Porte and Rahma and Ors (No. 3)

[2009] FamCA 797

FAMILY COURT OF AUSTRALIA

PORTE & RAHMA AND ORS (NO. 3) [2009] FamCA 797

FAMILY LAW  -  PROPERTY  -  s 79A application by liquidator  -  receivers and managers appointed  -  third party creditor  -  interim orders

Family Law Act 1975 (Cth)

APPLICANT: Mr Porte as Liquidator of S Corporation Pty Ltd (In Liquidation)

FIRST RESPONDENT: Mr Rahma

SECOND RESPONDENT: Ms Rahma

FIRST INTERVENOR:	ASK Funding Limited
SECOND INTERVENOR	S Corporation Pty Ltd (Receivers & Managers Appointed) (In Liquidation)

FILE NUMBER: MLC 8719 of 2007

DATE DELIVERED: 19 August 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Brown J

HEARING DATE: 19 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms. Rozner

SOLICITOR FOR THE APPLICANT: Heydon & O’Loghlen

THE FIRST RESPONDENT: In person

THE SECOND RESPONDENT:  In person

COUNSEL FOR THE FIRST INTERVENOR	Ms. Umbers
SOLICITOR FOR THE FIRST INTERVENOR	Westminster Layers

COUNSEL FOR THE SECOND INTERVENOR	Mr. Atkinson
SOLICITOR FOR THE SECOND INTERVENOR	Forte Family Lawyers

Orders

1. That to the extent necessary to give effect to these orders, the orders made herein on 15 May, 2008 be suspended until further order. 

2. That the first respondent (“the husband”) vacate the property situated at C (“C property”) by no later than 5:00 pm. on 21 August, 2009. 

3. That by no later than 5:00 pm. on 21 August, 2009 and subject to the husband vacating C property, the second intervenor (“the receivers”) advance to the husband as a cost and expense of the receivership the sum of $500 to assist him with his accommodation costs. 

4. That the second respondent (“the wife”) :

   (a)vacate the property situate at R (“R property”) by 5:00 pm. on Sunday 23 August, 2009;

   (b)deliver up to the receivers the keys to the property by 9:00 am. on Monday 24 August, 2009;  and

   (c)otherwise do all acts and things necessary such that vacant possession of R property be provided to effect the settlement of the sale scheduled for 28 August, 2009. 

5. That subject to receipt by the receivers of the monthly rent from the tenant of the property at B (“B property”) the receivers advance to the husband and the wife, as a cost and expense of the receivership, the following sums :

   (a)an amount equal to 28.5% of the rent received from B property, less GST per month to the husband to enable him to rent alternative accommodation;  and

   (b)an amount equal to 71.5% of the rent received from B property, less GST per month to the wife in consideration for her care and maintenance of C property. 

6. That the payments provided for in paragraph (5) of these orders will cease upon the earlier of :

   (a)all indebtedness of the parties including the husband, the wife and/or S Corporation Pty. Ltd. to the Bendigo and Adelaide Bank (“the bank”) having been paid;  or

   (b)the expiry of the wife’s licence to occupy C property. 

7. That the receivers forthwith obtain an updated sworn valuation of the property situate at M (“M property”) from HM Valuers (or such other valuer as the receivers may nominate in the event of the unavailability of either of the individual nominated valuers or another valuer of that firm to prepare an updated valuation by 15 September, 2009) (“the valuation”). 

8. That the receivers shall take no action to sell M until 1 October, 2009. 

9. That on or before 30 September, 2009 the husband be at liberty to purchase the M property from the receivers at the valuation and in the event the husband does not exercise this option :

   (a)the receivers do, on 1 October, 2009 or as soon as practicable thereafter, appoint an agent to manage the sale of M property;

   (b)the husband remove all items belonging to him personally or by any entity of which he is a director or shareholder from M property, failing which the receivers be at liberty to deal with any remaining items as they see fit in order to properly present M property for sale;  and

   (c)the husband and the wife do all acts and things necessary and reasonably required of them to co-operate with the sale of M property. 

10. That in the event the husband exercises the option to purchase M property pursuant to paragraph (9) of these orders :

    (a)M property be transferred to no person or entity other than the husband and/or the wife;  and

    (b)neither the husband nor the wife sell, transfer, encumber, dispose of or otherwise deal with M property or an interest in M property until final orders are made in this proceeding or as otherwise ordered by the court. 

