Poulsen & Poulsen
[2017] FamCA 387
•2 June 2017
FAMILY COURT OF AUSTRALIA
| POULSEN & POULSEN AND ANOR | [2017] FamCA 387 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Proceeds of sale of former matrimonial home – Where a company in liquidation is joined as a respondent to proceedings – Where the wife seeks to receive $400,000 from the proceeds of sale – Where the wife’s application is dismissed – Where the remaining balance of proceeds of sale are to be held in a solicitor’s trust account. FAMILY LAW – PRACTICE AND PROCEDURE – Disclosure – Where the husband is to disclose documents relating to the payment of fees to solicitors and accountants. Corporations Act 2001 (Cth) ABC v Lenah Game Meats (2001) 208 CLR 199 |
| APPLICANT: | Ms Poulsen |
| FIRST RESPONDENT: | Mr Poulsen |
| SECOND RESPONDENT: | B Pty Ltd ACN … (in liquidation) |
| FILE NUMBER: | BRC | 7161 | of | 2016 |
| DATE DELIVERED: | 2 June 2017 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Carew J |
| HEARING DATE: | 19 May 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Richardson SC |
| SOLICITOR FOR THE APPLICANT: | Hartley Healy |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Alexander |
| SOLICITOR FOR THE RESPONDENT: | McInnes Wilson Lawyers |
| COUNSEL FOR THE SECOND RESPONDENT: | Mr Hackett |
| SOLICITOR FOR THE SECOND RESPONDENT: | Tucker & Cowen Solicitors |
Order
UPON THE UNDERTAKING of Ms Poulsen not to further encumber the property situated at Suburb D, more particularly described as Lot … on Registered Plan …, Title Reference … upon the release of the caveat lodged by the first respondent
AND UPON THE UNDERTAKING of Tony Crilly on behalf of Crilly Lawyers, that in relation to any remaining proceeds of sale to be held in the trust account of Crilly Lawyers (after payments pursuant to any Family Court orders including legal costs as solicitors for the sale), not to exercise or attempt to exercise any lien with respect to any outstanding costs owed to Crilly Lawyers by the applicant
it is ordered by consent
Paragraph 4 of the order sought in the Application in a Case filed on 17 May 2017 is dismissed.
The applicant shall do all acts and things and sign all documents necessary so as to complete the sale of the property situated at Suburb D, more particularly described as Lot … on Registered Plan ..., Title Reference … (“the D property”).
The applicant shall do all acts and things required by Westpac Banking Corporation as set out in the agreement between the applicant’s solicitors, Hartley Healy, and Westpac Banking Corporation’s solicitors, King & Wood Mallesons, dated 18 May 2017 at annexure A of this order.
it is further ordered
B Pty Ltd ACN … (in liquidation) shall be joined as the second respondent to these proceedings and pursuant to s 500(2) of the Corporations Act 2001 (Cth) leave is granted to proceed against the company in liquidation.
Upon sale of the D property the proceeds of sale shall be disbursed in the following manner and priority:
(a) To meet all reasonable costs of sale including agent’s commission, legal fees on the sale, auction expenses (if applicable) and payment of the usual adjustments for sale;
(b) To meet all reasonable marketing costs of sale as invoiced from time to time by the agent conducting the sale;
(c) To discharge the amounts owing to Westpac Banking Corporation pursuant to the agreement between the applicant’s solicitors, Hartley Healy, and Westpac Banking Corporation’s solicitors, King & Wood Mallesons, dated 18 May 2017 at annexure A of this Order;
(d) The remaining balance thereafter shall be held in the Trust Account of Crilly Lawyers (the applicant’s conveyancing solicitors) pending final trial and the determination of the Applicant’s Part VIIIAA Application as particularised in paragraph 6 of the Applicant’s amended Initiating Application filed 28 April 2017.
Within 24 hours of this Order and within 24 hours of any future request by the applicant, the first respondent will provide to the applicant full details of:
(a) All steps he has taken and is taking to effect the sale of the boat;
(b) All offers made in respect the boat;
(c) The location of the boat;
And shall make the boat available for inspection by the applicant upon her request.
