LITTLE & LITTLE

[2015] FamCA 744

FAMILY COURT OF AUSTRALIA

LITTLE & LITTLE [2015] FamCA 744

FAMILY LAW – PROPERTY – Interim – Where the husband makes an application for an injunction to cause the wife to be removed as a director of two companies – Where there is a dispute about how monies held in the husband’s solicitor’s trust account should be distributed – Whether there should be an extension of time pursuant to the Family Law Rules for the parties to ask questions of the single expert witness in relation to the business valuation report.

Family Law Act 1975 (Cth)
Income Tax Assessment Act 1997 (Cth)
Superannuation Industry (Supervision) Act 1993 (Cth)

Family Law Rules 2004 (Cth)

APPLICANT: Mr Little

RESPONDENT: Ms Little

FILE NUMBER: BRC 10173 of 2012

DATE DELIVERED: 10 September 2015

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATE: 24 August 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Jordan

SOLICITOR FOR THE APPLICANT: Rostron Carlyle Solicitors

COUNSEL FOR THE RESPONDENT: Mr McDougall

SOLICITOR FOR THE RESPONDENT: Cooper Maloy Legal

Orders

1. That the husbands’ application for an injunction that would cause the wife to be removed from her position as a Director of each of the companies, B Pty Ltd and Little Pty Ltd is dismissed.

2. That the husband and the wife do all such things and sign all such documents as may be necessary to cause the monies currently held in the Trust Account of the husband’s solicitors, Rostron Carlyle Solicitors to be forthwith distributed in the following manner:

   (i)As to $67,000 to the husband for use by him solely in meeting legal costs and outlays already incurred and yet to be incurred in these proceedings; and

   (ii)The balance to be paid in equal shares to the husband and the wife or at his or her direction.

3. That the treatment of the payments made to each of the parties pursuant to paragraph (2) hereof in the determination of appropriate final property adjustment Orders that are just and equitable shall be a matter for agreement between the parties or the discretion of the Judge who determines such final Orders.

4. That pursuant to Rule 1.12 of the Family Law Rules 2004 (“the Rules”), the time within which either of the parties may ask questions of the single expert witness, Mr C, seeking clarification of his March 2014 report as to the value of the business operated by B Pty Ltd, pursuant to Rule 15.65 of the Rules, is extended to 21 days from the date hereof.

5. That each party who asks questions of Mr C pursuant to paragraph (4) hereof, shall pay Mr C’s costs of providing answers to that party’s questions.

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

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 10173 of 2012

Mr Little

Applicant

And

Ms Little

Respondent

REASONS FOR JUDGMENT

1. Mr and Ms Little were married for around 19 years when they separated in 2012. They have two children of that marriage who are now 22 and 15 years of age respectively. During their marriage they established and successfully operated a business. Ever since their separation, they have been in dispute about how to settle their entwined financial circumstances.

2. Contested proceedings for property adjustment orders have been pending in the Court since 2012. There have been several applications for interim orders filed in the proceedings to this time. Some have been heard and determined by the Court. Some have been settled with Orders being made by consent. Unfortunately for the parties, the matter has not yet been listed for trial. It is now said to be ready and awaiting a trial listing. It appears as if finality in this dispute will only be able to be achieved by determination of this Court and the longer that takes the more often the parties appear to come to the Court on interim applications.

3. For immediate determination are a few more matters of interim dispute. Firstly, the husband wants to have the wife removed as a Director of the company that operates the business and the company that is the trustee of their self-managed superannuation fund. The wife opposes that. Secondly, whilst each agrees that certain funds held in trust for the parties by the husband’s solicitors be distributed between them, they cannot agree as to appropriate distribution. Lastly, there remains dispute surrounding the valuation of the business by a jointly appointed single expert accountant. At the hearing, in the Judicial Duty List on 24 August, 2015, that dispute had narrowed to the question of whether the husband’s lawyers could ask questions of that single expert witness despite not having done so previously in accordance with the provisions of the Family Law Rules 2004 (Cth) (“the Rules”).

Some Relevant Background to the Application for removal of the Wife as a Director of the Companies

1. The company through which the parties operate the business (it is the corporate trustee of their discretionary family trust) was formed in 2000. The husband and the wife were the only shareholders and directors of that company right through until their separation. Since separation, the company has continued to operate the business with the husband remaining in charge of management. He and the wife have continued to be the shareholders and directors, save for a few periods since separation when the wife has been removed as a director by the husband before being reinstated.

