LGM & Cam (No. 2)
[2007] FamCA 1645
•17 December 2007
FAMILY COURT OF AUSTRALIA
| LGM & CAM AND ORS (NO. 2) | [2007] FamCA 1645 |
| FAMILY LAW – PRACTICE AND PROCEDURE - Application - Dismissal or Striking Out |
| Family Law Rules 1975 (Cth) |
| Lindon v Commonwealth (No 2) (1996) 136 ALR 251 Aldred & Aldred; Westpac Banking Corp (1986) FLC 91–753 In the Marriage of Spellson (1989) FLC 92–046 Bigg v Suzi (1998) 22 Fam LR 700 In the Marriage of Pelerman (2000) FLC 93-037 Dey v Victorian Railway Commissioners (1948-1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways(NSW) and Ors (1964) 112 CLR 125 Webster v Lampard (1993) 177 CLR 598 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1995-1997) 188 CLR 241 |
| APPLICANT: | Mr CAM |
| RESPONDENT: | Ms LGM |
| SECOND RESPONDENT: | LY |
| THIRD RESPONDENT: | MY |
| FOURTH RESPONDENT: | SY |
| FIFTH RESPONDENT: | K Inc |
| SIXTH RESPONDENT: | Z Pty Ltd (In Liquidation) |
| FILE NUMBER: | SYF | 3359 | of | 1997 |
| DATE DELIVERED: | 17 December 2007 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | O'Ryan J |
| HEARING DATE: | 6, 7, 8, & 9 November 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bedrossian of Counsel |
| SOLICITOR FOR THE APPLICANT: | Etherington's Solicitors |
| RESPONDENT: | Wife in Person |
| FOURTH RESPONDENT: | SY in Person |
| COUNSEL FOR SIXTH RESPONDENT: | Mr Cohen |
| SOLICITOR FOR SIXTH RESPONDENT: | Deacons |
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice O’Ryan delivered this day will for all publication and reporting purposes be referred to as CAM & LGM
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 3359 of 1997
| Mr CAM |
Applicant
And
| Ms LGM |
Respondent
And
| Mrs LY |
Second Respondent
And
| Mr MY |
Third Respondent
And
| Ms SY |
Fourth Respondent
And
| K Inc |
Fifth Respondent
And
| Z Pty Ltd (In Liquidation) |
Sixth Respondent
REASONS FOR JUDGMENT
INTRODUCTION
On 13 November 2007 I made orders dismissing the responses of the 1st, 2nd, 3rd and 4th Respondents in this matter in relation to a response filed on 28 September 2007 on behalf of Z Pty Ltd (In Liquidation) (ACN …). The orders were:
1.The response filed on 26 October 2007 on behalf of the First Respondent [LGM] be dismissed.
2.The response filed on 26 October 2007 on behalf of the Second Respondent Mrs [LY] be dismissed.
3.The response filed on 26 October 2007 on behalf of the Third Respondent Mr [MY] be dismissed.
4The response filed on 31 October 2007 on behalf of the Fourth Respondent [SY] be dismissed.
Then on 15 November 2007 I made orders giving effect to the made on 13 November 2007, which I set out below.
THE COURT DECLARES:
1)The property contained within folio identifier […], title reference […], being otherwise known as [the QLD property], and as to which the First Respondent and the Fourth Respondent are registered upon title as the proprietors of the fee simple, is held upon trust on behalf of the Sixth Respondent.
2)Mortgage registered number […], registered on title to the [QLD] Property in favour of the Second Respondent and the Third Respondent, is void.
3)The First Respondent, in her capacity as a director and officer of the Sixth Respondent:
· (a) with reasonable care and diligence contrary to s 180(1) of the Corporations Act, 2001;
· (b) failed to exercise the powers and to discharge the duties of the office of director for a proper purposes or in good faith in the best interests of the Sixth Respondent contrary to s 181(1) of the Corporations Act, 2001; and
· (c) improperly used her position as a director of the Sixth Respondent to gain an advantage for herself and to cause detriment to the Sixth Respondent contrary to s 182 of the Corporations Act, 2001.
IT IS ORDERED:
4)The First Respondent and the Fourth Respondent forthwith execute and deliver up to the Sixth Respondent a transfer in registrable form of the whole of the property contained within folio identifier […] in Queensland, title reference […].
5)The Second Respondent and the Third Respondent forthwith execute and deliver up to the Sixth Respondent a discharge of mortgage number […] in registrable form to the Sixth Respondent.
6)The First Respondent and the Fourth Respondent forthwith give possession of the whole of the property contained within folio identifier […] in Queensland, title reference […] to the Sixth Respondent.
7)In default of compliance by each or any of the First Respondent, the Second Respondent, the Third Respondent and the Fourth Respondent, with the orders in paragraphs 3, 4 & 5 above, no later than the expiration of 14 days after the making of such orders, and upon the filing by the Sixth Respondent of an affidavit deposing to the facts and circumstances of such default by the First Respondent, the Second Respondent, the Third Respondent and/or the Fourth Respondent (as the case may be) the Court forthwith thereupon shall settle and sign in favour of the Sixth Respondent:
a) a transfer in registrable form of the whole of the property contained within folio identifier […] in Queensland, title reference […] pursuant to order 3 above;
b) a discharge of mortgage in registrable form of the mortgage number […] pursuant to order 4 above; and
c) granting leave to the Sixth Respondent forthwith to issue a writ of possession for or otherwise enter possession of the whole of the property contained within folio identifier […] in Queensland, title reference […] pursuant to order 5 above.
8)The Sixth Respondent have judgment as against the First Respondent for breach of the provisions of sections 180, 181 and 182 of the Corporations Act, 2001, with damages to be assessed.
9)The First Respondent, the Second Respondent, the Third Respondent and the Fourth Respondent pay the Sixth Respondent’s costs of and incidental to its Amended Response to an Application for Final Orders filed on 28 September 2007.
·
10)Paragraph 10 of the Minute filed on 14 November 2007 on behalf of the Sixth Respondent namely:
·
· The balance of the hearing of the proceeding by the Sixth Respondent for damages to be assessed as against the First Respondent be transferred to the Supreme Court of NSW pursuant to the provisions of s. 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act, 1987, for hearing together with proceeding numbered 50159 of 2006 in that court.
be adjourned for further hearing.
These are my reasons for making those orders.
Currently before me for hearing are applications pursuant to s 79 of the Family Law Act 1975 (Cth) for property settlement. The proceedings were commenced by an application filed on 4 March 1997 and have finally come on for hearing in November 2007, being a period in excess of 10 years. However, there have been numerous proceedings in other courts that have contributed to the delay in concluding the Family Court proceedings. In fact, at the commencement of the hearing before me there were still proceedings pending in the Supreme Court of New South Wales, the outcome of which may have an effect on the outcome of the current Family Court proceedings.
In the property proceedings there are six parties. The Applicant is CAM who I shall refer to as the Husband.
The First Respondent is LGM also known as …, …, … and … who I shall refer to as the Wife.
The Second Respondent is Mrs LY who is the Wife’s mother. I shall refer to her as Mrs LY.
The Third Respondent is Mr MY who is the Wife’s father. I shall refer to him as Mr MY.
The Fourth Respondent is SY also known as … who is the Wife’s sister. I shall refer to her as SY.
The Fifth Respondent is K Incorporated Association (Incorporation No. …) which I shall refer to as K Inc.
The Sixth Respondent is Z Pty Ltd (in liquidation) which was incorporated in March 1985. I shall refer to this company as Z Pty Ltd.
Z Pty Ltd is now in liquidation. The current Liquidator is Mr G of B Chartered Accountants who was appointed in December 2004. The former Liquidator was Mr W of W Chartered Accounts. Mr W was appointed in May 2001 by order made in the Supreme Court of New South Wales. He was removed in December 2004.
The Husband and the Wife are the shareholders of Z Pty Ltd and they each hold 50 per cent of the issued shares. The Husband and the Wife were the directors however their powers as directors ceased with the appointment of a liquidator. Z Pty Ltd carried on a business of importation of electronic goods and sale within Australia of electronic goods.
Z Pty Ltd is the relevant party, being the Sixth Respondent noted upon the record, and in respect of which jurisdiction is attracted including that with respect to costs. Nothing on the record of the Court discloses that the Liquidator personally has been joined to the proceeding as a party, or has submitted to the jurisdiction of the Court.
There are other entities that, although not parties to the current proceedings, are relevant.
ZG Pty Ltd (in liquidation) (ACN …) was incorporated in July 1992. I shall refer to this company as ZG Pty Ltd. It is now deregistered. The Husband and the Wife were the shareholders and they each held 50 per cent of the issued shares. The Husband and the Wife were also the directors however their powers as directors ceased with the appointment of a liquidator. From time to time during the period of trading activity of Z Pty Ltd, ZG Pty Ltd was used as bare trustee of the business of Z Pty Ltd.
Z2 Pty Ltd (ACN …) was incorporated in January 1997. I shall refer to this company as Z2 Pty Ltd. The shareholders and directors are presently the wife’s sister SY and the wife’s mother LY. The Husband and Z Pty Ltd allege that it carries on the business that was formerly the property of Z Pty Ltd.
X Company Ltd was incorporated in Taiwan in June 1976. I shall refer to this company as X Ltd. The current status of X Ltd is not known. However the shareholders are the Wife, the wife’s parents, the wife’s sister SY and the Wife’s sister, JC. The Husband contends that the Wife is the director. X Ltd carried on a business of exporting computer components.
L Pty Ltd (ACN …) was incorporated in July 1990. I shall refer to this company as L Pty Ltd. The directors are the Wife and SY. The Wife is also the secretary. The Wife holds one “A” Class share and two “B” Class shares. SY holds one “A” Class share and one “B” Class share. L Pty Ltd is active, but not trading. It is the legal owner of real property.
Q Pty Ltd (ACN …) was incorporated in August 1992. I shall refer to this company as Q Pty Ltd. The Company is active, but not trading. It is the legal owner of a resort enterprise previously conducted in Queensland, but is not the legal owner of any real property.
In the property settlement proceedings the significant issue is the extent and value of the net assets of the parties to the marriage. As often occurs in cases involving the interests of third parties, it is substantially about step one of the preferred approach. The Husband contends that the Wife has failed to make full and frank disclosure of her financial circumstances. This is denied by the Wife. It is a complex issue and involves the interests of third parties being persons or entities who are not parties to the marriage.
Z Pty Ltd sought that defences disclosed in amended responses filed on behalf of each of the Wife, the wife’s father, the wife’s mother and SY being the 1st, 2nd, 3rd and 4th Respondents to the application by Z Pty Ltd be summarily dismissed. It was submitted on behalf of Z Pty Ltd that the amended responses of the Wife, the wife’s parents and the wife’s sister to the application of Z Pty Ltd disclose no triable issue, and are apt to be struck out pursuant to the provisions of r 10.12(d) of Family Law Rules 2004, on the ground that there is no reasonable likelihood of success; or alternatively, pursuant to the provisions of r 10.12(c) of the Rules, on the ground that the proposed amended responses are frivolous, vexatious or an abuse of process.
The summary dismissal application is made at the commencement of the trial and at a point when there has been no cross-examination of any witness.
Submissions were made by each of the Wife and SY being the 1st and 4th Respondents. No submissions were made by the wife’s parents being the 2nd and 3rd Respondents. However I proceeded on the basis that all submissions made by the Wife and SY were to be adopted by the wife’s father and by implication the wife’s mother. Z Pty Ltd accepted that in respect of the wife’s parents this was a proper course, given that each of the Wife and the wife’s parents and SY is a litigant in person.
SHORT HISTORY
The Husband was born in England in June 1945 and the Wife was born in Taiwan in November 1951.
The Husband and the Wife met in about late 1981 or early 1982. They were married in December 1982. In early May 1996, the Husband and Wife separated under the one roof until the beginning of November 2006. On about 4 November 1996, the Husband ceased residing in the matrimonial home. The Husband and the Wife were divorced on 5 June 1999.
There are two children of the marriage, a son born in October 1986 and a daughter, born in March 1989. Final parenting orders were made by Cohen J on 9 November 1998.