Within 7 days of this Order the first respondent will obtain a written appraisal for the value of the boat, and will provide that appraisal to the applicant, and upon provision will consult with the applicant in respect to any changes that she wishes to make to the sale price and if the parties cannot agree the listing price shall be the price assessed in the appraisal or $55,000 whichever is the lower.
Within 7 days of this Order the first respondent shall provide to the applicant the following documents (if not already disclosed):
(a) All documents relating to the payment of fees by the first respondent in his personal capacity, to the following firms, for the period 1 June 2015 to present:
(i)Batch Mewing Lawyers;
(ii)Tucker & Cowen Solicitors;
(iii)X Forensic Accountants (including but not limited to the payment of $30,000 prior to B Pty Ltd being placed into voluntary administration).
Pursuant to Rule 13.07A of the Family Law Rules 2004 (Cth) (“the Rules”) the second respondent and its Liquidators are permitted to disclose the contents of and provide a copy of all documents inspected or copied under the Rules in Family Court of Australia proceedings BRC7161/2016 for the purposes of performing their duties under the Corporations Act 2001 (Cth).
The second respondent and its Liquidators are permitted to use all documents produced or disclosed (including correspondence) in Family Court of Australia proceedings BRC7161/2016 for the purposes of performing their duties under the Corporations Act 2001 (Cth).
In the event that the parties are unable to agree in writing within 21 days of this Order what costs Order, if any, might be made regarding the costs of and incidental to the said Application:
(a) Each party file within a further 14 days written submissions in respect of that issue; and
(b) Unless either party otherwise therein contends to the contrary, that issue be determined in chambers without the necessity of further appearance by either party.
In the event that the parties reach agreement in writing on the issue of costs, they be at liberty to file jointly, minutes of consent via e-mail to the Associate to Justice Carew.
All applications for interim orders are otherwise dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Poulsen & Poulsen and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 7161 of 2016
| Ms Poulsen |
Applicant
And
| Mr Poulsen |
First Respondent
And
B Pty Ltd ACN … (in liquidation)
Second Respondent
REASONS FOR JUDGMENT
This is a dispute between a wife, a husband and a family company now in liquidation. It concerns the net proceeds of the former matrimonial home at Suburb D (“the D property”) which went to auction in May 2017; whether a single expert should be appointed; injunctions; whether the wife should be appointed trustee for sale of a boat and disclosure.
B Pty Ltd ACN … (in liquidation) (“B Pty Ltd”) was placed into voluntary administration on 23 March 2017 and then liquidation on 10 May 2017 and is to be joined to these proceedings as a second respondent by consent.
There was a degree of urgency associated with the removal of a caveat on the property but that was resolved at the eleventh hour and no longer requires court intervention. The wife provided an undertaking not to further encumber the property and on that basis the husband signed a Withdrawal of Caveat and provided it to the wife’s solicitors.
background
The wife and husband married in 2001 and separated on 8 June 2015. They have two children aged fourteen and eleven respectively. The children continue to live with the wife but spend time with the father for five or six nights per fortnight.
The wife has re-partnered although she and her partner do not live together.
The husband has also re-partnered.
Both children attend private schools and the husband is meeting the private school fees. The current child support assessment requires the husband to pay $1,575.17 per month. The wife alleges the husband has child support arrears of $18,250 as at 27 April 2017 and contends the husband pays nothing pursuant to the assessment.
The husband is currently employed and receiving a salary of $100,000 per annum.
When the wife and husband were together they operated a business (“the family business”). The husband held the relevant business licence. The entity that operated the family business was B Pty Ltd. The wife was the bookkeeper for B Pty Ltd until August 2015.
The husband is the sole director of B Pty Ltd and the wife is the sole director of the only shareholder, R Pty Ltd (“R Pty Ltd”). R Pty Ltd is the corporate trustee for the Poulsen Family Trust which, until recently, owned the premises from which B Pty Ltd operated the family business. Those premises were sold on 12 April 2017 and the proceeds paid to the Westpac Banking Corporation (“Westpac”) in reduction of debt owing to Westpac. The husband and wife are equal shareholders in R Pty Ltd.