2. With the consent of the parties, I made an interim Order on 8 December 2014 in terms agreed between the parties that included provision for the husband to take steps as required to cause ASIC records to reflect that the husband and wife are the directors and equal shareholders of the company. That was done, apparently, after the husband had unilaterally caused the wife to be removed as a director of the company earlier that year.

3. On the husband’s own evidence, he did not cause the wife to be reinstated as a director and shareholder of the company until 28 April 2015. The wife had apparently filed a further interim application seeking that reinstatement pursuant to the December 2014 Order before that date, and on 4 May this year, with the consent of the parties, Justice Hogan of this Court made a further interim Order in terms agreed between the parties that again included provision for the husband to take steps within seven days to cause ASIC records to reflect that the wife is an equal shareholder of the company.

4. These Court outcomes just outlined are to be understood in a context of the husband outlining his historic concerns about the wife not discharging her duties as a director appropriately with the interests of the parties, through their interests in their discretionary trust, in mind. Included, were his expressed concerns that the wife was not acting in accordance with a provision of another Order made with the consent of the parties by Justice Bell of this Court in April 2013. That required the wife to sign and return within three days of her receipt of same, documents requiring her signature relating to the day to day operation of the business. Those concerns had caused the husband to act unilaterally and, according to assertions of the wife, questionably, in respect of alleged share transfers prior to those Orders being made. Against that history, the husband consented on those two relatively recent occasions to the reinstatement of the wife to directorship of the company as well as the rectification of the share registry to reflect her equal ownership.

5. About seven weeks after the consent Order was made by Hogan J, the husband filed his application to have the wife removed as a director of the company. In his supporting affidavit, filed at the same time, he gave evidence that on 22 May 2015 he had contacted the wife, advising her the business needed to purchase a new motor car for staff needs and informing her that she needed to sign finance documents to facilitate the purchase. The husband said that he was told by the proposed financier that the wife had told the financier that she and the husband are bankrupt. The wife denies that she did this. The husband said he then had to spend a couple of days proving to the financier that he was not bankrupt.

6. The husband gave evidence that on 25 May 2015 he caused his solicitor to write to the wife’s solicitor informing that a copy of the wife’s driver’s licence was required to progress the loan application for the purchase of the car. The wife was asked to provide that by 26 May, the next day. The husband’s evidence is that she did not and on 27 May he caused his solicitor to write again requesting it be provided urgently. He gave further evidence that not before 4 June 2015 did the wife’s solicitors respond with information that the copy of the driver’s licence would be provided upon the provision of certain requested information about the need for the purchase of the new car for the business. The husband then caused the application for her removal as a director to be filed, asserting that the delay was causing the business substantial financial loss on a daily basis.

7. Worthy of observation at this point, in my view, is a fact that subsequently emerged in the affidavit evidence.  Immediately after receipt of the wife’s request for more information about the proposed new vehicle purchase, the husband caused the wife to again be unilaterally removed as a director of the company without telling her so that the company could purchase the vehicle without her involvement and further knowledge. It is clear that he did this at the same time as causing his application for her removal as a director to be prepared and filed and without deposing to this unilateral action in his affidavit in support of the application.

8. After the purchase of the vehicle, he says he caused the wife to be reinstated as a director yet again. There was, however, delay in this occurring, which the husband attributes to forgetful oversight on the part of the staff member he asked to cause it to happen.

9. As to the second company, the husband deposes to the parties having a self-managed superannuation fund and that this company is the fund’s corporate trustee, of which he and the wife are both directors and equal shareholders. The husband also deposes to historic concerns he has had about the wife’s conduct of her role as a co-director of this company and argues for her removal as a director as a consequence. 

The Application for Removal of the Wife as Director

1. There is no dispute between the parties that the Court has the injunctive power to order the parties to cause the wife to be removed as a director of the company that operates the business. 

2. In short, for the husband it was submitted that the wife’s actions are prejudicing the good management of the business, with a potential for that to cause loss to the parties through reduction in the value of the business and such that granting the relief he seeks would be an exercise in property preservation pending trial.

