Matthews and Norris (No. 4)

[2017] FamCA 1160

FAMILY COURT OF AUSTRALIA

MATTHEWS & NORRIS (NO. 4) [2017] FamCA 1160

FAMILY LAW – PROPERTY – Interim applications – Where the dispute concerns the use of the sale proceeds of property owned by the husband which, pursuant to former consent orders, were placed into a controlled moneys account – Where the parties guaranteed the payment of debt incurred by a corporation in which they have a mutual interest – Where the husband particularly has an interest in ensuring the viability of the corporation because he is the sole director and both parties are the shareholders – Ordered the parties to use the sale proceeds in the controlled moneys account to pay particular liabilities of the corporation and to meet fees and charges incurred by the operation of the parties’ self-managed superannuation fund.

APPLICANT: Mr Matthews

RESPONDENT: Ms Norris

FILE NUMBER: NCC 2226 of 2015

DATE DELIVERED: 27 October 2017

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Austin J

HEARING DATE: 27 October 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Carty

SOLICITOR FOR THE APPLICANT: Oliver Campbell Heslop Lawyers

COUNSEL FOR THE RESPONDENT: Not Applicable

SOLICITOR FOR THE RESPONDENT: Not Applicable

Orders

PENDING FURTHER ORDER, IT IS ORDERED THAT

1.Order 17 (including the Order comprising Exhibit 1) made on 27 January 2016 is discharged.

2.The parties shall do all acts and things necessary to cause the whole of the funds held by Oliver Campbell Heslop Solicitors in the controlled money account with National Australia Bank, BSB …, Account Number ...17, to be withdrawn and deposited to the Oliver Campbell Heslop Solicitors general trust account.

3.The husband shall do all acts and things necessary to cause the funds deposited in the Oliver Campbell Heslop Solicitors general trust account to be disbursed by those solicitors upon his direction, as required from time to time, to pay:

a.The following liabilities in respect of Matthews Pty Ltd:

i.Lease surrender fee of $8954.30 to WA Minister for Works;

ii.Loan repayments that fall due and payable to the National Australia Bank  in respect of real properties;

iii.All insurances, rates and utilities due and payable in respect of real properties;

iv.Payment of all lawn mowing, repairs and general maintenance bills due and payable in respect of real properties,

v.All real estate agents’ listing and marketing fees for the sale or lease of real properties;

vi.Any payments in satisfaction of mortgages secured over real properties;

vii.All ASIC fees, accounting fees and other professional fees and charges reasonably incurred in the ordinary operation and management of the corporation; and

b.Payment of all ASIC fees, accounting fees and other professional fees and charges reasonably incurred in the ordinary operation and management of N Pty Ltd, as trustee for the Matthews Superannuation Fund.

4.The husband’s costs of and incidental to the determination of this interim dispute are reserved until final trial.

5.Otherwise;

a.The Application in a Case filed on 4 September 2017 is dismissed;

b.The Response to an Application in a Case filed on 13 October 2017 is dismissed;

c.The application for interim relief contained within Exhibit F1 is dismissed; and

d.Any and all other outstanding applications for interim relief are dismissed.

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

IT IS NOTED that publication of this judgment by this Court under the pseudonym Matthews & Norris (No. 4) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCC 2226 of 2015

Mr Matthews

Applicant

And

Ms Norris

Respondent

EX TEMPORE REASONS FOR JUDGMENT

1.The parties are currently involved in litigation concerning their respective applications for property settlement pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”). The proceedings were commenced by the husband in August 2015 and have now been on foot for a little over two years.

2.The dispute between the parties over parenting orders for their only child, pursuant to Part VII of the Act, was finalised when final orders were made by me earlier this year in June 2017. Their outstanding applications for property settlement under Part VIII of the Act constitute the only outstanding substantive dispute.

3.The matter presently requiring the Court’s determination is an Application in a Case filed by the father on 4 September 2017, to which the wife joined issue by filing a Response to an Application in a Case on 13 October 2017.

4.The husband ultimately moved on the orders set out within the minute of orders he tendered (comprising Exhibit F1), which was substituted for the orders proposed in his Application in a Case, for which purpose he relied upon his affidavit filed on 4 September 2017 and various exhibits (Exhibits F2 to F10 inclusive).

5.The wife relied upon her affidavit filed on 13 October 2017 in support of the orders sought in her Response to an Application in a Case. 

6.Although, at this stage, I am uncertain as to the full extent of the parties’ respective financial circumstances, the interim dispute concerns one former asset: the net sale proceeds of a single parcel of real property owned by the husband at O Town, NSW, which were placed into a controlled moneys account pursuant to consent orders made in January 2016. The intention of that order was to retain the net proceeds of sale, pending the ultimate determination of the parties’ property settlement dispute. For reasons I need not discuss in these reasons, the progress of the substantive property dispute to trial has taken much longer than the parties anticipated.

