Meeks and Meeks and Anor
[2019] FCCA 638
•15 March 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MEEKS & MEEKS & ANOR | [2019] FCCA 638 |
| Catchwords: FAMILY LAW – Property proceedings – application for injunction restraining wife dealing with discretionary trust – purpose of the injunction is to maintain the current status quo – just and convenient – Mareva or asset protection injunction – balance of convenience – risk of asset dissipation – matters to be considered. |
| Legislation: Family Law Act 1975 (Cth), ss.4(1)(e), 75(2)(m), 90AF, 114 |
| Cases cited: G & T (2004) FLC 93-176 |
| Applicant: | MR MEEKS |
| First Respondent: | MS MEEKS |
| Second Respondent: | COMPANY [A] PTY LTD |
| File Number: | ADC 5045 of 2018 |
| Judgment of: | Judge Brown |
| Hearing date: | 7 March 2019 |
| Date of Last Submission: | 7 March 2019 |
| Delivered at: | Adelaide |
| Delivered on: | 15 March 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr McGinn |
| Solicitors for the Applicant: | Dickson Wright Lawyers |
| Counsel for the First Respondent: | Ms Diamantopoulos |
| Solicitors for the First Respondent: | Welden & Colucio Lawyers |
| Counsel for the Second Respondent: | Ms Pyke QC |
| Solicitors for the Second Respondent: | Welden & Colucio Lawyers |
ORDERS
That interim orders 1, 2 & 3 sought by the Husband in the Initiating Application filed 5 December 2018 be dismissed.
Any application for costs by the First and Second Respondents for cost be made within 28 days of today’s date.
Pursuant to Section 26 of the Federal Circuit Court of Australia Act1999 the parties and their legal representatives do attend a Conciliation Conference with a Registrar of the Court on 5 June 2019 at 11am.
Unless otherwise exempted from payment the Applicant must pay the Conciliation Conference fee in accordance with the Family Law (Fees) Regulation 2012 twenty eight (28) days prior to the Conciliation Conference.
The respondent file and serve a statement of her financial circumstances within 14 days of today’s date.
No later than 22 May 2019 the parties exchange informal discovery of all relevant documents as specified in Order 24 Rule 4 of the Federal Circuit Court Rules.
No later than 29 May 2019 the parties exchange all valuations or appraisals of any assets of property in dispute between them both real and personal together with all relevant financial documents as specified in Rule 24.03 of the Federal Circuit Court Rules.
Further consideration of the matter is adjourned to 11 June 2019 at 9:30am
IT IS NOTED that publication of this judgment under the pseudonym Meeks & Meeks & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 5045 of 2018
| MR MEEKS |
Applicant
And
| MS MEEKS |
First Respondent
And
| COMPANY [A] PTY LTD |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Mr Meeks “the husband” and Ms Meeks “the wife” were married on … 1994. They separated in mid-2018. They have two children, both of whom are now adult. They are Ms B aged 23 and Mr C aged 22.
On 5 December 2018, the husband commenced proceedings to implement a settlement of matrimonial property between him and the wife. He is employed as a tradesman at an annual salary of $59,000.00. The wife is customer service officer, who is employed by Employer. She estimates her annual wage to be somewhere in the vicinity of $45,000.00.
The parties’ major asset is their former matrimonial home situated at Property D. It is valued at $640,000.00 and is unencumbered. The husband has superannuation worth $120,000.00; whilst the wife has superannuation worth $50,000.00. They have a joint term deposit of approximately $100,000.00.
The parties are each aged in their early fifties. Although Ms B and Mr C continue to live at home, they are financially self-supporting. Accordingly, but for one idiosyncratic factor, the issues arising between the parties, as to how their pool of assets, worth somewhere in excess of $800,000.00 is to be divided, would not be unduly complex.
However, the husband and wife are not the only parties to the proceedings. The husband has joined a company, Company [A] Pty Ltd as trustee of the Company [A] Pty Ltd Family Trust, as a second respondent to the proceedings. These are entities created by the wife’s parents and which are now controlled by the wife and her brother.
