Martin & Martin and Ors
[2013] FamCA 222
FAMILY COURT OF AUSTRALIA
| MARTIN & MARTIN & ORS | [2013] FamCA 222 |
| FAMILY LAW – INJUNCTIONS – third parties to the substantive property proceedings between husband and wife seek to rely upon the continuance of injunctive orders as between husband and wife – Husband calls for discharge of injunction unless third parties provide an undertaking as to damages – Opposition by third parties to giving an undertaking as to damages – Consideration of principle of clean hands – Injunctions should be discharged unless undertaking given. |
| Family Law Act 1975 (Cth) |
| Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 Black Uhlans Incorporated v New South Wales Crime Commission and Ors [2002] NSWSC 1060 Blue Seas Investments Pty Ltd v Mitchell and McGillvray (1999) FLC 92-856 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; Commission of Taxation and Worsnop [2009] FamCAFC) Commonwealth v Verwayen (1990) 170 CLR 394, 411 Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501, 508 Frigo v Culhaci [1998] MSWSC 383 Jackson v Sterling Industries Ltd (1987) 162 CLR 612 King v Lynpete Australia Pty Ltd & Ors [2012] VSC 140 Mullen v DeBry [2006] FamCA 1380 Prince and Prince (1984) FLC 91-501 Robb Evans of Robb Evans & Associates v European Bank Ltd [2009] NSWCA 67, [28] Stanford v Stanford [2012] HCA 52 Waugh and Waugh (2000) FLC 93-052 |
| APPLICANT: | Ms Martin |
| RESPONDENT: | Mr Martin |
| 1ST INTERVENOR: | X Firm |
| 2ND INTERVENOR: | QF Pty Ltd |
| FILE NUMBER: | MLC | 9829 | of | 2007 |
| DATE DELIVERED: | 9 April 2013 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 14 February; 5 March 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Taylor |
| SOLICITOR FOR THE APPLICANT: | Cahill & Rowe Family Law |
| COUNSEL FOR THE RESPONDENT: | Mr Glick SC |
| SOLICITOR FOR THE RESPONDENT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE 1ST INTERVENOR: | Dr Ingleby |
| SOLICITOR FOR THE 1ST INTERVENOR: | Nedovic & Co |
| COUNSEL FOR THE 2ND INTERVENOR: | Mr Kohn |
| SOLICITOR FOR THE 2ND INTERVENOR: | Hopkins Lawyers |
Orders
That paragraph 8 of the orders made on 10 December 2010 as subsequently varied be discharged unless by 4.00pm on 1 May 2013 QF Pty Ltd and X Firm provide an undertaking as to damages in the usual form.
That all interim applications are otherwise dismissed.
IT IS CERTIFIED:
That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel including senior counsel, to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Martin & Martin 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 MELBOURNE |
FILE NUMBER: MLC 9829 of 2007
| Ms Martin |
Applicant
And
| Mr Martin |
Respondent
And
| X Firm |
1st Intervenor
And
| QF Pty Ltd |
2nd Intervenor
REASONS FOR JUDGMENT
In proceedings between Ms Martin (“the wife”) and Mr Martin (“the husband”) an order was made on 10 December 2010 by Dessau J in the following terms:
8.That until further order, the husband be and is hereby restrained from any further borrowings within [B Group] (including but not limited to [Martin Pty Ltd] and [C Pty Ltd] as is valued and identified by [D Report]) and the wife, by herself, her servants or agents be and is hereby restrained by from encumbering or further encumbering any property registered in her name.
I shall refer to that order as “the injunction”. The orders were made by consent of the husband and wife at a time when each of them was represented by counsel and solicitors.
The husband was then, and still is, conducting a business through various corporate entities and the focus of the injunction was not only on further borrowings but also on precluding the husband from altering the financial position of the business because it might prejudice the interests of the wife in the property proceedings.
Now, much further down the litigation pathway, there are intervenors. It is a little unclear how they became parties to the proceedings but for my purposes, QF Pty Ltd and X Firm are indeed parties.
X Firm previously acted for the wife in these family law proceedings. They no longer act for her and there are currently proceedings in the Supreme Court of Victoria arising out of a costs dispute between the wife and that firm.
QF Pty Ltd is a commercial litigation funding lender who advanced funds used by the wife in the litigation until some time in 2012. I gather those funds were paid to X Firm.
During 2012, the husband and wife reached an agreement between themselves personally to resolve their property proceedings. As I understand that settlement, the wife would not have received sufficient funds to enable a discharge of the level of her legal obligations (as they then were) to either X Firm or QF Pty Ltd.
