MASON and BROOKS

[2020] FCWA 181

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY COURT ACT 1997

LOCATION: PERTH

CITATION: MASON and BROOKS [2020] FCWA 181

CORAM: O'BRIEN J

HEARD: 30 JULY 2020

DELIVERED : 16 OCTOBER 2020

FILE NO/S: PTW 5177 of 2019

BETWEEN: MS MASON

Applicant

AND

MS BROOKS

Respondent

Catchwords:

DE FACTO RELATIONSHIP – PROPERTY SETTLEMENT – INJUNCTIONS – Where the parties are joint owners and directors of a number of companies operating largely separate businesses – Where the respondent has been in control of the businesses since separation – Where the applicant is critical of the respondent's management of the businesses and seeks injunctive relief installing her in a position of control to the exclusion of the respondent – Where the evidence does not support the applicant's contention – Where in any event potential issues arise as majority ownership and control of the companies by an indigenous person is a condition of relevant contracts, and enables the businesses to access significant funding benefits – Where the respondent is an indigenous person and the applicant is not – Turns on its own facts.

Legislation:

Corporations Act 2001 (Cth)
Family Court Act 1997 (WA)

Category: Reportable

Representation:

Counsel:

Applicant	:	Mr Robertson
Respondent	:	Ms Anderson

Solicitors:

Applicant	:	Leach Legal
Respondent	:	FMD Legal

Case(s) referred to in decision(s):

In the marriage of Farr and Farr (1976) FLC 90-133

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT – PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

IT IS NOTED that publication of this judgment by this Court under the pseudonym Mason & Brooks has been approved by the Family Court of Western Australia pursuant to s 243(8)(g) of the Family Court Act 1997 (WA).

1[Ms Mason] and [Ms Brooks] lived together in a de facto relationship from October 2009 until March 2019. They operated businesses together during their relationship, and significant difficulties have arisen between them since their separation.

2The matters requiring determination are those raised in the amended Application in a Case filed by Ms Mason on 12 March 2020, and Ms Brooks’ response to that application. The interim determinations are required in the context of the substantive application for alteration of property interests filed by Ms Mason on 12 July 2019 and the response filed by Ms Brooks on 23 August 2019. Neither party has particularised the substantive relief which they seek.

3The immediate issues relate primarily to the control of business entities, and were the subject of a hearing on 30 July 2020.

Brief background

4The parties are the only directors and shareholders of a number of entities.

5[Company A] is a company established by the parties in 2010. Company A operates under contract (“the CDP contract”), a Community Development Program for the [Town A] region.

6[Company B] was established in 2016 in [Town A].

7[Company C] was also established in 2016. It is a hospitality company and operates a [local business] in Town A. Company C rents a [farm] at [Town B] in [State A] (“the farm”) from the Brooks Family Superannuation Fund (“the superfund”). The parties are both members of the superfund.

8[Company D] was established in 2018, with the intention of developing a [personal products] business. It is not active.

9Ms Brooks is the majority shareholder in each of the entities. She holds 51 per cent of the shares in Company B, Company C and Company D, and 53 per cent of the shares in Company A. Ms Mason owns the balance of the shares in each entity. The differential shareholding was established by the parties because Ms Brooks is Aboriginal; various benefits flow to the company by virtue of a majority Aboriginal shareholding. Ms Brooks is the CEO of each of the active entities.

10In June 2019, shortly after the parties separated, Ms Brooks terminated Ms Mason’s employment with the active entities. Ms Mason lodged a claim with the Fair Work Commission and a conciliation conference was unsuccessful.

11As detailed later in these reasons, Ms Mason is critical of the manner in which Ms Brooks has managed the business interests of the parties since their separation. That is at the heart of the present dispute.

12It is common ground that the businesses operated by Company B and Company C are not currently profitable, and have been “propped up” by the successful business operated by Company A. In December 2019 the parties commissioned a review of the Group comprised of the companies.

Relief sought by the parties

13In her amended Application in a Case filed on 12 March 2020, Ms Mason sought:

(a)orders requiring the parties to do all things necessary to instate her as Managing Director and Controlling Financial Officer of all four companies, and as Operations Manager of the CDP contract;

(b)a series of injunctions restraining Ms Brooks from:

(i)instructing the companies’ lawyers;

(ii)undertaking financial transactions on behalf of the companies or removing funds from them;

(iii)terminating Ms Mason’s employment;

(iv)entering or remaining upon the farm, or allowing any third-party to do so;

(v)contacting or directing employees, customers, contractors, distributors and/or stakeholders of the companies;

(vi)calling a general meeting of members of the companies without notice to her;

(vii)removing her as a director, or appointing additional directors; and

(viii)encumbering, transferring, disposing of or otherwise dealing with the assets of the companies.