By way of final orders, the husband seeks that the wife transfer to him her interest in the Property D property, together with the sum of $84,000.00. In default of payment, he seeks the following order:
“That in default of the payment of the sum of $84,000 in full the wife do all things and execute all documents necessary to cause the assets of the Company [A] Pty Ltd Trust to be sold and for the proceeds of such sale shall be applied:
firstly in payment of the sums outstanding pursuant to these orders to the husband; and
the balance to the wife.”
There is no controversy that the wife is a director of Company [A] Pty Ltd, along with her brother Mr E. It is the corporate trustee of a discretionary trust, which owns five parcels of real property, three of which are residential properties, which are rented producing regular income; and two of which are vacant pieces of land, producing no income.
The wife has deposed that the municipal value of the various parcels of land is a little over $1 million. The husband asserts that it is closer to $1.165 million. For obvious reasons, if these sums are included in the proceedings, it would significantly increase the property subject to these proceedings. It would also create issues relevant to the interests of a third party, namely the trust itself.
On a final basis, the wife seeks orders that would result in an equalisation of the parties’ superannuation and an equal division of the other assets of their long marriage, chiefly the former matrimonial home and the term deposit. Significantly, in the context of the current proceedings, she seeks the following order:
“The Respondent [wife] shall hereafter be entitled to retain all her estate and interest both at law and in equity in Company [A] Pty Ltd and the Company [A] Pty Ltd Family Trust without any further claim by the Applicant.”
In its response, filed 8 February 2019, Company [A] Pty Ltd seeks the dismissal of any claim against it and that the husband pay its costs. Mr E (the wife’s brother) has sworn an affidavit in support of these orders. Annexed to this affidavit is a letter from accountants, Mr F, who maintain the accounts and prepare the tax returns for the company.
In this context, Mr F has written that the wife has not been directly involved in the operation of the trust, which was settled in 1995 by the wife’s parents, Ms G & Mr H, who owned the properties subject to the trust prior to its settlement. It is Mr F’s position that the trust has never made any distribution of capital since 1995.
In her statement of financial circumstances, the wife has conceded that her interest in the Company [A] Pty Ltd Family Trust and any unpaid distributions to which she is and may in future be entitled, are to be accounted as potential financial resources for her. She refutes, however, any suggestion that trust property should be included in her and the husband’s pool of matrimonial assets available to be divided between them as a consequence of the current proceedings.
Underpinning her assertion, in this regard, is her contention that the husband has made no direct or indirect contributions towards the acquisition, conservation and improvement of any item of trust property, which was owned by the wife’s parents prior to the marriage between the parties.
In this context, issues have arisen whether it is proper for the court to make an injunction restraining the wife from exercising any powers available to her, as a director of Company [A] Pty Ltd pending the resolution of the property proceedings between her and the husband. In particular, the husband seeks the following interim order:
“ Until further order, the wife be restrained, and an injunction granted restraining her from:
a) Exercising any power as trustee or as a director or office holder of a trustee company from paying or causing to be paid or distributed to any person any income or capital or making any loan or advance to any person without the written consent of the husband first being obtained or by order of this Honourable Court save and except for utilities, rates and taxes, levies, accounting and administration fees and other like usual outgoings in respect of the assets of the trustee of Company [A] Pty Ltd Family Trust.
b) Exercising any power of appointment in respect of any trust of which the wife is an appointor;
c)Resigning as the director of any company which is a trustee or as a trustee of any trust”[1]
[1] See order 2 of the interim orders sought of the Initiating Application filed 5 December 2018.
It is clear from the husband’s affidavit material that he does not trust the wife. His evidence can be summarised as follows:
·He is not a financially sophisticated person and during the parties’ marriage left money matters to the wife;
·Since separation, he asserts that he has had access to joint bank records for the first time and has discovered that $265,000.00 has been withdrawn, by the wife, for purposes unknown to him;
·The parties’ son Mr C has told him he has a bank account containing $130,000.00. In addition Mr C has recently purchased a house. The husband is unaware how Mr C could be in such a position and, as a result, he is suspicious;
·His understanding is that he is not within any class of discretionary beneficiary of the trust but his wife and children are.