On 18 August 2002 the Husband married ML. They have three children being an older son born in January 2003, a younger son born in August 2005 and a daughter born in April 2007.
The wife’s father was born in 1919. The wife’s mother was born in 1928.
SY was born in July 1949.
BACKGROUND FACTS RELEVANT TO THIS APPLICATION
For the purposes of this application, the background facts which I set out below largely relate to a property in Queensland , a mortgage in relation to that property and breaches of fiduciary duty by the Wife and SY. Z Pty Ltd sought a declaration that the QLD property was held in trust by the Wife and SY on behalf of Z Pty Ltd. Z Pty Ltd sought that a mortgage secured on the title of the QLD property in favour of the wife’s parents be set aside.
Between 1982 and 1996 the Husband and the Wife conducted a business using L Pty Ltd first until the incorporation of Z Pty Ltd and then Z Pty Ltd, which business was constituted by the wholesale supply of electronic equipment, primarily to the New South Wales government, and to other distributors acting for it.
Z Pty Ltd imported requisite electronic components from the Republic of Taiwan for assembly in Australia, with its primary supplier being the Taiwanese company known as X Company.
On or about July 1992 ZG Pty Ltd was incorporated. From about that date, the business was conducted by Z Pty Ltd using the trading name “[ZG]”. The Wife gave evidence in proceedings in the Supreme Court that Z Pty Ltd never conducted business.
On or about 7 July 1992, the Wife and SY entered into a contract for the purchase of the QLD property. Z Pty Ltd contends that the funds used to purchase this interest in the QLD property were funds directly attributable to the property of Z Pty Ltd. Z Pty Ltd contended that the purchase price of the QLD property of $1,350,000 was funded as follows: $630,000 of funds (approximately) of Z Pty Ltd; and a $720,000 loan advanced from the Commonwealth Bank of Australia (“CBA”) (approximately).
At all times, commencing upon settlement of the purchase of the QLD property to 2 May 1997, the loan advanced by the CBA was repaid with funds of Z Pty Ltd.
The Husband ceased any involvement in the day to day conduct of the Z Pty Ltd business as from early November 1996 when the Husband and the Wife ceased residing under the same roof.
On 9 January 1997, Z2 Pty Ltd was incorporated. It is contended by the Husband and Z Pty Ltd that Z2 Pty Ltd assumed and converted to its use and custody the whole of the assets and undertaking of Z Pty Ltd, without any consideration being paid to the members of Z Pty Ltd, in respect of such assets and undertaking
On 4 March 1997 an application for property settlement was filed on behalf of the Husband in the Family Court. He sought properties at 36 and 37 R Street and payment of $600,000.
On 2 May 1997, the CBA loan was paid out, in part, with loan funds secured by a first mortgage over the QLD property granted by the Wife and SY to I & L Securities Pty Ltd. The mortgage was stamped to secure $500,000. This loan was settled on or about 1 May 1997. The Husband and Z Pty Ltd contend that the loan by I Securities Pty Ltd was repaid at all times by Z2 Pty Ltd, which funds were properly the funds of Z Pty Ltd.
On 18 June 1997 the Wife filed a response. She simply sought that the Husband’s application be dismissed. She did seek parenting orders that for present purposes are not relevant.
In September 1997 X Company Ltd commenced proceedings in the Common Law Division of the Supreme Court of New South Wales as plaintiff against Z Pty Ltd as first defendant, the Husband as second defendant and the Wife as third defendant. X Company sought repayment of around $4.8 million of loans said to have been made to Z Pty Ltd between 30 June 1992 and 30 June 1996, plus interest. Both the Husband and the Wife were also joined as defendants on a number of alternative bases, which included negligence and breach of s 232 of the Corporations Law. In November 2001, when the matter was listed for hearing, the claim had been amended to a claim for about $7.6 million plus interest making a total claim in excess of $11 million. The claim was ultimately resolved by Mathews AJ in February 2002. When the proceedings were commenced the contention was that X Company had lent money to Z Pty Ltd.
On 1 December 1997 the Husband filed a defence to the Statement of Claim issued on 7 September 1997 by X Company. By this time the Husband had been completely excluded from participation in the affairs of Z Pty Ltd, and the Wife had practical control of it. The Wife did not file a Defence, either on her own behalf or on behalf of Z Pty Ltd.
In December 1997 in the Supreme Court proceedings X Company entered default judgment against Z Pty Ltd in the sum of $7,666,998.67. The Husband contends that the Wife and X Company were acting in concert, one of their aims being that the Wife would retain no assets in her own name which were capable of being divided in the proceedings in the Family Court.
In January 1998 in the Supreme Court proceedings X Company entered a default judgment against the Wife with the quantum of damages to be assessed. The Wife did not contest entry of the judgment. The Wife did not file a defence and allowed default judgment to be entered against herself and Z Pty Ltd. It will be seen shortly that the Husband defended the proceedings and filed a cross claim joining SY as a party.
On 3 February 1998 an amended application for final orders was filed on behalf of the Husband. He sought properties at 36 and 37 R Street and payment by the Wife of $1,026,325. He also sought that, pending compliance with the order, the Wife be restrained from dealing with any property in which she had an interest or increasing any liabilities and in the alternative, she pay to Z Pty Ltd by way of damages the sum of $1,000,000 for breach of fiduciary duty in her office as a director of the company. The Husband sought a declaration that Z2 Pty Ltd be held upon trust for Z Pty Ltd and all monies received in the conduct of its business since its incorporation and that Z2 Pty Ltd account to and pay to Z Pty Ltd for all monies held upon trust by Z2 Pty Ltd.
On 18 May 1998 a further amended application for final orders was filed on behalf of the Husband. He sought the same orders as set out in the amended application filed on 3 February 1998. However, he named Z2 Pty Ltd as the Second Respondent and Z Pty Ltd as the Third Respondent.
On 13 August 1998 an amended response to an application for final orders was filed on behalf of the Wife. She sought that the Husband’s further amended application filed on 18 May 1998 be dismissed. As well, the Wife sought that the Husband transfer his interest in 36 and 37 R Street, his interest in all other real property in which he had an interest and his shares in Z Pty Ltd and Z2 Pty Ltd to her. The Wife sought other orders which I need not repeat.
In December 1998 X Company obtained in the Supreme Court an injunction against the Husband restraining him from dealing with any matrimonial property until further order. Dunford J ultimately dissolved this injunction on 12 May 1999 and X Company was ordered to pay the Husband’s costs.
The Husband and Z Pty Ltd contend that on or about 29 April 1999 the loan by I Securities Pty Ltd was repaid by Z Pty Ltd, which funds were properly the funds of Z Pty Ltd.
In July 1999 the wife’s parents commenced proceedings against the Husband and the Wife claiming a debt of $100,000. The Husband was successful and an order made that the wife’s parents pay his costs. Subsequently the Husband commenced enforcement proceedings in relation to the costs order and the wife’s father was examined before a Deputy Registrar of the Local Court.
On 30 August 1999 an order was made in the Family Court by a Judicial Registrar restraining the Husband and the Wife from selling, transferring, encumbering, alienating or otherwise dealing with any real property in which they had an interest. This order was continued by Rose J on 7 September 1999.
In May 2001, Z Pty Ltd was wound up in insolvency by the Supreme Court of New South Wales on the application of X Company. Mr W was appointed as its liquidator. The Wife did not oppose the winding up.
On 18 July 2001 a Notice of Motion was filed by the Husband in the Supreme Court for orders to act on behalf of Z Pty Ltd in the X Company proceedings. These proceedings were before the Supreme Court on a number of occasions. Ultimately on 27 August 2001 Einstein J granted leave to the Husband to act on behalf of Z Pty Ltd to apply to set aside the default judgment entered by X Company. At this time Z Pty Ltd was in liquidation.
On 7 September 2001 the Husband filed a Notice of Motion in the Supreme Court on behalf of Z Pty Ltd seeking to set aside the default judgment obtained by X Company and for leave to Z Pty Ltd to file a defence and cross-claim. In September 2001 Sully J made an order that the judgment against Z Pty Ltd be set aside and leave was granted to the Husband to file a defence and cross-claim. Thereafter the claim by X Company was defended by Z Pty Ltd and the Husband but not by the Wife. As to the Wife the only issue was the assessment of damages.
On 2 November 2001 the Wife and SY co-signed with the wife’s parents as first mortgagee, documents to mortgage the QLD property for $300,000 to V Pty Ltd.
The hearing of the X Company proceedings commenced in the Supreme Court before Mathews AJ on 5 November 2001. Shortly prior to the commencement of the hearing a further amended statement of claim was filed by X Company on 31 October 2001. The claim by X Company was significantly changed and was for the price of electronic parts supplied by X Company to Z Pty Ltd between about 1988 and 1996. It is not necessary to consider how the amount was calculated, however the quantum of the claim by X Company had been enlarged to $7,514,466.
The action by X Company against the Husband and the Wife was that they had contravened s 232 of the Corporations Law. The contention was that during the relationship of the Husband and the Wife they had acquired significant assets which included real property, motor vehicles, a cruiser and investments and had paid for these assets using the funds of Z Pty Ltd. It was contended that rather than pay X Company as a creditor, the Husband and the Wife had used money which could have been used to pay X Company.
There was put in evidence a transcript of the evidence in chief of SY on 5 November 2001 (Exhibit E) and also a transcript of the evidence in chief of the Wife on 8 November 2001 (Exhibit F). Both SY and the Wife gave evidence as witnesses called by X Company. It was submitted on behalf of Z Pty Ltd that I was entitled to assume that it was evidence adduced without controversy and could be taken to be factually correct.
In the X Company proceedings the Wife was asked a number of questions about the purchase of property and this was said to be so as to demonstrate the misuse of funds by the Husband and the Wife. Senior Counsel for X Company asked the Wife a series of questions about the purchase of property and in so doing identified as one asset the property in QLD that was purchased by the Wife and SY. Senior Counsel then identified properties of which the Husband and the Wife were the joint owners and also a property at H Street and the following was then put:
Q. In the course of the questions that I have asked to about those properties, you have given answers where you have said they were paid off with the company money, do you remember giving answers to that effect?
A. Yes
Q. What company money are you speaking of? Which company or companies?
A. [Z Pty Ltd].
On 9 November 2001 it was put to the Wife by Senior Counsel for X Company that he spent some hours taking the Wife through specific cases where the Wife had suggested that payments were made to X Company in the cashbooks of Z Pty Ltd which the Wife acknowledged were not paid to X Company but were used to meet private expenditure for the benefit of the Husband and the Wife. Senior Counsel put to the Wife “May I take it that these ones that I have shown you are but some of the many cases where you have done the same thing throughout the whole of [Z Pty Ltd’s] life?” and the Wife said “Yes”. Senior Counsel also put “May I take it that where you have also, in the cashbook, recorded entries as payments to other companies, they are also unreliable, in that you have on many occasions recorded as payments for business expenses to other companies, payments which were made to benefit [the husband] and yourself in relation to your private assets?” and the Wife said “Yes”.
In submissions made on 9 November 2007 counsel for Z Pty Ltd, by reference to Volume 8 of the Husband’s Tender Bundle, identified the following evidence:
· 8-155/T38 lines 38 ff - 8-156/T39 lines 1-16: Evidence given by SY (in English) testifying to her participation in a scheme with the Wife to defraud the Australian Customs Service of import duty due by Z Pty Ltd.
· 8-159/T42 lines 43-49: Evidence given by SY (in English) testifying to the fact of the Wife’s ownership of 44 per cent of the issued shares in X Company.
· 8-333/T218 - 8-342/T227: Enumeration orally by the Wife of the properties which were acquired with, and/or whose debt burden was serviced from, the funds of Z Pty Ltd. These properties include the Queensland property (8-338/T223 lines 5-27).
· 8-343/T228 lines 1-35: The Wife was asked, in respect of all of the properties so identified in the preceding 10 pages of transcript as to the source of finance, and testified that it was Z Pty Ltd, together with the funds necessary to acquire BMW 7 series motor vehicles and a 41 foot motor cruiser.
· 8-345/T230 lines 40-57: The Wife in further testimony confirmed that money for funding of all of the properties in which she held an interest was derived from moneys of Z Pty Ltd.