(c)an order that she be at liberty to draw $99,333 by way of director’s loan to equalise the parties’ post separation directors’ loans;

(d)orders requiring her to cause to be paid to Ms Brooks an ongoing salary of $2,303 net of tax per week, and superannuation of $16,625 per annum;

(e)the appointment of a single expert to value the interests of the parties in the companies, and orders to facilitate that;

(f)sole occupation of the farm;

(g)that Ms Brooks indemnify her in relation to costs and liabilities associated with a property at [Suburb A] in [State B]; and

(h)that within seven days Ms Brooks deliver up her personal belongings, and meet the costs associated with doing so.

14In written submissions filed on 21 May 2020 Ms Mason indicated that she did not press for the order giving her liberty to draw a director’s loan.

15In her response filed on 15 May 2020, Ms Brooks sought:

(a)orders to effect the winding up of the farming enterprise conducted through Company C;

(b)orders for the sale of the farm, and the deposit of the net proceeds of sale into a joint interest-bearing account pending further order; and

(c)an order that she do all things necessary to cause Ms Mason’s belongings to be stored in a secure storage facility, with the cost to be met by Company A.

16There was some confusion at the commencement of the hearing on 30 July 2020 when I sought to confirm the relief sought by the parties. Counsel for Ms Mason confirmed that there was no change in the relief sought by her. Counsel for Ms Brooks initially indicated that her client did not seek the winding up of Company C or the sale of the farm, notwithstanding that her filed response had not been amended. When I enquired as to just what it was that Ms Brooks now sought, counsel took instructions and said that in fact Ms Brooks did seek that orders be made immediately for the winding up of Company C but did not seek the sale of the farm. When asked to clarify what was meant by “winding up”, she said that Ms Brooks sought that steps be taken to cease the business operations of that enterprise, including the termination of employees, and that an unnamed but suitably qualified person be appointed to give effect to that.

17Given the apparent confusion, I stood the matter down to afford counsel for Ms Brooks the opportunity to confer with her instructor and take clear instructions. When the matter resumed, counsel advised that Ms Brooks was not in fact pursuing the relief set out in her response filed on 15 May 2020, and sought no orders other than the dismissal of Ms Mason’s amended application in a case and costs.

Evidence relied upon by the parties

18The amended application and response had previously been listed for hearing before a magistrate, and argued, on 22 May 2020. On 29 May 2020, the magistrate advised the parties that he considered it appropriate for the matter to be assigned to the Complex Track, and for the interim and interlocutory issues to be determined by a judge.

19The matter having been argued before the magistrate, the parties agreed that the transcripts of the hearings on 22 and 29 May 2020 should be before me in evidence.

20Ms Mason relied on her affidavits filed on 12 July 2019, 12 March 2020, 14 July 2020, and 24 July 2020.

21Ms Brooks relied on her affidavits filed on 23 August 2019, 15 May 2020, and 17 July 2020.

22Orders were made on 23 June 2020 permitting each party to file and serve one additional affidavit to be relied upon for the purpose of the hearing, on the condition that such affidavit was filed by the close of Registry on 14 July 2020 and served immediately thereafter. Ms Mason filed her affidavit on 14 July 2020; Ms Brooks did not. On 17 July 2020 Ms Brooks filed an Application in a Case seeking leave to file her own affidavit late, and additionally seeking to file a witness affidavit of [Ms D]. Ms Mason filed a response to that application on 24 July 2020, raising no objection to the late filing of the affidavit of Ms Brooks (who had encountered health difficulties) but objecting to the introduction of a witness affidavit.

23I permitted Ms Brooks to rely on her own late filed affidavit, but not the affidavit of Ms D. I permitted Ms Mason to rely on the affidavit filed in support of her response on 24 July 2020. The relevant application and response in relation to that issue were each dismissed, with costs reserved.

24Each party filed a written outline of submissions.

Final orders sought by the parties

25The application of Ms Mason for interim orders, and the response of Ms Brooks to that application, must be considered against the background of the final relief sought by each.

26Ms Mason’s initiating application was filed on 12 July 2019. In it, she sought an order in the following terms:

“The balance of the net asset pool be distributed to effect a just and equitable property settlement between the parties”.

27She otherwise sought orders excusing her from particularising the relief sought by her both on an interim and a final basis until Ms Brooks had filed and served responding documents, and provided full and frank disclosure. Over 12 months later, no amended application particularising her claim for final orders has been filed.