In these circumstances, the husband instructed his solicitor to lodge a caveat over each of the parcels of land subject to the trust. I have not been provided with copies of these caveats and do not know the nature of the interest claimed by the husband on which each caveat was based.
However, what is clear is that the solicitors for Company [A] Pty Ltd warned the caveats concerned and each lapsed in mid-December of 2018. In addition, the wife is disinclined to provide any undertaking in respect of her future involvement with the trust, it being her position that such an undertaking is not necessary and the husband’s application for an injunction is misconceived.
The wife’s evidence can be summarised as follows:
·Company [A] Pty Ltd was incorporated on … 1995 and her parents were joint directors;
·The Company [A] Pty Ltd Family Trust was established on … 1995;
·She and Mr E became directors of Company [A] Pty Ltd in … 2001, on the resignation of her parents;
·She has little to do with the operation of the trust, leaving it to Mr E and the accountant;
·She does not control Company [A] Pty Ltd. She and Mr E are the sole directors and hold the same number of shares.
·She did not instruct anyone in respect of the warning of the husband’s caveats. Again, she left the issue to Mr E;
·She denies any unauthorised withdrawals from the parties’ joint bank account, asserting that she has only used funds for legitimate household expenses;
·She has no personal contemporary knowledge of Mr C’s financial circumstances other than that she saved child endowment received by her on behalf of both him and Ms B and she accumulated these sums into term deposits;
·When Mr C turned 18, he received $66,000.00 from his term deposit;
·She and the husband have also assisted the children with their living expenses and she has encouraged them to save.
It is the husband’s position that the fact that the caveats on the various properties controlled by the trust have lapsed, as a consequence of the actions of the trust’s solicitors, which incidentally are the same solicitors utilised by the wife in the proceedings and the wife herself has declined to provide an undertaking in respect of the trust and its actions in the future, provide ample justification for the court to make the interim order sought by him.
In particular, the husband’s counsel, Mr McGuinn submits that in the absence of such an undertaking and given the lapse of the various caveats concerned, the husband can be properly concerned that, pending the outcome of the current proceedings, the trust may be re-settled or its assets moved sideways with the intent to defeat his claim. In these circumstances Mr McGuinn submits that it is proper for the court to maintain the current status quo.
On the other hand, the wife and the trust itself contend that the husband has not established any evidentiary basis to support the grant of such an injunction. To the contrary, it is submitted that the evidence does not support the conclusion that the wife controls the trust in question or has ever acted in such a way that it could be concluded that she is its alter ego or its separate structure is in some way a sham.
Rather it is submitted that the evidence indicates that it is Mr E who controls the trust and, in any event, the wife cannot act independently of him. In these circumstances, it is inappropriate that the husband should be placed in a position where he is in effect beholden to Mr Meeks in how he elects to manage the trust.
Fundamentally, however, the wife and the trust contend that there is no evidence to support a conclusion that the wife is intent on taking steps, vis-à-vis the trust which are calculated to defeat the husband’s claim for a property settlement.
Legal principles applicable
The court’s power to grant an injunction is contained in section 114 of the Family Law Act1975. Section 114(1) provides as follows:
“In proceedings of the kind referred to in paragraph (e) of the definition of matrimonial cause in subsection 4(1), the court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate, including:
…
(e) an injunction in relation to the property of a party to the marriage; or …”
The definition of matrimonial cause, arising from subsection 4(1)(e) is as follows:
“proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship …;”
Section 114(3) provides that the court’s power to grant an injunction, whilst exercising jurisdiction under the Act, is subject to considerations of what is both just and convenient. In addition the court has authority to apply any conditions to an injunction granted by it, which is considers appropriate.
