LUCK & NORWOOD
[2018] FamCAFC 207
•2 November 2018
FAMILY COURT OF AUSTRALIA
| LUCK & NORWOOD | [2018] FamCAFC 207 |
| FAMILY LAW – APPEAL – PROPERTY – INJUNCTIONS – Appeal from orders made pursuant to s 114 of the Family Law Act 1975 (Cth) – Whether the primary judge erred by failing to identify the subsection on which she relied to make the injunctions – Prima facie case – Serious question to be tried – Whether the primary judge conflated the principles necessary to the determination of s 114(1) with the making or a maintenance order – Whether the primary judge erred in finding that the wife would be prejudiced if the injunctions were not granted – No error demonstrated. FAMILY LAW – APPEAL – PROPERTY – INJUNCTIONS – Personal services – Where the primary judge made an order restraining the appellant from engaging in personal services – Where her Honour did not have the power to make such an order – Where this order exceeded the reach of the wife’s application and the husband was not given the opportunity to make submissions on it – Error demonstrated – Appeal allowed in part – Order as to personal services set aside – No order as to costs. |
| Family Law Act 1975 (Cth) |
| Brown v West (1990) 169 CLR 195; [1990] HCA 7 Browne v Keith (2015) 55 Fam LR 208; [2015] FamCAFC 143 Farr and Farr (1976) FLC 90-133; [1976] FamCA 72 Kramer & Ward (2017) FLC 93-817; [2017] FamCAFC 270 Lockwood v The Commonwealth (1954) 90 CLR 177; [1954] HCA 31 Medlow & Medlow (2016) FLC 93-692; [2016] FamCAFC 34 R v Bevan; Ex parte Elias (1942) 66 CLR 452; [1942] HCA 12 R v Dovey; Ex parte Ross (1979) 141 CLR 526; [1979] HCA 14 Re LSH; Ex parte RTF (1987) 164 CLR 91; [1987] HCA 53 Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852 |
| APPELLANT: | Mr Luck |
| RESPONDENT: | Ms Norwood |
| FILE NUMBER: | SYC | 1490 | of | 2017 |
| APPEAL NUMBER: | EA | 51 | of | 2018 |
| DATE DELIVERED: | 2 November 2018 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Alstergren DCJ, Ainslie-Wallace & Aldridge JJ |
| HEARING DATE: | 10 September 2018 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 8 March 2018 |
| LOWER COURT MNC: | [2018] FamCA 141 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Richardson SC |
| SOLICITOR FOR THE APPELLANT: | Barkus Doolan |
| COUNSEL FOR THE RESPONDENT: | Mr Gould |
| SOLICITOR FOR THE RESPONDENT: | Quinn Legal Advisory |
Orders
The appeal against the orders of Rees J made on 8 March 2018 is allowed in part.
Order 5 made on 8 March 2018 is set aside.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Luck & Norwood has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 51 of 2018
File Number: SYC 1490 of 2017
| Mr Luck |
Appellant
and
| Ms Norwood |
Respondent
REASONS FOR JUDGMENT
Mr Luck (“the husband”) appeals from interim orders and injunctions made by Rees J on 8 March 2018 in relation to financial proceedings between him and Ms Norwood (“the wife”).
The matter came before the primary judge on the application of the wife as part of a duty list. Her Honour heard the application and delivered orders and reasons the following day.
Background
The parties married in 2005. At that time the wife was conducting a financial services business (“the business”) and, after the parties got engaged, the husband joined her in that business. The business operated through B Pty Ltd (“the Company”) as trustee for the B Family Trust (“the BFT”). The parties are equal shareholders in the Company and each is a director.
Following the birth of the parties’ children, the husband continued running the business and the wife looked after the children and also earned some money from another business. The income from the wife’s other business was paid into a joint business account in the BFT. It was generally agreed that the amount of money earned by the wife was significantly less than that generated by the business, having been found at [39] to be about $400 per week. The wife also maintained an administrative and accounting function for the business however, the husband ran the day to day operation of the business.
The income generated by the business was paid into a business account in the BFT from which the expenses of the business were met and each party received an amount of money by way of income. Any profit remaining thereafter was distributed equally between the wife and the husband.[1] The wife said that the husband and she drew a nominal amount of cash as wages, amounting to about $20,000 each year and each received 50 per cent of the dividends generated reflective of their shareholding.[2]
[1] Affidavit of Ms Norwood, filed 1 December 2017 at [15].