28Ms Brooks filed her response to the initiating application on 23 August 2019. She sought orders whereby:

(a)she would retain control and ownership of the companies, by Ms Mason executing the relevant resignations and share transfers;

(b)she would secure the release of Ms Mason from any guarantees given in her capacity as a director, and otherwise indemnify her in relation to any liabilities or potential liabilities of the companies;

(c)Ms Mason would transfer to her the relevant interest in a jointly owned property at [Street A, Town A];

(d)Ms Mason would retain the property owned by her at [Street B, Town A]; and

(e)she would pay to Ms Mason “such cash adjustment as will effect a just and equitable settlement”, again proposing that she particularise that sum upon exchange of disclosure and completion of valuations.

29It is understandable that, in circumstances where there are significant valuations to be undertaken, neither party has yet specified their respective claims in dollar terms. It is, however, remarkable that Ms Mason has not particularised her substantive claim in any manner, even to the extent of seeking clear orders as to property she would propose to retain or receive as part of her overall claimed entitlement. It is only slightly less remarkable that neither party has particularised what each would say would represent their proper entitlements at least in percentage terms, notwithstanding that a just and equitable outcome need not be so articulated by the Court.

30The magistrates before whom the proceedings were previously listed sought to address that issue. Orders were made on 27 August 2019 requiring Ms Mason to file an amended application particularising the final orders sought by her by no later than 20 November 2019. On the same day, orders were made requiring Ms Brooks to file an amended response particularising the final orders she sought by no later than 27 November 2019.

31Neither party complied with those orders. On 4 December 2019, orders were made extending the time within which Ms Mason was to file her amended application to 7 days after provision to her of an anticipated report from [Accounting Firm A]. A further order was made requiring Ms Brooks to file her amended response within 21 days of being served with Ms Mason’s amended application.

32The anticipated report was published by Accounting Firm A on 12 December 2019. Ms Mason still did not file an amended application; while Ms Brooks was in default of the orders made on 27 August 2019, by the further orders made on 4 December 2019 she was not required to file an amended response until Ms Mason had filed her amended application.

33Still further orders were made, this time by consent, on 19 March 2020 requiring the parties to jointly instruct a named Single Expert to value the companies and provide her opinion on various taxation issues. While the earlier orders of the court were not discharged, the parties jointly proposed an order requiring them to each file and serve a Minute setting out the orders they seek on a final basis within 14 days of the date of publication of the report of the Single Expert. That order was made. The Single Expert has not yet reported.

34By that entirely unsatisfactory process, some 15 months after proceedings were commenced by her, the court is left with no meaningful indication of the relief sought by Ms Mason on a final basis, even in broad conceptual terms. The only progress in that regard is that, when Ms Brooks filed her response seeking that Company C be wound up and the farm sold, Ms Mason stated in an affidavit that she would seek to retain both as part of her overall entitlements.

35Nevertheless, the interim dispute falls to be considered against the background of the substantive claims as pleaded to date; all that can be confidently said in relation to relevant issues is that Ms Brooks seeks to retain ownership and control of all the companies, and that Ms Mason has not said what she proposes beyond her evidence just noted that she would seek to retain Company C and the farm.

36Those matters were properly emphasised in submissions on behalf of Ms Brooks.

The legal principles

37While passing reference was made in submissions on behalf of Ms Brooks to principles relevant in proceedings brought under the Corporations Act 2001 (Cth), it was not in dispute that the principles relevant in these proceedings are those which attach to the power of the court to make such order or grant an injunction as it considers proper.[1] In context, “proper” means “reasonable and just in the circumstances”.[2]

Operational control of the businesses, and the positions of the parties over time

[1] Corporations Act 2001 (Cth) s 235A.

[2] In the marriage of Farr and Farr (1976) FLC 90-133 at 75,636.

38Given the nature of the interim dispute, it is necessary to recount the history of the operational control of the businesses, the roles of each party in that control, and the changes in the relief sought by Ms Mason over the course of the litigation.

39In her affidavit filed on 12 July 2019, Ms Mason said that from the commencement of the business she worked full-time at Company A managing day-to-day issues, overseeing the accounts, developing human relations and drafting tender applications. She said further that prior to separation, Ms Brooks was “not involved in the operations of the [c]ompanies, working approximately 3-4 hours per week and preferring to stay at home drinking and playing games on her iPad”.

40That contrasted somewhat with the evidence given in her affidavit filed on 12 March 2020, where she said that she was responsible for financial management and control of Company A’s operations under the CDP contract, while Ms Brooks “ran cultural awareness training, assisted with community engagement (the non-technical side of the CDP contract) and liaised and presented on cultural issues for the companies from time to time”.

41It appears to be common ground that at least from sometime in 2018 until separation, Ms Mason was primarily responsible for the operations of Company C.

