Sadler and Sadler and Ors

[2016] FamCA 604

FAMILY COURT OF AUSTRALIA

SADLER & SADLER AND ORS [2016] FamCA 604

FAMILY LAW – INTERLOCUTORY APPLICATIONS – Where the wife sought a raft of interlocutory orders including the appointment of receivers for certain property, income of trusts and a superannuation fund – Where the Third Intervenor resisted the appointment of receivers and sought other interlocutory orders – Where various interlocutory orders were made, including the joining of certain parties to the proceedings and the appointment of receivers 

Corporations Act 2001 (Cth), ss 80, 420, 1337C
Family Law Act 1975 (Cth), ss 106A

Family Law Rules 2004 (Cth), rr 6.03

Guirguis & Guirguis and Official Trustee in Bankruptcy (1997) FLC 92-726

APPLICANT: Ms Sadler

FIRST RESPONDENT: Mr Sadler

SECOND RESPONDENT: B Pty Ltd

FIRST INTERVENOR: Mr Miller

SECOND INTERVENOR: Trustee in Bankruptcy

THIRD INTERVENOR:

C Pty Ltd

D Pty Ltd
E Pty Ltd
F Pty Ltd
G Pty Ltd

FOURTH INTERVENOR: Mr Fuller and Mr Martini

FILE NUMBER: NCC 1976 of 2012

DATE DELIVERED: 21 July 2016

PLACE DELIVERED: Newcastle

PLACE HEARD: Newcastle

JUDGMENT OF: Cleary J

HEARING DATE: 21 July 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Levick

SOLICITOR FOR THE APPLICANT: O’Hearn Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Not Applicable

SOLICITOR FOR THE FIRST RESPONDENT: Arnold Lawyers

COUNSEL FOR THE SECOND RESPONDENT: Not Applicable

SOLICITOR FOR THE SECOND RESPONDENT: Arnold Lawyers

COUNSEL FOR THE FIRST INTERVENOR: Not Applicable

SOLICITOR FOR THE FIRST INTERVENOR: Shotters Lawyers

COUNSEL FOR THE SECOND INTERVENOR: Not Applicable

SOLICITOR FOR THE SECOND INTERVENOR: Hicksons Lawyers

COUNSEL FOR THE THIRD INTERVENOR: Not Applicable

SOLICITOR FOR THE THIRD INTERVENOR: Beazley Boorman Lawyers

COUNSEL FOR THE FOURTH INTERVENOR: Not Applicable

SOLICITOR FOR THE FOURTH INTERVENOR: Not Applicable

Orders

1. That pursuant to Rule 6.03 of the Family Law Rules 2004, the following parties be added to these proceedings:

   (a)       B Pty Ltd (“Second Respondent”);

   (b)       Mr Fuller and Mr Martini (“Receivers”) (“Fourth Intervener”).

Appointment of Receivers

1. That Mr Fuller and Mr Martini of …, Newcastle, NSW 2300, be appointed as joint and several Receivers (“the Receivers”) of:

   2.1The property and income of the Sadler Family Trust (ABN …);

   2.2The property and income of the H Trust (ABN …); and

   2.3The property and income of the I Superannuation Fund (ABN …).

2. That in exercising any of their duties under these Orders the Receivers have all of the powers ordinarily available to them pursuant to s 420 of the Corporations Act 2001, and have the right to seek further powers from the Court in the course of exercising the duties of the receivership.

3. That in exercising any of their duties under these Orders the Receivers be authorised to do anything that the Director of B Pty Ltd may do.

4. That the Receivers’ remuneration be calculated in accordance with the standard rates effective from time to time of J Consulting, Newcastle.

5. That there be no security given by the Receivers.

6. That the husband, the wife and the Second Intervenor (the husband’s trustee in bankruptcy) shall co-operate with the Receivers and shall:

   7.1Provide such documents, financial records, bank statements, tax records and any other financial document as required by the Receivers within

   
   

   48 hours of a request by the Receivers; and

   7.2Provide any other information sought by the Receivers which relates to the income and/or property of the entities in Clause 2 of these Orders.

7. That the Receivers be added as parties to these proceedings.

8. The Receivers shall submit reports to the following parties at intervals of no less than two (2) months:

   9.1The wife, by delivery by email to O’Hearn Lawyers;

   9.2The husband, by delivery by email to Arnold Lawyers;

   9.3The First Intervener, by delivery to Shotters Lawyers;

   9.4The Second Intervener, by delivery by email to Hicksons Lawyers; and

   9.5The principal Registrar of the Newcastle Registry of the Family Court of Australia by normal post, for placement on the Court file.