3. In response, for the wife it was submitted that the husband has not established the requisite need for such relief, his application merely being made to seek the convenience of not having to properly involve the wife in company related issues, having regard to the high conflict that exists between them.

4. The power to grant injunctive relief affecting property is not to be exercised lightly and only with circumspection. The grant of such relief is generally conditioned on the applicant demonstrating a serious issue to be determined as between the parties, such as the demonstration of a prima facie case for s 79 property adjustment Orders, and the demonstration of real danger that unless the injunction is granted the applicant’s claim will be prejudiced.

5. In this case, there is evidence sworn to by the husband that the net property interests of the parties have a total value of around $4.5 million and their interests in the business are worth around $3.3 million. There is little dispute, if any, between the parties about each party having a substantial entitlement to property through adjustment Orders that are just and equitable. What I am far from convinced of is the probability that absent removal of the wife as a director of the company at this late stage of the proceedings when a trial looms, that there is a real danger of the husband’s interests in obtaining property adjustment that is just and equitable being prejudiced. Unhappy as the husband might be, some three years after separation, about having to continue to deal with the wife in his management of their family trust’s business, I am simply not persuaded that drastic injunctive steps should now be taken. I will not grant the injunction he seeks in respect of this company.

6. As to the application for an injunction causing the wife to be removed as a director of the corporate trustee of the parties’ self-managed superannuation fund, I am not satisfied that I can grant such an injunction without causing the parties to then immediately fall foul of provisions of the Superannuation Industry (Supervision) Act 1993 (Cth).

7. The definition of a “self-managed superannuation fund” contained within s 17A of that Act requires each member of the fund to be a director of a corporate trustee of the fund. Breach of that requirement could result in the fund losing status as a complying superannuation fund for the purposes of the Income Tax Assessment Act 1997 (Cth) with serious detrimental financial consequences for each member of the fund.

8. Neither the husband nor the wife nor any of their legal representatives raised this issue with the Court. I can only respectfully conclude it was overlooked. In these circumstances, I will not make an Order that would cause the wife to be removed as a director of the corporate trustee of the self-managed superannuation fund that she is a member of.

Some Relevant Background to the Application for Distribution of the Money held in trust and the Parties’ Submissions

1. The parties’ former home on the Gold Coast was sold in April this year, pursuant to the Order I made with the consent of the parties in December last year. There is around $193,000 sale proceeds held by the husband’s solicitors on trust for the parties pending further Order or agreement. The husband’s application seeks payment of $67,000 from that amount for the purposes of paying outstanding legal fees. He deposed in a July affidavit to owing his solicitors $35,448 and that he has been advised by them that his costs of proceeding to trial will be at least another $30,000. He does not have access to that amount of money otherwise.

2. It is agreed between the parties that when their former Gold Coast home was sold that the wife’s former solicitors had to first be paid $67,479 to cause a writ they had registered over the title to the property to be discharged. The husband argues he should have access to the same amount from the remaining money in trust before the balance is then divided equally between him and the wife. He says that this will bring them back to parity in terms of access to family capital prior to finalisation of the property adjustment proceedings.

3. For the wife, the argument is that the total balance of $193,000 should be divided equally between the parties at this interim stage as the husband has already had access to the parties’ funds by sale of a boat that was valued at $71,370, for which he is said by the wife to have already received $40,000.

4. This issue, however, is a matter of factual dispute between the parties now. The husband says that he agreed to sell the boat to a third person for $40,000 as he was struggling financially. In November, 2014, the third person deposited $40,000 into his bank account, before the husband says he contacted this third person and told him that he was not going to sell the boat to him before the property adjustment proceedings were finalised. The husband says he then reached agreement with the third person to treat the $40,000 as a personal loan between them, to be repaid when the property adjustment proceedings were concluded. He deposes to having spent the $40,000 on work expenses and for the day to day expenses of himself and the parties’ daughter.

5. The Court was told that the wife does not accept the husband’s evidence as truthful and for the wife it was submitted that the husband has, therefore, already had $40,000 from the parties’ property interests that should now preclude him from getting the first $67,000 from the money held in trust.

