MEDLOW & MEDLOW

[2014] FamCA 161

FAMILY COURT OF AUSTRALIA

MEDLOW & MEDLOW [2014] FamCA 161

FAMILY LAW – PROPERTY – Interim – Injunction – Where the wife seeks a Mareva injunction on an urgent basis so as to restrain the husband from causing or allowing a company associated with him to settle litigation in the New South Wales Supreme Court with a company associated with his brother – Where previous Orders provide that the husband was and continues to be obliged to not execute certain documents dealing with property without giving the wife at least 14 days prior notice – Where the wife received a letter from the husband giving her notice of a proposed settlement of the Supreme Court proceedings – Where the wife has not had adequate time to respond to the husband’s proposal – Where the wife claims that the husband has not met his disclosure obligations – Where the husband claims there is a real urgency for liquid funds to pay his ongoing spousal maintenance obligations, his outgoing needs and legal fees for upcoming criminal proceedings – Where an injunction is made restraining the husband for a period of two weeks from signing any documents or causing any documents to be signed on his behalf which finally determine the litigation in the New South Wales Supreme Court.

Conveyancing Act 1919 (NSW) s 66G;
Family Law Act 1975 (Cth) s 106B.
Mullen & De Bry (2006) FLC 93-293;
Strahan & Strahan (Interim Property Orders) [2009] FamCAFC 166;
Waugh & Waugh (2000) FLC 93-052.

APPLICANT: Ms Medlow

RESPONDENT: Mr Medlow

FILE NUMBER: SYC 7742 of 2010

DATE DELIVERED: 14 March 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 14 March 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Sirtes SC

SOLICITOR FOR THE APPLICANT: Barkus Doolan

COUNSEL FOR THE RESPONDENT: Mr Kirk QC

SOLICITOR FOR THE RESPONDENT: Watts McCray Lawyers

Orders

1. The proceedings are adjourned to 10.00 am on 28 March 2014.

2. Leave is granted to the parties to approach the Associate to Justice Loughnan in relation to any agreement to a change in that date.

3. Leave is granted to the parties or their legal representatives to attend by telephone should they so wish.

4. Until 6.00 pm on 28 March 2014 an injunction be made in terms of the orders sought at paragraph 2 of the Application of the wife filed on 13 March 2014, as follows:

   2.That pending further order, the husband, both personally, by his attorneys, as a director of [Medlow Pty Ltd], in his capacity as a shareholder of [Medlow Pty Ltd], in his capacity as an appointor of the CS No. 1 Trust and or in his capacity as appointor of the [Mr M Medlow Trust] be restrained and an injunction granted restraining the husband from signing any documents or causing any documents to be signed on his behalf which finally determine the proceedings being Medlow Properties Pty Ltd v Medlow Properties Pty Ltd being case number … in the Supreme Court of NSW without the prior written consent of the wife.

5. The court notes the injunction is granted on the basis of the wife’s undertaking as to damages which is Exhibit A (dated 14 March 2014).

6. Leave is granted to either party to restore the proceedings to the list on giving 24 hours’ notice to each other and the Associate to Justice Loughnan.

7. Any further documents on which any party seeks to rely be filed and served not later than 4.00 pm on 26 March 2014 unless the parties otherwise agree.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Medlow & Medlow 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 7742 of 2010

Ms Medlow

Applicant

And

Mr Medlow

Respondent

REASONS FOR JUDGMENT

1. These are proceedings for injunctions, including mandatory injunctions, in the context of substantive proceedings for settlement of property between husband and wife. 

2. The parties started living together in December 1990, were married in 1992 and separated in 2008 or 2009.  They have two children who are 21 and 16 years of age.  Relevantly, the husband is facing a criminal trial which is to commence in August of this year and which is likely to take at least six weeks.

3. The matter comes before the Court on the wife’s Application which was filed yesterday and has been made returnable on short notice.  Of the relief sought in that Application, the matter that is pressed on an urgent basis is in the nature of a Mareva injunction to restrain the husband from causing or allowing a company associated with him to settle litigation in the New South Wales Supreme Court with a company associated with his brother. 

4. Orders were made in this Court on 14 January 2011 whereby the husband was and continues to be obliged to only execute certain documents dealing with property after giving the wife at least 14 days prior notice. 

