Lowrence and Lowrence (No. 2)

[2008] FamCA 1019

FAMILY COURT OF AUSTRALIA

LOWRENCE & LOWRENCE (NO. 2) [2008] FamCA 1019

FAMILY LAW – PROPERTY SETTLEMENT—Assets $17m—corporate entities—husband and wife reached agreement on multitude of assets—percentage distribution—Husband model litigant—Husband to raise $2m by 1 February 2009—current world economic crisis—wife to sign share transfers now and to be held in escrow—Onus on Husband to inform third party—If Husband elects to hold bulk of assets in corporate structure and enforcement becomes necessary third party will be impacted by order of sale—Property Orders made

APPLICANT: Ms Lowrence

RESPONDENT: Mr Lowrence

FILE NUMBER: BRC 7083 of 2007

DATE DELIVERED: 9 October 2008

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 9 October 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Galloway

SOLICITOR FOR THE APPLICANT: Dixie Ann Middleton & Associates

COUNSEL FOR THE RESPONDENT: Mr Baston

SOLICITOR FOR THE RESPONDENT: Habermann & Associates

Orders

IT IS ORDERED THAT:

Definitions
A. ‘The Lowrence Group’ means the following companies and trusts:
  Lowrence Corp Pty Ltd
  Lowrence Holdings Pty Ltd
  Lowrence Corp (NSW) Pty Ltd
  M Pty Ltd
  L Pty Ltd
  Lowrence Corp Superannuation Fund
  The D Trust
  The Lowrence Family Trust
  The Lowrence Corp Trust

1. The Husband shall transfer to the Wife free of encumbrance all his right, title and interest in and to the property located at R (hereafter referred to as the former matrimonial home) (more particularly described as Lot … on RP…, County of …, Parish of …, Title Reference …) within thirty (30) days of Orders being made in these terms by the Family Court of Australia at Brisbane.

2. The Husband shall refinance the debt secured over the former matrimonial home in favour of the National Australia Bank into his sole name within thirty (30) days of Orders being made in these terms by the Family Court of Australia at Brisbane and shall provide evidence of same to the Wife and pending this refinance, the Husband shall indemnify and shall keep the Wife indemnified against this debt and he shall take all other steps necessary to release this property as security for all other borrowings by the parties or the entities in the Lowrence Group, including any security it provides to the industry regulatory body.

3. The parties deem the property located at R and more particularly described as Lot … on RP…, County of …, Parish of …, Title Reference … as the main residence of the parties and it is acknowledged and agreed that as a consequence of this election this property is capital gains tax exempt.

4. The Husband shall pay to the Wife by bank cheque drawn in her favour, the capital sum of $7,541,254.00 and shall pay the same in the following manner:

4.1      On or before 1 February 2009 the sum of $2 million;

4.2      On or before 1 July 2009 a further sum of $2 million; and

4.3      On or before 1 December 2009 the balance of $3,541,254.00.

5. Any extension of time to pay or any other indulgence granted by the Wife to the Husband shall not be deemed in any way a waiver of the rights of the Wife to enforce the terms of these Orders.

1. The Husband is restrained from further encumbering, selling, disposing or otherwise dealing with any of the property owned by him or by any entity in the Lowrence Group without the Wife’s prior written consent other than in the ordinary course of business until all monies payable to the Wife pursuant to these Orders have been paid other than for the purpose of complying with these Orders.

2. The Husband is restrained from taking any action which will change the current share holding in any of the companies in the Lowrence Group until all monies payable to the Wife pursuant to these Orders have been paid save for the purposes of giving effect to these Orders and with the Wife’s written consent, other than in the ordinary course of business.

3. The Wife shall return to Lowrence Corp Pty Ltd the motor vehicle and the BP card currently in her possession contemporaneous with and in exchange for the Husband’s compliance with the payment pursuant to Order 4.1, but shall have the right to sole use of the vehicle and the BP card until the Husband’s compliance with 4.1 and the Husband shall take all reasonable steps to cause the company Lowrence Corp Pty Ltd not to remove same from the Wife’s possession until his compliance with Order 4.1.

4. That on or before 1 November 2008 the Wife shall execute and deliver to the Wife’s solicitor a share transfer duly executed by her which transfers to the Husband her shareholding in the following:

   9.1Her 1 B class share in M Pty Ltd.

