Ledarn and Ledarn

[2011] FamCA 935

FAMILY COURT OF AUSTRALIA

LEDARN & LEDARN [2011] FamCA 935

FAMILY LAW – PROPERTY – Return of property to business premises

Family Law Act 1975 (Cth)

APPLICANT: Mr Ledarn

RESPONDENT: Ms Ledarn

FILE NUMBER: MLC 6423 of 2010

DATE DELIVERED: 12 December 2011

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 7, 8 & 9 December 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Wilson

SOLICITOR FOR THE APPLICANT: Taussig Cherrie Fildes

COUNSEL FOR THE RESPONDENT: Mr Gates

SOLICITOR FOR THE RESPONDENT: Aughtersons

Orders

1. That the wife forthwith do all things required to cause to be returned to the factory at S2, Suburb C:

   (a)The Z engineering machine and associated equipment removed from the factory premises at S2, Suburb C on or about 15 November 2011; and

   (b)The boxes of engineering equipment and items (including but not limited to prototype …, models and casting patterns) removed from the factory premises at S2, Suburb C on or about 19 November 2011.

2. That the husband forthwith cause all engineering drawings related to … to be returned to S2, Suburb C.

3. That the husband forthwith cause all research and development and engineering vehicles belonging to the Ledarn Group of entities to be garaged at either S2 or S1, Suburb C when they are not otherwise being used for the purposes of testing and research and development.

4. That for the purposes of these orders, should either party require a vehicle from the possession of the other for the purposes of research, development or engineering, the requesting party shall give the possessing party notice in writing as to their requirements and reasons therefore whereupon, some explanation associated with testing, engineering, research or development should be given and if there is no reason why the possessing party is using such vehicle, it shall be made available immediately and returned upon the conclusion of any such testing work to the place from which it was taken.

5. That until further order, each party be forthwith restrained from removing from company premises:

   (a)any vehicles used for research, development or engineering other than for the purposes of testing or development and all such vehicles shall be kept at the company’s premises when not being so used; and

   (b)any plant and equipment or other property of the company other than by agreement.

6. That the wife pay the husband’s costs of these interlocutory proceedings in a sum to be agreed and failing agreement as assessed.

IT IS CERTIFIED:

1. That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Ledarn & Ledarn has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC6423 OF 2010

Mr Ledarn

Applicant

And

Ms Ledarn

Respondent

REASONS FOR JUDGMENT

The two issues

1. There are two contentious issues in this interlocutory dispute. First, should a piece of business equipment be returned by the wife to the business premises of the husband pending trial in early 2012? Secondly, should mandatory and thereafter prohibitory injunctions be granted requiring the husband to return a variety of motor vehicles to the business premises from his residence and thereafter, those vehicles remain stored on business premises?

2. One might wonder how simple things such as this could be so contentious but even with a final hearing not far away, the parties cannot agree on issues that clearly affect their joint business operation.

Relevant background

1. The business operation is conducted from two factory sites which are virtually on the opposite sides of one road. Each of the parties has a different role and different emphasis in the way each participates in the business. More importantly, each is pursuing a final order for exclusive ownership of what has been a very financially successful business over their long marriage.

2. The current dispute has involved staff being required to give evidence creating a palpable tension. As one wise and long-standing senior employee said, it would be very difficult to poach new specialist employees to the business because of the tension between the owners.

The December 2010 proceedings and orders

1. The starting point for the current dispute is the orders I made after another contested interlocutory hearing in November 2010. On 2 December 2010, I ordered inter alia that:

   ·    the wife be restrained from entering the premises known as “S2” other than for 2 hours a day and at which time the husband was not to be present;

   ·    the respective applications of the parties be otherwise dismissed.

2. The wife’s application in November 2010 had been for the removal of the husband from the business. The husband’s application was that the wife be restrained from disposing of property and changing corporate details but also that he have access to certain financial material that he claimed had been denied him. He also sought that the wife operate the administration of the business from the premises known as “S1”.

3. To complicate matters, a state magistrate had granted the wife a family violence order excluding the husband from S1.

4. The issue of conflict involving the staff was then well and truly evident.

5. Although no specific orders were made about any status quo concerning the running of the business, that was the effect of what occurred. That did not stop the dispute continuing. As became apparent, the husband put surveillance camera equipment into S2, removed vehicles and locked away from the wife’s grasp, a variety of technical drawings. Prior to these particular interlocutory applications however, none of those matters was litigated. The parties were before this Court on a number of occasions as they prepared for a final trial which was to have occurred in November 2011. There were contentious arguments about whether accounting material had been provided to a single expert witness as well as “shadow” accountants. Over objection from the wife, the trial date was finally vacated because it was clear that the case was just not going to be ready to start. Discovery and production of documents had not been done. Then the current dispute occurred.