5. The wife filed an application in March 2013 seeking to be reinstated as a director of the entity, Medlow Pty Ltd, that is litigating in the Supreme Court.  That application was dismissed on 9 May 2013.  It is the wife’s case – and I do not understand it to be controversial  – that the Court and the wife were then told that:

   a)the husband would disclose to the wife all communications and advices in respect of the proceedings between those two entities and any communications or negotiations between him and his brother Mr H Medlow;

   b)he had disclosed those things to date; and

   c) the husband  did not intend to dispose of his interest, through the company, of two properties at Suburb I and Suburb J prior to the property settlement with the wife. 

6. Those properties have been valued by a single expert valuer at $9.2m and $35m respectively.  The valuer also expressed an opinion that if the Suburb J property was rezoned from rural to industrial, its value would be more like $345m.  In the case of the Suburb I property, the valuer opined that if it was rezoned from rural to residential, it would be worth more like $29.4m.

7. It is the wife’s evidence that the husband has not fully disclosed to her in accordance with his assurances to the Court in May of last year. 

8. After 5.00 pm on 26 February this year, the wife’s solicitor received a letter from the husband’s solicitor giving her notice of a proposed settlement of the Supreme Court proceedings. 

9. The letter is lengthy but it includes the propositions that the parties are committed to the National Australia Bank to pay it over $5m by a date in May of this year; that the planned source of that payment was the sale of a property in B Street, Suburb C; that the property had not been sold; that there is no income from companies associated with the parties, and; with criminal proceedings upcoming, the spousal maintenance obligation that the husband has taken on in relation to the wife, there are considerable outgoings. 

10. The letter advised that the proposed settlement involved the husband’s company taking the Suburb I property and his brother Mr H Medlow’s company (Mr H Medlow Pty Ltd, taking the Suburb J property, with the husband’s brother to pay the husband $16.9m.  That sum was to be paid by way of $645,000 on the signing of an option agreement; $645,000 on the signing of a deed; $11.21m was payable on 30 June, but that time could be extended at Mr H Medlow’s discretion to 28 July.  Finally, $4m, was to be provided in effect, by vendor finance provided by the husband, to be repaid at the earliest of the occurrence of a number of things, including the expiration of 10 years, rezoning and so on.

11. The wife’s solicitors wrote back on 6 March 2014, asserting that she had not received the required disclosure from the husband; asserting that the current problems would not have occurred if she had remained a director of Medlow Pty Ltd, as she had sought to do in May of last year; that the husband must have engaged in communications about the settlement that had not been disclosed to her.  Therefore she proposed that she be restored as a director.  She queried what the tax implications might be of the settlement and asked for an extension of time, a further 21 days, to consider the implications of the proposed deal. 

12. It is said, and again there has been no contradiction, that there was no answer to that letter. On 11 March 2014 the wife again wrote through her solicitors, asking for a response to her request for an extension of time and putting the husband’s solicitors on notice that as there had been no response, the wife would file an application for an injunction. It was also asserted that if the husband signed the deed notwithstanding the warning contained in the letter, then she might move the Court under s 106B of the Family Law Act to set aside any resultant transfer.

13. Learned counsel for the husband provided me with the written submissions that were provided to Austin J, who heard the proceedings in May of last year.  The submissions canvas the import for these proceedings of a decision of the Full Court in Waugh & Waugh and discuss the implication for that decision of a subsequent decision in Mullen & De Bry.  It is asserted in those submissions that there was not a significant impact on the earlier decision by the latter.  I disagree.  The Full Court in Mullen & De Bry said:

    Finally, we think it’s helpful to recognise the essential power being exercised in this case is simply described in section 114(3), where it says, “A court may grant an injunction in any case in which it just or convenient to do so.” 

14. The Full Court went on:

    Ultimately each case will involve an overall assessment of a number of factors to determine the just or convenient result.  Not all cases with the same identity of factors will necessarily produce the same result because of varying weight individually and comparatively.  We perceive that a real though perhaps subtle difference exists between, on the one hand, establishing on the balance of probabilities a risk or danger of a disposal of property intended to defeat an order, and on the other hand, providing to the civil standard as an independent issue that a scheme to defeat an order exists.

