Malone and Malone and Ors

[2014] FamCA 1199

FAMILY COURT OF AUSTRALIA

MALONE & MALONE AND ORS [2014] FamCA 1199

FAMILY LAW – Interim application – Where the family trust and the parties’ son are joined as second and third respondents to the proceedings respectively – Where the wife seeks orders pursuant to s106B of the Family Law Act 1975 (Cth) to set aside the deed of variation and change of appointors in relation to the family trust - Where the wife seeks to set aside mortgages entered into between the husband and the family trust, and the husband and the third respondent – Where the wife seeks these issues be determined in a discrete hearing – Where that application is dismissed – Where the wife seeks injunctions on the second and third respondent – Where those injunctions are granted.

APPLICANT: Ms Malone

RESPONDENT: Mr Malone

2^nd RESPONDENT: A Pty Ltd ACN … atf B Trust

3^rd RESPONDENT: Mr C Malone

FILE NUMBER: SYC 6592 of 2014

DATE DELIVERED: 17 December 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Watts J

HEARING DATE: 17 December 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Spain

SOLICITOR FOR THE APPLICANT: Mills Oakley Lawyers

COUNSEL FOR THE RESPONDENT: Mr Millar

SOLICITOR FOR THE RESPONDENT: Meyer Partners

COUNSEL FOR THE 2^ND & 3^RD RESPONDENTS: Mr Schonell, SC

SOLICITOR FOR THE 2^ND & 3^RD RESPONDENTS: Barkus Doolan

Orders

1. By consent, B Trust, by way of its trustee A Pty Ltd ACN …, be joined as the 2^nd respondent in these proceedings.

2. By consent, Mr C Malone be joined as 3^rd respondent to these proceedings.

3. The application by the wife for an order in terms of paragraph 3 of Exhibit 2 is dismissed.

4. Pending further determination of orders 1, 5 and 6 of Annexure “A” to the wife’s Amended Imitating Application:

   4.1.The 3^rd respondent be and is hereby restrained from doing any act or thing to exercise the powers that he has as appointor of B Trust;

   4.2.The 2^nd respondent be restrained from doing any act or thing to enforce any provision of the mortgage given by the husband to the 2^nd respondent dated 4 December 2014 over the property situated at and known as D Street, E Town in the State of New South Wales being all of the land comprised in Folio Identifier … (“the E Town property”);

   4.3.The 3^rd respondent be restrained from doing any act or thing to enforce any provision of the mortgage given by the husband to the 3rd respondent dated 4 December 2014 over the E Town property;

   4.4.The husband be further restrained from mortgaging, encumbering, charging or otherwise adversely dealing with the E Town property;

   4.5.The 3^rd respondent be restrained from doing any act or thing to interfere with the wife’s use and possession of the German motor vehicle registration number …;

5. The orders sought by the wife in the terms of paragraph 5 of Exhibit 2 be dismissed.

6. Pending further order and without admissions and by way of spousal maintenance pursuant to s 72 Family Law Act1975 (Cth) the husband shall:

   6.1.Pay to the wife the sum of $608 per fortnight; and

   6.2.Pay the wife’s health insurance premiums.

7. Upon the expiration of 28 days from service of these orders upon the trustee of ….Superannuation and Benefits Scheme:

   7.1.In accordance with section 90MU(1)(a) of the Family Law Act 1975, the trustee of the …Superannuation and Benefits Scheme is directed not to make any splittable payments, except for the regular fortnightly payment made pursuant to the husband’s pension entitlement, out of the husband’s interest in …Superannuation and Benefits Scheme without leave of the Court;

   7.2.The husband shall notify the wife within 28 days prior to making an application to the Trustee for any payment out of the husband’s interest in …Superannuation and Benefits Scheme;

   7.3.In accordance with section 90MU(1)(b) of the Family Law Act 1975 (Cth), the Trustee of …Superannuation and Benefits Scheme is to notify the Court within the period specified in the immediately succeeding clause of this order of the next occasion that a splittable payment, except for the regular fortnightly payment made pursuant to the husband’s pension entitlement, becomes payable out of the Husband’s interest in … Superannuation and Benefits Scheme;

   7.4.The period specified for the purposes of the immediately preceding clause of this Order is a period which commences 14 days prior to the next occasion that a splittable payment, except for the regular fortnightly payment made pursuant to the husband’s pension entitlement, becomes payable out of the husband’s interest in … Superannuation and Benefits Scheme and ceases 14 days after that occasion;

   7.5.Leave is granted to the Trustee of … Superannuation and Benefits Scheme, within 28 days from the service of these orders upon the Trustee, to make an application to set aside this order.