· 8-346/T231 lines 5-12: The Wife testified to her falsification of entries upon the cheque butt records of Z Pty Ltd, which were inconsistent with the payee of the cheque, including falsifying recording X Company as payee when a third party was the true payee.
· 8-346/T231 lines 24-57: The Wife testified to the ownership, in her own right, of equity in X Company.
· 8-351/T236 lines 7-8: The Wife said that the Z Pty Ltd business grew from nothing.
· 8-356/T241 Lines 23-31: The Wife testified that ZG Pty Ltd never conducted business, and that after her separation from the Husband in 1996, Z2 Pty Ltd was incorporated by SY, and in respect of which she commenced work as Manager.
· 8-367/T252 lines 12-40: The Wife conducted the finance side of the business and 90 per cent of cheques were filled in by herself or SY, in the handwriting of either of them.
· 8-379/T264 - 8-382/T267: The Wife testified to the use of moneys of Z Pty Ltd to service the debt in the amount of $58,382.55, and to retire debt in the amount of $459,215.30 due to Citibank, upon the H Street business premises used by Z Pty Ltd, and in respect of which she, the Husband and the 2nd and 3rd Respondents were the registered proprietors, and that she falsified entries in the Z Pty Ltd cashbook which related to such payments.
· 8-386/T271 lines 33ff - 8-393/T278 lines 1-34: The Wife testified to using Z Pty Ltd funds to fund construction of the holiday house constructed at Lot 2, L in the amount of $1.5 millions approximately, and which sums are recorded upon two documents bearing the Wife’s handwritten notations reconciling amounts to cheques drawn upon the account of Z Pty Ltd. These documents, admitted in evidence in the X Company proceeding, are found within Vol 1 at pp. 1-70 - 1-72 of the Husband’s tender bundle.
On 18 December 2001 the Wife and SY executed a statutory declaration that they are the registered proprietors of the QLD property and that it has no encumbrances. On 18 December 2001 SY executed a statutory declaration that L Pty Ltd was to provide a guarantee and indemnity of the obligations of SY, the Wife and the wife’s parents under indebtedness of $300,000 owed by them to V Pty Ltd.
On or about 20 December 2001, a loan was advanced to Z2 Pty Ltd, by V Pty Ltd, which loan was secured by mortgage in favour of V Pty Ltd over the QLD Property and which mortgage was stamped to secure $300,000. Z Pty Ltd contends that the loan by V Pty Ltd was repaid by Z2 Pty Ltd, with funds which Z Pty Ltd contends were properly the funds of Z Pty Ltd.
On 22 January 2002 the Commissioner of Taxation lodged an amended proof of debt in the liquidation of Z Pty Ltd claiming an amount of $796,961.75.
In January 2002 the liquidator of Z Pty Ltd commenced proceedings in the Supreme Court seeking a transfer of a number of items of real property and other assets in the name of Z Pty Ltd.
In February 2002 Mathews AJ delivered judgment in the X Company Supreme Court proceedings. Her Honour dismissed the claim by X Company and dismissed the cross claim by Z Pty Ltd. Her Honour dismissed the claim by X Company because she decided that she could not accept the evidence of the Wife and SY and their sister JC, and that the financial records of both X Company and Z Pty Ltd were unreliable. Her Honour made a finding that the Wife admitted falsifying the records of Z Pty Ltd so as to conceal the misapplication of company funds. Further, that the Wife and her sisters falsified the records of X Company so as to support a false claim against Z Pty Ltd. Her Honour also said that the motive for doing this was easy to find and it was that had the judgment not been set aside then recourse would have been made against the Husband and the Wife and if successful, the properties the subject of the property dispute in the Family Court would have been sold to meet the judgment of X Company. As to the cross claim it was dismissed essentially because her Honour was not persuaded that the attempt by the Husband to re-create the accounts between Z Pty Ltd and X Company was accurate or complete.
In those Supreme Court proceedings, X Company put before the Court invoices that it contended recorded goods that had been delivered to Z Pty Ltd, but had not been paid for. The Husband defended those proceedings on the basis that firstly the invoices as put into evidence on behalf of X Company were in part, or in some instances in whole, fraudulent or false; that is, there had been no delivery of goods.
It was submitted on behalf of Z Pty Ltd that on 8 November 2001, Senior Counsel appearing for X Company conceded that the Wife misused funds of Z Pty Ltd in acquisition and improvement of real property. Further, that evidence was led from the Wife that the destination of funds was sought to be concealed fraudulently by the notation being adopted on cheque butts of Z Pty Ltd that such moneys were paid to X Company.
In June 2002 orders were made in the Supreme Court by Dunford J restraining the Wife and SY from dealing with certain real property.
In June 2002 Mathews AJ delivered a judgment in relation to an application for costs in the X Company Supreme Court proceedings. The hearing of the costs issues took place over five days. Her Honour made an order that X Company and SY pay the Husband’s costs of the entire proceedings on an indemnity basis being the costs incurred for himself and for his conduct of the proceedings in the name of Z Pty Ltd in respect of the entire proceedings.
On or about 13 September 2002 V Pty Ltd transferred its mortgage over the QLD Property in favour of PT. On 13 September 2002 there was a payout of V Pty Ltd loan facilities by PT and execution of a Deed of Assignment of V Pty Ltd securities in favour of PT.
In August 2003 an appeal by SY against the costs order of Mathews AJ in the X Company Supreme Court proceedings was dismissed by the New South Wales Court of Appeal and an order made that she pay costs of the appeal.
On 16 September 2003 a hearing commenced in the Supreme Court before Campbell J of a claim by the liquidator of Z Pty Ltd to certain assets. The liquidator sought to recover 11 parcels of real estate, investments in 12 managed funds, a timeshare and a 41 foot boat. The hearing concluded on 16 September 2003 and judgment was delivered in November 2003.
In November 2003 orders were made by Campbell J to reflect his reasons for judgment of 3 November 2003. The orders, in summary, provided as follows:
·The Husband and the Wife hold Lot 2 L property upon trust for Z Pty Ltd.
·The Husband and the Wife hold 36 R Street upon trust for Z Pty Ltd.
·The Husband and the Wife hold property at G upon trust for Z Pty Ltd.
·The Husband and the Wife and the wife’s parents hold H Street upon trust for Z Pty Ltd.
·The Husband and the Wife hold two units in the M Resort and B Resort being shares in M Club Ltd upon trust for Z Pty Ltd.
·The Husband and the Wife within 14 days account to Z Pty Ltd for the proceeds of sale of the motor vessel called “[…]” and the property at B.
·L Pty Ltd account to Z Pty Ltd for the proceeds of sale of Lot 3 and Lot 21 W Street.
·The Husband and the Wife within 14 days account to Z Pty Ltd for funds invested in trusts, companies and investments funds which were identified in schedule 2 to the orders.
By Deed executed on or about 21 April 2004 PT transferred the mortgage he held over the QLD property, in favour of WT, for no consideration. Despite the deed entered into on or about 21 April 2004, an assignment of the mortgage to WT over the QLD property was never registered with the Queensland Department of Natural Resources, Mines and Water.
On 30 September 2004, with the assistance of the Wife, the wife’s father completed a questionnaire being a form of examination in relation to proceedings in the Local Court. He signed the document and his signature was witnessed by a Registrar of the Local Court. In the document the wife’s father contended that he did not own and nor was he purchasing any property. In answer to a question “Does any person owe you any money? Give details” he replied “[The husband] owes me more than $7 million for the last twenty years”. The wife’s father gave no evidence in relation to any debt owed to him with respect to the mortgage secured on the title of the QLD property. The wife’s father also said that the only income he receives is a pension from the Australian Government. In relation to what arrangements the wife’s father was prepared to make to satisfy the judgment debt he said that he could not pay because the Husband owes some $7 million. In relation to his assets and liabilities the wife’s father disclosed that he had a share in L Pty Ltd and that he had a share in X Company. He did not disclose any other asset such as the mortgage. As to liabilities he contended that he owes a relative about $1 million and that he borrowed this money over the past seven years from his son … and his daughter … however his children do not ask him to pay interest. He did say that he is the mortgager with his wife over a property at S Street. He said that he owns “own” no other mortgage.
In December 2004, Mr W was removed as liquidator of Z Pty Ltd and Mr G of B Chartered Accountants was appointed as liquidator of Z Pty Ltd. In September 2006 Mr W of B Chartered Accountants was appointed as liquidator of Z Pty Ltd to fill the vacancy upon Mr G’s retirement from practice and resignation from the office of Liquidator.
On or about 29 March 2005, PT executed a discharge of the mortgage over the QLD Property. No amount was paid to PT by way of repayment of any loan or otherwise to secure this discharge.
Z Pty Ltd contended that the only cash resources available to the Wife and SY at all relevant times relating to the mortgage payments, including interest and principal payments, were the funds of Z2 Pty Ltd derived from its trading and business operations, which were properly the funds of Z Pty Ltd.
Z Pty Ltd contended that the QLD property mortgage was procured by the fraudulent conduct and deceit of the Wife, SY and the wife’s parents by reason of their purporting to create a debt due by the Wife and SY to the wife’s parents in the amount of $500,000 which was in truth, and in fact, fictitious and thereupon purported to record by reason of this fictitious debt an encumbrance upon title to the QLD property by dealing number …, which encumbrance is voidable by reason of fraud at the suit of Z Pty Ltd.
There was put in evidence a transcript of examination of the wife’s father in the Supreme Court of New South Wales, Equity Division before a Senior Deputy Registrar on 6 and 7 July 2006 in the examination into the examinable affairs of Z Pty Ltd. In the course of his examination the wife’s father said that he does not own any property but many years ago when he was in Taiwan he had money. He was asked “So does anybody owe you money?” and he replied “I don’t have any money, how could anyone owe me money”. The wife’s father went on to give evidence that he relies upon the pension for his support. He was then asked questions about whether or not he would be able to get the pension if he was owed a lot of money and the following was put “And if you are owed a lot of money you cannot get the pension” and he replied “Yes, nobody owes me money” The wife’s father was also asked some questions about friends that gave him money from Taiwan and he was not prepared to identify the persons who gave him money. He then said, when pressed, that he could not remember; that there were too many people and it goes back to 2002. The wife’s father was again examined on 17 July 2006. Among other things he was reminded of the evidence that he had previously given and was then asked “…[d]oes anybody owe you money [Mr MY]?” and he replied “No there is nobody owing me money”. Importantly the wife’s father was shown a copy of a mortgage document dated 16 April 1999 and it related to the mortgage between the Wife and SY and the wife’s parents for an amount of $500 000 secured over the title of the QLD property. The wife’s father said “No I don’t know what that is” and further “No I don’t understand this”.
It was submitted on behalf of Z Pty Ltd that by reason of the events that have occurred, Z Pty Ltd is entitled to a declaration that the mortgage is void, and an order that it be discharged.
THE CURRENT PROCEEDINGS
The proceedings came before me in September 2005 for case management purposes and since then have been before me on numerous occasions. I made orders on 9 and 23 September 2005, 21 October 2005, 22 November 2005, 3 March 2006, 7, 16 and 30 June 2006, 28 July 2006, 22 September 2006 and 13 October 2006, 24 November 2006, 20 December 2006, 2 February 2006, 8, 22 and 29 March 2007, 17 April 2007, 3 May 2007, 10, 20 and 24 August 2007, 28 September 2007 and 19 and 26 October 2007 and 2 November 2007.
I note that the Wife was represented by counsel or a solicitor on 9 and 23 September 2005, 21 October 2005, 22 November 2005, 3 March 2006, 7, 16 and 30 June 2006 28 July 2006, 13 October 2006, 24 November 2006, 8 March 2007, 17 April 2007, 3 May 2007, 16 and 23 July 2007 (Moore J), 10, 20 and 24 August, 2007, 28 September 2007 and 19 October 2007. I also note that SY had legal representation before me on 24 November 2006, 8 March, 2007, 17, April 2007, 3 May 2007, and 10 and 20 August 2007.
On 20 October 2006 a further amended application was filed on behalf of the Husband. In this amended application he sought orders against, and named as respondents, the wife’s parents, SY and K Inc. The Husband sought, among other things, the following:
[The QLD] property
4.That pursuant to s106B of the Act, the [QLD property] Mortgage be set aside.