15. And the Full Court was in that territory because the then federal magistrate who dealt with the matter at first instance, cited Waugh & Waugh for the proposition that there was a threshold finding to be made that there was a scheme afoot to defeat a claim.  The Full Court went on:

    While ultimately a particular factor may overwhelm others, it is generally unwise to commence with a rigid focus on finding to a particular standard of proof one or more of a number of factors relevant only at a discretionary level and subsidiary to the ultimate purpose.

16. The Full Court then seemed to express the opinion now advanced by learned counsel for the husband::

    In conclusion, we do not think Waugh, properly understood, lays down any incorrect principles.  However, we consider that Lucev FM erred by focusing unduly on whether the evidence established a scheme of the wife to remove assets to defeat an order in the substantive proceedings.

17. In Mullen & De Bry, in re-exercising discretion on the facts before the Court in that case, the Full Court accepted that there was an arguable case in the substantive matter, and noted that there was a Response to the husband’s application asserting that he should receive no property settlement; that the wife resided overseas; that there had been a sale of an asset without notice to the husband; there had been the conversion of real estate within the jurisdiction to cash; the wife was silent about her intentions, and; there were no available enforcement proceedings.  In that case an injunction was granted.

18. The situation before me is very different.  The wife says she has not had sufficient time to consider the proposal; that the entire proposal has only been revealed today, and even then she has questions arising from an apparent inconsistency in the documents.  If the subject properties at Suburb I and Suburb J ultimately have a value that is much greater than their current value, then the settlement proposed by the husband will reduce the pool of assets and disadvantage her.  The wife notes that the husband has apparently changed his mind about disposing of the properties, reversing the position he announced to this Court in May last year, and the position he maintained as recently as January 2014, in an affidavit filed in the Supreme Court proceedings, in relation to what would be the best use – the appropriate way, of dealing with those two properties.

19. I must say, in relation to the his representations in the Supreme Court proceedings, I appreciate that there may be different considerations in the evidence one would put before the Supreme Court in proceedings under s 66G of the Conveyancing Act to separate jointly owned property, to the matters that he might want to agitate before this Court.  Nevertheless, it is clear that the husband had a course in mind, consistent with the original purpose of purchasing those properties, many years ago and, in May of last year and recently, he reaffirmed that course.

20. It is also clear he changed his mind, if not earlier, then probably just before the proceedings were recommenced in the Supreme Court.  I should have said the Supreme Court proceedings were settled in mid 2013 with the parties walking away without substantive orders.  The proceedings were then reinstituted by the entity associated with the husband’s brother, in November 2013.  There is evidence from correspondence that reveals that just before the proceedings recommenced, the husband was actively considering and getting advice on disposing of his interest in at least one of those properties.

21. As I understand the husband’s case, he says “I have met the obligations under the orders of January 2011 and have given the wife 14 days’ notice of the proposal”.  It is contended on behalf of the wife that the fact that not all of the detail of the proposed settlement was fleshed out in the 26 February letter, is not relevant and that there has been substantial compliance with the January 2011 orders because there is no meaningful aspect of the proposed agreement that has not been revealed and was not revealed 14 days ago.  It is the husband’s case that to his mind, the deal is done.  What remains is just the formality of executing documents. Importantly, the husband deposed that the deal could be lost if he asked his brother for further time for him (and the wife) to consider the proposal.  Over the luncheon adjournment an inquiry was made of the husband’s brother for further time and that request was rejected. 

22. Next, the husband says there is an urgent need for liquid funds.  There is a commitment, he says, which amounts to $400,000 after-tax to be paid by him for the support of the wife and that outgoing needs to be funded.  Importantly, he says, he has a commitment for legal fees for his upcoming criminal proceedings.  He also says that an alternate suggestion proposed by the wife is unworkable.

23. Some of the reasons for me granting the wife’s Application for additional time to consider the proposal will appear from the transcript of the interplay with the husband’s counsel, during submissions.  The lifeblood of property settlement proceedings – of all financial proceedings, is disclosure.  The orders made in January 2011 did not set out in full the husband’s obligations in relation to the wife as far as disclosure went.  On every day, he was obliged to keep her advised about matters that would be relevant to her claim in the proceedings.  There could be no higher stakes in this case than those related to the proposed settlement.