The facts

1. The facts were simple. Around 15 November 2011, as the discovery dispute raged, the wife removed a Z engineering machine from S2. She did not tell the husband she was doing so. Four days later, the wife removed two pallets of engineering equipment from S2. On 29 November 2011, the husband filed his application seeking that plant and equipment be returned. The innocuous dispute really concerned the logic behind each party’s actions.

The applications

1. On 7 December 2011, the wife filed a response to the husband’s application. She pointed to the fact that the husband had taken a variety of motor vehicles from S2 and had them stored “off site” which she asserted was contrary to legislative requirements for research and development taxation entitlements.

2. Each party had filed affidavit material but as the wife filed her material on the day of the hearing, discussion ensued about whether the matter should be adjourned and witnesses called for cross-examination. Ultimately, because of the tense situation in the business, I ruled that the hearing should proceed, that the husband could lead evidence in reply to the wife’s lately filed affidavit and over objection from the husband, the wife could call employees as witnesses on discrete points. The hearing still took substantial time.

3. The husband relied on his affidavit filed 29 November. The wife relied upon her affidavit filed 7 December and paragraphs 127-137 of an affidavit she had filed on 28 October 2011 together with affidavits by Mr B filed 28 October and 7 December. Mr B is an employee. Two employees, Mr I and Mr A refused to provide affidavits but by leave, were called pursuant to subpoenae.

4. A contentious issue also arose about whether a private contractor could assist in providing services concerning the Z engineering machine and both counsel spoke to someone from the company and provided me with their respective versions of what the company could offer.

5. In this case, there is little dispute about the important facts. The issue is what to do pending trial.

The argument

1. The husband’s position was that regardless of the impending trial, the plant and equipment should be put back at S2 and the vehicles should be left to him to sort out.

2. The wife’s position was that the Z engineering equipment was not going to be used by the husband because it could not be at least until the end of January and as such, nothing should be done about the problem until trial. In respect of the vehicles, her final position was that that they should be put back on company premises and each party have access to them for testing purposes.

3. Despite this being an interlocutory hearing where the testing of the evidence was limited, I am content to make findings on what I heard. The standard of proof is the balance of probabilities. I am satisfied that the findings I make below are open on the evidence.

The legal principles

1. Before turning to the facts, in the reasons that I published on 2 December 2010, I referred to the jurisdiction and power of the Court to make injunctive orders. I shall not repeat those reasons but do rely upon them.

2. As was pointed out by the learned authors Meagher, Heydon and Leeming in Equity-Doctrines & Remedies LexisNexis 4^th edition, s 114 of the Family Law Act 1975 (Cth) (“the Act”) confers on courts a much wider power to grant injunctions than ever existed either at law or in equity. The authors [at para 21-535] say that it is implicit in the Act that the power exists to issue injunctions for the purposes of enforcing the Act. Because Part VIII of the Act is designed to give power to divide the property of the parties, it is important that the Court have power to ensure that pending the ultimate hearing to divide that property, both the property and the parties’ respective interests in it can be protected. Section 114 therefore extends to matters of asset protection including the intangible interests in businesses such as goodwill and intellectual property. Despite the squabble between the parties, this issue is about protecting the business.

Evidence

The Z Engineering Machine

1. The wife’s evidence about the Z engineering machine was that S1 was not just limited to administration. She said that the premises housed critical aspects of engineering processes and there were key engineering staff that she named as working from or having worked from the premises. The husband denied S1 had such critical aspects and explained his understanding of the roles of the named employees. The Engineering Manager of the business gave evidence that the vast majority of the company’s engineering equipment was at S1. What is apparent from his evidence is that S1 conducts one operational part of the business and S2 the other. I am satisfied that the wife embellished her evidence to make it appear that the staff at S1 were mostly engineering people. That is not the case as much of what does occur there is administrative.

2. A significant part of the wife’s evidence was that the husband had limited involvement in the business as a whole and she oversaw weekly meetings which included the factory operations at S2. She said the husband’s involvement in the production that occurred at S2 was limited. Despite the clear line of cross-examination by the wife’s counsel that the husband had attended S2 irregularly and hence by inference had shown little real interest in the business as a whole, I find the exact opposite. The Engineering Manager regularly meets with the husband at his home and deals with him by email. That manager spends about equal time between the two factories. The Production Manager who has been with the company for over 17 years said that the husband’s absence would have no impact on production but production is one thing, ownership and planning are another. Many business owners do not attend to the production line but are presumably conscious of what is going on. That became evident here when the Production Manager confirmed that he emailed the production reports to the husband each morning. He confirmed that the husband or the Engineering Manager spoke to him if there was a problem. Counsel for the wife put to him that he did not receive a response to the emails. It must be open to me to presume that the production line is operating efficiently under the Manager’s guidance and that the husband did not need to acknowledge the emails. That evidence did nothing to assist me.