On 2 May 2008 the parties jointly purchased the D property where they resided as a family until their separation, whereupon the husband moved elsewhere. The wife and children vacated the D property on 13 April 2017 and now live in rented accommodation. The wife listed the D property for sale on 27 April 2017 and it went to auction in May 2017.
During the period September 2013 to February 2014 extensive renovations were carried out to the D property and the source of funds for those renovations was B Pty Ltd at least to the extent of $593,744.12. The husband contends that the total cost was $850,000.
After completion of the renovations, the D property was transferred from the joint ownership of the wife and husband to the wife alone on 8 April 2014. The only sum advanced for the renovations after this date was a sum of $6,430.65 on 30 April 2014. The consideration of $150,000 shown on the Contract of Sale was not paid by the wife to the husband.
On 30 June 2014 a loan agreement in relation to the renovation monies was entered into between B Pty Ltd and the husband alone.
It is not in dispute that the loan advanced by the company has not been repaid.
The D property was valued at $1,500,000 on 19 November 2015.
The wife entered into an agreement with Westpac as evidenced by the letter dated 18 May 2017 and requires the sum of $709,177.17 plus interest and costs to be paid to Westpac from the sale proceeds of the D property.
Until the husband’s business licence was suspended and revoked on 23 March 2017 he continued to operate the family business. The husband contends that he will not be able to reapply for his business licence for three years.
After separation the wife initially obtained employment as a project manager on a salary of $54,750 but resigned from this position on the advice of her psychologist in or about February 2016. The wife commenced part time employment as a client service officer on 14 March 2016 on a salary of approximately $22,275 per annum. The wife also receives a Family tax Benefit from the government of about $9,831.64 per annum.
The outstanding creditors of B Pty Ltd are estimated by the liquidator to be in the vicinity of $5,000,000 and include priority employee entitlements of $193,564.98 and proof of debt contractors of $2,679,834.09.
The 2016 financial records for B Pty Ltd record ‘directors’ loans as follows:
a)Loan to Ms Poulsen and Mr Poulsen (apparently referable to the property renovations) $594,300.01;
b)Mr Poulsen’s loan $168,262.10; and
c)Ms Poulsen’s loan $154,000.52.
A document annexed to the wife’s accountant’s affidavit refers to ‘shareholders loan reconciliation’ and records a joint loan from B Pty Ltd to the husband and wife for the D property of $612,708.56.
B Pty Ltd’s liquidator has issued a demand to each of the wife and husband for the monies allegedly owing to B Pty Ltd.
The wife denies owing any sum to the company. She contends that loans have been incorrectly attributed to her without her knowledge. She points out that the only loan made to her by B Pty Ltd was in 2011 (as evidenced by a loan agreement) and has been repaid.
The wife also contends that the husband has created a sham company, T Pty Ltd, in order to siphon the B Pty Ltd’s projects and deplete the company of what would otherwise have been lawful income. There are a number of documents that create a suspicion that that has been the case. The wife also contends that the husband has acted recklessly or negligently in running B Pty Ltd and has acted in a way consistent with various threats to leave her with nothing.
The husband denies being reckless or negligent in running the company and denies diminishing the property pool by directing work to T Pty Ltd. He contends that by securing employment with T Pty Ltd he has protected his income earning capacity given he no longer has a business licence.
As at 17 May 2017 the wife’s lawyer deposes to the wife having outstanding legal costs of approximately $204,217.27 and estimated future legal fees of $100,000.
The husband concedes having paid legal fees to date of $199,064. He deposes to owing his family lawyers $100,000 in outstanding invoices and work in progress with no prospect of payment without a distribution from the net proceeds of sale of the D property. His lawyer deposes to an intention to await payment until the husband is able to make payment.
The husband deposes to having made disclosure of all documents in his possession as at 18 May 2017.