11. That on or before 31 December, 2009 the husband and/or the wife be at liberty to pay out the balance of the debt remaining due to the receivers and/or the bank after the sale of M property, failing which :

    (a)the receivers do, on 1 January, 2010 or as soon as practicable thereafter, appoint an agent to manage the sale of C property;

    (b)the wife forthwith provide to the receivers an executed withdrawal of caveat for C property;  and

    (c)the husband and the wife do all acts and things necessary and reasonably required of them to co-operate with the sale of C property. 

12. That up to and including 30 September, 2009 the husband be entitled to reasonable access to the M property upon 24 hours notice and under the supervision of employees and/or agents appointed by the receivers, such access to be for the purposes of :

    (a)the husband storing any items removed by him upon his vacation of C property; 

    (b)the husband removing any items associated with any business or entities conducted previously or currently by him; 

    (c)the husband removing all items stored by him or any entity or business associated with him in circumstances where the husband has not exercised the option by 30 September, 2009; 

    (d)for the purpose of any prospective financier inspecting N property;

    (e)the husband removing any necessary personal items stored pursuant to paragraph (12)(a) hereof for his living requirements;  and

    (f)such other purposes as the receivers may agree upon. 

13. That in default of the husband and/or the wife personally or as director, trustee or otherwise, doing all acts and things and executing all such documents as are necessary to give effect to these orders, a registrar of the Family Court of Australia at Melbourne be appointed pursuant to s.106A of the Family Law Act 1975 to execute all such documents in the name of the party in default and to do all such acts and things necessary to give validity and operation to these orders.

14. That all extant applications be otherwise listed for mention at 10:00 am. on 26 August, 2009 to confirm the compliance of the husband and the wife with paragraphs (2) and (4) of these orders  PROVIDED THAT  the mention date may be vacated upon notification to the associate to the Honourable Justice Brown by the receivers that the husband and wife have complied with their obligations and copies of such notification be provided forthwith by the receivers to all parties. 

15. That the matter be referred to the docket of the Honourable Justice Mushin.

16. That the dispute between the applicant (the liquidator) and the first intervenor (ASK Funding Limited), including but not limited to :

    (a)the claim of ASK Funding Limited to priority over the liquidator in respect of debts owed by the husband and wife to it;  and

    (b)the priority of ASK Funding Limited’s claim within the liquidation;

    be listed for hearing before the Honourable Justice Mushin at 10:00 am. on 18 January, 2010.

17. That subject to an order to the contrary by the docket judge, all then extant applications be listed at 10:00 am. on 1 March, 2010 for the hearing of any urgent interim application and to enable directions to be made for trial. 

18. That the husband’s application for an interim order restraining the wife from removing the children of the marriage H born … January, 1992, X born … March, 1993, E born … August, 1995, U born … January, 2002 and Y born … December, 2003, or any or them from the Commonwealth of Australia and his application for interim orders in respect of a car in the wife’s possession, be dismissed.    

19. That subject to any order to the contrary by the docketed judge, the first respondent (the husband), the second respondent (the wife) and the second intervenor (S Corporation Pty. Ltd.) are excused from attendance at the hearing referred to in paragraph (16) hereof. 

20. That all questions of costs of 3, 10, 18 and 19 August, 2009 and of all applications filed herein, with respect to all parties, be reserved. 

21. That the reasons for judgment this day be transcribed and copies made available to the parties. 

22. That the transcript of this day be transcribed and copies made available to the parties.

23. That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.

AND THE COURT NOTES

A.Prior to the making of these orders the wife :

(i)executed a licence agreement with the receivers in the form marked as annexure “A” to the affidavit of Mr GK sworn and filed 17 August, 2009 to enable her to occupy C property with the children of the marriage for six months, from 22 August, 2009 until 22 February, 2010;  and

(ii)executed a withdrawal of the caveat lodged by her on M property. 

B. These orders are made on the basis that they in no way purport to determine any priority of any person or entity in respect of any claims upon S Corporation Pty. Ltd. (In Liquidation) and/or S Corporation Pty. Ltd. (Receivers and Managers appointed) (In Liquidation) and/or the husband and/or the wife.

C. That the question of disbursement of any surplus of funds in the hands of the receivers upon repayment of all debts and associated costs due to the bank and/or the receivers shall be determined consequent upon the outcome of the dispute between the liquidator and ASK Funding Limited, pursuant to paragraph (16) hereof. 