Pursuant to the provisions of section 90AF the court has authority to make an injunction, pursuant to section 114, binding a third party. In strict terms, the husband is no longer seeking any specific order against Company [A] Pty Ltd itself. Rather he seeks orders that would restrain the wife from exercising her individual powers as a trustee.
However, necessarily such a restrain must have implications for Mr E Company [A] Pty Ltd in his capacity as a trustee. Given he and the wife have the same number of shares in the company; there are no other shareholders; and any decision requires a majority of shareholders for its implementation; it must mean that such an injunction will also apply to him indirectly.
The court’s authority to make an injunction under section 90AF, affecting the interests of a third party, is subject to the satisfaction of a number of conditions which are set out in subsection (3). Each such condition must be separately satisfied. They are as follows:
·the granting of the injunction must be either reasonably necessary or appropriate and adapted to effect a division of the property of the marital partners concerned [3(a)];
·further, if the injunction concerns a debt of one of the parties or both of them, it is not foreseeable, at the time that the injunction is made, that it will result in the debt not being paid in full [3(b)];
·the third party affected has been accorded procedural fairness [3(c)];
·the court is satisfied that it is just and convenient to make any injunction under concerned [3(e)];
·a number of other matters which are set out in subsection (4) and which relate to other expenses which may result to others arising from such a third party order. These matters include the taxation and social security implications of the order and the administration costs of the creditor concerned by the order [section 90AF(4)(a)(b)(c) & (d)];
·importantly, in the context of this case, if the injunction concern a debt of one of the parties, the court must consider the capacity of that party to repay the debt in the period after the order is made [section 90AF(4)(e)].
In G & T[2] O’Reilly J summarised the principles relevant to the granting of an injunction, in matrimonial property proceedings, as follows:
“The purpose of interlocutory restraining orders in a case such as this is to preserve the status quo until the trial. In order to exercise its discretion the court is required to find that there is a serious issue to be tried and that the balance of convenience supports the making of an order…
Plainly, it is also a requirement that the restraints sought be reasonably necessary in the sense that if the restraining orders sought are not made there would be a real risk of the defeat of the applicant’s claimed interest.”
[2] G & T (2004) FLC 93-176 at 78,989
Justice O’Reilly made reference to an earlier case Waugh & Waugh,[3] which also concerned the granting of an injunction in family law proceedings. The significant issue in that case concerned whether there was sufficient evidence that a party to the proceedings involved was intent on pursing a “scheme to defeat any judgment which [the other party] might obtain in the substantive proceedings, or whether [the party sought to be restrained] merely wished to trade, as he always had done, prior to and since separation”.
[3] Waugh & Waugh (2000) FLC 93-052 at 87,810
The Full Court in Waugh described this issue as “fundamental”. In this context, the Full Court was critical of the applicant’s evidence, which although replete with assertions that the other party might dispose of property under his control had not been able to produce cogent evidence that he had done so or intended to do so. In these circumstances, the Full Court declined to confirm the earlier made injunction.
Counsel for the wife and senior counsel for the second respondent submit that the situation confronting the Full Court in Waugh is analogous to the current matter. In Ms Pyke’s terminology, when it is boiled down, the husband’s position is that “he wants the injunction” and nothing more. As such, in the absence of actual evidence of any intent to deal with trust assets, contrary to the husband’s interests, the company, through its directors, is entitled to go about its business without interference from the husband.
However, more recently again, the Full Court, in M & DB[4] has corrected any misconception that the granting of an injunction, in matrimonial property proceedings, is to be determined by reference to some form of threshold issue regarding the existence or otherwise of some form of scheme to defeat a judgment exists. Rather, ordinary principles regarding the granting of interim injunctions are to be observed.
[4] M & DB (2006) FLC 93-293 at 80,996
I agree with Ms Pyke’s characterisation of the case as being one which, although ostensibly directed towards the wife, is in reality directed towards her client. As such the order sought is what is commonly referred to as a Mareva injunction. A Mareva injunction is one which is granted to prevent a party from disposing of assets with the intention of frustrating the enforcement of a judgment.[5] It is a remedy which is not to be granted lightly, particularly, if the interests of parties extraneous to the suit concerned, are affected by it.