5.That within 14 days of the date of making these orders the Wife’s Parents do all acts and things and sign all documents required to discharge the [QLD property] Mortgage.
6.A declaration that [SY] holds her interest in [the QLD property] on trust for the Husband and Wife.
7.That within 14 days of the date of making these orders the Wife do all acts and things and sign all documents required to transfer to the Husband all of her rights, title and interest in [the QLD property].
8.That within 14 days of the date of making these orders [SY] do all acts and things and sign all documents required to transfer to the Husband all of her rights, title and interest in [the QLD property].
On 24 November 2006 I made the following orders:
1.Without prejudice to the obligation of the Wife to provide discovery in accordance with the categories of documents previously ordered by the Court to be discovered the Wife provide documents to the Court in answer to the notice to produce dated 24 April 2002 and issued to her by the Husband’s solicitors by 15 December 2006.
2.The Second Respondent [the wife’s mother LY] provide documents to the Court in answer to the notice to produce dated 24 April 2002 and issued to her by the Husband’s solicitors by 15 December 2006.
3.The Third Respondent [the wife’s father MY] provide documents to the Court in answer to the notice to produce dated 24 April 2002 and issued to me by the Husband’s solicitors by 15 December 2006.
4.The Fourth Respondent [SY] provide documents to the Court in answer to the notice to produce dated 24 April 2002 and issued to her by the Husband’s solicitors by 15 December 2006.
5.The Fifth Respondent provide documents to the Court in answer to the notice to produce dated 24 April 2002 and issued to it by the Husband’s solicitors by 15 December 2006.
6.The Husband provide documents to the Court in answer to the notice to produce dated 29 May 2002 and issued to it by the Fifth Respondent’s solicitors by 15 December 2006.
7.Each of the Respondents to the further amended application for final orders filed on behalf of the Husband on 20 October 2006 file and serve by 4.00 pm on 15 December 2006 a response to the said further amended application.
8.It be NOTED that the fourth and fifth respondents are not required, subject to further order, to file a financial statement in accordance with the Family Law Rules.
9.It be NOTED that liberty be granted to the parties to apply in relation to the above orders requiring the production of documents to the Court.
10.The proceedings are listed for mention before me at 2.15 pm on 20 December 2006.
11.I grant to the parties and their legal and accounting representatives leave to inspect any documents produced to the Court in response to the above Orders.
There have been numerous issues in relation to discovery.
On 5 December 2006 a response to an application for final orders was filed on behalf of SY and she sought that the Husband’s amended application be dismissed.
On 15 December 2006 a response to the Husband’s amended application for final orders was filed on behalf of the Wife. She sought, among other orders, that the Husband’s amended application be dismissed.
On 15 December 2006 a response to the Husband’s amended application for final orders was filed on behalf of the wife’s husband. On the same day a response was filed on behalf of the wife’s mother. She gave her address as 35 H Street.
On 20 December 2006 I made various orders including the following:
General Directions for Conduct of Matter
1.The Liquidator of [Z] Pty Ltd is to file and serve such application as he may wish to make in relation to the properties known as Lot 1 and Lot 121 [L property] by 2 February 2007.
2.The Husband is to serve all evidence upon which he intends to rely upon the other parties (except the Liquidator of [Z] Pty Ltd (in liq)) by 30 April 2007.
3.The Liquidator of [Z] Pty Ltd is to serve all evidence upon which he intends to rely (in relation to any claim regarding the [L] properties) upon the other parties by 30 April 2007.
4.All parties (other than the Husband and the Liquidator of [Z] Pty Ltd) are to serve any evidence upon which they intend to rely either in opposition to the claims by either the Husband and/or the Liquidator of [Z] Pty Ltd or in support of their own claims by 30 June 2007.
5.The Husband and the Liquidator of [Z] Pty Ltd are each to serve any evidence in reply upon which they intend to rely by 31 July 2007.
6.The parties are otherwise granted leave to have the matter re-listed before his Honour Justice O’Ryan on 7 days’ notice, if circumstances require it.
The Final Hearing of the Husband’s Property Application
7.The Court notes that, although a date for the final hearing of this matter is not yet fixed, the current estimate of the duration of the final hearing is 3 to 4 weeks and the timetable set by the Court is done so with a view to fixing a hearing date in the vicinity of October 2007.
On 2 February 2007 I made the following orders:
1.Order 6 made on 24 November 2006 as amended on 20 December 2006 be further amended to provide that the Husband is to provide the documents referred to by 4.00 pm on 9 February 2007.
2.Order 1 made on 24 November 2006 as amended on 20 December 2006 be further amended to provide that the Wife provide discovery by 4.00 pm on 23 February 2007.
3.It be NOTED that subject to agreement as to the payment of costs and expenses the Husband and the Fifth Respondent agree that the Single Expert referred to in Order 7 made on 20 December 2006 will undertake a valuation of both the improved and unimproved value of Lot 1 [L property].
4.The matter be listed for mention before me at 9.30 am on 9 March 2007.
5.Request that there be an appearance by or on behalf of the liquidator of [Z] Pty Ltd on 9 March 2007 and it be NOTED that a reason for that listing is so that there can be such an appearance.
6.It be NOTED that for the time being the Wife is appearing on behalf of her parents.
7.It be NOTED that the liquidator of [Z] Pty Ltd has made no submissions in relation to Orders 2 to 7 inclusive made on 20 December 2006 in relation to the appointment of a joint expert valuer of real property notwithstanding that the liquidator may ultimately be a party who is effected by those Orders given the liquidator claims an interest in items of real property the subject of those Orders and I anticipate that in the event that there was an appearance by or on behalf of the liquidator on 9 March 2007 that the liquidator would be in a position on that occasion to address any matters arising out of Orders 2 to 7 inclusive made on 20 December 2006 so far as they effect the interests of the liquidator.
On 22 March 2007 I made the following orders:
1.Such previous orders and directions as have been made by the Court for the filing and serving of affidavit evidence for the purposes of the final hearing of these property proceedings are vacated (being, in particular, those orders made on 20 December 2006 in accordance with paragraphs 13 to 17 inclusive of the document entitled “Directions for Further Conduct of Matter Proposed by Husband”).
2.I grant leave to the Husband to issue Notice to Produce to the various Respondents excluding the Fifth Respondent such Notice to Produce to be served by 29 March 2007 and made returnable before me on 17 April 2007.
3.It be NOTED that the reference to a Notice to Produce in the previous Order is simply for the purposes of identification of the relevant documents and that order is made as an order for production by third parties of relevant documents.
4.The Liquidator of [Z] Pty Ltd file and serve within 21 days of today’s date a Response to the Further Amended Application filed on behalf of the Husband on 20 October 2006.
5.The hearing of all Applications be listed for a period of four weeks by arrangement with my Associate and it be NOTED that it is anticipated that that hearing will not be until November 2007. [Monday 5 November 2007]
6.The matter be listed before me at 9.30 am on 17 April 2007.
7.Paragraph 2 of the document titled “Directions For Further Conduct Of Matter Proposed By Husband” be adjourned to 9.30 am on 17 April 2007.
2. With respect to the funds presently held by the Husband’s solicitors, Etheringtons Solicitors, on behalf of the Husband and Wife jointly, being those funds initially in the amount of $174,500 paid into such account on or about 18 October 2006 and being also those same funds previously provided by the Wife for the stated purpose of purging her alleged contempt with respect to the sale of the [NSW] property:
2.1That the Husband and the Husband’s solicitors, Etheringtons Solicitors, be authorised to apply such part of those funds for the payment or pre-payment of the expenses that will be incurred on behalf of the Husband and Wife with respect to the valuation of real properties and/or companies or businesses (provided that the Husband’s solicitors provide to the Wife 7 days’ notice in advance of actually paying out any such amount;
2.2That the application of the aforementioned funds be limited to those valuation expenses for which the Husband and Wife are to be responsible in accordance with the Orders made by the Court on 20 December 2006 (being particularly paragraphs 2 to 12 inclusive); and
2.3That the ultimate liability as between the Husband and Wife or any other party to each relevant valuation for the entirety of the costs of such expert valuations is otherwise reserved.
8.Any application by the Wife in relation to costs also be listed on the said date.
9.It be NOTED that so far as practicable on that date it would also be intended to make directions for the filing of affidavits of evidence in chief and that it is agreed that in relation to third party interests being the Second to Fifth Respondents that the affidavits of evidence in chief will be filed sequentially.
On 17 April 2007 a response to an application for final orders was filed on behalf of Z Pty Ltd. On 17 April 2007 I made various orders including that all parties file and serve by 4.00 pm on 1 May 2007 a reply to the response to an application for final orders filed in Court on that day on behalf of Z Pty Ltd.
On 27 April 2007 an amended response to an application for final orders was filed on behalf of Z Pty Ltd.
On 27 April 2007 a reply was filed on behalf of K Inc to the response of Z Pty Ltd.
On 30 April 2007 a reply was filed on behalf of SY to the response of Z Pty Ltd.
On 2 May 2007 a response was filed on behalf of the wife’s father to the response of Z Pty Ltd. On 2 May 2007 a response was filed on behalf of the wife’s mother to the response of Z Pty Ltd.
On 3 May 2007 a response was filed on behalf of the Wife to the response of Z Pty Ltd.
On 14 July 2007 the solicitors for the Husband sent a letter (Exhibit J) to all parties and advised:
We have on numerous occasions indicated to the respondents, in open court before O’Ryan J (on transcript) and in pleadings and correspondence, the case that our client intends to make in this matter. So that the respondents are under no misunderstanding, and have ample time to prepare their case, we repeat our client’s position as follows.
Thereafter there was set out in a detailed way the contentions of the Husband. Importantly it was made clear that if there were to be any assertions made regarding ownership, equitable or otherwise, to property or contributions they would be challenged unless there was source documentation provided.
On 16 August 2007 the Husband swore his affidavit of evidence in chief.
On 24 August 2007 I made a number of orders including the following:
1.The First, Second, Third, Fourth, Fifth and Sixth Respondents file and serve all evidence upon which they intend to rely by 4.00 pm on 24 September 2007.
2.It be NOTED that the Husband and the Sixth Respondent will be seeking orders for the filing of evidence in reply.
3.All parties, with the exception of the Fifth Respondent, have leave to serve upon each other by 7 September 2007 a notice to admit facts and the parties upon whom a notice to admit has been served are to provide a response in accordance with the Family Law Rules to such notice by 4.00pm on 24 September 2007.
On 27 September 2007 the Wife swore her affidavit of evidence in chief.
On 28 September 2007 I made the following orders:
1.The Husband be granted an extension of time to 2 October 2007 to file his supplementary affidavit, the contents of which has already been served upon the First to Fourth Respondents.
2.The Wife be granted an extension of time until close of business on 2 October 2007 to file and serve any affidavit evidence (including exhibit folders), upon which she intends to rely.
3.The Second, Third and Fourth Respondents file and serve any remaining evidence in chief upon which they intend to rely by 4.00 pm on 5 October 2007.
4.The Fifth Respondent provide to each of the parties by 4.00 pm on 5 October 2007 a proof of evidence of the two witnesses currently overseas.
5.The Fifth Respondent file and serve by 4.00 pm on 5 October 2007 an affidavit setting out the evidence in chief of each member of the Committee “of [K Inc]”.
6.It be NOTED that the Fifth Respondent may seek to call evidence from some members of the Association in relation to the issue of “the genuiness” of [K Inc].
7.It be NOTED that the Sixth Respondent proposes to file and serve as soon as practicable an affidavit of the former liquidator Mr [W] and as well provide a copy of any outstanding transcript of the public examination conducted in accordance with provisions of the Corporations Act.
8.All parties file and serve any evidence upon which they intend to rely in response by 4.00 pm on 18 October 2007.
9.All parties are to give to any other relevant party notice of the names of the witnesses who will be required for cross examination by no later than 4.00 pm on 22 October 2007.
10.The Husband and the Wife file and serve by 4.00 pm on 19 October 2007 updated statements of financial circumstances in accordance with the Family Law Rules.