42In her affidavit filed on 23 August 2019, while not decrying the role of Ms Mason as described, Ms Brooks gave more detailed evidence as to her own involvement in the business. She described her work in developing the business by accessing networks in business and government that she had established while working with [Company E], engaging politicians and stakeholders in the community, and securing the major contracts including CDP. She also explained that her majority shareholding, and for that matter her position as CEO are both necessary conditions to certification of the business with [Organisation A], an organisation which facilitates connection between indigenous businesses as suppliers, and corporate and government purchasers.

43It is tolerably clear that, notwithstanding the initial evidence given by Ms Mason, both parties were actively involved in Company A prior to separation, with Ms Mason primarily fulfilling a management role and Ms Brooks undertaking both a business development role, and roles related to the fulfilment of contracts once obtained.

44On Ms Mason’s case, the parties ended their relationship on 17 March 2019. On Ms Brooks’ case, the relationship ended in April 2019. As noted above, at the time the relationship ended Ms Mason was living on the farm and was primarily responsible for the operations of Company C. Ms Brooks was living in Town A.

45In her affidavit filed on 15 May 2020, Ms Brooks says that on 30 April 2019 Ms Mason employed [Mr K], with whom unbeknownst to Ms Brooks she was in a relationship, as [a] manager on a salary of $105,000 per annum plus superannuation. On the same day, Ms Mason employed Mr K’s sister as a consultant on a salary of $80,000 per annum plus superannuation. Ms Brooks says that Ms Mason took both steps without consultation with her and without her knowledge; Ms Mason did not respond to that aspect of the evidence of Ms Brooks, notwithstanding that in her affidavit filed on 14 July 2020 she specifically replied to other matters raised in the same paragraph of the relevant affidavit.

46On 31 May 2019 Ms Mason informed Ms Brooks of her relationship with Mr K.

47On 5 June 2019 Ms Brooks terminated the employment of both Mr K and his sister.

48On 8 June 2019, through her solicitors, Ms Mason sought an undertaking from Ms Brooks to the effect that she would not be removed as a director of the companies, that no additional directors would be appointed, that the property of the company would not be dealt with without her consent, and that her own employment and that of other employees would not be terminated or altered as to conditions without her agreement.

49On 9 June 2019, Ms Brooks terminated Ms Mason’s employment as Managing Director of Company A.

50On 28 June 2019 Ms Mason filed an application at the Fair Work Commission.

51Ms Mason then commenced these proceedings by filing her application on 12 July 2019. On the first return date, with both parties represented by their present solicitors and counsel, interim orders were made by consent. The recitals to the Minute of Consent Orders record that the orders were “agreed pending an adjourned hearing after the parties’ attendance at a mediation style conference”. The transcript of the hearing records that both counsel agreed that it was intended that the conference would take place before the end of November; on that basis, the proceedings were adjourned to 4 December 2019 for directions only.

52The orders made by consent which are relevant for present purposes were:

(a)orders restraining [Ms Mason] from commencing or continuing proceedings in the Federal Court or Federal Circuit Court in relation to her dismissal;

(b)orders restraining [Ms Mason] from removing any company funds, entering any company premises, and contacting any employees, contractors, distributors or stakeholders of any of the companies, and from lodging any complaints or otherwise communicating about the companies with the Department of the Prime Minister and Cabinet;

(c)orders restraining [Ms Brooks] broadly in terms of the undertaking which had been sought by [Ms Mason]; and

(d)orders requiring [Ms Brooks] to service certain liabilities, and to cause to be paid to [Ms Mason] the sum of $2,303 per week net of tax, and $16,625 per annum into her nominated superannuation fund.

53Those orders were made against the background of the interim relief sought by Ms Mason at that time, which included an order seeking the reinstatement of her employment. Self-evidently, the relief sought by Ms Mason at that time did not include any orders to remove Ms Brooks from her positions of control in the companies as presently sought; further, the orders made by consent left adjourned that aspect of her application which sought the reinstatement of her employment.

54Ms Brooks continued in control of the companies. It appears that at the time of the consent orders in late August 2019 Ms Mason was living in [State C], as one of the orders made by consent required the delivery of a motor vehicle to her at an address to be nominated by her in that state. While her residential address was not disclosed on the initiating documents filed on 12 July 2019, the documents were executed at [City A]. At the relevant time, Ms Brooks was living in Town A, but she too has spent significant periods in the eastern states since the parties separated.

55On 4 December 2019 Ms Mason filed a Notice of Address for Service, as she was self-represented. She showed her address for service as being an address at [Suburb B] in State C. At the hearing that day Ms Mason expressed the view that steps needed to be taken to ensure “joint control of the joint assets”. She confirmed that she was based in State C. She expressed concern that if Ms Brooks did not follow anticipated recommendations to come from the report, that could “result in a liquidation”. At the same hearing, the solicitor appearing for Ms Brooks confirmed that Ms Brooks spent most of her time in [State D], but did travel interstate frequently.