24. One of the first steps in relation to Mareva injunctions is to look at the wife’s claim.  The wife’s claim is said to be 50 per cent of the property, not $25m, and the husband’s response is that she should receive 20 per cent, not $10m.  Even if the wife’s claim was expressed to be a dollar figure, say$25m, she would have a right, without leave, to amend her claim at any time until the final trial dates had been fixed and invariably she would be allowed to amend her claim even after the final trial date had been fixed.

25. The Court’s power in relation to s 79 is to change interests in property.  It can be done on different days.  It can be done by agreement halfway through the life of the normal proceedings, but there is one coherent property settlement.  The property is valued at the time the decision is made.  If there is a contested hearing then the relevant values are those at that time.  These proceedings are not at the stage of a final hearing.  As I understand it, the matter has yet to be even allocated to a judge’s docket.  Interlocutory matters have been put before three different judges and the case is nowhere near a final trial.  I do not know what value the pool of property will be found to have.  There could be a change in the zoning, for example, in Western Sydney and the pool of assets will be more like $400m than $40m.

26. So all of the evidence about the properties having a value of something today is interesting but is not determinative of anything.  If it pleases the parties to settle their case or to settle some other case on the basis of that evidence, well and good, but that evidence does not mean that these properties are worth that amount of money for the purposes of disposing of them over the objection of one party. 

27. In any event, the wife is entitled to be consulted.  The husband changed his mind and he knew he was contemplating disposing of his interest in one or more property.  He knew he was going to talk to his brother about disposing of one of the properties.  He did not alert the wife to those things, let alone seek to involve her in the negotiations.

28. Parties who want urgent orders are expected to act in a timely way.  They are expected to bring their matter before the Court; give notice; and account for all of the time between the time the circumstances giving rise to the urgent issues arose and when the other party was notified.  In my opinion, the moving party, should be the husband, not the wife.  He wants something done in the course of an interim step in property settlement proceedings that could not be undone when s 79 is exercised in this case.  The authorities in relation to interim property orders, for example, Strahan and similar cases have left intact that part of the law whereby the Court should avoid doing something on an interim basis that cannot be undone on a final basis.

29. Now, it could be that the husband is correct.  It is perhaps even stronger than that, but that does not mean he can take all of the time – months – to think about this issue, give the wife virtually no time to think about it, and expect the Court sanction that conduct.  It is not enough to say, that the wife is unlikely to come up with another solution or that because she is overseas it is not practicable for her to get advice on the issue.  She is entitled to the opportunity to take advice, an opportunity which the husband clearly allowed himself.  It might even be that allowing her that opportunity will lead to a good outcome.  Except for the need to secure the husband’s legal representation for the criminal trial, the parties are in exactly the same interest on these issues.  It is in both their interest to maximise the benefit they get out of their property.  It is in both their interests to avoid a mortgagee sale.  It is in both their interests to make sure that there is no money unnecessarily wasted on interest on debt or on legal fees.

30. We do not have the benefit of the reasons for judgment of 9 May 2013.  I mean no criticism of his Honour for that.  I assume that the parties were present when the decision was given, but in any event they could have asked for those reasons to be taken out.  I infer from the husband’s case presented to me, that his Honour was satisfied either that the wife’s involvement in the affairs of the husband’s company was going to be unhelpful or destructive or, as the husband’s case was presented, that her involvement in the company was only ever intended to meet the requirements of the superannuation legislation and that could be fixed by a change in corporate trustee and the wife being on the board of that new entity.  For my part however, I do not have a basis for excluding her from the decisions associated with the settlement of the Supreme Court proceedings.  To do so would be inconsistent with the orders that have been made in the past.  It would be inconsistent with the Family Law Act and with the requirements of natural justice.  The wife is entitled to an opportunity to be heard about this.  She cannot be adequately heard today.

1. If she causes damage by this, then there is a remedy in the form of the undertaking that I am told is available and which I will take from her.  That is an undertaking that she will meet the damages found to have arisen as a result of the order I make today to any person, if a court subsequently finds that those damages should be met by her.

2. I am minded to give the wife a period of two weeks to consider the proposal.

I certify that the preceding thirty two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 14 March 2014.

Associate:

Date:  21 March 2014