Price and Underwood and Ors

[2008] FamCA 1072

FAMILY COURT OF AUSTRALIA

PRICE & UNDERWOOD AND ORS [2008] FamCA 1072

FAMILY COURT – PROPERTY – Interlocutory injunction to protect property – Not justified – Dismissed – Costs against applicant

APPLICANT: Ms Price

RESPONDENT: Mr Underwood

SECOND RESPONDENT: N Company Pty Ltd

THIRD RESPONDENT: N Underwood

FOURTH RESPONDENT: J Underwood

FIFTH RESPONDENT:

V Pty Ltd

(In its capacity as trustee of the
V Superannuation Fund)

FILE NUMBER: MLC 13425 of 2007

DATE DELIVERED: 3 November 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Jordan J

HEARING DATE: 3 November 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms C.E. Molyneux QC

SOLICITOR FOR THE APPLICANT: Maria Barbayannis & Co

COUNSEL FOR THE THIRD AND FOURTH RESPONDENTS: Mr P.M. O'Shannessy

SOLICITOR FOR THE THIRD AND FOURTH RESPONDENTS: Middletons

Orders

IT IS ORDERED BY CONSENT

1. That V Pty Ltd (in its capacity as trustee of the V Superannuation Fund) be restrained until further order from distributing any money it holds on behalf of (member number …) Mr Underwood.

IT IS FURTHER ORDERED

1. That until further order the Third and Fourth Respondents either personally or via their servants or agents be restrained from diminishing the value of, dealing with, disposing of, encumbering or expending the following:

   (i)     the A Street property;

   (ii)the assets and/or income of the A Investment Trust;

   (iii)the assets and/or income, if any, of the estate of the late Mr Underwood;

   (iv)any funds received or which may be received by way of insurance benefits or superannuation entitlements of the late Mr Underwood, including but not limited to from ING, V Superannuation Fund and AXA (excluding the funds received by way of life insurance benefits in the approximate sum of $136,000).

2. That otherwise all interim applications be dismissed.

3. (a)     That the Applicant pay the costs of the Third and Fourth Respondents of and incidental to these proceedings and that such costs be as agreed and failing agreement as taxed.

   (b)That payment of such costs be stayed pending agreement between the parties or pending determination of these proceedings.

4. Certify for counsel, including Senior Counsel.

IT IS DIRECTED

1. That the Amended Initiating Application be listed for further mention before Registrar Field by way of telephone-link at 4.00 pm on 17 December 2008.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 13425 of 2007

MS PRICE

Applicant

And

MR UNDERWOOD

Respondent

And

N COMPANY PTY LTD

Second Respondent

And

N UNDERWOOD

Third Respondent

And

J UNDERWOOD

Fourth Respondent

And

V PTY LTD (In its capacity as trustee of the V Superannuation Fund)

Fifth Respondent

REASONS FOR JUDGMENT

EX TEMPORE

1. There are interlocutory applications before the Court by the applicant and the third and fourth respondents, seeking injunctions in relation to property, the subject of substantiative proceedings between the applicant wife and the estate of her deceased husband, and ancillary proceedings between the applicant wife and the third and fourth respondents, who are the adult children of the deceased from a previous marriage.

2. It is clear that there is an unhappy history between the parties and the litigation to date is extensive and has, no doubt, been very expensive.  It appears from the material that there are also high levels of mistrust.  I do not propose to exacerbate the situation by descending to a detailed review of the history or of the various contentions of the parties in relation to the conduct of the other.

3. Simply stated, the wife instituted proceedings against the husband shortly before his death in April of this year.  She subsequently joined the third and fourth respondents.  The material discloses issues as to the nature and duration of the marriage, which issues are likely to have a material bearing upon the assessment of the wife's entitlement in due course. 

4. One of the fundamental questions for the trial will relate to the identification of the property of the parties to the marriage.  The identity of the property of the husband, wife and third and fourth respondents is largely the subject of agreement.  The most significant issue at trial will relate to what property should be included in the list of property of the husband and/or the wife to be the subject of orders for property settlement.  The husband was diagnosed with a serious life-threatening illness in about April of 2005.  Since that time, he has entered into a number of transactions which have had the effect of vesting in the wife, on the one hand, and the third and fourth respondents, on the other, substantial property. 