3. One significant absent witness was the operator of the Z engineering machine. He resigned by email on 2 November to leave on 29 November. It was the wife’s evidence that the employee had agreed to work on a contract basis “as required” but that he would only do so on condition that he had no dealings with the husband and could work from S1. That evidence did not sit comfortably with the resignation email which was addressed to both husband and wife and said that it had been a pleasure working with them both. Further, neither the Production Manager nor the Engineering Manager confirmed that the now-resigned employee would not work with the husband. Counsel for the wife urged an adjournment into January for the witness to be called but there had been plenty of time in November for that to occur. That was particularly so where two other employees who refused to give affidavits were called on a viva voce basis. Another employee sided with the wife and provided an affidavit. The husband’s view about some of his assertions was that they were just wrong. This employee made no secret of the fact that he did not want to be in the same place as the husband. After a careful analysis of his evidence, I do not accept that it advances the matter at all. His role is limited and it appeared that the wife and possibly the employee were endeavouring to portray him having a role greater than he did.

4. When cross examined about what agreement the wife had with the now-resigned employee, she said that he would attend and work on projects after hours and on weekends. Whilst that evidence if given by the employee might have had some weight, it is noticeable that in his resignation letter, he was taking his unused annual leave because of his wife’s medical condition. Just what he was prepared to do to assist remains a mystery.

5. The wife’s evidence as to why she took the Z engineering machine was only partially to do with the employee’s resignation. She described a need to continue to use the machine. In a letter dated 15 November, the wife’s solicitor said that as a precautionary measure, given the wife’s concerns about the husband’s “propensity” to unilaterally remove equipment, the wife has arranged to remove the Z engineering equipment. Apart from the evidence to which I shall refer below about the husband removing motor vehicles, no cogent evidence was presented to me to justify such an assertion. There was some criticism of the husband for not having taken immediate action particularly bearing in mind that the parties were then literally at this Court over the trial listing dispute. The husband’s explanation was that he was distracted by the other issues. I accept that.

6. There was controversy over who could operate the Z engineering machine as it has multiple functions or phases each of which is very technical. The very experienced Engineering Manager acknowledged that he did not have the requisite skill to operate it and he ventured to suggest that there were probably only 10 people in Australia appropriately qualified. The resigned-employee had been trained on the machine. The wife’s desire to use the Z engineering machine has to be seen in the context of how that would occur. She proffered no other possibility than the contracting arrangement just mentioned.

7. The more apparent reason for her action seemed to be that she was concerned that the husband was endeavouring to set up a competitive business in case he did not get the business in the property proceedings. Whilst that issue was the subject of searching cross-examination of the husband by counsel for the wife, there is no reliable evidence that the husband has done any such thing. The husband candidly acknowledged that if he did not ultimately get the business, he would set up another. On any view, there is no basis for me to find the husband has done anything to prejudice the business. Again, the wife’s evidence was based on suspicion save that 12 months ago, an affidavit was filed by an employee who said that the husband told him about “Plan B”. That evidence was a year old yet nothing was done about it. I am not prepared to rely upon it.

8. The innuendo of the wife just mentioned, along with her actions in removing the Z engineering machine, formed the basis for an assertion to her in cross-examination that she too was setting herself up to get the business. She denied that but it is clear that she, along with the husband, is very keen to show that each has a greater interest, desire and involvement than the other. I do not find that either is doing anything other than what I would expect.

9. The wife’s evidence was that the husband unilaterally moved the Z engineering machine to S2 in 2009. The husband denied that and said it was 2008. I would not find that the wife deliberately misled the Court about the date but whatever date it was, if it was so significant, why was action not then taken? The wife also referred to the now-resigned Z engineering machine operator being involved in breaking up a violent scene between the husband and wife a year ago yet he continued to work on this machine at S2 thereafter. Absent some cogent evidence from that employee about his relationship with the husband, the business and his proposal, I must reject the wife’s evidence.

