Mitzou and Roubanis

[2014] FamCA 455

FAMILY COURT OF AUSTRALIA

MITZOU & ROUBANIS [2014] FamCA 455

FAMILY LAW – INJUNCTIONS – Interim Orders – preservation of property – risk of dissipation by both parties – possibility of insolvency – limited access to funds pending the determination of the parties’ assets and liabilities.

Corporations Act 2001 (Cth) ss 290, 1323, 1324, 1337C
Family Law Act 1975 (Cth) ss 4, 31, 79, 80, 114
Family Law Rules 2004 (Cth) rr 15.32, 15.33, 15.45

CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345

APPLICANT: Mr Mitzou

RESPONDENT: Ms Roubanis

FILE NUMBER: ADC 1988 of 2014

DATE DELIVERED: 27 June 2014

PLACE DELIVERED: Adelaide

PLACE HEARD: Adelaide

JUDGMENT OF: Berman J

HEARING DATE: 25 June 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Richards

SOLICITOR FOR THE APPLICANT: Christopher Ganzis and Co

COUNSEL FOR THE RESPONDENT: Mr Camatta

SOLICITOR FOR THE RESPONDENT: Camatta Lempens Pty Ltd

Orders

1. The order made 13 June 2014 be discharged.

2. The parties do all things necessary and sign all such documents as may be required to cause the amount payable to “B Pty Ltd” and “C Pty Ltd” (“the Companies”) pursuant to a settlement of the proceedings in the Supreme Court of Victoria and held in the trust account of Newman Legal to be placed in an interest bearing account with a bank or such other financial institution as the parties may agree, with such account to by styled in the name of “B Pty Ltd” and “C Pty Ltd” and held upon condition that the said funds are not to be disbursed without the written consent of the parties or order of the Court, SAVE AND EXCEPT that if the parties are not able to agree the terms and conditions by which the said funds are to be held THEN in default of agreement they shall remain in the trust account of Newman Legal pending further order.

3. The respondent wife shall do all such things and sign all such documents as are necessary to enable the companies to continue to operate “Business D” (“the business”). 

4. That the applicant husband shall be at liberty to conduct “Business D” in the ordinary course.

5. That the wife do all things necessary to instruct the ANZ Bank to reinstate and continue the trading accounts of “Business D” and in particular ANZ Bank account numbers …86 and …29 to the intent that “the Companies” shall be at liberty to utilise those accounts in the running of the business in accordance with the terms of these orders.

6. That subject to any agreement between the parties, the husband will cause all and any income of the business, in particular fees payable by the franchisees of the said business, to be paid into the trading accounts of “the business” as set out in paragraph (5) hereof.

7. To the extent that information in respect of the day to day affairs of “Business D” is not available to the wife via her internet access to “Business D’s” Zero Account, the husband will provide to the wife the following information and documents:-

   (a)On a fortnightly basis, a schedule of the debtors and creditors ledgers of “the business” and respond in good faith to reasonable requests for information in regards the said business activities;

   (b)Provide the respondent with copies of all written communications between the husband and any agent of “the Companies” with any franchisee, “the Companies’” lawyers and their respective agents as and from the date of this order;

   (c)Any written advice, communication or correspondence pertaining to any legal proceedings to which “the Companies” are a party;

   (d)Any written communication pertaining to any financial negotiations with franchisees and their respective agents;

   (e)       Sales figures regarding current and future franchisees;

   (f)Any written information and/or communication in respect of any new and/or potential franchisee or franchise agreements;

   (g)Any written communication or information pertaining to any funds the companies have an expectation of or entitlement to, including from legal proceedings or otherwise.

8. From the trading accounts of “the business”, but in default from the monies held in any account as set up pursuant to paragraph (2) hereof or monies held by Newman Legal, the husband at first instance and the parties thereafter shall cause to be paid:-

   (a)The loan repayments to the ANZ Bank in respect accounts …86 and ...29 being the ANZ Bank loan in respect of the wife’s purchase of her share of the “the business” in the sum of $2,575.51 per month and the wife’s mortgage over the Suburb E property in the sum of $2,552.98 per month;

   (b)The payment of the minimum amount in respect of the personal credit cards of the husband in or about the sum of $1,163.12 per month.