5. Whilst there has not been any formal assessment of the value of most of the property, it is common ground that by far the most valuable pieces of property are two residential properties in a suburb of Melbourne; one at B Street, registered in the wife's name and occupied by the wife and two teenage children of the husband and the wife, and another at A Street, registered in the names of the two adult children, the third and fourth respondents. 

6. These properties have not been the subject of any formal valuation.  However, there is before the Court some evidence of market appraisals, which suggest that the B Street property may have a value in the vicinity of $1.9 million and the A Street property may have a value in the vicinity of $1.45 million.  Those values are not admitted but, at this stage, they are the only evidence indicative of value.  In her submissions, wife's counsel embarked upon an appraisal of her own, based on calculations, which was to the effect of suggesting that the A Street property could have a value as high as $2.65 million. 

7. On any view, on the appraisal evidence of the third and fourth respondents, a combined value of the two properties is of the order of 80 per cent of the entirety of the property in issue.  On the appraisal figures submitted by counsel for the wife, the combined value of the real estate properties would be in excess of 90 per cent of the value of the property in issue. 

8. In the material and applications, the third and fourth respondents have evidenced an intention to argue that the A Street property registered in their names is their property, to which they have proper legal and beneficial entitlement.  The wife, in one of her amended substantiative applications, seeks orders from this Court to set aside the transfer of the A Street property to the third and fourth respondents.  The A Street property was previously held by a trust, the A Investment Trust. 

9. The wife wishes to argue that the transactions which purported to effect her transfer of legal and equitable ownership to the third and fourth respondents should be set aside.  In her application, the wife seeks a number of consequential orders which would result in the direct transfer of that property to the wife, or would have the effect of securing transfer of that property to the wife, or, alternatively, have it dealt with in other ways which would enable it to be included in the property pool to be considered by the Court at the final hearing.

10. It is important to note that the husband, through legal representatives, has not appeared in these cases, and I understand the personal representative has not yet been appointed. 

11. The material filed in support of this application is quite vast.  Included in it, is evidence that the third and fourth respondents have, I gather from June of 2005, affirmed in sworn testimony that they are prepared to consent to an order restraining them from transferring or encumbering the A Street property, or otherwise dealing with it pending determination of the matters before the Court.  It is argued on behalf of the wife that additional property should also be the subject of preservation orders. 

12. It is argued by the third and fourth respondents that, in addition to their proposed consent to orders, there have been other arrangements made between the parties by agreement or the subject of consent orders, which would secure to the wife 90 per cent of the property, the subject of arguments for the trial Judge. 

13. By applications filed on 24 June and 5 September, the wife seeks orders designed to secure more than is being offered.  In particular, she seeks orders for the repayment or retention of appropriated funds, including, in round figures, some $130,000 from ING, $80,000 from Goldman Sachs, $25,000 withdrawn from Westpac and $37,000, being the proceeds of sale of some shares. 

14. It is common ground that the named funds will be paid to, or have been paid to, or have been utilised by, the third and fourth respondents during the course of this year.  The third and fourth respondents argue that they are entitled to those funds, or have used some of those funds to meet expenses incurred as a consequence of their father's treatment and burial.  The wife, for her part, challenges the entitlement of the third parties to those funds and/or the utilisation of any of them towards the expenses previously referred to.  She is not prepared to concede payment of funeral expenses as a proper allocation of those funds.

15. Her argument is that all of the substantial property, including the B Street and A Street properties, should be included in the property pool and distributed between the parties in accordance with section 79.  The third and fourth respondents argue that they have legitimately acquired legal title to A Street, and that that should be excluded from the property, the subject of section 79 orders. 

16. As to the wife's case, in relation to the injunctions necessary to secure the return of the $270,000 I have previously identified, it is argued on behalf of the wife that, if she succeeds in convincing the Court that A Street was and should be regarded as property of the husband, because the trust which transferred to the third and fourth respondents was, in fact, the alter ego of the husband, and the transfer was designed to, or had the effect of, defeating the wife's claim, then the property pool could be as much as $5.13 million. 

17. It is argued that the wife's entitlement, on her own case, could be as high as 70 per cent or $3.6 million, and that without A Street the remaining property would be insufficient to meet her claim.  In essence, it is argued that she could win the battle but lose the war if the third and fourth respondents retain the A Street property and retain it beyond the jurisdiction of the Family Court.