IT IS NOTED that publication of this judgment under the pseudonym Porte & Rahma and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 8719 of 2007

MR PORTE AS LIQUIDATOR FOR S CORPORATION (In Liquidation)

Applicant

And

MR RAHMA
First Respondent

And

MS RAHMA

Second Respondent

And

ASK FUNDING LIMITED
First Intervenor

And

S CORPORATION PTY. LTD. (Receivers & Managers Appointed)
(In Liquidation)
Second Intervenor

REASONS FOR JUDGMENT

1. I do not propose to rehearse the background which resulted in the liquidator of S Corporation Pty. Ltd. filing an application to set aside final property orders made on 15 May, 2008 between the husband, wife and S Corporation.  It has been described in two earlier judgments, in some detail.

2. I propose to order a transcript of the submissions made to the court yesterday and today, which will be made available to the parties, at no expense to them.  That will ensure that there is a record of the various positions of the parties, yesterday and today.  I will not now summarise every submission made by the parties to the litigation as the transcript will make them clear.  There are now five parties to the litigation.  The applicant is the liquidator.  The respondents are the husband and wife.  The intervenors are ASK Funding, a third party creditor of the husband and wife, and the receivers appointed by the Bendigo Bank. 

3. Yesterday the husband sought to make an application that V Pty. Ltd. be added as a party.  The husband’s evidence is of appointing that company as trustee of each of the three trusts which own real estate which is among the subject matter of the proceedings.  The director of that company is the parties’ oldest daughter, O, who is the only of the children over eighteen.  O has sat in court throughout this hearing.  I have not heard that application to join V Pty. Ltd. and do not propose to do so today.  As I said yesterday, the application the husband sought to file appeared on its face to be misconceived and likely to muddy waters which are not already pellucid.  For that reason I did not grant leave to file it.

4. I add that yesterday I gave leave for affidavits said to have been sworn by O and by the wife to be filed, together with four affidavits sworn by the husband.  All were filed at my direction, as they should have been.  It has since been discovered that the affidavits of O and the wife were not sworn.  I will ensure that the copies on the court file are noted as unsworn.  If the deponents still say that the contents are true and correct, and wish to swear to them on a subsequent date, they can do so. 

5. The parties spent much of yesterday in discussion.  The court was then told that there was broad agreement between the parties as to a way forward and counsel for the receivers summarised that broad agreement.  From the outset it was put that it would need some hours and a degree of further discussion before the agreement could be crafted into a form which could be submitted to the court as orders to be made by consent. 

6. I heard from each of the parties after counsel for the receivers summarised their apparent consensus.  The liquidator and ASK Funding raised a number of matters and the husband and wife advanced some concerns.  It would be fair to say that at the end of the day I was not sure that the husband and wife agreed to orders being made as proposed but that was certainly within the reasonable parameters of their respective submissions. 

7. Today counsel for the receivers has tendered a minute of orders which the receiver proposes.  Prior to its tender the wife signed a licence agreement in respect of the C property and a withdrawal of caveat over the M property in anticipation of the orders proposed by the receivers being made.  Those documents are held by the receivers’ solicitors at the moment on an undertaking that if orders are not made in the terms proposed, they will be of no effect and will be destroyed.

8. The matters on which the receivers seek direction from the court might be deemed case management matters.  When should the case come back before the court?  Should there be a date next week for a mention, in case things do not go as planned?  When should directions be given for trial?  Is there a need to fix a date on which to hear any outstanding interim applications in early 2010? 

9. The liquidator has no objection in principle to the bulk of the orders proposed by the receivers but is concerned about paragraph (16) of the minute, which provides for any surplus of funds in the hands of the receivers (after repayment of all debts and associated costs to the bank and the receivers’ costs) to be held in an interest bearing account through Forte Lawyers.  The liquidator’s objection was foreshadowed yesterday.  The effect of the order proposed, and this is my word, not that of counsel, would be to starve the liquidator.  While the liquidator is in a secondary position to the receivers at the moment in respect of the bank debts, the liquidator has a number of statutory obligations.  It should not be forgotten he was appointed by the Supreme Court of Queensland and this court could not rule out the potential for that court to be involved in the determination of issues which arise in the liquidation.

10. There are a number of things a liquidator must do which are not dependant on the bank, through the receivers, achieving payment of its secured debts.  The liquidator has statutory obligations and obligations to the court which appointed him.  The receivers, albeit not court appointed, also have statutory obligations.  The husband’s submissions tend to ignore these realities. 

11. In a spirit of compromise, counsel for the liquidator proposed that assets be dealt with as proposed by the receivers but the question of ASK Funding’s priority be determined prior to the expiration of the licence given to the wife to occupy the C property.  It is realistic to assume that that property will be sold on terms which provide for vacant possession on a date after the expiration of the wife’s licence;  it is highly improbable the receivers would envisage selling the property subject to that licence, in the circumstances of this case. 