11.The Sixth Respondent file and serve by 4.00 pm on 28 September 2007 an amended response.
12.It be NOTED that a draft of the proposed amended response has been circulated and the Wife contends that there has been no notice of the relief sought in paragraph 12(11) and the Wife therefore reserves her position in respect of that relief both as to filing a defence or reply to the response as well as any further evidence in chief.
13.It be NOTED that the Sixth Respondent will by 4.00 pm on 28 September 2007 provide to all parties a notice pursuant to sections 97 and 98 of the Evidence Act.
14.The proceedings be listed for mention at 9.30 am on 19 October 2007.
IT IS FURTHER ORDERED (IN CHAMBERS):
15.The Sixth Respondent to file and serve its amended response to an application for final orders by 4.00 pm on 28 September 2007.
16.The Applicant and First, Second, Third, Fourth and Fifth Respondents to file and serve his/her or its Points of Defence in response to the Sixth Respondent’s amended response on or before 4.00 pm on Friday, 12 October 2007.
17. The parties, by their respective Points of Defence, shall set out:
17.1 whether they admit, do not admit, or deny each fact alleged by the Sixth Respondent’s amended response;
17.2 as to each fact alleged upon the Sixth Respondent’s amended response which is not admitted or is denied, all Contentious Factual Issues, if any, which they propose to raise at trial;
17.3 all such particulars of Contentious Factual Issues as are necessary to understand the issue which will be advanced at trial;
17.4 all grounds of affirmative defence to the allegations contained within the Sixth Respondent’s amended response, if any, which they contend flow from the Contentious Factual Issues proposed to be raised at trial;
17.5 any alternative final orders or relief for which the party will contend at trial.
18.Sixth Respondent to file and serve its Reply to Points of Defence, if any, on Friday, 19 October 2007 at 9.30 am.
19.All parties to file and serve any Notices to Admit as they may be advised and consequential upon the filing of the respective pleadings required by these directions, on or before 22 October 2007.
20.In respect of the obligation upon parties to file Points of Defence, each such party shall have liberty to apply in respect of such obligation pursuant to the provisions of Rule 11.03 of the Family Law Rules, subject to such liberty being invoked no later than 12.00 midday on Friday, 5 October 2007.
On 28 September 2007 Z Pty Ltd filed an amended response to an application for final orders. In this response the following was sought and stated:
2.A declaration under sections 78(1) or 106B(1) of the Act or the general law that [K Inc] holds title to the [L] Property on constructive trust on behalf of [Z Pty Ltd].
3.A declaration under sections 78(1) or 106B(1) of the Act or the general law that [K Inc] holds title to the [L] Property on resulting trust on behalf of [Z Pty Ltd].
3AA declaration under sections 78(1) or 106B(1) of the Act or the general law that the property in [QLD] is held upon constructive trust or alternatively resulting trust on behalf of [Z Pty Ltd]
3BAn order under sections 78(1) or 106B(1) of the Act or the general law that the [QLD property] Mortgage be set aside.
3CAlternatively, a declaration under s 37A of the Conveyancing Act 1999 (NSW), that the transfer of the [L] Property to [K Inc] by the Father and the Mother was an alienation of property made with intent to defeat [Z Pty Ltd] as their creditor and is thereby void.
4.An order under sections 78(2) or 106B(1) of the Act or the general law that [K Inc] execute and deliver immediately to [Z Pty Ltd] a transfer in registrable form of the [L] Property from [K Inc] to [Z Pty Ltd].
4AAn order under sections 78(2) or 106B(1) of the Act or the general law that the Wife and the Sister execute and deliver immediately to [Z Pty Ltd] a transfer in registrable form of the [QLD] property from themselves or any entity or nominee under their control who or which holds such title to [Z Pty Ltd].
5.In default of compliance by [K Inc] with the orders in paragraph 4 above, no later than the expiration of 7 days after the making of such orders and the filing by [Z Pty Ltd] of an affidavit deposing to the facts and circumstances of such default by [K Inc], and or the Wife and the Sister (as the case may be), an order under section 106A of the Act or the general law that a Registrar or officer of this Court be granted power of attorney to sign on behalf of [K Inc], the Wife and/or the Sister in favour of [Z Pty Ltd] a transfer in registrable form of the [L] Property and/or the [QLD] property.
6.An order under sections 78(2) or 106B(1) of the Act or under the general law, that [K Inc] immediately deliver up to [Z Pty Ltd] the original certificates of title to the [L] Property, and that the Wife and the Sister immediately deliver up to [Z Pty Ltd] the original certificates of title to the [QLD] property.
7.In the alternative to paragraph 6 above, order that the Registrar-General of the Department of Lands in the State of NSW under section 138 of the Real Property Act 1900 cancel the existing certificate of title and issue a new certificate of title to the [L] Property simultaneously with the registration of the transfer described above.
8.An order under section 79 of the Act that within 14 days [K Inc] deliver up vacant possession of the [L] Property to [Z Pty Ltd] and that within the same period the Wife and the Sister deliver up vacant possession of the [QLD] Property to [Z Pty Ltd].
9.An order pursuant to section 80 of the Act or the general law that [K Inc] pay [Z Pty Ltd] damages in an amount to be determined or assessed in respect of its use and occupation of the [L] Property from 1 June 1999 to the date of that order.
10.An order pursuant to section 80 of the Act, or alternatively, s. 1317H(1) of the Corporations Act, 2001, or alternatively the general law, that the Husband and the Wife pay damages to [Z Pty Ltd] for breach of their duties under:
(a) sections 180, 181 and 182 of the Corporations Act 2001; and
(b) alternatively, the general law,
to [Z Pty Ltd] in an amount to be determined or assessed.
10AAlternatively, an order that the real property of the marriage, whether held in the names of the Husband and the Wife, or by nominee companies under their control, forthwith be delivered up to [Z Pty Ltd] and thereupon be vested in the Liquidator of [Z Pty Ltd] to permit all just claims upon such assets as may be admitted to proof as debts in the winding up of [Z Pty Ltd] thereafter to be administered by the liquidator pursuant to the provisions of the Corporations Act 2001 and the Corporation Regulations.
11.The Applicant and each of the Respondents to the Further Amended Application for Final Orders filed on 20 October 2006 pay [Z Pty Ltd’s] costs of and incidental to the Further Amended Application for Final Orders and this Amended Response.
12.Interest under the Family Court Act 1975 and under the Family Court Rules 2004.
13.Such further or other orders as shall appear just or convenient.
The following facts and particulars were then provided:
1.[Z Pty Ltd] is and was at all material times a proprietary company registered under the Corporations Act 2001.
2.[K Inc] is and was at all material times an incorporated association under the Associations Incorporation Act 1984.
3.The Husband was a director of [Z Pty Ltd] from its incorporation [in] March 1985 to date and is a 50% shareholder in [Z Pty Ltd].
4.The Wife was the wife of the Husband and a director of [Z Pty Ltd] from its incorporation [in] March 1985 to date and is a 50% shareholder in [Z Pty Ltd].
5.At all relevant times, the Parents were the parents of the Wife.
5AAt all relevant times, the Sister was the sister of the Wife and the daughter of the Parents.
6.On or about 12 January 1992, the Husband, the Wife and the Parents as tenants in common in equal shares purchased an interest in remainder in the [L] Property expectant upon the death of the transferor from [Mr L].
7.The funds used to purchase this interest in the [L] Property were funds directly attributable to and the property of [Z Pty Ltd] and not otherwise.
Particulars
A.Between 12 December 1991 and 17 December 1991, the Husband, the Wife and the Parents exchanged contracts as purchasers with [Mr L] as vendor for the purchase of the interest in the [L] Property described above.
B.The stamp duty upon this agreement, duplicate copy of this agreement and transfer was paid from [Z Pty Ltd’s] funds.
C.The deposit under the agreement of $36,000 was paid from [Z Pty Ltd’s] funds, such payment being made by the Husband, and/or the Wife, and/or the Parents, or alternatively by any of them, without [Z Pty Ltd’s] authority or consent.
D.On or about 24 January 1992 the balance of the purchase price was paid with [Z Pty Ltd’s] funds.
E.In any event, immediately following settlement of the purchase of this interest in the [L] Property no encumberance was recorded on title to the [L] Property securing any indebtedness, andf it is thereby to be inferred that the balance of the purchase price was paid solely from the cash resources available to the Husband, the Wife and the Parents at that time.
F.The only cash resources available to the Husband, the Wife and the Parents at that time were [Z Pty Ltd’s] funds derived from its trading and business operations.
8.On or about 22 July 1996, the Husband and the Wife executed a transfer in favour of the Parents as joint tenants of their interest in the [L] Property, in remainder subject to the life estate to [Mr L], which was subsequently registered on title to the [L] Property contrary to the fiduciary duty owed by them to [Z Pty Ltd].
9.Although the transfer records on its face receipt of consideration of $175,000, no consideration was in fact paid by the Parents to the Husband or the Wife.
10.[In] August 1996 [Mr L] died and by Notice of Death dated 19 September 1997 and bearing dealing number […] registered on title to the [L] Property, title in fee simple in the [L] Property vested in the Parents, which by reason of the above facts and circumstances, was impressed with a trust in favour of [Z Pty Ltd].
11.By transfer bearing date 1 June 1999, the Parents gifted or transferred title to the [L] Property to [K Inc] for no consideration, which transfer also was impressed with a trust in favour of [Z Pty Ltd].
12.At all times, the funds used to improve the [L] Property were funds of [Z Pty Ltd] or funds derived from a valuable asset of [Z Pty Ltd], comprising its business of the wholesale importation and distribution of computers and related equipment, for which [Z Pty Ltd] has commenced proceedings against [Z2] Pty Limited ACN […] in Supreme Court of New South Wales No. […].
Particulars
B.The [L] Property was improved by the construction of a new residence having a total cost of $1,638,929.70 being funds in the amount of $810,791 identified by Messrs […], Chartered Accountants, by a memorandum dated 25/5/1997 (more fully particularised in the applicant’s tender bundle volume 2 p249) which funds were appropriated by the Wife from the account of [Z Pty Ltd] conformably with her practice identified by her in her oral evidence given to the Supreme Court of NSW on 9/11/01 (more fully particularised in the applicants tender bundle vol 8, p393-4), and as to the balance being funds in the amount of $828,138.70, which were further funds obtained from the resources of [Z2 Pty Ltd], and passed to [K Inc] as purported donations, but which is in truth and at all material times were attributable to and the property of [Z Pty Ltd].
13.[K Inc], in breach of trust, has had the benefit of the use, occupation and/or possession of the [L] Property from 1 June 1999 to date, and thereby [Z Pty Ltd] is entitled to a declaration of right that [K Inc] holds the title to the [L] Property upon trust for [Z Pty Ltd].
14.In the events that have occurred, the Husband, the Wife and the Parents, together with [K Inc] on and from the time of its incorporation, by their conduct intentionally and fraudulently concealed the nature and extent of the deprivation of [Z Pty Ltd’s] rights to the [L] Property until the time of its discovery by the liquidator of [Z Pty Ltd] no earlier than the time of his appointment as liquidator by the Supreme Court of NSW [in] May 2001 in proceeding numbered […] in the Supreme Court.
15.In the premises, [Z Pty Ltd] is entitled to an order of the Court that the title to the [L] Property forthwith and without encumbrance or charge be transferred by [K Inc] to [Z Pty Ltd].
16.[K Inc] has not paid any amount to [Z Pty Ltd] in respect of its use, occupation and/or possession of the [L] Property from 1 June 1999 to date.
17.[Z Pty Ltd] has therefore suffered the following loss and damage:
(a) loss of market rent for the [L] Property from 1 June 1999 to date and interest upon this amount; and
(b) loss of the chance to participate in the appreciation in the value of the [L] Property; or alternatively, to invest the funds otherwise diverted from [Z Pty Ltd] in the furtherance of its business and trading upon its own account for the purpose of deriving and enjoying revenues and profits therefrom.
18.By contract dated on or about 7 July 1992, the Wife and the Sister entered into a contract for purchase of the [QLD] Property. The funds used to purchase this interest in the [QLD] Property were funds directly attributable to and the property of [Z Pty Ltd].