[5] Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyds Rep 509
In Cardile v LED Builders Pty Ltd[6] Kirby J disapproved of the nomenclature of Mareva injunction preferring the use of the expression asset preservation order. This, is in effect, what the husband seeks – he seeks to preserve trust property until the final determination of the proceedings between the parties concerned. In this context, it is to be noted that the assets in question were originally the property of the wife’s parents and are not directly subject to orders sought by the husband.
[6] Cardile v LED Builders Pty Ltd[6](1999) 198 CLR 380 at 412 [80]
In Clout (Trustee) v Anscore Pty Ltd & Ors[7] Drummond J summarised the requirements, to be satisfied before a Mareva injunction should be granted as follows:
“… the requirements which must be satisfied before a Mareva order can be made against a party to an action, viz, that the applicant must establish by evidence a prima facie case, in the sense of an arguable case, that it will obtain a judgment against the particular party, that the applicant must demonstrate by evidence that there is a real risk that, unless restrained, the respondent will deal with its assets so as to frustrate enforcement of that judgment and, finally, that the Court, in granting any interlocutory relief, including a Mareva order, should generally grant the minimum relief necessary to do justice between the parties.”
[7] Clout (Trustee) v Anscore Pty Ltd & Ors [2000]FCA 727 at [6]
Such a power has been characterised as being wide in nature, but subject to the limitation that it be exercised for the purpose for which it has been conferred, which necessarily must include the prevention of any abuse or frustration of the court’s process. As such, the moulding of any interlocutory injunction must depend upon the circumstances of the particular case concerned.
In this context, the High Court held as follows:
“The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such order, at least against the parties to the proceedings against whom relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked.”[8]
[8] See Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 32
Accordingly, one of the prime purposes of a freezing order is as an aid to the administration of justice. In Cardile the High Court approved this passage and provided other principles, relating to the making of interlocutory orders, in the nature of Mareva orders, particularly in the context of their application to third parties. Following my reading of the judgment, I have attempted to summarize those principles as follows:
·It is a drastic remedy, which should not be granted lightly;
·This is because it imposes a severe restriction upon a party’s entitlement to deal with his/her assets, in circumstances where the party seeking to impose the restriction has not as yet been able irrefutably to establish to the court any such entitlement to do so in concluded proceedings;
·The purpose of such orders is not to provide de facto security in advance of judgment nor to improve the position of a plaintiff in the event of the insolvency of a defendant;
·In this context, it is likely to be difficult to quantify, with precision, the amount of damages likely to be granted on judgment and as a consequence of which it is apprehended assets may be disposed.
·This necessitates great care being taken in the framing of such orders, particularly the extent of any freezing order, as an order lightly or wrongly granted may have a capacity to impair or restrict commerce;
·In this context, the court should consider matters relating to the practicality of the order concerned;
·It is a discretionary remedy. As such, any applicant for such relief must proceed diligently and expeditiously;
·An applicant must show a reasonably arguable case on both legal and factual matters.
However, in the context of matrimonial property proceedings, it is incumbent on the court to bear in mind the following observation of Forrest J in Lampros & Anor & Lampros & Anor:[9]
“In this Court particularly, interim injunctive relief its primarily utilised to maintain things as they are, or to restore things to as they were until they were abruptly changed to the prejudice of an interested party, to protect claims that parties have or may have to substantive relief after a final hearing.”
[9] Lampros & Anor & Lampros & Anor [2012] FamCA 415 at [50]
Discussion
The first issue is whether Mr Meeks has established an arguable case that he is entitled to judgment against the trust. He has not expressed his claim, against the wife in percentage terms. The wife has indicated that she seeks an equalization of assets, in a pool which she estimates to be worth significantly less than $1m.
In contrast, after a twenty six year marriage, the husband seeks the transfer to him of the matrimonial home ($640,000.00) together with the sum of $84,000.00, presumably on the basis that the wife retain her trust assets, to which he has made no direct contribution and which were acquired by other parties around the time of the commencement of the marriage between him and the wife.