[2] Affidavit of Ms Norwood, filed 1 December 2017 at [17].
The parties separated in July 2016 and the previous arrangements as to the payment of funds generated by the business continued as they had during the marriage.
On 9 March 2017 the wife initiated property settlement proceedings. On 10 March 2017 she drew down $200,000 on a loan account of the parties. She did not inform the husband of this withdrawal. On 28 March 2017 the husband drew down $110,000 from the same account and deposited that amount in his own account, he said to thwart any further drawings from that account by the wife.[3] He also drew down a further sum of $83,000 from the same source to fund his legal costs.
[3] Annexure to Affidavit of Mr Luck, filed 19 February 2018 at [30].
The husband thereafter transferred all income from the business account to an account in his name. He maintained that this was necessary to ensure sufficient money was available to him to meet business and other expenses that he stated he “had been paying since separation”.[4]
[4] Annexure to Affidavit of Mr Luck, filed 19 February 2018 at [18].
The wife became aware that the husband had established a company T Pty Ltd of which he is the sole shareholder and director and she was concerned that the husband intended to solicit business away from the Company to the new company to her financial detriment.
Thus the wife sought injunctions and other orders.
Relevantly, her Honour ordered that the husband and wife direct the Company as trustee for the BFT to make specified payments each month as set out in Order 1 of the primary judgment. Those payments included a payment to each of the husband and wife of $5000 per month (Order 1(f)). Order 2 specified that any funds not otherwise dispersed pursuant to Order 1 be retained in the company account and not be disbursed other than by agreement between the parties.
Orders 4 and 5 stated:
4. That the husband is restrained from diverting away, approaching or soliciting the existing business of the Company to any other person or entity.
5. That the husband is restrained from engaging in [business transactions] other than through the Company.
The appeal
The husband raises eight challenges to her Honour’s orders. In particular it was contended that the primary judge failed to identify and apply the relevant principles to support her orders and it is convenient to deal with those grounds together.
The nature of the orders made
Ground 1
It was first argued that the primary judge did not identify the jurisdiction by which she could make the orders sought. Next it was argued that the primary judge did not indicate whether the orders were being made pursuant to s 114(1) or pursuant to s 114(3) of the Family Law Act 1975 (Cth) (“the Act”). Further it was argued that if the orders purported to be made pursuant to s 114(1), the primary judge was obliged but failed to identify the type of injunction being made by reference to the various subsections of s 114(1).
These contentions may be readily dismissed. Since counsel for the appellant conceded that there was, at the time of the making of the impugned orders, an application on foot for property settlement proceedings as between the parties, there thus exists a “matrimonial cause” (see paragraph (ca) of the definition of “matrimonial cause” contained in s 4(1) of the Act). The instant proceedings in which the wife sought interim orders and injunctions fall within the definition of “matrimonial cause” under paragraph (e) contained in s 4(1) of the Act, being “proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship” and thus it is clear that there is jurisdiction to exercise the power under s 114. To the extent that it was contended that her Honour might have made these orders pursuant to s 114(3), we do not accept that her Honour did and in answer to this ground we need to do no more than refer to the well-known authorities as to the difference in the exercise of the power provided in the subsections (see R v Dovey; Ex parte Ross (1979) 141 CLR 526 and Re LSH; Ex parte RTF (1987) 164 CLR 91).
Further, it is well established that it is not an error for a judge to fail to or mistakenly identify the source of power upon which an order is made, so long as the order is within power. For example, see R v Bevan; Ex parte Elias and Gordon (1942) 66 CLR 452 at 487; Lockwood v The Commonwealth (1954) 90 CLR 177 at 184; Brown v West (1990) 169 CLR 195 at 203; Browne v Keith (2015) 55 Fam LR 208 at 212; Kramer & Ward (2017) FLC 93-817 at [152].
We reject the assertion that her Honour was obliged to specify which type of injunction was being made by reference to s 114(1)(a) to (f). Section 114(1) does not by its terms restrict the power to make orders and injunctions to the categories there set out but requires the court to make such order or injunction as it considers “proper with respect to the matter to which the proceedings relate”.