56On 13 December 2019, Ms Mason filed an application in a case seeking orders which would require the parties to engage an independent recruitment service, and with the assistance of that service appoint an Independent Chairperson to “govern the companies” and to have the casting vote in any meeting of the directors. She sought her own reinstatement to her previous position as Managing Director of the companies.

57Relevantly for present purposes, she also sought orders whereby she would manage Company C and the farm, and Ms Brooks would manage “the assets of Company A, Company B, and Company C in [State D]”. She sought a raft of other orders which are not relevant for present purposes.

58In essence, Ms Mason at that stage sought relief whereby she would run Company C (albeit with the assistance of Ms Brooks in managing the local business), and Ms Brooks would run the other businesses, both with the oversight of the proposed Independent Chairperson.

59Ms Mason’s application was listed for hearing on 19 March 2020. She reengaged solicitors, and on 12 March 2020 her amended Application in a Case was filed. It sought the relief earlier summarised in these reasons. At the hearing on 19 March 2020 orders were made for the filing of responding documents by Ms Brooks, and for interim argument to take place before the magistrate on 22 May 2020.

60Responding documents were filed, and the argument proceeded on 22 May 2020. There was a dispute as to whether Ms Brooks should be permitted to rely on late filed documents, and after hearing lengthy submissions the magistrate reserved his decision. In the course of exchanges with counsel, his Honour raised his concern that the matter might be more appropriately heard and determined by a judge, in the context of assignment to the Complex Track. Both counsel were heard in relation to that proposition.

61Having considered the matter, on 29 May 2020 the magistrate delivered oral reasons permitting Ms Brooks to rely on the late filed affidavit, and otherwise assigning the matter to the Complex Track for hearing before me. Until further order, Ms Brooks was restrained by injunction from increasing or extending any director’s loan account without first giving Ms Mason 21 days’ written notice.

62The control of the companies, accordingly, both legally and operationally remain in place consistent with the orders made by consent on 27 August 2019.

The performance of the companies

63Given that the central premise of Ms Mason’s application is that the financial performance of the companies has deteriorated significantly on Ms Brooks’ watch since separation, and that the relief sought is necessary to preserve the property available for division between the parties, it is appropriate to review the evidence as to both historic and current performance. As noted earlier, the parties separated late in the 2019 financial year.

64It is common ground that Company A is a very successful business. It made before tax profits of $1.357 million in FY 2017, $1.953 million in FY 2018, and $1.819 million in FY 2019. On Ms Brooks’ evidence, the financial statements circulated by Accounting Firm A for the first six months of FY 2020 show a before tax profit of $845,527, with the draft profit and loss statements and balance sheets for the last six months of that financial year projecting a before tax profit for the year of $2.27 million.

65Company B is much less successful. It made a before tax profit of $2,911 in FY 2017, a before tax loss of $67,680 in FY 2018, and a before tax profit of $117,232 in FY 2019. On Ms Brooks’ evidence, the financial statements circulated by Accounting Firm A for the first six months of FY 2020 show a before tax loss of $229,636, with the draft profit and loss statements and balance sheets for the last six months of that financial year projecting a before tax loss for the year of $264,794.

66Company C is still less successful. It has never turned a profit. It made before tax losses of $8,601 in FY 2017, $154,631 in FY 2018, and $423,963 in FY 2019. On Ms Brooks’ evidence, the financial statements circulated by Accounting Firm A for the first six months of FY 2020 show a before tax loss of $379,911, with the draft profit and loss statements and balance sheets for the last six months of that financial year projecting a before tax loss for the year of $479,645.

67A number of additional observations inform a consideration of those figures.

68It is common ground that Company B and Company C are being “propped up” by Company A, and represent a drain against its cash flow.

69On Ms Brooks’ evidence, which was not disputed, the profit figure of $117,232 for Company B for FY 2019 was artificially inflated by the receipt of grant income of approximately $550,000 (including GST), used primarily for the purchase of equipment. It appears clear that, absent that grant income, Company B would have made a significant loss in that year.

70The author of the report noted that sales revenue for Company C increased by 51 per cent or $350,000 in 2019, but costs rose by 76 per cent or $646,000 in the same period. Wages, superannuation and labour hire increased over the same period from a figure representing 46.3 per cent of sales to a figure representing 67.3 per cent of sales.[3] As earlier noted, the evidence of Ms Brooks to the effect that late in the 2019 financial year, and without her knowledge, Ms Mason employed her partner Mr K and his sister on combined salaries of $185,000 plus superannuation was unchallenged.

[3] Report at page 9.