The husband has paid expenses for the wife and children since September 2016 of $62,547 in addition to a provision for her legal fees of $40,000 and has paid the costs of two mediations of $12,430. The husband contends that he was unemployed for a period of six weeks up to 1 May 2017 and is now employed by his father in E Pty Ltd a company set up by his father in February 2017.
A valuation was obtained for the parties interests in B Pty Ltd (including the business) and R Pty Ltd as trustee for the Poulsen Family Trust valuing the goodwill of the business at $170,000 and the company (including the business) at $(816,800) and R Pty Ltd as trustee for the Poulsen Family Trust at $1,364,914 less loans to the parties $(44,483). The total net value of the parties’ interests was $503,631.
On the first return date of the wife’s application in the Federal Circuit Court on 26 September 2016 orders were made by consent for the wife’s financial support, disclosure and mediation and the matter was listed for interim hearing on 31 January 2017.
Thereafter the parties engaged in two unsuccessful mediations.
On 22 November 2016 B Pty Ltd obtained judgment against a third party for $701,321.17. That sum remains outstanding and is unlikely to be recovered as the third party is now in administration.
On 24 February 2017 the husband’s urgent application to sell the D property and commercial premises from where the company operated the business was dismissed. At that time the wife proposed to retain the D property and meet the outgoings on the property. The commercial premises have since been sold by the wife and the proceeds paid to reduce debt to Westpac.
The wife in her application sought to join Westpac in relation to a dispute she had with the bank about the extent of her liability under certain guarantees. An agreement has been reached between the wife and Westpac in the terms set out in annexure A to the order I propose to make.
On 11 April 2017 the husband, through his lawyers, claimed an interest in the D property and sought an undertaking that the property would not be sold or otherwise dealt with without his consent in writing and gave notice of an intention to lodge a caveat if the undertaking was not forthcoming. The husband lodged a caveat on the property on 12 April.
The husband complains that he has not been consulted about the proposed sale or how and when he might recover his personal possessions from the property.
the relief sought
injunctions
The wife seeks an injunction in the following terms:
(1)That until further order and pursuant to sections 114 and 90AF(1) of the Family Law Act 1975 (Cth) the second respondents be restrained and an injunction issue restraining them from:-
(a)Making any demand of any nature against the wife, including but not limited to a demand for the return of any property and/or payment of any loans, debts or alleged loans owing to [B] Pty Ltd; and
(b)Commencing legal proceedings against the wife other than in these proceedings.
The liquidators for the company have certain statutory obligations which they have a duty to undertake and I note that they have already issued a demand against the wife for the repayment of alleged loans and have put on record their intention to sue the wife and husband in this Court in these proceedings.
Mr Hackett conceded that as officers of the Court his clients could be rightly criticised if they embarked upon proceedings other than in accordance with their stated intention.
Given that concession I do not propose to grant the injunction sought.
expert report
The wife seeks the appointment of a single expert accountant, Mr F, to prepare a report in relation to:
a)The property, contracts and clients that have been assigned/transferred to T Pty Ltd from B Pty Ltd in the last 12 months;
b)The role of the Husband and any past employees of B Pty Ltd in the running of T Pty Ltd; and
c)Any benefits received by the Husband and Ms G from T Pty Ltd of any nature including but not limited to fringe benefits, motor vehicles, trust distributions, loan accounts with T Pty Ltd and credit cards.
Mr Richardson SC for the wife referred to numerous documents that at the very least create a suspicion that T Pty Ltd is a phoenix or sham company created at the husband’s instigation thereby depleting the assets of B Pty Ltd. He argues that as the liquidators have indicated their intention to sue in this Court it would be appropriate to have a single expert deal with this contentious issue which potentially affects all parties. He argues that the liquidators have already dismissed the prospect of investigating this matter as evidenced by their report to creditors dated 2 May 2017.