As to this latter point, we accept that the word “proper” as referred to in the section has been interpreted to mean “reasonable and just in [the] circumstances” to warrant the making of the injunction (see Farr and Farr (1976) FLC 90-133 at 75,636) however we do not accept the contention that her Honour made no findings to like effect.
We must then turn to her Honour’s reasons. After setting out the circumstances of the matter to which we have already referred, her Honour found that the husband had diverted income from the BFT to himself and away from the wife and that he was not entitled to make decisions as to the operation of the Company without the wife’s consent. Her Honour further found that in this way he had dealt with the jointly owned property of the parties with the effect of diminishing the wife’s control over that property (at [18], [21] and [22]).
Her Honour foreshadowed making orders which would ensure that the parties have control of the funds and she took into account how the parties had conducted their financial affairs in the past (at [25] and [36]).
Her Honour said apropos the husband’s decision to change the means of distributing the income from the business:
What I think is unreasonable is that, thereafter, he unilaterally determined that the way in which their finances would be structured would be changed.[5]
[5] Transcript, 21 February 2018, p 12 ln 27.
We do not accept that her Honour failed to identify the circumstances that made the injunctions and orders “proper” in the relevant sense.
Grounds 2 and 3
Ground 2 contends that her Honour failed to find that the wife had made out a prima facie case for the making of the order and secondly, it was argued that her Honour did not find that there was a serious question to be tried. Finally it was argued that her Honour’s orders were in effect maintenance orders rather than orders that preserved the status quo ante pending final hearing. We do not accept any of those contentions. The interlocutory orders were made in the course of proceedings under s 79. It was not suggested that there was not a serious question to be tried in them. It is clear from the reasons as summarised above, specifically her Honour’s reasons at [21] and [22], that her Honour found that the husband’s actions had operated to the wife’s detriment and that the orders were necessary to restore the status quo ante of the parties’ financial arrangements pending the hearing of the application.
Nor do we accept that in truth her Honour’s orders were maintenance orders. Her Honour at [38] was aware that “[t]his was not a maintenance application”. In what we regard as an entirely orthodox manner consistent with freezing orders (as conceded by counsel for the appellant), her Honour provided for the payment of certain agreed expenses from the income generated by the business, as it had done before the husband’s unilateral change. Equally her Honour provided for the payment of income to each party, in this instance $5000 per month, again consistent with what had been happening before the husband’s actions.
Having rejected the assertion that the orders were for the maintenance of the wife, we thus reject ground 3 which asserts that her Honour conflated the principles necessary to the determination of s 114(1) with the making or a maintenance order.
Thus we find no support for grounds 1, 2 and 3 of the appeal.
Ground 4
Turning then to Ground 4, it was argued that since there was no evidence that the husband would in fact defeat or prejudice the wife’s interests, her Honour was wrong to make the injunctions.
First it was contended that the husband’s actions had not caused any detriment to the wife’s position. We reject that assertion, her Honour clearly found that the husband’s actions had wrested control over joint assets of the parties from the wife with the result that he determined what payments were made from the income of the business and in circumstances to the exclusion of the wife.
Further her Honour found:
24. … It is, however, notable that since separation the husband has spent $166,781 on his own credit card debts. I accept that he uses his credit cards both for personal and business expenses but he made no effort to differentiate between those expenses. None of the funds were spent on paying the wife’s credit cards. The funds of B Pty Ltd have also been used to pay the costs of the supervisor who conducts the husband’s time with the children. The wife was not consulted about that expenditure.
25. The husband is not entitled to use the funds generated by the business owned by the BFT at his whim and orders will be made which ensure that both parties have control of those funds.
In our view there was abundant evidence which enabled her Honour to properly conclude that the husband’s actions had already operated to the wife’s detriment.
Notwithstanding that the husband said that he continued to pay the income of the Company in ways which were consistent with the parties’ previous arrangement, as her Honour noted, the control over how and whether the payments were made rested solely in the husband.
Her Honour’s orders reflect the proper exercise of discretion and we find no error in the making of them.
Ground 5
Ground 5 argues that in making the orders, the primary judge failed to take into account the “substantial injustice” flowing to the husband from those orders.
It was contended that the injustice to the husband is reflected in the diminution of his weekly income and in her Honour’s failure to order that the husband receive a commercial salary from the income derived from the business.