   9.2Her 6250 ordinary shares in Lowrence Holdings Pty Ltd.

   PROVIDED that until such time as the Husband has made the payments provided for in Order 4 hereof such shares shall be charged with the liability of the Husband to the Wife in respect of Order 4 hereof and FURTHER shall be held by the solicitor for the Wife in escrow and no action be taken to effect registration of such transfer until such time as the payments provided for in Order 4 hereof have been made to the Wife.

5. The Husband shall thereafter be responsible for preparing the registration and the transfer of the said shares in the share registry of the said companies.

6. The Wife shall within ninety (90) days of these Orders resign from the office of Director of the following companies namely M Pty Ltd and Lowrence Holdings Pty Ltd.

7. The Husband shall prepare at his expense the necessary documentation for the Wife’s resignation of directorship of the said companies and the Husband shall file a Form 304 with the Australian Securities Commission within thirty (30) days of these Orders being made and shall notify the solicitors for the Wife of the lodgement of the said forms.

8. The Husband hereby indemnifies the Wife from any liability arising from her having provided a Deed of Covenant to the industry regulatory body, Director’s Guarantees or having been a Director, Secretary or shareholder or any other office bearer of the companies Lowrence Corp Pty Ltd, Lowrence Holdings Pty Ltd and M Pty Ltd during the period that such Guarantees or Deeds of Covenant were in place or she held such office or was a shareholder including but without limiting the generality of the above, liability arising in respect of any income tax payable by reason of having been a Shareholder, Director or Secretary or any other office bearer of the Company or payment in respect of any income or dividends declared or payable to the Wife but not yet paid prior to the date of these Orders or thereafter.

9. Upon the Husband’s compliance with Order 1, he shall provide written evidence that the Deed of Covenant, if any, provided by the Wife to the industry regulatory body has been revoked and the former matrimonial home is no longer shown on the industry regulatory body’s annual audit report as security or an asset of the Husband or the Lowrence Group, being the first report filed after the making of these Orders. The Husband shall provide such written evidence forthwith upon the issuing of that report.

10. Should the trustees of the Lowrence Corp Trust, in the exercise of their discretion, make a distribution to the Wife, such a distribution shall be deemed to be the income of the Husband and he shall be solely liable for any tax assessed on same and he shall indemnify and shall keep the Wife indemnified against this liability. The Wife shall make no claim to such distribution.

11. Should the trustees of the D Trust, in the exercise of their discretion, make a distribution to the Wife, such a distribution shall be deemed to be the income of the Husband and he shall be solely liable for any tax assessed on same and he shall indemnify and shall keep the Wife indemnified against this liability. The Wife shall make no claim to such distribution.

12. Should the trustees of the Lowrence Family Trust, in the exercise of their discretion, make a distribution to the Wife, such a distribution shall be deemed to be the income of the Husband and he shall be solely liable for any tax assessed on same and he shall indemnify and shall keep the Wife indemnified against this liability. The Wife shall make no claim to such distribution.

13. The Husband, as the appointer of the Lowrence Family Trust, shall exercise his power of appointment and remove the Wife as a trustee forthwith upon the making of these Orders and he shall take all steps necessary forthwith to release the Wife from all liability arising from her having been a trustee of the Lowrence Family Trust, and pending the release of the Wife from any Guarantees she may have provided in her capacity as trustee or otherwise of the National Australia Bank and any liability arising under the Commercial Bills that the Trust holds with the National Australia Bank and the Husband indemnifies and shall keep the Wife indemnified against same. The Wife shall sign all necessary documents to transfer all real estate held in her name in her capacity as trustee of the Lowrence Family Trust to the new trustee, or as otherwise directed by the Husband.

14. That in respect of The Lowrence Family Trust, The D Trust, the Lowrence Corp Trust and the shares in M Pty Ltd the Wife shall relinquish any claim in and to such trusts and to the extent necessary forgive any monies owed to her by any of such trusts.

15. The parties shall close the joint account with the National Australia Bank contemporaneous with and in exchange for the Husband’s compliance with Order 1 and the Wife shall retain any credit balance held in the account at the date of closure of the account and the Husband shall make no withdrawals from this account.