Particulars
A.The registration of a company known as [Z2 Pty Ltd] in about January 1997 in respect of which reasonably to be inferred that the funds and property of [Z2 Pty Ltd] were the funds and property of [Z Pty Ltd].
B.The purchase of the [QLD] property of $1,350,000 was funded as follows:
(i) $630,000 of [Z Pty Ltd’s] funds (approximately); and
(ii) $720,000 loan advanced from the Commonwealth Bank of Australia (“CBA”) (approximately).
C.At all times, commencing upon settlement of the purchase of the [QLD] Property to 2 May 1997, the loan advanced by the CBA was repaid with [Z Pty Ltd’s] funds.
D.On 2 May 1997, the CBA loan was paid out, in part, with loan funds secured by a first mortgage over the [QLD] property granted by the Wife and the Sister to [I] Securities Pty Limited. The mortgage was stamped to secure $500,000.
E.This loan settled on or about 1 May 1997.
F.The loan by [I] Securities Pty Limited was repaid at all times by [Z2 Pty Ltd], which funds were properly the funds of [Z Pty Ltd].
G.On or about 29 April 1999 the loan by [I] Securities Pty Limited was repaid by [Z2 Pty Ltd], which funds were properly the funds of [Z Pty Ltd].
I.On or about 20 December 2001, a further loan was advanced to [Z2 Pty Ltd] by [V] Pty Limited, which loan was secured by mortgage in favour of [V] Pty Limited over the [QLD] Property and which mortgage was stamped to secure the maximum prospective of $300,000.
J.The loan by [V] Pty Limited was repaid by [Z2 Pty Ltd], which funds were properly the funds of [Z Pty Ltd].
K.On or about 13 September 2002 [V] Pty Limited transferred its mortgage over the [QLD] Property in favour of [PT].
L.By deed executed on or about 21 April 2004 [PT] transferred the mortgage he held over the [QLD] Property, in favour of [WT], for no consideration.
M.Despite the deed entered into on or about 21 April 2004, as assignment of the mortgage to [WT] over the [QLD] Property was never registered with the Queensland Department of Natural Resources, Mines and Water.
N.On or about 29 March 2005, [PT] executed a discharge of the mortgage over the [QLD] Property. No amount was paid to [PT] by way of repayment of any loan or otherwise to secure this discharge.
O.The only cash resources available to the Wife and the Sister at all relevant times relating to the mortgage payments, including interest and principal payments, were the funds of [Z2 Pty Ltd] derived from its trading and business operations, which were properly the funds of [Z Pty Ltd].
19.A.The [QLD property] mortgage was procured by the fraudulent conduct and deceit of the Wife and the Sister and the Parents by reason of their purporting to create a debt due by the Wife and the Sister to the Parents in the amount of $500,000 which was in truth and in fact fictitious and thereupon purported to record by reason of this fictitious debt an encumbrance upon title to the [QLD] Property by dealing number […], which encumbrance is voidable by reason of the fraud at the suit of [Z Pty Ltd].
19B.In the events that have occurred [Z Pty Ltd] is entitled to a declaration that the mortgage is void, and an order that it be discharged.
19.At all material times, the Husband and the Wife were directors of [Z Pty Ltd] and owed duties to [Z Pty Ltd] in that capacity pursuant to:
(a) sections 180, 181 and 182 of the Corporations Act 2001; or
(b) alternatively, pursuant to the general law to exercise due care and skill; to act in good faith in the best interests of [Z Pty Ltd] as a whole; for the proper purpose; and not improperly to use their position to gain an advantage for themselves or alternatively cause detriment to [Z Pty Ltd].
20.In breach of these duties owed to [Z Pty Ltd], the Husband and the Wife have:
(a) used [Z Pty Ltd’s] funds to acquire valuable real property in the [L] Property in their own names and in the names of the Parents, contrary to the interests of and to the detriment of [Z Pty Ltd];
(b) used [Z Pty Ltd’s] funds to improve and maintain the [L] Property without accounting to [Z Pty Ltd] for any benefit derived therefrom; and
(c) executed a transfer of this interest in the real property in the [L] Property in favour of the Parents for no consideration or in any event, for no consideration the benefit of which was received by [Z Pty Ltd].
21.[Z Pty Ltd] has therefore suffered the following loss and damage:
(a) exclusion from the benefit of enjoyment of the title to and value of the [L] Property; and
(b) loss of market rent for the use, occupation or possession of the [L] Property from 1 June 1999 to date; and/or
(c) alternatively, the amount of [Z Pty Ltd’s] funds used in the acquisition, maintenance or improvement of the [L] Property in the period 12 December 1991 to date; and
(d) the loss of the chance to participate in the appreciation in the value of the [L] Property; or alternatively, to invest the funds otherwise diverted from [Z Pty Ltd] in the furtherance of its business and trading upon its own account for the purpose of deriving and enjoying revenues and profits therefrom.
22.The Husband, the Wife and the Sister, in and about the period from January 1986 until 7 January 1997, unlawfully appropriated to their private use the whole of the fee cash flow available to [Z Pty Ltd] from the conduct of its operations, and employed such funds, together with further funds borrowed from commercial financiers, to make investments in their own names or in the names of nominee companies established for their benefit, and contrary to the interests of [Z Pty Ltd] or its creditors.
Particulars
Section 4-6 of the Report of the Liquidator of [Z Pty Ltd] dated 4 March 2002, being annexure A to the affidavit of [Mr W] sworn on 5 March 2002[1].
i)[1] This report was not put into evidence for the purposes of the summary dismissal hearing.
Admissions made by the Husband, the Wife and the sister in evidence given in proceedings no […] in the Supreme Court of NSW in hearings before her Honour Acting Justice Mathews more fully particularised in section 2 of the Report of the Liquidator.
22.The funds unlawfully appropriated from [Z Pty Ltd] by the Husband, the Wife and the Sister were used to acquire the real property within Australia without any benefit being obtained by or conferred upon [Z Pty Ltd].
Particulars
Section 6 of the Report of the Liquidator
23.At all material times the real property held by the Husband, the Wife and the Sister, whether in their own names or by nominee companies under their control, were impressed with a constructive or alternative, a resulting trust for the benefit of [Z Pty Ltd].
24.[Z Pty Ltd] hereby is entitled to trace the funds appropriated from its accounts by the Husband, the Wife and the Sister into the real property acquired with such funds, and forthwith to have delivery up of all such real property to it in specie of the purpose of permitting creditors of [Z Pty Ltd] to prove in the winding up and to participate in the realisation of such assets and distribution of such moneys as may be received by the Liquidator of [Z Pty Ltd].
On 19 October 2007 I made the following orders:
1.Note that there is no appearance by or on behalf of the wife’s parents.
2.Leave is granted to the Applicant, First Respondent, Second Respondent, Third Respondent, Fourth Respondent and Sixth Respondent, to rely upon documents produced under Subpoena to Produce in Supreme Court proceedings […] at the hearing of Family Court proceedings SYF 3359 of 1997.
3.Leave is granted to the First Respondent, Fourth Respondent and Sixth Respondent, to rely upon documents produced under Subpoena to Produce in Supreme Court proceedings […] at the hearing of Family Court proceedings SYF 3359 of 1997.
4.The Wife file and serve upon the Husband’s solicitors a verification of the list of discovery previously provided by her in these proceedings by 22 October 2007.
5.The Second, Third Fourth and Fifth Respondents file and serve any remaining evidence in chief upon which they intend to rely by 24 October 2007.
6.The Husband and the Sixth Respondent file and serve any evidence, upon which they intend to rely in reply by 25 October 2007.
7.The time for all parties to give to any other relevant party notice of the names of the witnesses, who will be required for cross-examination is extended to 29 October 2007.
8.The time for the Husband and the Wife to file and serve updated Statements of Financial Circumstances (in accordance with the Family Law Rules) is extended to 24 October 2007.
9.The Sixth Respondent is to serve upon the Husband and Wife an affidavit outlining, at least in such general terms as the Liquidator of the Sixth Respondent is capable of providing at this stage of the liquidation of the Sixth Respondent, the financial position of the Sixth Respondent, including its actual or potential assets and its actual or potential liabilities, noting that the liquidator will endeavour to have the affidavit available for the forthcoming hearing.
10.All parties are to serve upon each other and deliver to the Associate to O’Ryan J by no later than 29 October 2007 a case summary document, including (where appropriate to the nature of that party’s involvement in the proceedings):
10.1. an identification of the nature of the proceedings (insofar as that party is involved in the proceedings);
10.2. a list of affidavits and other evidentiary material to be relied upon in the proceedings;
As to paragraph 2, Mr Cohen in oral submissions said that this paragraph is merely an admission and for the purposes of this application, can be ignored.
As to paragraph 3, in oral submissions, Mr Cohen submitted that this paragraph is a bare denial and does not allege any alternative grounds, thus not commanding anything that should be taken to a final hearing. It was submitted that I should not be persuaded that the allegation ought to put his client to the vexation of the final hearing where the simple allegation goes nowhere in terms of relief.
As to paragraph 4(a), the Sixth Respondent contends that the assertion by the 1st – 4th Respondents that the sum of $11,694 was remitted to the Australian Taxation Office for employers’ instalment deductions, is fanciful. Z Pty Ltd noted in its letter to the Respondents that it has particularised its allegation and had served upon the Respondents the evidence of the documents. Having regard to the way the paragraph is framed, Mr Cohen submitted that it is not something which raises a triable issue because the allegations that accompany what Z Pty Ltd contends about this matter are not traversed. It was submitted that the 1st – 4th Respondents neither in the evidence given by them during the conduct of the examination of the examinable affairs of Z Pty Ltd nor in their affidavits, have asserted this as a fact. The Sixth Respondent submitted that on this point the basis alleged is frivolous, vexatious or an abuse of process and therefore should be accordingly struck out.
As to paragraphs 4(b) and 4(c), the Sixth Respondent contended that such assertions were advanced before the Supreme Court of New South Wales in proceeding numbered … and rejected in their entirety. Therefore, as with the assertion made by paragraph 4(a), Z Pty Ltd contended that this assertion is further conduct by the 1st – 4th Respondents which may lead only to the conclusion that the basis alleged is apt to be struck out on the grounds that it is frivolous, vexatious or an abuse of process.
In summary, these paragraphs appear to be seeking to relitigate the matters that were dealt with in the Supreme Court proceedings.
As to paragraph 5 this deals with Lots 1 and 107 L.
As to paragraph 6 the Sixth Respondent contended that this paragraph constitutes no reasonable ground of defence in opposition to the Z Pty Ltd claim against the Respondents for the same reasons advanced in respect of paragraphs 4(b) and 4(c) of the amended response.
Mr Cohen in his oral submissions referred to the balance of the allegations which, apart from paragraph 6, are bare denials of fully particularised matters. He gave the example that there is no traversing of the notion that a deposit of $36,000 and the balance of the purchase price (on 24 January 1992) also came from funds of Z Pty Ltd. The Sixth Respondent contended that, in the absence of traversing of those material facts, this bare denial simply does not raise a triable issue. Mr Cohen went further and submitted that a triable issue would require the particulars of an affirmative defence to each of the matters and on any fair reading of this pleading that simply did not occur.
Mr Cohen made some references to other bare denials and irrelevant allegations made the Respondents, and went on to say:
MR COHEN: … At this point, in this document, one runs out of allegations that are propounded as points of defence. What your Honour will see – the balance of the material is is [sic] merely a refusal to admit matters that my client properly put into its notice to the facts and authenticity of documents. So for the purpose of the pleading it is completely irrelevant and needs no real assessment. …
Mr Cohen then took me to the supplementary two-page document titled “Proposed Points of Defence” filed on behalf of the four respondents. Mr Cohen argued that the assertions made by the 1st – 4th Respondents in that document, taken at their highest, do not rise high enough to demonstrate a failure of Z Pty Ltd to do anything at all. It was submitted by the Sixth Respondent that the points of defence in this document, make assertions about matters which have already been dealt with by Matthews J and are thus res judicata.
After the Wife and her sister had concluded their oral submissions, Mr Cohen clarified some factual issues and referred me to parts of the transcript in the Supreme Court proceedings where Mr Graham QC questioned the Wife about the use of company cheques.