12. It should not be forgotten that it was the liquidator who commenced these proceedings.  Amongst the issues he seeks determined are whether the husband is a debtor or a creditor of S Corporation and in what sums, the entitlement to removal of caveats lodged by the wife over the remaining real properties registered in the name of S Corporation and the question of the disposition of any surplus after liquidation and whether it should be paid to V Pty Ltd.

13. Counsel for ASK Funding does not oppose the course advocated by counsel for the liquidator.  She supports an early determination of her client’s asserted entitlement to some priority over the liquidator.  A determination of ASK Funding’s claim to priority over the liquidator in respect of debts owed by the husband and wife to it and the priority of its claim within the liquidation would determine matters as between ASK Funding and the liquidator but if ASK Funding did not succeed in those claims, it would not determine ASK Funding’s claim against the husband and wife.  ASK Funding would then seek to recover the sums owing by the husband and wife out of the matrimonial pool, if the final orders are set aside and fresh orders made. 

14. The wife’s position is that she has to “go for the proposal”.  She made a number of comments.  Broadly speaking, she is exceedingly concerned about delay;  she referred to the debilitating effect of it on her, to the uncertainty of living with litigation hanging over her head and the heads of her children and to the whittling away of the matrimonial assets by legal costs and expenses, and interest. 

15. The wife is also concerned about child support or, rather, by the lack of child support.  She alleges the husband has never supported the children, save when expressly ordered to do so by the court, and that she was forced to accept the arrangement contained in the property orders made by consent on 15 May, 2008, which provided for the establishment of a child maintenance trust and included a note that the funds paid to that trust would be in substitution of any assessment under the child support legislation.

16. It should be said that throughout these proceedings, the wife has made it clear that she consented to the 15 May, 2008 orders with trepidation and because she saw no alternative.  Reasonably, she is even unhappier now, faced with the prospect of a very significantly reduced pool of assets. 

17. The husband, too, is concerned about the potential for a child support assessment to issue if the final orders are suspended, a course I proposed yesterday.  He fears that the wife could bring an application for child support.  There is no doubt she could;  indeed, she could have brought such an application at any time.  The envisaged child maintenance trust has not been created and, whatever happens, it will not hold the assets envisaged in May 2008.  As importantly, the notation to the order is only a notation;  it is not an order. 

18. If the wife brought an application for child support she would no doubt be met by the husband pleading the May 2008 orders and the intention of those orders, the financial mess in which he is embroiled, the current litigation before the court and the fact that the parties’ respective financial positions will not be known until this round of litigation concludes.  I add that the husband’s case is that he is not in receipt of any income, a proposition with which the wife does not agree.  If it is literally true, he would not be at risk of anything other than the minimal child support assessment.

1. Late in the piece, and in response to submissions from the husband, the wife also raised concerns about oral applications he made in the course of his submissions.  The first was for an order to restrain her from removing any of their infant children from Australia without the agreement of both;  the second related to a car driven by her, which used to be in his possession.

2. The husband sought an order restraining the mother from removing the children from the Commonwealth of Australia without the consent of both parties.  From the bar table he said he is very concerned about the wife’s mental state and fears she could take the two younger children overseas, never to return. 

3. There is a dispute between the parties as to the actual time the husband is presently having with his children and the nature of their current relationship.  One of the applications he made in a document filed earlier in the proceedings is for the children to live with him.  I do not propose to say anything further about that.  The court has had the opportunity to observe the mother’s passion to protect her children.  Nothing in the evidence satisfies me I should make an order in the terms sought.  To grant such an injunction the court would need far more than an assertion of concern about a party’s state of mind or mental health.  I note that the wife herself complained earlier about the potential for the husband to take the girls overseas to marry them off.  The evidence does not support any injunctions in this respect.

4. As to the car, the husband professes to be very concerned that it is not insured.  If it were to be returned to him, it would remain uninsured as his evidence is of an incapacity to pay the outstanding insurance.  Such a return would not deal with what he says is the central problem.  He has also spoken of speeding tickets incurred by the wife, to which there is reference in other material filed by him. 

5. I do not doubt that dealing with the various regulatory authorities about speeding tickets and parking tickets levied against the owner of the vehicle who denies he/she was the driver at the time of the alleged offence can be something of a steeple chase.  Nevertheless, there are procedures to deal with the issues and he should utilise them.  I do take account of his submissions.