16. Save as aforesaid the parties hereto acknowledge and agree that each party shall be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these Orders being made and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank records thereof, insurance policies are deemed to be in the possession of the owner thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for payment out of such entitlements and further each party will indemnify the other and keep the other indemnified in respect of any debts incurred by each of them subsequent to the date of separation not otherwise mentioned herein.

17. The parties shall do all acts and things and execute all deeds and instruments necessary to enable the terms hereof to take effect and as may be required by the Office of State Revenue. In particular each of the parties either individually or through their respective solicitors (as the case may be) will submit to the other not later than fourteen (14) days from these Orders being made all such documents as may be necessary to give effect to the provisions of these orders on the basis that the transferee of each item of property concerned, shall prepare or cause to be prepared at his/hr cost and expense, the necessary documentation to transfer right, title or ownership to him or her.

18. On the failure or neglect of either party to do all such matters, acts and things and to execute all such deeds and instruments as aforesaid, the Registrar or Deputy Registrar of the Family Court of Australia at Brisbane is hereby appointed to execute all deeds and instruments in the name of that person, as may be necessary to give validity and operation to these orders it is deemed that there is a failure or neglect to sign if the party to whom documents are submitted has not signed them by the due date for settlement specified herein and the Affidavit of the party not in default testifying to this breach is deemed sufficient evidence of this breach.

19. Save and except for all sums to be paid pursuant to these Orders and for an indemnity, warranty, covenant or representation given by these Orders each party hereby releases the other from all sums of money, actions, proceedings, accounts, claims, demands, costs and expenses of any kind whatsoever which either party now has or at any time had or but for the execution of these presents might have had against the other for or on account of or in relation to any acts, cause, matter or thing whatsoever arising out of the marriage.

20. All other applications are dismissed and there is no order as to costs.

NOTATION:

In the event of any default, the matter is to be listed before the Honourable Justice Barry or such other Judge available in the Brisbane Registry.

IT IS NOTED that publication of this judgment under the pseudonym Lowrence & Lowrence is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 7083 of 2007

MS LOWRENCE

Applicant

And

MR LOWRENCE

Respondent

REASONS FOR JUDGMENT

1. This matter was set down for a three day property settlement hearing on 7, 8 and 9 October 2008.  On Tuesday I was informed that all issues have been resolved, save for a number of individual matters.

2. I made rulings on the outstanding issues I was asked to make.  I then requested counsel to prepare draft orders to give effect to the agreements reached between the parties.  Another impasse was reached as to the terms of the draft orders.

3. I move to a consideration of the matters that are not resolved.  I have before me draft orders representing the wife's proposals.  They cover some 22 paragraphs.  I have the draft orders put forward by the husband, they cover some 23 paragraphs, though the wife's document is by far the longer document.

4. A number of the unresolved issues would fall into the category described as banal.  The first is a typical example.  Paragraph 3 of the wife's draft which, for some reason, is opposed by the husband provides the parties deem former matrimonial home - as the main residence of the parties and it is acknowledged and agreed that as a consequence of this election this property is capital gains tax exempt.

5. I pointed out that I fail to understand the import of an order in those terms.  It is certainly not binding on the Commissioner of Tax, and that is the only possible reason why one might insert that order.  I assume that it was on that basis that the order was objected to.  Anyway the order is benign as far as I am concerned.  It does not have any financial impact on the husband.  Any properties that he has are owned in a corporate structure save one property at V.  It is not asserted by the husband that that has been his principal place of residence.  I will allow paragraph 3 to stand.

6. Order 5 of the wife's draft orders related to the wife having to repay the husband $32,000 after she received the final instalment of the $7,500,000.  I am informed that that has already been factored in in calculating the amounts payable by the husband under the terms of paragraph 4, so paragraph 5 can be deleted.

7. Paragraph 6 is a significant provision.  It provides that in the event of the husband making default in any one or more of the payments required by him pursuant to these orders, then upon such default all sums of moneys due and owing shall forthwith become payable.

8. There is a provision that any extension of time to pay or any other indulgence granted by the wife to the husband shall not be deemed in any way a waiver of the rights of the wife to enforce the terms of these orders.  I am minded to allow the last sentence to stand.  The provision is opposed.  The submission was made that the behaviour of the parties and the conduct of the litigation has been exemplary.  I accept that.  In my experience in litigation involving sums such as dealt with here, the husband, in particular, has been a model litigant.  There is no evidence of any complaint about the provision of disclosure.