In a hearing before Coleman J on 14 September 2012 after which his Honour gave judgment on 17 October 2012, the husband and wife sought that their agreed orders be made over the opposition of QF Pty Ltd and X Firm. Coleman J refused saying that the Court was not in a position to make findings of fact which were required by law. There was a significant argument that the debts of the wife to the particular creditors were different to those which were often seen in these sorts of proceedings but his Honour felt that the Court could not, in the unusual circumstances make a finding that the proposal was just and equitable. His Honour then formally joined the intervenors as parties to the proceedings and then adjourned the matter back for a trial on the relevant issues.
Simply put, by virtue of becoming parties, the intervenors have to be consulted about any alteration to the extant injunctive orders. As such, whichever way one looks at it, they have effective control over the financial dealings of the husband and he has to consult them if he desires to alter the financial structure and borrowings of the business. Indeed, that has happened over the period since the intervenors were joined. Usually after consultation at the court door, a compromise has been reached. Orders have been made allowing the husband latitude with his borrowings but always on the basis of the provision of information to the intervenors. The intervenors criticised the husband for a lack of compliance.
Despite all of those dealings and orders, the one unresolved issue has been the request of the husband that the intervenors provide an undertaking as to damages. Those words really do not describe what this application is about. The injunction remains in place but the husband now seeks that unless the intervenors provide that undertaking as to damages, the injunction should be discharged.
The intervenors oppose the discharge of the injunction and deny there is any basis for them to provide the undertaking as to damages. Both intervenors also sought orders that if the injunction was to be discharged, the husband should first place into a trust account an amount equivalent to their respective claims. At an earlier interlocutory hearing, X Firm agreed that that issue could wait for trial but QF Pty Ltd sought that order when the matter was argued before me.
The affidavit material relied upon by the parties was largely historical and because this is a discretionary exercise of power, each party, through their counsel, put submissions on the issue.
Counsel for the husband argued that family law cases were no different from any other civil proceedings relating to injunctive orders and that all of the authorities supported the concept that an undertaking of damages should be required if the injunction was to remain in place. The solicitor for the wife adopted the position of the husband. Both counsel for the intervenors argued that there was no basis to require any such undertaking having regard to not only the pathway that had been followed but also because the husband had not provided a lot of the financial information that he was obliged by orders to provide.
In my view, the injunctive principles that apply to family law financial disputes should be seen as much the same as those concerning commercial disputes.
Section 114 of the Family Law Act 1975 (Cth) (“the Act”) enables the Court to provide a discretionary remedy. The fundamental principle is that an order should only be made if it is proper. Discretionary though the remedy may be, it is not unfettered and must be exercised according to law (see Stanford v Stanford [2012] HCA 52).
The Court must look to the facts of the particular case as well as the governing principles set out in Part VIII of the Act for the guidance of the exercise of that discretion. The facts in this case must fit within those provisions.
Counsel for the husband likened the injunction to a Mareva order because it operated to quarantine assets out of which the intervenors sought to be paid to recover a debt allegedly owed to them in their role as creditors of the wife. A Mareva order is a severe remedy, not to be made lightly because of the detrimental effects it has on the party it restricts (see Frigo v Culhaci [1998] MSWSC 383).
In Waugh and Waugh (2000) FLC 93-052 the Full Court cautioned against applying broad-brush principles regarding Mareva orders indiscriminately to injunctions over assets in family law disputes (see also Mullen v DeBry [2006] FamCA 1380).
In financial cases, injunctions between parties to the relationship usually arise where one party has control of a large majority of the assets which are the subject of the dispute (see Blue Seas Investments Pty Ltd v Mitchell and McGillvray (1999) FLC 92-856).
Unlike other jurisdictions, it would be unusual for an undertaking as to damages to be sought inter partes (at least as between parties to the marriage or de facto relationship) unless there was a strong indication that there would not be sufficient equity in property other than in the assets to be secured, to make an adjustment between the parties to achieve a just and equitable outcome.
Non-relationship party intervenors are in a different category. Whilst there may be a number of different factual scenarios that could arise, the most common in this jurisdiction relate to creditors of one or both of the parties. In a marriage, s 79(10) specifically provides for creditor intervention and there are various authorities about the treatment of claims by creditors (see Prince and Prince (1984) FLC 91-501 and Commission of Taxation and Worsnop [2009] FamCAFC).