6. The husband’s position about the orders proposed by the receivers is complicated by the making by him of what one might call an open offer.  He told the court the offer is set out in yet another affidavit he has sworn.  I did not allow that affidavit to be filed, finding it more appropriate to hear a submission.  I may do him an injustice in summarising it so briefly, but what he said is on the record and can be read in the transcript.

7. Effectively, the husband’s submission is that everybody is going to lose if the litigation continues.  There is not enough money to go round.  Everybody is going to have to cut his/her coat according to the cloth available.  The husband proposed that the dispute be resolved by the liquidator getting some $30,000 to cover his legal costs and expenses and ASK Funding receiving some $70,000 of the more than $300,000 owed to it by the husband and wife.  The remaining three real properties should be valued and the husband should have thirty days in which to purchase M property after the valuations are completed.  He spoke about potential borrowings. 

8. The other parties to the litigation heard of the offer as it was described to the court.  It transpired that the husband had given no other party notice of it, despite the negotiations between them earlier in the day.  I do not propose to ask anyone at the bar table to say anything about the offer.  Each of the parties has heard it.  They have also heard the husband say it could run in tandem with the orders proposed by the receivers and have heard him say it is negotiable.  On its face it ignores a number of realities.  It is not for this court to speculate on what compromises a creditor engaged in litigation will make but the court must take into account the legal obligations of the liquidator, which cannot so easily be compromised by an agreement made with one party or one creditor. 

9. I should also say that in the course of these hearings – this is the fourth day this matter has been before me since the registrar said it needed “a quick mention” at 9:30 am. before another trial commenced – is that the husband and wife have been diametrically opposed at times, aligned one hundred percent at times and advanced positions somewhere between those points at other times.  I am not critical of them for that.  I make that statement because I am satisfied the court needs to be cautious about relying on a specific submission made during a period of alliance which is at odds with another submission made when they are at logger heads.  I also add that the parties’ adult daughter has been in court again today.  I doubt it brings her any joy to hear these matters ventilated in the court room. 

10. I have regard to the obligations of the various participants, particularly the obligations of the receivers and liquidator.  I take into account the fact that the R property has been sold and is to be settled next week.  I do not ignore the objections the husband and wife have made to the course adopted to date by the liquidator and the receivers.  I do not decide any question about the priority of ASK Funding, or the husband’s status as a debtor or creditor of S Corporation.  Considering the evidence and submissions, I am satisfied that the only way forward, as a matter of law and consistent with the court’s obligations to exert some control over litigation, is to make orders broadly as advanced by the receivers.  When I say control I do not mean an involvement which relates to the merits of the respective parties.  I mean that the court has an obligation to ensure that the issues which need to be determined are determined and that the court is not distracted by matters which may be important to the parties but are not relevant to the litigation.

11. All applications will be listed to me on 26 August to monitor compliance with the orders made today.  If the wife has vacated R property, the husband vacated C property and the wife and children taken possession of C property under the licence signed today, that listing can be vacated. 

12. I have heard the wife’s passionate submissions in support of bringing the trial forward and her incomprehension that the case may not be determined until next year.  She has made very clear, over a number of hearings, her concern about what she perceives as the tardiness of the liquidator.  She has told the court of her desperation and that she fears she may have no choice but to withdraw from the litigation. 

13. No one who heard that submission could fail to be touched by it.  It was heartfelt and eloquent.  To some extent, she is supported by the husband in these respects.  However, having regard to what needs to occur it is not possible to determine all outstanding disputes within a month or so.  I do not rule out an agreement between the parties running in tandem with orders made today;  that has happened in other cases and could happen in this one.  But the court has to be mindful of the obligations of the liquidator and the receivers.  It cannot summarily dismiss the husband and wife’s objections to the setting aside of the final orders and their objections to the claim of ASK Funding.

14. I will fix a date in January or early February 2010 for determination of the claims of ASK Funding to priority over the liquidator in respect of outstanding debts of the husband and wife to it.  The parties will be advised of that date when the sealed copy of orders are provided.

15. As I will be unavailable to hear the trial of the competing applications for final orders, the matter will be referred to the docket of Mushin J.  The listing in January or early February 2010 will be before his Honour.  I will also fix a date in late February or early March for the matter to be mentioned before him for the determination of any then outstanding interim applications and directions for trial.  Again, that date will be in the order provided.  Obviously, his Honour may give directions for those hearings or may need to change dates.  However, the parties should act at the moment on the basis of the dates which will be included in the orders. 

I certify that the preceding
33  paragraphs
are a true copy of the reasons for
judgment herein of the
Honourable Justice Brown AM.

Dated the           day of            2009.

…………………………………………
Associate.