10. The question then remains about what impact there is on the business on the machine being idle? The husband’s evidence was that he would do some things on it and then whilst searching for a new qualified employee, engage a contractor company. As I earlier mentioned, counsel for both parties spoke to someone at the company yet their versions of the import of that evidence is conflicting to a degree. The important parts that I do accept are that they have their own equipment that they could use although they could also use the company’s Z engineering machine. There was discussion about what would be cheaper but having regard to the nature of this dispute that is an irrelevant consideration. The proposed contractor was familiar with the company’s Z engineering machine but they would have to familiarise themselves with the equipment. None of this affects my determination because the wife has no evidence that I could accept that she could operate the Z engineering machine. The husband showed more interest in getting a solution which was viable.

11. In respect of the protection of the asset therefore, I find that it is more likely that the husband would be able to arrange production use of the existing machine and his understanding of the importance of it was greater than that of the wife. Because the husband is excluded from S1 by the family violence order and the fact that the machine was at S2 before being unilaterally removed by the wife, it should be returned forthwith. Counsel for the wife submitted that this was not unilateral action in the true sense because the husband had done a number of things such as putting in cameras at the factory and denied her access to motor vehicles to affect the wife’s rights. I reject that. There was significant involvement of the parties in the court at the time this occurred. The parties have experience lawyers and they use them extensively. This was unilateral action by the wife.

The pallet of equipment

1. The wife also removed a pallet of engineering moulds and equipment. The Engineering Manager confirmed that these were used very irregularly but there were reasons to keep them. I find that the wife’s only reason for doing what she did was to prevent the husband from keeping them to start up another business in circumstances where there was no evidence for the reasons earlier mentioned. Without any other plausible explanation for her actions, this equipment too should be returned.

The drawings

1. The wife sought orders relating to some technical drawings removed by the husband. There was much argument about who drew the things and who owned them. Without some specific evidence otherwise, I would find that they belong to the company. The husband’s evidence was that these drawings were taken by him because they were on a computer to which he was denied access by the wife. The wife did not deny that assertion. The husband’s evidence was that he took the thousands of drawings home to computerise them and make a list of the components. The wife’s evidence was really set out in the letter she instructed her solicitors to send to the husband’s solicitors. It asserted that the wife had “concerns” the husband might “mark” or “alter” the originals to improve his case in this Court. That was a breathtaking assertion when the uncontroversial evidence was that the drawings were already on computer to which the husband had been denied access.

The company vehicles

1. The husband over a period of time has removed company testing vehicles and garaged them at his home. When asked why he did that, he said that there was an absence of room. That was possibly right at S2 but it would appear the opposite at S1. The real concern was that when one or the other factory needed a vehicle for testing purposes, it was not always provided. That accusation was made by both parties against the other and corroborated by the Engineering Manager.

2. In my view, consistent with the principles that I have outlined above, these vehicles should be housed on company premises and made available where there is a justifiable need for them to be made available for testing. I understand testing to mean more than just operation at the factories. These are a special type of vehicle which need testing on various terrains. It is important that the parties have access to those vehicles to protect the interests of the business.

3. Counsel for the wife offered draft written undertakings about use of company property and counsel for the wife said his client had no problem with that concept but in my view, I could not see the point of making orders based on undertakings in circumstances where the parties have scant concerns for the business interests. I decline the undertakings.

Costs

1. Each party at my request submitted their positions on costs arising out of the proceedings.

2. Counsel for the husband submitted the wife’s actions justified an order and counsel for the wife said that each had done things that justified a position where each bore their own costs.

3. Section 117 of the Act provides that each party shall bear their own costs unless there are circumstances justifying a departure from that principle and if the court is contemplating such an order, it must give consideration to the matters set out in s 117(2A).

4. There are justifying circumstances in this case because of the actions taken by the wife. This action was brought about by her unilateral behaviour and no compromise was offered. 

5. The parties each have significant financial resources. There are no legal aid considerations here. There were no orders breached or non-compliance with procedures but the wife must have realised that the position after 2 December 2010 was a holding one. The letter written on 15 November indicated her logic and in my view, there was no foundation for her belief. She ignored a co-owner’s views.

6. Although the wife has been unsuccessful, she has not been wholly so. The husband too has not really justified his position concerning the motor vehicles and the evidence supports the fact that he too was not troubling himself about the wife’s entitlements. That was evidence when the Engineering Manager said of the husband that he had not produced a vehicle when requested for testing purposes. However, that issue would not have been raised had the wife removed the machine and the husband taken action.

7. In my view, there are justifying circumstances here and the wife should pay the husband’s costs.

I certify that the preceding Forty Three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 12 December 2011.

Associate: 

Date:  13 December 2011