   (c)The outstanding and future fees of Newman Legal.

9. The husband be restrained and an injunction is hereby granted restraining him from using the company credit cards for any personal or non-business related expense without the express consent of the wife.

10. That the parties do all things necessary to enable funds to be withdrawn from the settlement proceeds to pay and discharge the following liabilities:-

    (a)To F Accountants to enable the preparation of outstanding BASS Statements in the sum of $5,000;

    (b)Such sum as is required to put in place the point of sale (POS) system pursuant to the contractual obligations extant between “the Companies” and the franchisees;

    (c)Such sum as required to give effect to Order 11 herein;

    (d)       The outstanding rent in respect of the Suburb G property.

11. Pursuant to Rule 15.45 of the Family Law Rules the parties shall jointly instruct such accounting firm as they may agree but in default of agreement the firm of H Accountants to prepare a financial report directed to the question of the financial viability of “Business D” and whether “the Companies” are currently solvent, with such report to be published by 29 August 2014.

12. That the parties are restrained and an injunction is granted restraining each of them from withdrawing any funds for their personal use from “Business D” including but not limited to making withdrawals from ANZ Bank account numbers …86 and …29 SAVE AND EXCEPT that the husband be permitted to draw the sum of $800 per week and the wife the sum of $300 per week or such other amounts as the parties may agree.

13. That the matter be listed for mention at 9.15am on 10^th September 2014.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Mitzou & Roubanis 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 ADELAIDE

FILE NUMBER: ADC 1988 of 2014

Mr Mitzou

Applicant

And

Ms Roubanis

Respondent

REASONS FOR JUDGMENT

INTRODUCTION  

1. By Initiating Application filed 4 June 2014, Mr Mitzou (“the husband”) seeks final orders for property settlement.  Annexure “B” to the substantive proceedings seeks interim orders that would oblige Ms Roubanis (“the wife”) to do all things and sign such documents as necessary to enable the husband to continue to operate “Business D” (“the business”) free from her interference.

2. At the time of filing the application, specific orders were sought that would require the wife to give all necessary instruction to the bankers of the business to “reactivate” two ANZ accounts.

3. The husband also sought orders that the wife be restrained from interfering with the day to day operation of the business generally but in particular, from making any direct contact with any of the franchisees of “the business” without the consent of the husband.

4. The matter came before me on an urgent basis and following a referral from the Federal Circuit Court.

5. On 6 June 2014, I heard the interim application on an ex-parte basis but declined to make any orders other than requiring the husband’s solicitors to take all steps necessary to bring his application and supporting documents to the urgent attention of the wife.

6. On 11 June 2014, the parties appeared and were each represented by counsel.  It was clear that there may well be some urgency in the Court giving the matter urgent attention on the basis that the ANZ bank may act capriciously in terms of the day to day running of the business and that the dispute between the parties having come to the attention of the franchisees may be the catalyst for dissent.  The payment by franchisees of an ongoing franchise fee based upon a percentage of turnover was critical to the cash flow of the business and therefore its ongoing viability.

7. The matter returned before me on 13 June 2014 at which time counsel and the parties were able to reach an interim agreement which would enable some of the alleged strictures imposed by the bank to be loosened.  Hopefully the consent orders would preserve the position pending the wife filing answering documents and the matter being given more comprehensive consideration.

8. As anticipated, the matter came back before me on 25 June 2014 now with the advantage of the wife’s answering documents and an affidavit and financial statement filed by the husband in further response.

9. A distillation of the Consent Orders made on 13 June 2014, the interim orders sought by the wife in her response filed 20 June 2014 and the husband’s reply to those orders sought as set out in his affidavit electronically filed on 24 June 2014, has better defined the issues for determination and has also enabled the parties to reach substantive agreement.

BACKGROUND

1. The husband was born in 1961 and is currently 53 years of age.  The wife was born in 1970 and is 44 years of age.  The parties met and formed a relationship from about 2005.  Each of the parties have children from prior relationships.

2. Whilst not germane to the determination of the interim proceedings, the husband alleges that the parties commenced cohabitation in approximately 2007, whereas the wife accepts that they were in a committed relationship from 2005 but did not live together until the date of marriage being in April 2008.