7.Although the husband was the sole legal proprietor of the O Town real property which generated the net proceeds of sale, the mother alleges she made financial contributions to the acquisition or retention of the property and, despite not articulating it in this way, I impute she asserts her equitable interest in the property and hence, its proceeds of sale, by way of resulting or constructive trust. Accordingly, it is not open to me today to assume, as an agreed fact, that the husband was the sole beneficial owner of the property, in which event he is not free to use the property’s sale proceeds as his exclusive property. So much might be implied from his agreement not to do so and to instead place the funds into escrow, pending the outcome of the proceedings.

8.The situation now is that the parties are liable, through a corporation in which they have a mutual interest named Matthews Pty Ltd (“MPL”), to meet ongoing debt. Each party guaranteed MPL’s payment of liabilities and so MPL’s financial viability as the primary debtor is relevant to them personally. Unless MPL remains solvent, they will each bear extra personal liability. Some of MPL’s debts relate to two parcels of real property at P Town and Q Town in Western Australia. The husband deposed, without contradiction, that the two properties are collectively worth about $573,000, but are subject to mortgages, the payout values of which are collectively worth about $664,000. In such circumstances, the debt exceeds the value of the properties by about $100,000 and so, if MPL is unable to discharge its debts in relation to the properties, the debts will be called in and the parties’ personal guarantees will be triggered.

9.Given MPL is currently in financial difficulty and experiencing trouble meeting its debts as and when they fall due, the husband is understandably concerned to ensure he can fulfil his prudential obligations as a director under the Corporations Act 2001 (Cth) by ensuring MPL’s continued solvency. If, as MPL’s sole director, he fails to ensure it trades solvently then he may bear personal responsibility for its debts and be additionally liable to prosecution by corporate regulators.

10.The husband now seeks to discharge the former order requiring the O Town property sale proceeds to be held in escrow and seeks further orders which permits him to use those funds for the payment of debts incurred by MPL.  The parties are exclusive joint shareholders in MPL. They were formally joint directors, but the mother voluntarily resigned her directorship in November 2016, so that the husband is the sole director.

11.The wife’s opposition to the husband’s use of the funds to discharge or defray MPL’s liabilities is difficult to fathom, for these reasons. In May 2016 (see Exhibits F9 and F10), she corresponded by email with the husband’s lawyer putting the husband on notice she was concerned MPL would not be able to pay its debts as and when they fell due, so she realised MPL was having difficulties meeting its financial obligations. As recently as January 2017, the wife and the husband’s solicitor exchanged more emails about the use of the preserved funds to meet MPL’s debts (see Exhibits F2-F8 inclusive; [33] of the wife’s affidavit).  The wife was amenable to use of the preserved funds to meet MPL’s debts, though she was anxious to ensure the use of the funds was conditional upon her being kept informed of the way in which the funds were spent, which was not an unreasonable request. However, the wife now unconditionally opposes the husband’s proposed use of the funds to pay any of MPL’s debts at all, which represents an abrogation of her former conditional consent. She has not put before the Court, either in her evidence or by way of submission, any rational explanation for why she has changed her mind. 

12.Of course, the wife is not exposed to the same financial prejudice as the husband because, in the meantime, a sequestration order was made against her estate and she is now bankrupt. Furthermore, she is no longer a director of MPL and is not exposed to the same sort of risk of penalty and civil liability as the husband, as the sole remaining director MPL.

13.The husband has an interest in ensuring the viability of MPL for the ultimate benefit of both parties, since they both retain their shareholdings, and the prejudice to the husband is much greater than the prejudice to the wife if MPL founders financially.

14.For those reasons, I intend to make orders which generally reflect those proposed by the husband, which now brings me to the wife’s proposal.

15.In her Response, she simply seeks that all of the preserved funds be paid to her own nominated bank account, within the next seven days, without any further embargo upon her use of those funds.

16.I cannot see any evidentiary basis to make Orders 1 and 2 proposed by the wife and, in fact, she made no submission to support the making of such orders. 

17.The third order sought by the wife would require the husband to reimburse her, within the next seven days, for the money he spent allegedly in breach of orders made on 27 January 2016. The impediment to any such order is that the husband does not concede he expended any money in breach of orders made between the parties on 27 January 2016 and, in the face of such controversy, the wife failed to establish the fact, either by evidence or submission.  Accordingly, proposed Order 3 must be dismissed.

18.The last order sought by the wife was that the husband pay her costs of and incidental “to these proceedings”, which I impute to mean this particular interlocutory dispute rather than the substantive proceedings at large. No submission was made by the wife in support of the proposed order and she has appeared without legal representation. It is apparent that the documents the wife used in this interlocutory dispute were prepared by her and it is difficult to see, in the circumstances, what legal costs and disbursements she might have incurred. If none was incurred there is none to recoup.

19.For those reasons, all of the orders sought in the mother’s Response will be dismissed.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 27 October 2017.

Associate: 

Date:  18 May 2018