In reply to the oral submissions of the 1st and 4th Respondents, the Sixth Respondent provided written submissions. The fundamental purpose of those written submissions was to provide a schedule of evidence recorded upon the transcript of evidence in the X Company proceeding in the Supreme Court, containing the testimony of the Wife and SY.
The Sixth Respondent contended that upon any fair reading of the documentary evidence and the evidence in chief given by the Wife and SY in those proceedings in their capacity as witnesses in the case in chief advanced by X Company, it is perceptible that funds have been appropriated by the Wife and SY for their own benefit as well as for the benefit of the wife’s parents.
It was submitted on behalf of Z Pty Ltd, and I accept, that I could rely upon the testimony given in the X Company proceedings because it is a safe working assumption that such evidence is not contested or equivocal. Further, that there is no requirement to form conclusions as to credit as the evidence was of contemporaneous facts that speak for themselves.
Z Pty Ltd contends that given such clear evidence, “there is no real or non-fanciful chance that any of the 1st – 4th Respondents will adduce evidence in this proceeding that reasonably could be expected or anticipated to raise a triable issue”.
It was submitted that the application is really made to the inherent jurisdiction of the Court to stop the abuse of its process when it is employed for groundless claims. In the written submissions of the Sixth Respondent relating to its application for summary judgment upon its claims as against the 1st – 4th Respondents, Z Pty Ltd contended in reply to the oral submissions of the respondents:
15. … such evidence as the 1st – 4th Respondents conceivably could point to in this proceeding, could never elicit such a plausible contention requiring investigation, such that further evidence needs to be received and assessed as upon a final hearing.
…
17. … that upon the facts and circumstances reviewed above in these submissions, clearly this application is wholly justified, upon the authorities. The purported opposition to [Z Pty Ltd’s] claim ought properly be characterised as having no reasonable prospects of success, or being so manifestly hopefless [sic] as to be untenable as upon a final hearing.
Submissions for the 1st Respondent
The Wife, at the hearing, made oral submissions in response to the submissions made on behalf of the Sixth Respondent, and I had difficulty in ascertaining the points she was trying to address. Notwithstanding that difficulty, and after several attempts to redirect her to the issues she should be responding to, I was able to establish that her main complaint or point of defence related to her contention that the Sixth Respondent did not have evidence, or sufficient evidence, to support their assertions of disputed fact. She raised matters such as the Sixth Respondent not having the original cheque in relation to stamp duty and not having a bank statement in relation to the liquidator’s sworn admission in court. For example, when referring to the L property, she said:
[THE WIFE]: … The liquidator cannot prove there is a deposit. The liquidator cannot prove there is stamp duty. The liquidator cannot prove the balance money from the company account. They don’t even have the bank statement. …
However, in a document filed on 28 September 2007, the Sixth Respondent gave notice to the Husband and the Respondents relating to evidence that Z Pty Ltd would produce at trial pursuant to s 97 and s 98 of the Evidence Act 1995 (Cth). This document was amended on 14 November 2007. The document sets out, in tabular form, the particulars of the evidence in support of proof of the contentions of Z Pty Ltd.
The Wife made submissions about the transfer by the Husband and the Wife of their interest in Lots 1 and 107, L, to the wife’s parents. The Wife sought to defend the contention of Z Pty Ltd that there was no consideration paid by the wife’s parents to the Husband and Wife despite the transfer records, prima facie, showing a receipt of consideration in the amount of $175,000. In doing so, she stated that amounts of around $145,000 and then $30,000 were paid into their personal accounts. The Wife submitted that $140,000 came from the proceeds of sale of a unit at Y. The Wife made a number of submissions about Lots 1 and 107 L.
I put to the Wife that Mr Graham QC, in the Supreme Court proceedings, had questioned her about various cheques and that she admitted to a misrecording of those cheques of in the books of Z Pty Ltd. The Wife contended that the money was not technically money of Z Pty Ltd because it was money that was loaned to the company.
I asked of the Wife whether she contended that her parents contributed money for some of the properties and she said that the last payment from her parents that she could recall came from their term deposit account. The Wife stated that the records were in the parents’ affidavits. There followed some discussion and the Wife recalled that the “$140,000-odd” had been banked into her personal account upon the mother selling the Y Unit. The money, according to the Wife, was then banked into Z Pty Ltd account.
Submissions for the 4th Respondent
SY made oral submissions which by implication are the submissions of the wife’s parents who are the 2nd and 3rd Respondents.
As already stated, the Amended Responses of each of the 1st – 4th Respondents are identical and therefore my comments in relation to the Wife apply to the 2nd – 4th Respondents. That is, the points of defence contain no more than denials of allegations made against them.
In her oral response to the submissions made by Mr Cohen, SY said, through the interpreter, “I can only say that I say it on my behalf and on behalf of both of my parents, the 2nd and 3rd Respondents, that the 6th Respondent’s allegations is [sic] not true.”
RELEVANT PRINCIPLES
In the Family Court proceedings for final orders are started by filing an application: Chpt 2 of the Family Law Rules. The application must give full particulars of the orders sought; and include all causes of action that can be disposed of conveniently in the same case: Chpt 4 of the Family Law Rules. A respondent to an application for final orders who seeks to oppose the orders sought in the application or seeks different orders must file a response to the application for final orders and give full particulars of the orders the respondent seeks: Chpt 9 of the Family Law Rules. If in the response the respondent seeks orders in a cause of action other than a cause of action mentioned in the application for final orders then the applicant must file a reply to the response and either oppose the orders sought in the response or seek different orders: Pt 9.2 of the Family Law Rules. In summary, they are proceedings without pleadings.
It should be observed that Chpt 25 of the Family Law Rules deals with applications under the Corporations Act.
Rule 1.04 of the Family Law Rules provides that the main purpose of the Rules is to ensure that each case is resolved in a just and timely manner at a cost to the parties and the Court that is reasonable in the circumstances of the case. Section 43 of the Family Law Act sets out the principles that the Court must apply when exercising its jurisdiction under the Act.
Rule 1.06 of the Family Law Rules provides that the Court must apply the Rules to promote the main purpose, and actively manage each case by doing the things mentioned in paras (a) to (j) inclusive and one such matter is by identifying the issues in dispute early in the case and separating and disposing of any issues that do not need full investigation and trial: r 1.06(c).
Rule 1.08(1) of the Family Law Rules provides that each party has a responsibility to promote and achieve the main purpose and then sets out some what the responsibilities include. The responsibilities include complying with the duty of disclosure (r.08(1)(b)); identifying the issues genuinely in dispute in a case (r.08(1)(h)) and being satisfied that there is a reasonable basis for alleging, denying or not admitting a fact (r.08(1)(i)). Part 13.1 of the Family Law Rules deals with the general duty of disclosure and the duty of disclosure in financial cases. Part 13.2 deals with the duty of disclosure of documents.
Part 1.3 of the Family Law Rules deals with the powers of the Court in all cases and r 1.09 provides that if the Court is satisfied that a legislative provision does not provide a practice or procedure; or a difficulty arises, or doubt exists, in relation to a matter of practice or procedure it may make such orders as it considers necessary. There is also a power in the Family Law Rules to dispense with the Rules: r 1.12.
Rule 11.01 provides that the Court may exercise any of the powers mentioned in Table 11.1 to manage a case to achieve the main purpose of the Rules (see rule 1.04). The powers include to specify the facts that are in dispute, state the issues and make procedural orders about how and when the case will be heard or tried and order a party to provide particulars, or further and better particulars, of the orders sought by that party.
Part 15.2 of the Family Law Rules deals with affidavits and r 15.05 provides that the evidence in chief at a hearing must be given by affidavit. Rule 15.07(2) imposes an obligation to file affidavits of evidence in chief by a specified time although this is, as in this case, subject to any order. There is also, again subject to an order, no provision for the filing of such affidavits sequentially.
The Court may in an appropriate case make an order for the filing of a statement of the facts that a party contends support a right to the relief sought and particulars of the claim. The purpose of doing so, consistent with the purpose of the Rules, may be to define the issues of fact or law which the parties wish to submit for determination and set out the case which each party proposes to rely upon and give notice of that case to the opposite party. The function of the particulars as an extension of the stated facts may be to enable the opposite party to know what case such party will have to meet and enable that party to know what evidence that party ought to be prepared with. It follows that the Court may also order that the opposite party file a defence in which the opposite party sets out how it is sought to avoid the relief sought by the moving party.
It is a fundamental principle that litigants should have access to the full procedures of courts to prove their lawful claims or defence to claims by others. However for reasons that do not require elaboration this principle is subject to a number of countervailing policies. In Lindon v Commonwealth (No 2) (1996) 136 ALR 251 at 255-256 Kirby J identified some of the countervailing policies. In the result courts gave adopted various procedures that enable litigants to seek an early and summary determination of litigation. Courts have adopted rules of court that enable a party to obtain default or summary judgment or to have a claim or defence struck out. As well courts have powers under the inherent jurisdiction to prevent abuse of the process of the court.
The Family Court has an inherent or implied jurisdiction to strike out the whole or part of an application or response or stay or dismiss an action which is frivolous or vexatious or an abuse of process or which must fail or which the plaintiff cannot prove. This is part of the Court’s power to control proceedings. In Westpac Banking Corp v Aldred (1986) FLC 91–753 Nygh J discussed the inherent power and said:
So under its inherent jurisdiction the court may strike out the whole or part of the indorsement on a writ or stay or dismiss an action which is frivolous or vexatious or an abuse of process or which must fail or which the plaintiff cannot prove, and which is without a solid basis.
Nygh J also relied upon s 38(2) of the Family Law Act and drew upon O 63 rr 1 and 2 of the High Court Rules. The decision was affirmed by the Full Court in In the Marriage of Spellson (1989) FLC 92–046.
Between 1989 and 1995 the Family Court had a system of pleadings and during that period O 11 r 11 of the Family Law Rules, which empowered a court to strike out a pleading, was in force. In Bigg v Suzi (1998) 22 Fam LR 700 at 710-711 the Full Court (Barblett DCJ, Lindenmayer and Finn JJ) discussed some of the history and affirmed that the Court had the power whether it be exercised under the inherent power or O 26 r 18 and perhaps O 63 rr 1 and 2 of the High Court Rules: see also In the Marriage of Pelerman (2000) 26 Fam LR 505 at 511.
The summary disposal of proceedings may occur for a number of reasons. There is power in the event of failure to attend court events to dismiss an application and if no response has been filed to make the order sought in the application: Pt 12.4 of the Family Law Rules. There are powers to dismiss all or part of a case or determine the case as if it were undefended if there is non compliance with the Rules or a procedural order: Pt 11.02 of the Family Law Rules. There is power to dismiss an application if a court is satisfied that a party had frequently started a case that is frivolous, vexatious or an abuse of process: Pt 11.04 of the Family Law Rules. There is power to dismiss all or part of a case if a party has not taken a step in a case for one year: Pt 11.06 of the Family Law Rules.
Part 10.3 of the Family Law Rules provides as follows:
10.12A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a)the court has no jurisdiction;
(b)the other party has no legal capacity to apply for the orders sought;
(c)it is frivolous, vexatious or an abuse of process; or
(d)there is no reasonable likelihood of success.
10.13After the final resolution event, a party may apply for a decision on any issue, if the decision may:
(a)dispose of all or part of the case;
(b)make a trial unnecessary;
(c) make a trial substantially shorter; or
(d)save substantial costs.
10.14On an application under this Part, the court may:
(a)dismiss any part of the case;
(b) decide an issue;
(c)make a final order on any issue;
(d)order a hearing about an issue or fact; or
(e) with the consent of the parties, order arbitration about the case or part of the case.
NoteThis list does not limit the powers of the court. The court may make orders on an application, or on its own initiative (see rule 1.10).
The powers conferred under the Rules for the summary disposal of proceedings are very wide as are the circumstances in which the powers may be exercised.