8. The 2^nd respondent and the 3^rd respondent in his personal capacity and in his capacity as a director and sole shareholder of the 2^nd respondent, be restrained from:

   8.1.Providing funds by way of a loan; or

   8.2.Making a distribution of income or capital; or

   8.3.Repaying any loan to any beneficiary, the husband or the 3^rd respondent

   from B Trust without giving the wife 28 days notice of such intention in writing.

9. Today’s costs of each party is reserved.

10. The case assessment conference scheduled for 6 February 2015 is vacated.

11. Leave grant to the parties to approach the Registrar for a date for a conciliation conference, on the condition set out in order 12.

12. The 3^rd respondent, 14 days before the conciliation conference, is to file and serve an affidavit setting out the circumstances in which B Trust distributed profit, income, capital or other funds to the husband and the wife in the 2011, 2012 and 2013 financial years with details as to what became of those distributions given that both the wife and husband have indicated to the court today they are unaware of what happened to those distributions.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Malone & Malone and Ors 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 SYDNEY

FILE NUMBER: SYC 6592 of 2014

Ms Malone

Applicant

And

Mr Malone

Respondent

And

A Pty Ltd ACN … atf B Trust

2^nd Respondent

And

Mr C Malone

3^rd Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. Order 3 of Exhibit 2 is opposed by the husband and the second and third respondent. The wife seeks orders pursuant to s 106B Family Law Act 1975 (Cth) (“the Act”) to set aside the deed of variation and change of appointors in relation to B Trust which was entered into between the trustee, the husband and the third respondent on 27 November 2014. She also seeks an order under s 106B of the Act to set aside mortgages entered into between the husband and B Trust on 4 December 2014 and a further mortgage entered into between the husband and the third respondent dated 4 December 2014. The relief sought is that the applications under s 106B be dealt with as a discrete hearing on a final basis.

2. The effect of those instruments is firstly, to remove the husband as the effective controller of B Trust and secondly, to secure what the husband and the third respondent assert were unsecured loans against the major asset of the parties, which is the property at E Town where the husband currently resides.  The husband seeks to retain the E Town property at the conclusion of the property proceedings. 

3. In support of her application to bifurcate the s 106B hearing, the wife points to the fact that these three transactions have all taken place during a period when these interim proceedings have been on foot, having been commenced in early November 2014. I am informed, and I have not been told any differently, that all of the parties at the bar table have been involved in these proceedings since 5 November 2014.

4. In opposition to that application, as counsel for the husband has said, regard has to be had for what this property case will ultimately be about.  Putting aside the matters that arise from the material that has been filed relating to the loan accounts of the family trust, the case is primarily about what moneys have come from the third respondent or the family trust to the parties, particularly for the purposes of purchasing the E Town property. 

5. Just pausing there, I will say something briefly about the matters that have arisen to which senior counsel for the second and third respondent has not been able to provide any information today. Those matters arise from a document which was originally attached at page 43 to the husband’s affidavit filed on 4 November 2014, setting out the beneficiary accounts for B Trust in 2011 and 2012.  That material has been supplemented today by page 41, Exhibit 1.  Those pages would indicate that over the 2011 to 2013 tax years, a total of about $877,000 was distributed to the husband and wife from the trust and neither the husband nor the wife are able to provide the Court with any information today about the history of those distributions or what has happened to them.  Senior counsel for the second and third respondents, who appear today without the third respondent being present, are unable to provide any further information about those transactions. 

6. Putting that issue to one side, I accept, on the evidence that has been filed, that what counsel for the husband says is essentially correct.  If the whole of the purchase moneys for the E Town property are found to be debts fully repayable by the husband to the third respondent, then the property pool remaining would be of a minor nature involving some cars, household items, the two pensions held by the husband and a small debt owed by the third respondent to the parties, which was moneys that they provided to him some year ago to provide capital for his ventures.  The case would then be a competition between the third respondent, as a creditor, or the third respondent and the trust as a creditor, and the wife, claiming something out of the value of the property in which the husband lives.