Mr Hackett for B Pty Ltd and its liquidators contends that his clients have statutory duties pursuant to the Corporations Act 2001 (Cth) to recover assets of B Pty Ltd in order to maximise the return to its creditors. Their powers to investigate include coercive powers. His clients are accountants and object to the appointment of another accountant to do their job. He submits that the suggestion that the creditor’s report referred to by Mr Richardson SC evinces a concluded view is unfair and points out that the report was written prior to the time of their appointment as liquidators and prior to the receipt by them of the many documents referred to by Mr Richardson SC.
I consider there is much force in the submissions made by Mr Hackett. It is premature to consider the appointment of a single expert particularly in circumstances where it is proposed that the fees for that expert be paid from the net proceeds of sale of the property which may turn out to be insufficient to meet the claims of all parties.
sale of the husband’s boat
On 31 January 2017 an Order was made by consent to sell the boat. It has not yet sold and the wife rightly complains about the husband’s lack of transparency in relation to his attempts to sell it.
His affidavit is an example of obfuscation in the most curious terms. The husband deposes to the boat being advertised “at a value which reflects its true value” without disclosing the listing price. He further deposes - “I felt it would be imprudent of me to accept an offer for the boat well below market value” and “I have not rejected any reasonable offers” without disclosing what, if any, offers he has received. It fell to his counsel, Mr Alexander, to inform the Court that his client had not in fact received any offers. Finally, despite the wife clearly making the location of the boat an issue, the husband remained silent.
Mr Alexander proposed a minute of order to address the wife’s complaints. I propose to make an order increasing the husband’s obligations to keep the wife informed of the sale procedure and provide for her to have input.
disclosure
The wife seeks an order that the husband disclose a number of specified documents or if they are no longer in his possession an order for the second respondent to provide disclosure.
Mr Hackett submitted that an order directed to his client was premature. He submitted that his client as an officer of the Court will comply with its duties of disclosure once it becomes a party and the documents specified are likely to be on the computer hard drive confiscated by his client and if they are they will be disclosed. I accept those submissions.
Mr Richardson SC for the wife points to ongoing difficulties in having the husband comply with his duty of disclosure hence the application. The husband provided documents shortly before the hearing and the husband has deposed to having disclosed all documents in his possession up to 18 May 2017.
It seems to me that the documents identified are all likely to be in the hands of the liquidators save for documents relating to the payment of legal fees by the husband in his personal capacity. I will therefore limit the order to those particular documents and for documents in the control of the husband that have not been disclosed.
disbursement of proceeds of sale of d property
All parties agree that the D property should be sold and that certain payments should be made. They disagree about whether the wife should receive $400,000 before the balance is deposited into the wife’s conveyancing solicitor’s trust account.
The wife seeks the following order:
(1)The sum of $400,000 to be deposited into the Hartley Healy Trust Account by way of partial property settlement and/or legal costs and/or lump sum spouse maintenance
The following facts are not in dispute:
a)The renovations to the D property were carried out during the period from approximately September 2013 to in or about February 2014;
b)At the time the renovations were carried out:
i)The husband and wife were joint owners;
ii)The wife was the bookkeeper for B Pty Ltd and remained the bookkeeper until in or about August 2015;
c)The source of funds for the renovations was B Pty Ltd in the sum of $593,744.12;
d)No repayment of that sum has been made;
e)On 8 April 2014 the husband transferred his interest in the D property to the wife;
f)The wife did not pay any money for the transfer;
g)A loan agreement was entered into between the husband and B Pty Ltd in relation to the sum advanced on 30 June 2014;
h)B Pty Ltd was placed into liquidation on 10 May 2017.
Mr Richardson SC for the wife submitted that despite the terms of the Application, no order for ‘partial property settlement’ was required because his client is the sole registered proprietor of D property. He relied upon the Full Court decision of Medlow & Medlow[1] where the Full Court held:
105. The wife’s application was for the payment of the balance of the Suburb C property proceeds to her. That payment was described by her as being “by way of interim property settlement”. That phrase is repeated in these grounds of appeal. It is difficult, therefore, to be critical of the primary judge who described her application by using the same phraseology. However, it is apparent from what we have said already that we accept that the wife was simply seeking an order that she receive the interest to which she was legally entitled and was not seeking an interim order intending to alter property rights.