9. The parties, with the assistance of accountants and lawyers, have reached agreement on the value of a multitude of assets.  They have agreed on the percentage distribution.  I note that there are numerous provisions in the legislation which are all directed to the issue of enforcement.  Relating to the powers of the Court, under s 80 the Court has the power to appoint or remove trustees.  That is not limited to simply making final orders for property, in my view.  It can also be made in terms of enforcement. 

10. Section 105, a well known provision, provides for the Court to order documents to be executed by Registrars in default of the parties executing.  106B allows the Court to set aside transactions made to defeat claims.  Section 109A is a broad provision saying that the Rules of Court can apply for enforcement.

11. I turn to chapter 20.  The Court can order the transfer of shares to the wife from the husband in relation to one or more of the corporate entities.  She is then empowered to sell assets of the company, apply for the winding up of the company, whatever step she wants to take, all the while interest is accumulating.

12. I take note of the current financial crisis which seems to be in the order of a one in 80 to 100 year event.  It is certainly not an easy environment in which to raise capital, whether from financial institutions or other sources.  It is not an easy market in which to sell real estate.  I appreciate that paragraph 6 is a relatively standard provision in mortgage documents and most other commercial documentation, but I am not prepared, in the particular facts of this case, to make an order in such terms other than a provision in terms of the last sentence which, again, I think is totally unnecessary.  Simply because the wife has granted an indulgence does not mean to say she is going to waive her rights, and I am sure her legal representatives would be pointing that out in any correspondence.

13. However, the particular facts to which I avert are that I have great confidence in the husband he will be as good as his word.  The husband operates a large corporate organisation, a very successful corporate organisation to date.  In no sense would he be defaulting on orders in my view.  The other relevant fact is that at the present time no one can predict when the current financial chaos is going to end or how it will end. 

    ORDER DELIVERED

14. I am of a very strong view that orders of the Court are there to be complied with.  If there has not been compliance I am certainly prepared to take immediate action to ensure that there will be compliance. 

15. Paragraph 7 of the draft provides for an anticipatory breach.  Should the husband default in payment of any of the moneys then the wife can claim his super fund, 100 per cent of that fund, it is only $640,000.  She wants that first and foremost and then after that she wants an order that the wife shall select for sale any of the properties owned by the husband personally, or any of the properties owned by any of the entities in the Lowrence Group and same shall forthwith be listed for sale by private treaty, and so it goes on.

16. I accept that in various orders it is not uncommon to provide for a means of enforcing the orders in the event that there is a default.  Normally that is done by way of an injunction preventing a party from disposing of assets pending compliance.  I have to say that I see some merit in the observation by counsel for the husband.  I have never seen a splitting order made as a default provision.  The view that I take is it is best to wait to see what efforts the husband has made in the 15 weeks between now and 1 February to raise the $2,0000,000, which is the first tranche.  In the circumstances I will not make orders in terms as sought in the wife's paragraph 7.

17. The wife's orders 8 and 9, compared to the husband’s orders 4 and 5; I accept the force of the submissions by counsel for the wife, that is not realistic to cast an onus on the wife to take action within 21 days after receiving some form of notice from the husband.  In other words, the husband's draft provides for the husband being able to do certain things, provided he has given the wife 21 days prior written notice. 

1. The view that I take is the exceptions embodied in both sets of orders are very wide indeed.  The exceptions are that the restraint is the husband cannot encumber, sell, dispose or otherwise deal with any of the property in any of these corporate entities other than in the ordinary course of business or for the purpose of complying with these orders.  Ultimately it is a question of good faith and trust.  An unscrupulous litigant could sell property on the pretext the sale was covered by the phrase, "other than for the purpose of complying with these orders", and then use the proceeds for some unrelated purpose.

2. It seems, of course, at that stage the husband would be in breach of an order, and there may be contravention proceedings which have led to some recent Appellate Court decisions as to the consequences of engaging in such conduct.  For the reasons given, I will allow paragraphs 8 and 9 to stand in their current form, notwithstanding the observations that I have made. 

