Lund & Whittall

Case [2024] FedCFamC1F 271

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Lund & Whittall [2024] FedCFamC1F 271

File number(s): DNC 518 of 2022
Judgment of: BERMAN J
Date of judgment: 24 April 2024
Catchwords: FAMILY LAW – PRACTICE AND PROCEDURE – Where the wife seeks to join the husband’s company and a partner pursuant to Pt 3 of the Federal Circuit and Family Court Rules of Australia (Family Law) Rules 2021 (Cth) – Where the orders sought are by way of enforcement in the event the husband is in default – Where the wife has not established a basis for joinder – Consideration of alternative remedies – Consideration of s 233 and s 461 of the Corporations Act 2001 (Cth) – Consideration of s 40 of the Law of Property Act 2000 (NT) – Application dismissed.
Legislation:

Corporations Act 2001 (Cth) ss 233, 461, 462

Family Law Act 1975 (Cth) Pt VIIIAA, s 90AE, 90AF

Law of Property Act s 40

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 3.01

Cases cited:

B Pty Ltd and Ors & K and Anor [2008] FLC 93-380

Catombal Investments Pty Ltd [2012] NSWSC 775

Gallieni & Gallieni [2012] FamCAFC 205

Gormley & Gormley [2023] FedCFamC1F 296

Pagliotti & Hartner (2009) 41 Fam LR 41

Trawl Industries of Australia Pty Ltd v Effem Food Pty Ltd (1992) 108 ALR 335

Wayne v Dillon [2008] 40 Fam LR 543

Division: Division 1 First Instance
Number of paragraphs: 66
Date of hearing: 10 April 2024
Place: Adelaide via MS Teams
Counsel for the Applicant: Ms Farmer
Solicitor for the Applicant: AFL Withnalls Lawyers
Counsel for the Respondent: Mr McQueen
Solicitor for the Respondent: McQueens Solicitors

ORDERS

DNC 518 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS LUND

Applicant
AND:

MR WHITTALL

Respondent

ORDER MADE BY:

BERMAN J

DATE OF ORDER:

24 APRIL 2024

THE COURT ORDERS THAT:

1.The Application in a Proceeding sealed 1 March 2024 is dismissed.

2.The respondent’s costs are reserved to the final hearing.

Note:   The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

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

REASONS FOR JUDGMENT

Berman J

INTRODUCTION

  1. By Amended Initiating Application sealed 5 February 2024, Ms Lund (“the applicant”) seeks orders for property settlement and division summarised as…

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AGLC
Lund & Whittall [2024] FedCFamC1F 271
Case
[2024] FedCFamC1F 271
Decision Date

CaseChat Overview and Summary

The case of Ms Lund against Mr Whittall involved a dispute in the Federal Circuit and Family Court of Australia. The applicant, Ms Lund, sought to join Mr Whittall's company, F Pty Ltd, and a partner, Mr L, to enforce certain orders in the event that Mr Whittall defaulted on his obligations to transfer his interest in the B Street property and pay any settlement sums ordered. The primary legal issues before the court were whether there was a valid basis for joining F Pty Ltd and Mr L, and if not, what alternative remedies might be available under the relevant statutes. The court had to consider the provisions of the Federal Circuit and Family Court Rules of Australia, the Corporations Act 2001, and the Law of Property Act 2000.

In its reasoning, the court found that Ms Lund had not established a sufficient basis for joining F Pty Ltd and Mr L. The court examined the intricate business relationships and the extensive encumbrances over the B Street property but concluded that these complexities did not justify the joinder. The court also explored alternative remedies under the Family Law Act, including provisions that allow the court to order third parties to act in relation to the property of a party to the marriage. Additionally, the court considered the potential for orders under the Corporations Act, such as winding up a company if certain conditions were met. Ultimately, the court dismissed the application for joinder, noting that while there were complex financial arrangements, these did not meet the threshold for third-party joinder under the Family Law Act. The court also noted that the respondent's costs were reserved for the final hearing.

In conclusion, the court ordered that the application for joinder was dismissed and that the respondent's costs were reserved pending the final hearing. The decision underscores the necessity for clear and compelling reasons to justify the joinder of third parties in family law proceedings, particularly when the primary focus is on the division of property between spouses. The case highlights the importance of carefully considering alternative remedies and statutory provisions to achieve the desired outcomes in complex family law disputes.