71Company A is heavily dependent on the continuation of the CDP contract for its profitability. As an indication, on Ms Brooks’ evidence, Company A received income of just under $60,000 from the CDP in the month of April 2020. The contract is in place until 30 June 2022, unless earlier terminated in accordance with its terms. In operating the CDP contract, Company A has reporting and compliance obligations with the National Indigenous Australians Agency (“NIAA”) and the Department of the Prime Minister and Cabinet (“DPC”).

72The contract entitles DPC, through the agency of NIAA, to carry out a Provider Performance Review at any time, to monitor, measure and evaluate performance against key performance indicators set out in the schedule to the contract, and more generally. The DPC may also, at any time, undertake a Compliance Review. If DPC considers the performance of Company A to be unsatisfactory it may by notice require the company to work with it to improve performance or build capacity, including the development by DPC of a plan with which the company must comply. Ultimately, DPC may suspend referrals, withhold payments, impose additional conditions on the company, step in to take control or management of all or part of the business, or exercise termination rights.[4]

[4] CDP Head Agreement page 43, at clause 23.

73NIAA issued a breach notice on 26 November 2019 asserting that Company A’s performance under the CDP was “less than satisfactory” for the period 1 April 2019 to 30 September 2019, and requiring remedies to be undertaken by 31 March 2020. Company A was required to submit an Improvement Commitment Plan. The COVID - 19 pandemic has resulted in deadlines for compliance being extended.

74In response, Ms Brooks engaged the National Employment Services Association (“NESA”) to provide consulting services to address the compliance issues identified by NIAA. In May 2020, NESA provided a written CDP Service Review. The reviewer concluded that while the foundations for delivery of CDP services by the company are in place, there was a range of “clear governance and delivery issues which need urgent attention to ensure the program can be delivered at a level which would allow the organisation to retain the contract”. A set of detailed recommendations were made, including ongoing engagement of NESA to assist in implementation.

75On her evidence, Ms Brooks continues to work closely with NESA, and she has weekly meetings with Ms [O] who authored the review. The purpose of those meetings is to address Company A’s reporting and compliance obligations and ensure no further breach notices are issued. The company’s employment coordinator has been recently replaced, and efforts are being made to recruit and employ a new operations manager. The need for that position to be filled was clearly identified by the review as a priority.

76While Ms Brooks has provided updating information both personally and in correspondence to NIAA via an officer in that organisation with whom she has a long-standing professional relationship, it is clear that much remains to be done. Included in the materials in evidence were an email from a different officer at NIAA dated 3 July 2020 seeking updates regarding a number of issues including the required progress towards employment of an operations manager, and the adequacy of staffing more generally.

77It can safely be concluded that NIAA will continue to monitor Company A performance and compliance, and press for confirmation that issues identified in the November 2019 breach notice are properly addressed in a sustainable fashion. What cannot be assessed on the available evidence is the degree of risk that DPC will exercise more draconian measures in the event NIAA is not satisfied, or within what timeframe that risk might emerge. Certainly, NESA is pressing Company A to address the issues with a sense of urgency.

78As the author of the report noted, and counsel for Ms Mason emphasised, the “relocation of [Ms Brooks] to [City B] and the removal of [Ms Mason] as Managing Director…significantly reduced the level of day-to-day management control the Directors formally (sic) exerted over the Company A team and operations”, and in the absence of “strong local leadership” the operations probably did not perform as efficiently as in previous years.[5] Those observations were made in December 2019; Ms Brooks has now returned to live in Town A, and Ms Mason maintains her application for sole occupation of the farm, which is in State A, albeit she has indicated her willingness to return to Town A if required to do so. I note that in or about September 2019 Ms Mason sold the property owned by her at Street B in Town A.

[5] Report at page 6.

79Notwithstanding those challenges and the risk associated with them, the financial statements for Company A completed by the accountants up to 31 December 2019, and the draft profit and loss statement balance sheet for the remainder of FY 2020, indicate that the profitability of Company A has been maintained and possibly improved since the parties separated and the employment of Ms Mason was terminated by Ms Brooks.

80Taking into account the impact of “one off” grant income in FY 2019, the performance of Company B has not deteriorated since the parties separated and the employment of Ms Mason was terminated. Based on the review at 30 November 2019, the author of the report forecast a loss of $420,000 or more for 2020, noting that revenue growth was required from new and existing contracts, and that wages required an urgent review.[6] As noted above, it appears that the loss for FY 2020 will in fact be in the region of $265,000. On Ms Brooks’ evidence, Company B has good quality contracts in place and continues to win new work, and she is reviewing staffing arrangements with a view to reducing employment costs. On the figures set out in her affidavit, wage and salary expenses for the Company B increased in FY 2020 by some 12 per cent over the same expenses in FY 2019.

[6] Report at page 2.