The intervenors rely on claims and facts which are controversial at least in respect of the husband. In those circumstances, if an injunction is sought by a party at an interlocutory stage, an undertaking as to damages has the effect of protecting against potential losses suffered by the restrained party should the Court ultimately find that its injunction was wrongly ordered. Principles relating to undertakings as to damages are principles of equity derived from civil litigation (Blue Seas Investments Pty Ltd v Mitchell and MacGillivray (supra) at [54]). As a discretionary remedy, both the injunction and the undertaking as to damages can be moulded to almost any form as long as they achieve the desired purpose of preserving the court’s integrity. In light of the severity of a Mareva injunction, the court will only order the minimum restriction necessary to do justice between the parties (Commonwealth v Verwayen (1990) 170 CLR 394, 411). The requirement of an undertaking as to damages assists the court in lessening this incursion into one party’s proprietary rights. The court must envisage to the best of its ability the likely outcome if the injunction is ordered, and in the alternative, the result if it is not.
The power to order an injunction continue until trial is purposive – it must be seen to serve the interests of the court by protecting against abuse of process. If there is evidence that a party is a risk of removing assets from the reach of the court, this makes the ultimate orders effectively unenforceable. The purpose is therefore to protect the efficacy of the orders that may lie against the prospective judgment debtor (Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 392; Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 623, 638).
Usually, the right to the injunction is asserted by one party but the evidence remains untested. The court seeks to protect the underlying right claimed through the interlocutory injunction (Robb Evans of Robb Evans & Associates v European Bank Ltd [2009] NSWCA 67, [28]; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199.)
The undertaking itself can be shaped to fit the requirements of the case. Even where an undertaking has been given, the court may ultimately conclude that no compensation is to be paid, even where a loss has been demonstrated (Blue Seas Investments Pty Ltd v Mitchell and MacGillivray (supra) at [54])
All of those principles apply in a family law case, but I accept there are some circumstances where they should be used differently by the Court.
The starting position should therefore be to assume that the undertaking will be required to secure the injunction as in other civil proceedings. Then, it falls to the party seeking the injunctive order to show that an undertaking as to damages is not appropriate. It is a high threshold. Nothing changes just because there are subsequent alterations to orders. The position can and should be carefully re-evaluated where an intervenor comes into the proceedings after an injunction is granted and seeks to rely upon it, even where that injunction has been granted on the basis of the consent of the husband and wife.
Thus, I cannot think of any reason why these particular family law proceedings should be treated as any different from a commercial dispute. The intervenors, as creditors, are in a position where they can protect their interest but the husband is, to a large degree, at their beck and call. Whilst he can seek to vary orders, he has no commercial arrangement with them and he may be in a position where he loses as a result of their effective control. It is not his interests that the intervenors are pursuing but rather those of their potential judgment creditor, the wife. Counsel for QF Pty Ltd argued that there were numerous remedies including in tort available to the husband, and gave as an example malicious prosecution. That, however, puts the husband in the position where he has to prove his cause of action. That is not appropriate in a case where the intervenors have a commercial relationship with the wife.
It was argued that the husband could not seek an undertaking as to damages because he did not have clean hands. In my view of the authorities as outlined below, the clean hands or otherwise of the husband is not relevant in this case. It is important to stress that an examination of the clean hands principle could arise in an argument about whether the injunction is proper. It might be proper; but where an offer of an undertaking as to damages is not made – or refused – the court might not consider it proper to grant the injunction under s 114 of the Act, because the party seeking the injunction wants to retain the benefit it without compensating for the risk that the court might subsequently find there was no basis to have made the order.
In considering the discretionary relief, it is well understood in the commercial world that parties seeking the relief of the court through an equitable remedy must come with clean hands (Black Uhlans Incorporated v New South Wales Crime Commission and Ors [2002] NSWSC 1060) but there are important caveats to the clean hands principle. The alleged misconduct and the equity sued for must have an immediate and necessary relation to each other (King v Lynpete Australia Pty Ltd & Ors [2012] VSC 140). Where the equity would exist independently of the misconduct in question, the misconduct becomes irrelevant (Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501, 508.) Further, it is a retrospective, not a prospective inquiry; the court will look at conduct in the past only in the sense that it has given rise to the equitable right in question. If those principles are applied here and I consider they should be, nothing in the husband’s conduct could be seen as relevant.
QF Pty Ltd also sought an order in the alternative that money be placed into trust by the husband. That sum should be equivalent to the sum claimed by it against the wife. The complexities of that legal argument were not fully fleshed out when I questioned the extent of the Court’s power to make such an order against the husband. Any submission as to the power was not forthcoming and the application should not under those circumstances warrant further consideration. Absent some clear indication as to the power let alone the reasoning behind making such an order, it is not appropriate that the Court make it.
In the circumstances, unless the intervenors provide an undertaking as to damages in the usual form, the injunctions should be discharged on the basis that the wife no longer seeks that they remain in place.
I certify that the preceding Thirty One (31) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 9 April 2013.
Associate:
Date: 9 April 2013
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