In rejecting the submission that the husband should be paid a commercial salary, her Honour noted that it was contrary to the way in which the parties had previously arranged their financial affairs and said at [37]:
The position which was adopted by the parties before March 2017 did no more than recognise that the enterprise of their marriage had two core endeavours. One was the operation of the business and the other was the care and maintenance of their family and, particularly, their children. It is implicit in the husband’s submission that his contribution in running the business deserves quantified financial reward but that the wife’s contribution, as primary carer for the children and homemaker, does not.
As to the payment to the husband of a sum referable to income the primary judge said:
38. This is not a maintenance application. I propose to make an order that each party receive a fixed sum every month from the income of the trust, after payment of fixed expenses, and that the balance be retained and not used for any purpose unless both parties agree. That will give them the opportunity to agree on payments of such expenses as tax, life insurance and superannuation if they are deemed appropriate by both of them.
39. The amount to be distributed to each party will be $5,000 and the balance of the income of the trust will be retained unless agreed. I am conscious that the wife will have, in addition, income generated by her other business of about $400 per week. However, although historically this income was paid into the BFT, the other business is not owned and operated by the BFT. I am also conscious of the fact that the wife has the financial obligations of the children’s day to day care.
Her Honour took into account the financial impact of the orders made on both parties and concluded at [34] that based on such financial information as provided by the parties that the income available from the Company was insufficient to meet the asserted needs of both parties. Thus her Honour came to the conclusion reflected in [39].
We thus reject the submission that her Honour failed to take both of the asserted consequences into account, because did. The complaint devolves to an argument that her Honour did not resolve the issues in the husband’s favour. We thus reject the asserted error.
Grounds 6 and 7
These grounds concern Order 5 made by her Honour which restrained the husband from engaging in the business transactions other than through the Company.
It is argued that the primary judge failed to identify the jurisdiction to make this order and secondly that it was made without notice to the parties and denied the husband natural justice.
The husband argued that her Honour’s order is, in effect, an order relating to the husband’s personal service, requiring him only to conduct his business through a particular medium, the Company, and is an order unsupported by any power in the Act. We agree. The law in this regard was neatly described by Brereton J in Tullett Prebon (Australia) Pty Ltd v Purcell [2008] NSWSC 852 at [73] that “it is not in doubt that equity does not specifically enforce contractual obligations to render or receive personal services.”
The order sought by the wife was:
The Husband is restrained from utilising the company [T Pty Ltd] for any [business transactions].[6]
[6] Application in a Case, filed 1 December 2017 by Ms Norwood, Part D [7].
Clearly the order made by her Honour exceeded the reach of that sought by the wife in her application and denied the husband the opportunity of making submissions to her Honour as to the proposed order.
To that extent, we find her Honour erred.
Ground 8
This ground contends that her Honour failed to take into account that the wife drew down $200,000 from a joint loan account immediately after commencing proceedings and thus her Honour ought to have refused to make the orders sought because the wife did not come to the court with “clean hands”. It was also submitted that the injunctions should have been refused because the wife did not act promptly in seeking them.
This argument was not made to the primary judge during the hearing nor was it raised in defence of the application for injunction and for that reason the husband should be bound by the manner in which his case was conducted and should not be permitted to argue it on appeal.
In any event, it is clear from her Honour’s reasons that she was well aware of the parties’ actions in removing money from joint accounts and to the extent that the action of the wife had any role to play in making the orders, her Honour was clearly conscious of it.
We find no support in this ground.
Leave to appeal
These are interlocutory orders for which leave to appeal is required. The appellant must show that sufficient doubt attends the decision to warrant it being considered on appeal and that a substantial injustice would result if leave was not granted (Medlow & Medlow (2016) FLC 93-692 at [57]). As we have found error established in relation to Order 5 by reason of a denial of procedural fairness, leave should be granted. The appeal will thus be allowed in part.
Disposition of the Appeal
The appeal having succeeded only in relation to Order 5, we propose to set that order aside.
Costs
At the conclusion of the hearing submissions on costs were sought from the parties each of whom sought an order for Costs Certificates in the event that the appeal was successful. In our view, it is not appropriate to make such an order and we will make no order as to costs.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Alstergren DCJ, Ainslie‑Wallace & Aldridge JJ) delivered on 2 November 2018.
Associate:
Date: 2 November 2018
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