81Company C’s before tax losses increased from $154,631 in FY 2018, to $423,963 in FY 2019. It is common ground that Ms Mason controlled Company C’s operations during that period. The projected figures for FY 2020 represent an increase of approximately 13 per cent in losses by comparison to FY 2019.

82The fundamental premise of Ms Mason’s case, that the present state of the businesses is attributable to mismanagement by Ms Brooks, is simplistic, as is her proposed solution.

83That is so not only for reasons referred to further below, but for reasons associated with conditions which attach to the ownership, control and management of the companies.

84It is common ground that by the agreed mechanism of Ms Brooks holding a majority of the shares in each of the companies, and the agreed management structure, the entities were able to access both funding opportunities available only to companies with majority Indigenous ownership, and “benefits available to companies with Aboriginal persons in key leadership positions”.[7]

[7] Affidavit of Ms Mason filed 12 July 2019 at paragraph 23.

85Company A is a supplier certified by Organisation A, as noted earlier in these reasons. On Ms Brooks’ evidence, to which Ms Mason did not respond, certification by [Organisation A] is conditional not only upon majority Indigenous ownership, but also on the business being “led and/or managed by a Principal Executive Officer who is an Indigenous Australian”, and “controlled by an Indigenous Australian with whom rests the key business decisions”.[8] The evidence does not permit any conclusion as to the importance of Organisation A certification to the profitability of Company A.

[8] Affidavit of Ms Brooks filed 23 August 2019 at paragraph 21(e).

86Similarly, the CDP Head Agreement, the maintenance of which is critical to the profitability of Company A on the case of either party, requires Company A to be at least 50 per cent owned by Indigenous Australians and that Company A:

“[be] able to demonstrate equal Indigenous representation and involvement in its management; or

[be] able to demonstrate that at least 50% of the persons employed by [it] are Indigenous, including in positions of authority with the ability to make key decisions regarding [its] finances, operations, human resourcing and delivery of the [CDP] Services”.[9]

[9] CDP Head Agreement page 36, at clause 13.22.

87While there is provision for the relevant Minister to grant an exemption to those requirements, there is no evidence to suggest any such exemption has or would be sought or granted.

88Those contractual requirements call into focus the terms of the relief sought by Ms Mason whereby she would be instated as Managing Director and Controlling Financial Officer of the companies and Operations Manager of the CDP contract, and the role of Ms Brooks would be “limited to liaising and/presenting as to cultural issues as directed by [Ms Mason] in writing from time to time”.

89If orders are made in the terms proposed by Ms Mason, Company A would clearly not be able to demonstrate that Ms Brooks had “representation and involvement in its management” equal to hers. While the requirement of equal representation might be met by reference to the retention by Ms Brooks of her status as a director, the requirement of equal involvement in management would not.

90Neither counsel addressed that potential issue in submissions either before the magistrate on 22 and 29 May 2020, in their written submissions, or before me.

91I record that in circumstances where the relevant provision of the contract was in evidence, but neither party made submissions in relation to it, I have considered whether the matter should be relisted to afford the opportunity for further submissions on the point. I conclude that step is unnecessary, as even if submissions were made which satisfied me that the relevant provision would not trigger adverse outcomes if orders are made as sought by Ms Mason, I would not propose to make the orders sought by her in any event.

The parties’ criticisms of each other

92As earlier noted, in her affidavit filed at the commencement of the proceedings Ms Mason asserted that Ms Brooks is an alcoholic, who prior to separation worked approximately 3 to 4 hours per week, “preferring to stay at home drinking and playing games on her iPad”. While in her subsequent affidavits her position as to the involvement of Ms Brooks in the business prior to separation was modified significantly, she maintained the position that the capacity of Ms Brooks to effectively manage the business interests of the parties is compromised by dependence on alcohol and other health issues.

93Of course, those issues were raised by Ms Mason prior to her consent to the orders made on 27 August 2019. At the time, the interim relief sought by Ms Mason extended only to the reinstatement of her employment, and injunctions preventing her removal from her role as a director and the dissipation of assets. She did not in any sense seek to assume control.

94That position altered, as earlier noted, when by her Application in a Case filed on 13 December 2019 Ms Mason sought the appointment of an Independent Chairperson. It was only by the filing of her amended Application in a Case on 12 March 2020 that Ms Mason sought to herself assume control of the companies.

95On Ms Mason’s case, her changed position arose at least in part because of her concerns as to Ms Brooks’ fitness to continue managing the businesses after her admission into a rehabilitation facility in early January 2020 for issues related to alcohol. Ms Mason referred in her affidavit filed on 12 March 2020 to various emails sent by Ms Brooks which would support her contention as to her poor state of mental health. No further reference to Ms Brooks’ issues with alcohol were made in Ms Mason’s affidavits subsequently filed.