[1] [2016] FamCAFC 34 at [105]
It was submitted by Mr Richardson SC that the order sought was a ‘directive injunction’ but then proceeded upon the basis that his client was really answering what he submits is, in effect, an application for an injunction made by the husband and/or the company (although no formal application in those terms is made).
All parties proceeded on the basis that an order requiring the net proceeds of sale to be held on trust was in effect a restraint on the wife’s use of her property and therefore an injunction. I accept that.
Relevant legal principles
It is perhaps trite to say that the role of the Court is to afford justice according to law and not according to some idiosyncratic notions of fairness.[2]
[2]ABC v Lenah Game Meats (2001) 208 CLR 199 at [59]
The Family Court of Australia is a creature of Statute and its powers are found with the Family Law Act 1975 (Cth) (“the Act”). The Act provides a statutory basis for issuing an injunction or making an order for the preservation of property pending the determination of the substantive proceedings. That power is to be found in section 114 (1) and (3) and Rule 14.01 of the Rules. Those provisions relevantly provide:
Section 114
(1)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:
(a)…
(b)an injunction in relation to the property of a party to the marriage; or
(c)…
(2)…
(3)A court exercising jurisdiction under this Act in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise (including an injunction in aid of the enforcement of a decree), in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.
Section 4(1) “matrimonial cause” means
(e) proceedings between the parties to a marriage for an order or injunction in circumstances arising out of the marital relationship (other than proceedings under a law of a State or Territory prescribed for the purposes of section 114AB)
Rule 14.01
Orders about property
(1) The court may make an order for the … preservation of property if:
(a)the order relates to the property of a party, or a question may arise about the property in a case; and
(b)the order is necessary to allow the proper determination of a case.
(2)– (4) …
(5)The court may make an order under subrule (1) binding on, or otherwise affecting, a person who is not a party to a case.
Although s 114 refers to the power of the Court to grant such injunction as the Court may consider ‘proper’ or where it is ‘just and convenient’ to do so, the use of the term ‘injunction’, which is a “legal term of art”[3] attracts the operation of particular principles derived from equity courts,[4] although the term ‘injunction’ “takes its colour from the statutory regime in question”.[5] The term ‘just and convenient’ is not “at large”.[6]
[3] ABC v Lenah Game Meats (2001) 208 CLR 199 at [8] – [16], [59] – [61] and [86] – [105], Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at [65] ; Mullen and De Bry (2006) FLC 93-293
[4]ABC v Lenah Game Meats (2001) 208 CLR 199 at [88]
[5] Ibid at [89]
[6] Ibid at [105]
If a prima facie claim exists and damages would not be an adequate remedy the Court may grant an injunction where the balance of convenience favours it.
The High Court in Australian Broadcasting Corporation v O’Neill[7] described it thus:
[7] (2006) 227 CLR 57 at [65]
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:
"The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."
By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
"How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks."
[footnotes omitted]
is there a prima facie case?
Upon B Pty Ltd being joined as a second respondent it intends to seek the following relief:
a)A declaration that the wife holds the property or in the event the property is sold, the net proceeds of sale upon a constructive trust for the second respondent to the extent of $610,302.14 or such other amount as is determined by this Court in respect of improvements to the property paid for by the second respondent;
b)In the alternative a charge over the property and proceeds;
c)The sums of $610,302.14 and $209,669.77 due and owing to the second respondent either as monies lent by the second respondent to the wife or alternatively as monies had and received to the use and benefit of the company;
d)Interest on the sums in paragraph (c);
e)An injunction, until trial or earlier order, to restrain the wife from dealing with the equity in the property or proceeds; and
f)Costs.
It was not suggested that a pleading or filing of a Response was a formal pre-condition to a determination of whether an injunction should be granted. The matter proceeded on the basis that the relief proposed would be sought and the evidence to support the relief was (for the purposes of this application) set out in the material relied upon by the parties. Mr Hackett raised during submissions the prospect of further relief being sought e.g. a declaration that the wife was a an officer of B Pty Ltd and that the reference to ‘directors’ included a reference to her pursuant to section 9 of the Corporations Act 2001 (Cth).