The husband seeks orders against the trust only in the event that the wife is unable to satisfy the order which he seeks in respect of matrimonial property directly attributable to the marriage. The wife seeks orders only that the trust assets be quarantined from these proceedings.
The wife does however concedes that the trust properties are a potential financial resources, to which she may have recourse. As such, the trust may have relevance pursuant to the provisions of section 75(2)(o) of the Act. In this context, it is her evidence that her parents acquired the relevant properties either before or contemporaneous with her marriage to Mr Meeks and he has made no contributions towards them.
In his application and affidavit material, apart from seeking the default order, the husband has not indicated how his claim against the trust assets is mounted. He does not specify explicitly what factors relevant to the exercise arising under section 79(4) of the Act are relevant. It is an extrapolation, on my part, that it may be his case that section 75(2)(o) is engaged. As indicated, the authorities are clear that asset preservation orders are to be carefully considered and must relate to the specific application in the case concerned, particularly in respect of the terms of any judgment sought.
In this case, although aspects of his case do appear to have the favour of an ambit claim, it is the position that, at least in theoretical terms, it could be satisfied by the existing pool of marital assets. In all the circumstances of this case, I am not persuaded that the husband has demonstrated that he has an arguable case that he will be able to maintain any judgment against the second respondent or directly against the assets of the trust, which requires the tangential infringement of the entitlements of third parties to the marriage.
In terms of the balance of convenience, the trust hitherto has existed for the collection of rent and some distribution of income. It would seem, in these circumstances, that to restrain Mr E from carrying on the trust’s affairs, albeit tangentially, would be unduly oppressive to the trust.
The trust has been in existence for many years. The husband has had no involvement in its affairs. At best, his claim against it, appears to be speculative. In this context, I bear in mind that injunctions are not to be granted lightly. Rather, there must be a firm basis, discernible from the relevant factual matrix, to justify their making. In this case, it was the wife’s parents who obtained the relevant trust property, prior to the parties’ marriage.
The wife and her brother became directors of the corporate trust at a later stage. The husband is not a beneficiary of the trust or a member of any class of persons, who may become a beneficiary. As such, he has no direct interest in the trust or any indirect interest in ascertaining whether the trust’s affairs are being properly administered.[10] In these circumstances, I am satisfied that the balance of convenience does not favour the making of the injunction sought.
[10] See Kennon v Spry (2008) 238 CLR 366
As Forrest J has pointed out and as is clear from Waugh, in the family law context, interim injunctions exist primarily to preserve assets and to prevent the subversion of the court’s processes by any premature or unfair distribution or concealment of assets, before judgment. However, prior to the making of such an order, the court must be satisfied that there is a real risk of such an outcome based on real evidence not merely apprehensive speculation.
The nub of the husband’s case, in this regard, is that the caveats lodged by him have been warned and the wife herself is not prepared to proffer an undertaking sought by him. The various caveats lapsed in the absence of any caveatable interest being demonstrated by the husband. The wife, in my view, is not required to give an undertaking simply because the husband requests it. He must demonstrate some basis for it.
In my view, the husband has not demonstrated any evidentiary basis that the wife, in tandem with her brother, will do anything in respect of the trust which is untoward vis-à-vis his interests. It is the wife’s case that she does not have any direct control of the trust. In any event, it seems improbable that, after a significant period during which the assets of the trust have remained stable, they will be liquidated and the proceeds in some way concealed.
For these reasons, the application for the relevant injunction must be dismissed. In the event either the wife or Company [A] Pty Ltd wish to bring an application for costs, they should do so within twenty eight days of today’s date. Otherwise, I will refer the matter to a conciliation conference and make the standard directions relevant to such an appointment.
For all these reasons the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 15 March 2019
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
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Civil Procedure
Legal Concepts
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Injunction
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Costs
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Discovery
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Jurisdiction
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Procedural Fairness
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