3. As at the date of marriage, each of the parties held an interest in property.  The husband purchased a property in Suburb J in 2007 and the wife retained her interest in the Suburb E property purchased by her in about 1998.

4. The Suburb E property held by the wife in her sole name has significance in respect of the proceedings generally in that it has been used as security for various business and other loans.

5. In October 2012, the parties purchased the “D” franchise for about $650,000.  The business is operated by “L Unit Trust” with the trustee being “B Pty Ltd”.  The husband and the wife are directors and shareholders. There is a collateral entity namely “K Unit Trust”, the trustee of which is “C Pty Ltd”.  The companies and the trusts can be summarised generically as “Business D”.

6. The husband concedes that the parties contributed jointly to the purchase of “Business D”.  The wife sets out some better detail and asserts that the husband contributed $280,000 towards the purchase, whereas she used the remaining equity in the Suburb E property of $370,000 towards the business purchase.

7. The fact that there may be a disagreement as to the manner in which the parties contributed towards the purchase price is not a matter that needs to be considered at this time.

8. It is conceded that about the time of the business purchase, a dispute arose with two or more of the franchisees.  The relevant companies instructed solicitors in respect of the dispute and ultimately settlement was reached wherein “Business D” would receive a settlement sum of $210,000.  It was intended that the settlement sum was to be paid into the trust account of the company solicitor namely, Newman Legal.

9. As part of the obligations created by the Consent Order made 13 June 2014, the wife executed a Deed of Settlement  and settlement proceeds were paid into Newman Legal trust account, with those funds not to be dispersed without the consent of the parties or further order of the Court.

10. The separate proposals of each of the parties as to how those funds should be utilised is a matter for determination.

11. The parties separated in April 2014.  The separation remains acrimonious and the relationship between the parties features a high level of mistrust and animosity.  For his part, the husband considers that the wife has embarked upon a course of conduct which if unchecked would see the inevitable demise of the business, whereas the wife considers that the husband is seeking to keep her removed from the business and that his continued operation disregards her interests, not only in terms of the obligations of each of the parties as directors of the relevant corporate entities, but the very real financial consequence of exhausting any remaining equity in the Suburb E property.

EVIDENCE AND SUBMISSIONS

1. It is too early in the proceedings for the parties to consider any agreement as to the extent of the assets held by each of them either jointly or severally.

2. There does appear to be a concession that the business is in a parlous state.

3. Irrespective of the casting of blame, it is not controversial that the cash flow into the business is significantly compromised by the recalcitrant behaviour of the remaining franchisees.

4. It is from the income received into the business that the business expenses are met, but the parties are also dependent on the business for their personal expenses.

5. Over and above their day to day expenses, the business has maintained the ANZ Bank loans which relate to the wife’s purchase of her share of “Business D” in the sum of $2,575.51 per month and the ANZ Bank loan in respect of the mortgage over the Suburb E property of $2,552.98 per month.

6. In addition, the husband alleges that there are the following outstanding liabilities:-

   (1)Fees outstanding to O’Loughlin’s Solicitors for the Litigation (taking into account monies held)  $52,626.73

   (2)DMAW Law – legal fees  $78,635.89

   (3)DJ Blight (counsel fees outstanding)  $  3,637.00

   (4)M Accountants  $25,000.00

   (5)F Accountants  $  5,000.00

   (6)Anticipated GST  $17,250 - $40,000.00

   (7)Point of Sale System – not less than  $12,000.00

   (8)Outstanding rent on Suburb G property                  $  3,500.00

7. The wife neither rejects nor accepts at this stage the validity of the liabilities promoted by the husband.  There is agreement however that the trading position of “Business D” is poor, that franchisees are becoming more resistive to the payment of franchise fees and that the liabilities of the parties are significant and increasing.  Over and above the outstanding capital sums delineated by the husband, there are other liabilities of the business generally such as an overdraft facility and other outgoings.

8. It is a reasonable assessment that the parties are worried as to the ongoing viability of the business and therefore whether there is a question as to overall insolvency.

9. It would appear that the husband whilst concerned, does not consider that there is any issue in respect of insolvency if the wife cooperates in the sense of presenting to the franchisees and the bank a united front.