As to the proposed declaration of a constructive trust, there are of course numerous species of constructive trust which are imposed in many and varied circumstances e.g. ‘common intention’, ‘joint venture’, ‘unconscionability’.[8] The circumstances in which a constructive trust will be imposed are not closed. A constructive trust may be proprietary in nature but not exclusively.[9] Before a court will impose a constructive trust it will first consider whether there are “other means available to quell the controversy”.[10]
[8] Muschinski v Dodds (1985) 160 CLR 583; Baumgartner v Baumgartner (1987) 164 CLR 137; Giumelli v Giumelli (1999) 196 CLR 101
[9]Giumelli v Giumelli (1999) 196 CLR 101at [4]
[10]Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at [42]
Mr Richardson SC for the wife argues that B Pty Ltd does not have a prima facie case. He submits that because the wife is not a party to the relevant loan agreement and that as there can be no serious suggestion that the loan agreement was other than legitimate, B Pty Ltd could have no claim against the wife. By way of analogy, it was submitted, that if ANZ lent the husband money on an unsecured basis and he gave the money to a third party to buy a property, ANZ could not claim a proprietary interest in a property owned by that third party.
Mr Hackett for B Pty Ltd submits that the facts of this case would give rise to inter alia, a constructive trust. The reliance by the wife on her legal title to resist the repayment of the money advanced by B Pty Ltd is likely to support a finding of unconscionablity in circumstances where the money for the renovations was advanced at a time when the D property was in the joint names of the parties; the wife was the bookkeeper for B Pty Ltd and is likely to be taken to have known of the advance which was made in numerous tranches; the transfer of the D property occurred subsequent to the completion of the renovations for no payment; the loan agreement was entered into between B Pty Ltd and the husband alone at a time when the wife was the bookkeeper and the loan agreement with the husband alone was inconsistent with the reality that the benefit of the loan was to their joint benefit.
In my view B Pty Ltd have established a prima facie case as that term is explained in O’Neill.
balance of convenience
There are significant factors of prejudice to the wife. She is unable to adequately support herself and her children, a fact recognised it seems by previous orders made by consent that made certain sums available to her. Her lawyers will no longer act for her if their fees are not paid and secured and she will be left to act for herself in complex litigation where the other parties are likely to have representation. The husband has on her case acted in accordance with his threat to leave her with nothing and she will need expert assistance to investigate his dealings with B Pty Ltd.
Mr Hackett submits that if the money is paid to the wife it will not be recoverable. (Given the purpose for which the wife requires the payment that seems the irresistible conclusion.) He submits that the only uncontentious source from which B Pty Ltd can recover the money owing is D property. After sale costs and payment to Westpac there may be $700,000 remaining and this sum may be the only property available in the proceedings for distribution between the parties. Whether or not assets can be recovered from T Pty Ltd is at the moment a moot point but even if that is a viable claim, the liquidators have identified unsecured creditors of B Pty Ltd of over $5,000,000. The business operated by B Pty Ltd was valued by Mr Q in September 2016 at $170,000 and it is submitted that that may be the highpoint of recovery against E Pty Ltd. In short, a payment to the wife will deplete the available asset pool and in the process predetermine the outcome in favour of the wife.
Mr Alexander for the husband adopted the submissions made on behalf of B Pty Ltd save that in the event the wife were to receive a payment the husband should receive the same amount.
In the circumstances of this case I find that the balance of convenience favours the granting of the injunction.
Accordingly, I propose to dismiss the wife’s claim to receive $400,000 from the proceeds of sale. I will order that all of the net proceeds be paid into trust.
I certify that the preceding seventy-five (75) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 2 June 2017.
Associate:
Date: 2 June 2017
Key Legal Topics
Areas of Law
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Family Law
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Insolvency
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Civil Procedure
Legal Concepts
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Jurisdiction
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Costs
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Remedies
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Procedural Fairness
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