Orders

Orders of the court

DNC 518 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS LUND

Applicant

AND:

MR WHITTALL

Respondent

ORDER MADE BY:

BERMAN J

DATE OF ORDER:

24 APRIL 2024

THE COURT ORDERS THAT:

1. The Application in a Proceeding sealed 1 March 2024 is dismissed.

2. The respondent’s costs are reserved to the final hearing.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

By implication, the applicant considers that joinder of F Pty Ltd and Mr L is necessary to give practical effect to the orders sought by way of enforcement should the respondent default in his obligation to transfer his interest in the B Street property to the applicant, to provide clear title and to pay any settlement sum as ordered.BACKGROUND The parties commenced their relationship in 1999, cohabitated in 2009 and separated in mid-2020. There is one adult child born in 2004 and a child under the age of 18 years born in 2009. The applicant is employed as a manager and is in receipt of modest income. The respondent is in a quasi-partnership with Mr L. They conduct their business interests via various corporate entities which hold various investment properties in and around the City M environs. The principal asset of the parties is the B Street property. It is likely that the property has been used as collateral and cross security for the various investments undertaken by the respondent and Mr L either in their names or via their corporate entities. It is a feature of the proceedings that there remains some uncertainty as to the nature and extent of the various encumbrances secured over the B Street property. The applicant contends that to the best of her knowledge, there is a mortgage secured over the B Street property of approximately $420,000 in the respondent’s sole name but with the applicant as guarantor. It is possible, that the balance of the equity in the B Street property is fully encumbered by way of security for the respondent’s business loans either jointly or severally with Mr L. The respondent does not agree with the applicant’s summary that the business interests of the respondent, Mr L, F Pty Ltd and other corporate interests are intricate. In order to progress a better understanding of the assets and liabilities of the parties generally but also the value of the husband’s shareholding with Mr L in the various corporate entities, the parties agreed to jointly instruct Mr N as a joint single expert to prepare a valuation report of the following entities:-(1)F Pty Ltd;(2)O Pty Ltd;(3)P Pty Ltd;(4)Q Pty Ltd;(5)R Pty Ltd;(6)S Pty Ltd;(7)T Group Pty Ltd;(8)U Pty Ltd;(9)V Pty Ltd;(10)W Pty Ltd; and (11)Y Pty Ltd. Mr N prepared a valuation report dated 22 November 2023 comprising valuations of the various corporate entities together with a consideration of loan account balances as at 30 June 2022. Whilst Mr N raised a concern that a number of intra-group loan balances did not reconcile and that the group financial statements were deficient, the likely value of the respondent’s interest in the group of entities as at 30 June 2022 was $1,449,412. Paragraph 14.15 of the report sets out the value attributed to the respondent is comprised as follows:- Paragraph 11.42 of the report sets out the adjusted balance sheet for F Pty Ltd. Relevant to the current application is the inclusion of the following properties: It is apparent that Mr N made an error by including the property at 1 J Street as an asset held by F Pty Ltd. It is agreed that 1 J Street is jointly held by the respondent and Mr L as tenants in common as was conceded by Mr N in an Addendum Report dated 21 February 2024. The removal of 1 J Street from the assets of F Pty Ltd reduces the value from $987,161 to a deficiency of $1,212,839.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

In the circumstances, I propose to dismiss the Application in a Proceeding for the joinder of F Pty Ltd and Mr L.ALTERNATIVE CONSIDERATIONS It is possible that the provisions of s 90AE of the Act may be a relevant consideration. Section 90AE(2)(a) of the Act enables a Court to make an order that “directs a third party to do a thing in relation to the property of a party to the marriage”. Section 90AE and Part VIIIAA generally cannot be used to enhance the property of the parties but rather as is set out in s 90AE(3)(a) of the Act: (3) The court may only make an order under subsection (1) or (2) if:(a)The making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage. Simply put, orders made pursuant to s 90 of the Act are to be given effect provided that the checks and balances giving procedural fairness to a proposed third party are given. In the current context, s 90AE may be of assistance in respect of a mortgage holder if it could be established that the encumbrance held over the B Street property is unnecessary and could be transferred to an alternate property without any diminution of the security held. A further consideration is the potential application of ss 461 and 462 of the Corporations Act. The jurisdiction of the Court is such that it has original jurisdiction in respect of all civil matters arising under the Corporations Act. Section 233 of the Corporations Act sets out a number of orders that can be made by the Court including, an order that the company be wound up in accordance with s 233(1)(a) of the Corporations Act. However, s 461 of the Corporations Act also enables to the Court to wind up a company and it provides as follows:-[general grounds where Court may order winding up of a company](1) The Court may order the winding up of a company if:(a) the company has by special resolution resolved that it be wound up by the Court; or(c)the company does not commence business within one year from its incorporation or suspends its business for a whole year; or(d) the company has no members; or(e) directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members; or(f) affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or(g) an act or omission, or a proposed act or omission, by or on behalf of the company, or a resolution, or a proposed resolution, of a class of members of the company, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was or would be contrary to the interests of the members as a whole; or(h) …(k) the Court is of opinion that it is just and equitable that the company be wound up.