10. The husband considers that it is not in the interests of the business that the franchisees should be approached by each of the parties separately.  The wife asserts that it was necessary for her to do so in circumstances where the husband was resistive to the provision of any proper or comprehensive information as to the state of affairs of the business.

11. A consideration that the wife brings to account in terms of her attitude to the outstanding liabilities owed by the company arises from a concern that the business may not be viable.  The husband is generally more optimistic whereas at this stage the wife has a more pessimistic outlook.

ISSUES

1. The following matters need to be addressed:-

   (1)The financial viability of “Business D”.

   (2)The day to day management and operation of the business.

   (3)The extent to which settlement monies currently held by the company solicitors should be dispersed and if so, how that should occur.

   (4)The provision of information in respect of the conduct of the business.

   (5)On the oral application of the husband, an increase in the current level of drawing by the husband from $500 per week to $800 per week.

   (6)The wife’s application seeking an order of spousal maintenance or the ability to draw funds from the business to cover the shortfall in her expenses.

THE LAW

1. Neither party is seeking an order by way of interim property settlement or by way of litigation funding.  The orders that each of the parties agitate have as their principal focus the preservation of the property of each of the parties generally but in particular, the business known as “Business D”.

2. By reference to Section 31 of the Family Law Act1975 (Cth) the Court has jurisdiction to consider proceedings involving “matrimonial causes”.  This is the “original jurisdiction” of the Court.

3. Matrimonial cause is defined in Section 4 (ca) (i) as “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings…arising out of the marital relationship”.

4. The current proceedings are pursuant to Section 79 of the Act and are contained in Part VIII.  The breadth of relief is set out in Section 80.

5. In addition , Section 1337C of the Corporations Act 2001 (Cth) confers jurisdiction on the Court “with respect to civil matters arising out of the Corporations Legislation”.

6. The issues as between the parties fall into the following categories:-

   (1)Obtaining access to the business records of the entity to ensure that the husband in this case is managing the business operations appropriately and that there is financial transparency.

   (2)That the assets of the business and its underlying companies and trusts are preserved pending property settlement.

7. The wife alleges that the husband has either dissipated or that there is a real risk that he may dissipate business assets. She seeks injunctive relief.  The husband complains that whilst a level of overview of the wife is axiomatic, the actions taken by her have either damaged or will damage the viability of the business.

8. Accordingly, there is ample jurisdiction either under the provisions of the Corporations Act as to the right of a director (in this case the wife) to access company documents pursuant to Section 290. Additionally, under Rule 15.32 and 15.33 of the Family Law Rules 2004 (Cth) of this Court there is an obligation on each of the parties to make full and frank disclosure of necessary financial circumstances.

9. Additionally, under the Corporations Act there is power to make orders by way of injunctions pursuant to Sections 1323 or 1324.

10. It is an appropriate use of Section 114 (i) of the Act to make orders that would preserve the assets of the parties in order that the Court’s obligation to determine the assets and liabilities of the parties can be satisfied.

11. The protection and preservation of property of the parties is encapsulated in the decision of CSR Ltd vCigna Insurance Australia Limited (1997) 189 CLR 345 at 391:-

    A counterpart of a Court’s power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion.

12. I raised with the parties the provisions of Rule 15.45 (1) namely:-

    The Court may, on application or on its own initiative, order that expert evidence be given by a single expert witness.

13. This relates to the financial viability of the business and the reference by each of the parties, but in particular the wife, as to her concerns that the business may be “insolvent”.

14. Following further submissions, both parties agreed that such a financial enquiry should be undertaken.

CONCLUSION

1. I propose to make orders which will continue the tenor of the Consent Orders made 13 June 2014.  I will bring to account the orders sought by the wife in her response filed 20 June 2014 and the helpful reply of the husband in his affidavit filed 24 June 2014.  I propose to order some disbursement from the settlement monies held by Newman Legal and I think it reasonable that the parties have the ability to draw money from the business taking into account that the husband will be primarily responsible for the day to day business operation.

1. Accordingly, I make orders as set out at the beginning of these reasons.

I certify that the preceding forty eight (48) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 27 June 2014.

Associate: 

Date:  27 June 2014