I have the power to make summary orders and the circumstances in which I may do so include if I was satisfied that an application or response was frivolous, vexatious or an abuse of process or there is no reasonable likelihood of success. I have the power to summarily dispose of a case if it is clear that there is no question to be tried. This is often referred to as summary judgment and arises where the court is satisfied that there is no triable issue. It most often occurs where there is no reasonable cause of action or defence. I am also of the view that I have the power to strike out what may be a pleading such as a statement of facts as I have articulated above if it does not disclose a reasonable cause of action or defence. In summary, I have the power to make orders that a claim or defence does not go to trial in the ordinary way.
If an order is sought that an application or response be summarily dismissed there are however a number of important matters to consider given that the outcome may be to deprive a party of the opportunity to submit a case for determination. As Dixon J (as his Honour then was) in Dey v Victorian Railway Commissioners (1948-1949) 78 CLR 62 said at 91:
The application is really made to the inherent jurisdiction of the court to stop the abuse of its process when it is employed for groundless claims. The principles upon which that jurisdiction is exercisable are well settled. A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.
The passage above was cited with approval by Barwick CJ In General Steel Industries Inc v Commissioner for Railways (NSW) and Ors (1964) 112 CLR 125 who said at 128-130:
The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion.
…
... In my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.
See also Webster v Lampard (1993) 177 CLR 598 per Mason CJ and Deane and Dawson JJ); Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Lindon v Commonwealth (No 2) (supra) and Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1995-1997) 188 CLR 241 at 271 per McHugh J.
In exercising the inherent power or as in this case the powers conferred by r 10.12 (c) and or r 10.12 (d) of the Rules the following are relevant to consider:
a) The power is discretionary.
b) The power must be exercised with particular caution.
c)The applicant seeking summary dismissal must establish a clear case that the application or response is frivolous or vexatious or an abuse of process or which must fail as there is no reasonable likelihood of success.
d)A weak case or one that is unlikely to succeed is not sufficient to warrant termination.
e)If there are defects of pleading but it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe the pleading.
f) A serious legal question should ordinarily be determined at a trial.
g)Summary disposal is inappropriate if there is any serious conflict as to any matter of fact.
h)It does not matter that the issue may be intricate and that argument of an extensive kind may be necessary.
CONCLUSION
In the amended response filed on 28 September 2007 Z Pty Ltd sought relief in relation to lots 1 and 107, L, and this is the subject of the controversy between Z Pty Ltd and K Inc. Relief was also sought in respect of the QLD property and the mortgage on the title of that property. Relief was also sought pursuant to section 80 of the Family Law Act, or alternatively, s 1317H(1) of the Corporations Act, or alternatively the general law, that the Husband and the Wife pay damages to Z Pty Ltd for breach of their duties under ss 180, 181 and 182 of the Corporations Act; and alternatively, the general law, to Z Pty Ltd in an amount to be determined or assessed. Alternatively, Z Pty Ltd sought an order that the real property of the marriage, whether held in the names of the Husband and the Wife, or by nominee companies under their control, forthwith be delivered up to Z Pty Ltd and thereupon be vested in the Liquidator of Z Pty Ltd to permit all just claims upon such assets as may be admitted to proof as debts in the winding up of Z Pty Ltd thereafter to be administered by the liquidator pursuant to the provisions of the Corporations Act and the Corporation Regulations.
For the purposes of the allegations against each of the Wife, the wife’s father, the wife’s mother and the wife’s sister SY, declarations of right were sought by Z Pty Ltd in respect of certain properties and most particularly in respect of the QLD property. Z Pty Ltd sought declarations about a breach of trust by the Wife and SY. Z Pty Ltd also sought declarations in respect of the voidness or voidability of the Queensland mortgage of which the wife’s father and the wife’s mother are the mortgagees. In substance, Z Pty Ltd contended that in general the QLD property is held upon trust for Z Pty Ltd.
The relevant rights that are represented by the QLD property are divided as between the title, the registered proprietorship being by the Wife and SY and then the mortgage upon that title in the name of the wife’s parents. Z Pty Ltd contended that all of those relevant instruments that create such rights properly ought to be set aside on the footing that everything that is held in whatever fashion results from a breach of trust and therefore a constructive trust attaches to those rights.
In the written and oral submissions for Z Pty Ltd, Mr Cohen relied quite strongly on the notion that the 1st - 4th Respondents’ pleadings are nothing more than an abuse of the Court process. The evidence before the Court, he contended, clearly shows breaches of fiduciary duty in misappropriating funds of Z Pty LTd for personal purchases of property by the Wife and SY, and the absence of the production of any evidence to the contrary, renders the Respondent’s arguments doomed to fail.
In the amended response filed on 28 September 2007 Z Pty Ltd pleaded facts to support its contentions and provided particulars. The amended response was filed pursuant to orders I made on 28 September 2007.
On the same day, namely 28 September 2007 I made orders for the filing of what I described as points of defence. Z Pty Ltd also foreshadowed that it would seek that any defence or response to its claims was summarily dismissed.
Pursuant to the directions of 28 September 2007 each of the 1st – 4th Respondents filed a defence.
Each of the of the 1st – 4th Respondents were then given notice by Z Pty Ltd of the matters that would be put in support of the application to summarily dismiss the defence of each of the 1st – 4th Respondents.
In summary the procedure I made the subject of orders was adhered to.
It must also be remembered that in proceedings in the Family Court the evidence in chief of all parties is given in affidavits and affidavits also were filed in accordance with directions I had made.
When an analysis is undertaken of the orders sought by each of the 1st – 4th Respondents, I accept that no cause of action is disclosed that has any likelihood of success. The only relief sought in relation to the QLD property is that it is not a matrimonial asset. I accept the submissions made on behalf of Z Pty Ltd.
However assuming that it was sufficient for each of the 1st – 4th Respondents to simply seek that the amended response of Z Pty Ltd be dismissed, I then examined that part of the amended response of each of the 1st – 4th Respondents in which there are said to be points of defence. In my view difficulties remain.
Again I accept the submissions on behalf of Z Pty Ltd. The matters raised by each of the 1st – 4th Respondents appear to ignore what has transpired and the evidence relied upon by Z Pty Ltd, among other things, having regard to the provisions of s 97 and s 98 of the Evidence Act 1995 (Cth).
Again the controversy about Lots 1 and 107, L, has yet to be resolved.
I also note that each of the 1st – 4th Respondents contended that until the judgement of Mathews AJ in February 2002 Z Pty Ltd had only one creditor namely X Company and the wife’s parents and that Z Pty Ltd had not demonstrated that the assessable income derived by Z Pty Ltd was attributable to the inherent profitability of its activities, as distinct from its default in paying its indebtedness to X Company for the stocks supplied by the latter. In the Supreme Court proceedings the claim by X Company was found to be false and this finding was based, among other things, on the evidence in chief given by the Wife. As I have already observed the 1st – 4th Respondents are seeking to agitate matters that have already been adjudicated upon and in so far as that is what they sought to do then issues of abuse of process become more obvious.
The amended response of each of the 1st – 4th Respondents then dealt with a notice to admit facts and documents dated 23 October 2007. Notwithstanding the obvious outcome Counsel for Z Pty Ltd made submissions in relation to this part of each of the amended responses because each of the 1st – 4th Respondents were unrepresented. I accept those submissions.
In trying to make some sense of what is said it appears that each of the 1st – 4th Respondents maintained that in relation to the contention of Z Pty Ltd that the only cash resources available were funds derived from the trading and business operations of Z Pty Ltd, such resources were a loan account from the wife’s parents and X Company and as I set out above that Z Pty Ltd has not demonstrated, by affirmative evidence, that the assessable income derived by Z Pty Ltd was attributable to the inherent profitability of its activities, as distinct from its default in paying its indebtedness to X Company for the stocks supplied by X Company. It was contended that Z Pty Ltd operated its business on a loan account from the wife’s parents, X Company and L Pty Ltd.
Thereafter various properties were listed being H Street; Lot 2, L; 36 R Street; G property; M Resort Time Shares; C Street; QLD property; 37 R Street; G Street; W Street; B property; Lot 1 and Lot 107, L.
A number of these properties have been sold in consequence of orders made in the Family Court. Further the properties at Lot 2, L; 36 R Street; G property; H Street; two units in the M Resort and B Resort being shares in M Club Ltd; B property; and Lots 3 and 21 W Street were the subject of the orders made by Campbell J in the Supreme Court on 25 November 2003. I observe that it is stated by each of the 1st – 4th Respondents that Campbell J was misled by the former liquidator in relation to H Street.
Pausing there, as I have said, in the X Company proceedings it was established that there was no default in Z Pty Ltd paying any indebtedness to X Company for the stocks supplied by X Company and further the claim that X Company lent money to Z Pty Ltd was abandoned. Next it has already been resolved that a number of the properties identified were acquired using the funds of Z Pty Ltd. This outcome was founded in part on the uncontroversial evidence of the Wife as to misue of funds of Z Pty Ltd.
As to the QLD property a bare denial was made. I observe that it may be similar to pleading the general issue which has been abolished.
It was a matter of some difficulty in extracting from the oral submissions made by the 1st and 4th Respondents (and by implication the 2nd and 3rd Respondents) the contentions which each advanced by which I may be persuaded that sufficient articulation of a triable issue has arisen. Despite this difficulty, I found that the Respondents did no more than to make simple denials of the allegations and did not advance any meritorious points of defence in response to the Sixth Respondent’s application for summary dismissal. In light of the submissions on behalf of the Sixth Respondent and the 1st, 2nd, 3rd and 4th Respondents, I am satisfied that there is no argument arising on the allegations that are made in response that raise a triable issue in the proceedings.
While on the pleadings alone I was satisfied that there arose no triable issue(s), I decided to inquire as to whether any arguable case arose from the evidence of the parties. I then considered what was said in the affidavits of evidence in chief of each of the 1st – 4th Respondents.
Each of the 1st – 4th Respondents have known for a very considerable period of time, measured in years, that there are issues in relation to the beneficial ownership of assets acquired during the relationship of the Husband and the Wife whether jointly in the names of the Husband and the Wife or in the names of any of the 1st – 4th Respondents and others. The issue as to the ownership of the QLD property has been known to each of the 1st – 4th Respondents for some time. Each of the 1st – 4th Respondents have known for some time that in so far as they each contended that the source of funds to acquire various properties including the QLD property was not from the funds of Z Pty Ltd then such contentions would be disputed and primary documentary evidence required corroborating the contentions.
Z Pty Ltd has pursued recovery of various assets acquired during the relationship of the Husband and the Wife and has successfully been able to recover a number of assets.
In my view there is nothing in the pleadings that raises any triable issue as a defence to the claims of Z Pty Ltd nor any admissible evidence of each of the 1st – 4th Respondents to support the contentions as to the source of funds to acquire the QLD property and the mortgage on the title of that property. The 1st - 4th Respondents have been unable to produce any primary records or bank statements to satisfy me that any triable issue arises in respect of the ownership of this property.
There is also evidence before me, which is not controversial, relating to the improper use of company funds by the Wife for her personal use as well as for the benefit of the wife’s sister and the wife’s parents.
In my view, the outcome of the present application is indeed very clear. I accept the submissions made on behalf of Z Pty Ltd.
There are no serious questions of law that require consideration.
On all of the material, including the evidence in chief of each of the 1st - 4th Respondents there is no serious conflict of fact. There is also no question of credit involved. In fact the evidence that is before me is clear and unambiguous.
All of the issues have been sufficiently argued before me.
Some of what is before me on behalf of the 1st - 4th Respondents is either vexatious or an abuse or process in so far as, among other things, it was sought to agitate matters that have already been adjudicated upon.
In this case, I am satisfied that the standard enunciated in the authorities has been met. It is clear from the whole of the material, including the evidence, that there is no reasonable likelihood of success of any of the contentions of the 1st – 4th Respondents contained in their respective Amended Responses or there affidavits of evidence in chief, if this matter were to proceed to a hearing.
It follows that the response of each the 1st, 2nd, 3rd and 4th Respondents should be dismissed.
I certify that the preceding two hundred and forty one (241) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Ryan
Associate:
Date: 17 December 2007
Key Legal Topics
Areas of Law
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Civil Procedure
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Administrative Law
Legal Concepts
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Judicial Review
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Procedural Fairness
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Standing
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Abuse of Process
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Costs
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