7. There is force in the argument that the Court should determine the status of those alleged unsecured loans before dealing with the question of whether or not the mortgages need to be set aside. The current uncertainty of the financial position of the trust also means that there needs to be a fuller exploration before the Court of what has happened in the trust before there is an embarking upon the consideration of the applications under s 106B of the Act. I note that by consent there will be injunctive order in place to ensure the third respondent cannot receive any benefit from the mortgages that have been entered into until there has been some determination about whether or not the underlying loans upon which those mortgages are based, will be maintained by the third respondent in the course of the final property hearing.

8. I accept the argument that whether or not transactions that have happened actually do defeat anticipated claims is one that needs an analysis of the likely success of the claim and in those circumstances, in my view, the s 106B application should be heard as part of the final hearing.

9. In relation to the proposed orders 3.2 and 3.3 of Exhibit 3, the argument in relation to those orders is whether or not the words, “without first giving the applicant and the first respondent 28 days notice of their intention to do so” is added to the end of each of those orders.  On the face of it, the husband and third respondent have converted what were unsecured loans into secured loans in circumstances where there were current interim proceedings that bore upon what was to happen with those loans.

10. On balance, it’s appropriate, having consented to an order pending further order, that no advantage be taken in respect of those mortgages by the third respondent and that the onus be on him to come back to Court to convince the Court that pending a full hearing of the matter, he should receive some benefit from those mortgages.  I have regard to the submission that the wife has not provided any undertaking as to damages, but I also have regard to the fact that, as senior counsel for the second and third respondent points out, the wife is impecunious. 

11. In relation to the orders sought by the wife in respect of the motor vehicle which is currently in her possession, the wife says the following at paragraph 64 of her affidavit filed on 21 October 2014:

    In May 2014 [Mr C] and I met at [a] café in … Street, Sydney to discuss the arrangements for my future accommodation.  During this meeting, [Mr C] said to me words to the effect of “I will extend the lease but you need to give me the [German motor vehicle in the name of B Trust] and I will give you a smaller [motor vehicle] suitable to your needs and use the [German motor vehicle] proceeds to pay your further rent”.  I agreed to [Mr C]’s proposal and provided him with the keys and possession of the [German motor vehicle] subsequently on 29 August 2014.  The lease for the [Suburb F] property was extended for a further six months and is due to expire on 22 October 2014.  At this time, [Mr C] also provided me with access to an … motor vehicle in [Mr C]’s name.  I am unsure as to whether the [German motor vehicle] was sold by [Mr C].

12. The husband, in his affidavit in reply, does not deal with paragraph 64 in any way, and that’s not surprising, given that the wife does not allege that he was party to the conversation deposed to in that paragraph.  The third respondent, in his affidavit sworn on 16 December 2014, briefly deals with the issue of paragraphs 5 and 6 and says that the motor vehicle that the wife has in her possession is his motor vehicle and “I require the return of the motor vehicle”.

13. The wife relies upon the fact that the third respondent made a promise to her in the terms set out in paragraph 64 of her affidavit.  Importantly, the third respondent does not dispute the terms of the conversation in any way.  On its clear terms, the third respondent requested the wife to do something and in return, he would do something for her.

14. The wife agreed to do what the third respondent wished on the promise that he would extend her residential lease and give her a smaller motor vehicle suitable for her needs.  In those circumstances, particularly given that the third respondent now asserts he wants the motor vehicle back, it is appropriate to grant the first injunctive order that the wife seeks.  There was, however, no promise by the third respondent to the wife to maintain the motor vehicle and no order can be made in the terms of order 5 as sought, on the basis of promissory estoppel.  The parties have agreed to flagging orders in the terms of paragraphs 7 to 10 of Exhibit 2 with the alteration that was announced by counsel for the wife.

15. The difficulty is that counsel for the wife has conceded that the wife has overlooked to attend to the requirements of s 90MZD(1)(a) of the Act. No injunctive order is actually sought against the husband in relation to his superannuation interests, so no order can be made in that regard.

I certify that the preceding fifteen (15) paragraphs are a true copy of the ex tempore reasons for judgment of the Honourable Justice Watts delivered on 17 December 2014.

Associate: 

Date:  19.12.14