96In her affidavit filed on 15 May 2020, Ms Brooks acknowledges attending the rehabilitation facility in late January and early February 2020. She was also admitted to hospital in January 2020 for a [medical procedure], and in March 2020 for other health issues. She was hospitalised again in July 2020 suffering from [a medical condition]. On her evidence, unsupported at this stage by medical evidence, her principal diagnosis is [Medical Condition A] and [Medical Condition B].

97Ms Brooks is critical of Ms Mason both in relation to her employment of Mr K and his sister as earlier referred to, but also in relation to a number of financial transactions with Mr K. She is critical also of Ms Mason’s actions in selling the Street B, Town A property without any notice or consultation. She says that the parties’ relationship has broken down to the extent that they are now “incapable of productive communication”; certainly, by the relief now sought it appears clear that the prospect of the parties managing the businesses together in a cooperative fashion is not suggested by either to be realistic.

98Ms Mason is critical of Ms Brooks obtaining a rental property in City B following separation. Ms Brooks says that she obtained the property so as to have a convenient base for her various work commitments in the eastern states, while acknowledging that she had found it difficult coming to terms with the separation and wanted to spend increased amounts of time in City B to be close to family support networks. Ms Brooks now says that in any event she has moved back to Town A and intends to terminate the lease on the City B property. In those circumstances it is unnecessary to make the orders sought by Ms Mason in relation to that property on an interim basis. Any perceived premature disposal of funds may be addressed at trial.

99Ms Brooks is critical of Ms Mason for proposing that she run the businesses remotely from the farm, or possibly from elsewhere, or possibly by returning to Town A, in circumstances where she has sold the property she owned in Town A and has since separation apparently lived initially in one town in State C, then in a town in State A, then (and apparently currently) at a different town in State C.

100It is clear that the circumstances leading to the separation, and the separation itself, were difficult for the parties, and that their relationship has been characterised by conflict since. It is tolerably clear that those factors have influenced the behaviour of each of them, and that each has some valid criticism of the other.

101Notwithstanding the emphasis placed on those matters by the parties and in the materials filed on their behalf, nothing determinative turns on them.

Discussion and conclusion

102In short, I am not persuaded that the orders sought by Ms Mason should be made.

103There were clearly issues in both the Company B and Company C prior to separation. It appears that the issues in relation to Company C increased during the period when Ms Mason was at the helm of that business. While there have been issues with the Company A business as set out above, Ms Brooks has engaged appropriate external professional assistance to address them. In circumstances where the parties cannot conceivably work together, and Ms Mason undertook significant and necessary administrative roles albeit from her then base at the farm, that step by Ms Brooks was appropriate, as is her ongoing engagement with NESA.

104While it appears clear that in happier days each party undertook roles in the primary business for which they were best suited, and they had different skill sets, the solution proposed by Ms Mason to present difficulties focuses entirely on her own skill set. That skill set, on the assessment by NESA, is largely replaceable, even if not by Ms Brooks personally undertaking the work. The evidence of Ms Brooks as to the importance of her own involvement, her skills, her connection to community and her broader network to the sustainability and profitability of the primary business is not denied by Ms Mason, but is not addressed by the solution which she proposes.

105The relief sought by Ms Mason in relation to the delivery up of chattels is otiose. There are already orders in place. As earlier noted, Ms Brooks did not pursue the variation of those orders initially sought in her filed response.

106The amended Application in a Case filed by Ms Mason on 12 March 2020 will be dismissed.

Steps from this point

107At the hearing, counsel advised that the Single Expert was awaiting information from Accounting Firm A to enable the completion of her report, but that the necessary actions were progressing.

108Orders are already in place reflecting the agreement of the parties that they will participate in mediation style conferencing as soon as practicable upon the publication of the single expert report. Orders are also in place requiring each party to file and serve a Minute setting out the orders they seek on a final basis within 14 days of the date of publication of that report.

109While I will hear from counsel, I do not perceive a need to make further procedural orders at this stage other than to give the parties liberty to seek a relisting before me for directions after they have participated in the proposed mediation style conference.

Proposed orders

1.The amended Application in a Case filed by Ms [Mason] on 12 March 2020 and the Response filed by Ms [Brooks] on 15 May 2020 be and are hereby dismissed.

2.In the event that either party seeks an order for costs:

(a)that party must file and serve written submissions within 28 days;

(b)the party responding to such application for costs must file and serve responsive written submissions within 28 days thereafter;

(c)the parties have liberty to seek a relisting for oral submissions; and

(d)if no such request for a relisting is received by the court within 14 days after the date of filing of the responsive costs submissions, any application for costs be determined on the papers, and judgment and orders be published from chambers without the need for further appearance.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Family Court of Western Australia.

KM

Associate

16 OCTOBER 2020