My Decision on the Distribution

1. At this interim stage, I am not in a position to determine the factual dispute between the parties about the sale or otherwise of the boat and whether the $40,000 received by the husband is actually a loan or not. Clearly, that is a matter for the trial and any determination of how the use of that $40,000 by the husband prior to the trial is to be treated in the process of making property adjustment Orders that are just and equitable will be a matter for the Judge who hears the trial.

2. I am quite satisfied, on the evidence before me, that even if that $40,000 used by the husband is ultimately treated as a premature use of the parties’ property that should be notionally “added back” to a pool against which just and equitable adjustment Orders are appropriately determined, there will still be sufficient property of value for the wife’s interests not to be prejudiced by the first $67,000 of the money in trust being distributed to the husband and the balance distributed equally between them.

3. As there is no dispute that the wife already had access to $67,000 of the parties’ capital to pay some of her legal costs, unequalled by any similar distribution to the husband, I will Order that $67,000 be paid from the money in trust to the husband to pay his legal costs with the balance being distributed equally between the parties with the treatment of same to be a matter for the Trial Judge.

Some Relevant Background to the Application to do with the Single Expert

1. In March 2014, pursuant to previous consent Orders, the parties’ business was valued by Mr C, an accountant and he provided the parties with a valuation report that was later attached to an affidavit and filed in the proceedings.

2. The husband deposes to matters that have since occurred in the business that he asserts will make a difference to the valuation. Initially, he sought an Order from the Court that Mr D, accountant, be appointed to provide another valuation of the business. For numerous reasons, the wife opposed the application. Her counsel’s written submissions dealt with those reasons, focusing principally on the single expert provisions of the Rules.

3. At the hearing before me, counsel for the husband simply sought an Order that “the time for compliance with the opportunity to ask questions of the single expert, Mr C, pursuant to Rule 15.65, be extended to 21 days from the date of this Order.”

4. Rule 15.65, headed “Questions to Single Expert Witness” provides for a party seeking to clarify the report of a single witness to be able to ask questions of the single expert within 21 days of receipt of the single expert’s report by the party. Those questions must be in writing and put once only, be only for the purpose of clarifying the single expert witness’s report; and not be vexatious or oppressive, or require the single expert witness to undertake an unreasonable amount of work to answer. The party putting the questions must give a copy of any questions to the other party.

5. Clearly, the husband seeks to be able to now put questions to the single expert about his report nearly 18 months after his report was prepared, presumably having regard to matters that have transpired since. I expect he would do so, if permitted, with assistance from his own “shadow expert”, Mr D.

1. The wife opposes this course, simply submitting that it is outside the timeframe provided by the Rules and thus, should not be permitted.

My Decision on this Issue

1. In determining the issue, I have regard to Rule 1.04 which says that the main purpose of the Rules is to ensure 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. I also have regard to Rule 1.12 which permits me to dispense with compliance with any of the Rules at any time before or after the occasion for compliance arises. In considering whether to do so or not, I may consider Rule 1.04, the administration of justice, whether the application has been promptly made, whether non-compliance was intentional, as well as the effect that granting the relief sought would have on each party and parties to other cases in the Court.

2. I am satisfied, as I said to the parties at the hearing, that it is likely an updated valuation report will be required to be obtained in the lead up to the trial in this matter in any event, given the age of Mr C’s report and the fact that financial statements fixed as at 30 June 2013 were used by him in preparing his first report. In such circumstances, I am not troubled by the prospect of the husband or the wife, as they may be advised, asking Mr C questions seeking clarification of matters pertaining to his existing report in the meantime.

3. The Court was informed at the hearing on 24 August 2105, that the issue currently causing the most difficulty in respect of the parties being able to resolve the dispute between them is the value ascribed to the business by Mr C, a value the wife apparently accepts but the husband does not. If permitting either party to ask questions in writing of Mr C assists in the process of getting closer to agreement as to the value of the business and thus closer to getting the matter resolved then allowing such questions, albeit outside the time frame provided for in the Rules, accords with the main purpose of the Rules. Provided each party pays for any work that Mr C has to do to provide written answers to his or her questions, I do not consider the parties’ individual interests will be unjustly prejudiced in this process.

4. Accordingly, I will make an Order on this point in similar terms to that sought at the hearing by the husband, but I will order that each party pays Mr C’s costs of answering questions put by that party.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 10 September 2015.

Associate: 

Date:  10 September 2015