save that the injunction should be limited to the 45 shares he obtained from the husband, and it should be expressed to expire at 4:00pm on 15 June 2016, with the further hearing of the wife’s application being listed for 2:00pm on that day.  In addition there will be the liberty to apply afforded to Mr Laws senior to seek to dissolve the injunction on 48 hours’ notice.

HUSBAND’S APPLICATION IN RELATION TO CHILDREN’S ORDERS

1. The husband contends that the wife is being dilatory in resolving children’s proceedings, and asserts that there are no substantial matters left in dispute which would preclude final orders being made.  To that end, in his Application in a Case filed 4 May 2016, he sought that within 7 days the mother file any further application for final orders in respect of the children, and in the event that those orders were different from those recommended in the most recent Family Report of 14 January 2015, then an updated report be obtained.  Ultimately Mr Fellows did not oppose the wife being required to articulate the final orders which she seeks in relation to children’s matters (they plainly are insufficiently articulated in her Further Amended Response filed 16 March 2016) and there will therefore be an order to that effect.  In the event that the orders which she seeks do substantially differ from those recommended by the Family Report, then the need for any updated report can be addressed at that time.  It is premature to make an order until such time as the extent and magnitude of any difference between the parties in relation to children’s matters is apparent.

REMOVAL OF WIFE AS TRUSTEE FOR SALE

1. By paragraph 3 of his Application in a Case filed 4 May 2016, the husband sought to, in effect, discharge orders which I made on 25 September 2015 appointing the wife as trustee for sale of the former matrimonial home.  However the husband’s application was predicated upon the mistaken belief that her removal was necessary “to enable Westpac or its agents to carry out the sale of the property…”

2. As was plain from the orders themselves, it was never anticipated that the wife’s power to sell the property would be able to interfere with the mortgagees’ exercise of its power of sale.  Therefore there is no basis to make the orders sought by paragraph 3, and I decline to do so.

WIFE TO VACATE HOME

1. By paragraph 4 of that application the husband sought an order that the wife be required to vacate the property within 7 days.  However it seems plain that, the wife has paid something in excess of $3,000.00 to discharge the present arears on the mortgage of the property, and is likely continuing to pay funds to maintain the currency of that mortgage.  It is therefore a matter for the commercial judgment of Westpac whether they should require the property to be vacated by the wife, and if it does, the means by which it does so.  The husband expressed some anxiety at the prospect of a physical eviction of the wife and children from the home, but there is nothing in the material from Westpac to suggest that it would likely act in such a precipitous way.

2. I am not persuaded that there should be an order in terms of paragraph 4 of the husband’s application.

PAYMENT OF ACCOUNTANTS

1. The husband also sought that an amount due to some chartered accountants be paid from the proceeds of any sale of the property.  Such an application is premature.  In my orders of 25 September 2015 I dealt with the payment of the proceeds of sale of the property, noting that there may not in fact be any balance, depending upon the sale price. In any event 50 per cent of any net proceeds are to be paid into a solicitor’s trust account, and the disposition of those funds to pay accountants can then be dealt with, if the husband still presses for such an order.  As to that, I note that by agreement with the wife’s solicitors at the time, the relevant accountants’ bill was to be paid in the first instance by the husband, with the wife’s share of it to be taken into account during the course of the property division.  However that is a matter which can be considered in due course, if and when any balance proceeds pursuant to my orders are invested in the solicitors’ trust account.

TRANSFER TO FEDERAL CIRCUIT COURT

1. By paragraph 8 of his Application in a Case filed 4 May 2016, the husband sought that, if within a further 7 days the wife has not joined “any other party or entity to these proceedings that possess the documentary evidence in respect of a share sale agreement sought by her” then all outstanding applications be transferred to the Federal Circuit Court. His argument in this respect was difficult to follow. At an earlier hearing there was discussion as to whether or not, in the event that a claim under s 106B was not pressed by the wife, the matter retained sufficient complexity so as to continue in the Family Court of Australia, but as has been seen, such a claim is now actively advanced. There would be no basis to join a party to these proceedings merely to obtain documentary evidence.

2. Whilst there are attractions to this matter proceeding in the Federal Circuit Court in G Town, including that the husband would be able to personally attend hearings rather than them being conducted by electronic means, any substantive trial in this court will take place in G Town and hence that disadvantage – if it be one – will only be suffered by him during the course of interlocutory applications.

3. The claim under s 106B does introduce complexity to these proceedings of a kind which justifies the matter being retained in the Family Court.

OTHER MATTERS

1. The parties agreed that orders could be made by consent in terms of paragraphs 1 and 2 of the husband’s application of 4 May 2016, save that the obligation to update financial statements should be mutual.  There will therefore be orders in those terms made by consent.

2. Finally Mr Fellows conceded that he should embark upon a pleadings regime in support of the s 106B claim. I am therefore satisfied that there should be pleadings, but that Mr Laws senior and the husband should not be obliged to plead before the matter returns before me on 15 June 2016.

CONCLUSION

1. For these reasons I made the orders which I did on 16 May 2016.             

I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 16 May 2016.

Associate:

Date:  16 May 2016