3. Paragraph 10 involves the ubiquitous four wheel drive motor vehicle.  The wife, on yesterday's date, contended she did not want the car.  She was rather insistent that the company take back the vehicle and she receive 50 per cent of the value in cash as part of the payments to be made to her.  When it came to the enforcement of the orders, the wife says she wants the use of the car and the petrol card from the company that she has previously had until 1 February when the first instalment is due.  It does not have to be 1 February, whenever the first instalment is paid.  The husband's initial position was, return the car now if you do not want it.

4. It is difficult to accept the wife's cries of hardship having regard to her current financial circumstances, but I note the husband has the use of a luxury vehicle.  As I understood the submissions by counsel for the husband, he was not going to push for any order other than paragraph 10 and so I will allow that to stand.

5. Paragraph 11 of the wife's draft is to be compared with paragraph 7.2 of the husband's draft.  The difference is the wife's draft provides for the wife not to be required to sign share transfer documents in the parties' corporate structure until all the moneys due under paragraph 4 have been paid, that is not until December 2009. 

6. The husband's draft provides for the wife to sign share transfers but they are not to be registered in the company's office.  They have to be held in escrow by the husband's solicitor until payments are made pursuant to paragraph 4.  During the course of submissions counsel for the husband accepted his client was prepared to substitute the wife's solicitor to hold the shares in escrow.  I am of the view, under such a proposal, the wife's position is adequately protected.  One never knows what is going to happen over the next 15 months and it is better that the share transfers be signed now and held in a legal practitioner's office.

7. Objection was made by the wife to paragraph 17 of the husband's draft.  That provides:

   “That in respect of the [Lowrence] Family Trust, the [D] Trust, the [Lowrence Corp] Trust and the shares in [M] Pty Ltd the wife shall relinquish any interest into such trusts, and to the extent necessary to give any moneys owed to her by any of such trusts.”

   A suggestion was made that the word "interest" be deleted and substituted with the word "claim", so that it would be "the wife shall relinquish any claim into such trusts."  The argument put by the wife as to why that should be deleted was it was not necessary because it was covered by other provisions.  I would have thought the position of the parties was perfectly clear.  She gets the cash, he gets the companies, the trust and the super fund.

8. In the unlikely event that stamp duty was payable because of a reconstitution of the trusts, I would have thought the husband, as the transferee, would be liable for any stamp duty.  In any event, I would have thought it is going to be exempt because it is covered by the exemption provisions of the Act in relation to such transactions.  I will allow the paragraph to stand subject to the proposed amendment.

9. I believe I have ruled on all the matters in dispute.  I do sincerely hope that the legal representatives can now put together the orders in a form to be sealed and issued, and that can be done today.  In fact, I am rather insistent that it be done today.

10. I make the following further comments:  the onus is on the husband to inform Mr W, his business partner, fellow director and shareholder of the effect of these orders.  I refrained from making orders involving Mr W on Wednesday's date because I deemed they were not reasonably necessary as required by the terms of subsection 90AE(3).  The view that I hold at this point in time is that if it comes to enforcement a different situation arises altogether. 

11. If the husband elects to hold the bulk of his assets in a corporate structure with a third party, if he promises to pay the wife $7.4 million dollars and agrees to that becoming a Court order, then any third party cannot help but be impacted by a Court order sale.  As I have said I am confident it will not come to that, but the Court clearly has the power to make orders involving third parties if that becomes reasonably necessary to give effect to its orders.

    RECORDED  :  NOT TRANSCRIBED

12. I have not heard the full story and I am not interested in hearing the full story, but I find it difficult to accept that the filing was reasonable or necessary.  At this stage it is a matter between the wife and her solicitor.  I have, however, seen the overall account, and I can say that in relation to this matter, the costs overall are modest compared to many similar matters I have seen, so the wife can take some comfort in that regard.  Whether there is justification for charging for those documents that were filed and never read and, seemingly, had little impact on the whole scheme of things stands to be considered on another day.

13. In relation to the husband's solicitors non-compliance with the terms of Order 19, do not come into my Court at any time in the future in a matter such as this without having complied.  If it does happen the matter will be stood down until there has been compliance and the legal representative will be responsible for any costs associated with such delay

    ORDER DELIVERED

    RECORDED  :  NOT TRANSCRIBED

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry

Associate: 

Date:  9 October 2008