18. In my view, that proposition begs the question.  If the Court determines that A Street is not matrimonial property but that the legal and beneficial title to that property belongs with the third and fourth respondents, and that it should not be included in the property pool, then that is the end of that aspect of the case and the entitlement of the wife and the entitlement of the husband, through his estate, to property and the distribution thereof will be in relation to the remaining property. 

19. If the Court determines that the trustee was the alter ego of the husband and that the transfer to the third and fourth respondents was designed to, or had the effect of defeating the wife's claim, then, in my view, as the law stands, there can be little doubt that the Court has a wide range of powers of rectification to make the very types of orders, in fact, sought by the wife in her own amended application filed on 17 April. 

20. What the third and fourth respondents quite properly agree to is the preservation of the most significant property in issue - that is A Street - which will, until further order, remain registered in their names and unencumbered.  There will be available to the Court more than sufficient property, in my view, in those circumstances, to meet the 50 to 70 per cent entitlement of the wife, as identified in the parameters of the arguments.

21. In the meantime, in the material before me, the third and fourth respondents have a prima facie entitlement to the funds identified in the $270,000 referred to earlier.  On the evidence before me, it would appear highly probable that they did, in fact, provide care to their father, that they did, in fact, incur expenses in relation to his treatment and burial.  I do not find it a remarkable suggestion that the third respondent may indeed have been required to forego income for some time in order to provide intensive care.  In my view, it is not unreasonable that they be entitled to access what, in any event, may be found to be theirs and, on all of the arguments, is less than 10 per cent of the estate and, more realistically, may well be less than 5 per cent of the totality of the property in issue between the four parties in this case.

22. I have been handed some draft written orders.  In light of my determinations, it appeared to me that, consistent with the applications, what I have found and what has been proposed by the third and fourth respondents, orders number 2, 5, 6 and 7 would be appropriate.

23. Each of the parties makes application for orders for costs in relation to these proceedings.  I agree that it is appropriate that I determine that matter.  The case has taken the best part of a day.  The material filed is extensive.  It would be unfortunate if a trial Judge had to spend an extra day rereading this material and hearing the arguments. 

24. In terms of the merits of the application, I agree that it is appropriate to take a broad overview of the matter.  On the material before me, it is entirely understandable that the wife would have a reservation about the circumstances leading to the transfer of the A Street property, and that she would be anxious about the prospect that, should she be successful in any arguments in relation to that property, the property could be disposed of pending the determination of those matters and could be dealt with in ways which would prevent the wife enjoying the fruits of any successful argument.  In the circumstances, her initial application was one she was entitled to bring.  I am not aware of reading material about any earlier discussions between the parties one way or the other which may have avoided the application but, as my starting point, I will assume that it was reasonable to bring the application. 

25. In my view, however, the letter and the spirit of the response of the third and fourth respondents, both in their filed responses and importantly in their affidavits in support, were entirely appropriate.  The positions they took represented an appropriate response to the wife's concerns and an appropriate proposal which should have alleviated the wife’s concerns and alleviated the need to proceed beyond that point.

26. I accept the submission that, in those circumstances, the subsequent response of the wife in filing a further application seeking to attack comparatively modest sums of money was, in all the circumstances, excessive, has been unnecessary and has exposed the parties to further unnecessary expense.  She has been unsuccessful broadly in seeking to persuade the Court that the rather Draconian restraints proposed by her should be made.  An illustration of the extent to which she went was to seek to deny even the use of some portion of those funds for funeral expenses of her deceased husband.

27. In the circumstances, I take the view that the third and fourth respondents should not be exposed to the costs associated with this exercise, and that the wife should meet those costs.  I note that, on the papers, each of the parties has substantial property available at their disposal.  Neither party is on Legal Aid.  What I am not aware of is the wife's capacity to meet an order for costs at this time.  In those circumstances, I propose to take up the fallback offer made by counsel for the third and fourth respondents, that is, that payment of those costs be stayed until the determination of the proceedings.

28. The third and fourth respondents are likely to have access to additional funds as a result of these orders, which hopefully will alleviate the need to receive the fruits of that costs order in the short term.  In all the circumstances, I further order that the applicant pay the costs of the third and fourth respondents of and incidental to these proceedings, and that such costs be as agreed and failing agreement, as taxed. 

29. I make an order that the proceedings be transferred to a Registrar for further directions on a date to be advised. 

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Jordan

Associate: 

Date:  8 December 2008