9. That within 14 days of the date of these Orders the husband provide to the wife and to the Receivers, copies of statements for all accounts which receive income in respect of the following properties, for the period from

   
   

   1 January 2015 to the date of these Orders:

   10.1K Street, Suburb L;

   10.2M Street, Suburb N;

   10.3O Street, Suburb L;

   10.4P Street, Suburb L;

   10.5Q Street and R Street, Suburb S;

   10.6T Street, Suburb U; and

   10.7V Street, Suburb W.

Jet Skis

1. That within seven (7) days of the date of these Orders the husband do all acts and sign all documents necessary to transfer to the wife the legal ownership of the jet-ski 1, registration number … and trailer 1, registration number …, currently in the possession of the wife.

2. That as soon as reasonably practicable upon the husband’s compliance with Clause 11 of these Orders, the wife do all acts necessary at her own expense to register the ownership of that said jet-ski 1 and trailer 1 in her name.

3. That within seven (7) days of that said jet-ski 1 and trailer 1 becoming properly registered in the wife’s name, the wife do all acts and sign all documents necessary to deliver to the Second Intervener such documents as are required to transfer to the Second Intervener (as the husband’s trustee in bankruptcy) the legal ownership of the jet-ski 2 registration number … and the  trailer 2, registration number …, currently in the possession of the husband.

Energy Australia Account

1. (a)That within 14 days of the date these Orders the husband shall cause the name of  the wife to be removed from Energy Australia account number …;

   (b)That the husband pay to the wife within 14 days of the date of these Orders the sum of $877.40 NOTING that the wife intends to pay that sum to Energy Australia for the account dated 29 September 2015

2. That if any party refuses or neglects to sign within 14 days of a written request to do so any documents necessary to effect the terms of these Orders the Registrar of the Newcastle Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of s 106A of the Family Law Act 1975 to execute such documents on behalf of such party.

IT IS FURTHER ORDERED THAT

1. Leave is granted to the Applicant Wife, and any other party wishing to make a costs application, to file and serve such application within 28 days.

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 Sadler & Sadler and Ors 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 NEWCASTLE

FILE NUMBER: NCC 1976 of 2012

Ms Sadler

Applicant

And

Mr Sadler

First Respondent

And

B Pty Ltd

Second Respondent

And

Mr Miller

First Intervenor

And

Trustee in Bankruptcy

Second Intervenor

And

C Pty Ltd
D Pty Ltd
E Pty Ltd
F Pty Ltd
G Pty Ltd

Third Intervenor

And

Mr Fuller and Mr Martini

Fourth Intervenor

EX TEMPORE

REASONS FOR JUDGMENT

Introduction

1. This is an Application in a Case filed by the applicant wife (“the wife”) on 18 May 2016, supported by the following affidavits:

   a)The applicant wife, filed 18 May 2016;

   b)Mr Benjamin O’Hearn, solicitor, filed 18 May 2016; 

   c)Ms X, insolvency manager, filed 18 May 2016;  and

   d)Mr Fuller, accountant and registered liquidator, filed 19 July 2016. 

2. The application was listed in a duty list on 15 July 2016 and adjourned for closer consideration to a whole day on 20 July 2016. 

The Applications

1. The majority of orders sought relate to appointment of receivers for certain property, income of trusts and a superannuation fund. There are other orders sought in relation to chattels and debt. 

2. B Pty Ltd (“B”) is the trustee of the following entities: C Pty Ltd; D Pty Ltd; E Pty Ltd; F Pty Ltd; and G Pty Ltd (“the entities”). B is the subject of an application to be joined as a party. That Order will be made joining B as the Second Respondent to these proceedings. 

3. The application is filed pursuant to Chapter 25 of the Family Law Rules 2004 (Cth) (“the Rules”), which imports, with amendments irrelevant here, the rules of the Corporations Act 2001 (Cth) (“Corporations Act”) into the Rules.

4. Yesterday, on 20 July 2016, there was an application for adjournment of the hearing of the wife’s Application in a Case. That application was dismissed. In those reasons I referred to the application of the wife being brought in accordance with Part 20 of the Rules. That was incorrect. That incorrect reference, I am satisfied, had no bearing on the adjournment application.

5. The application of the wife is opposed by the respondent husband

   
   

   (“the husband”) who was present at court and was represented. The husband is bankrupt by his own petition made 18 February 2015.  The husband did not file a response or an affidavit. The husband is not without assets.

6. That implication is supported by the First Intervenor, Mr Miller.  This has significance. The First Intervenor is the major creditor of the husband’s bankrupt estate. He has the benefit of freezing orders made in the Equity Division of the Supreme Court on 11 March 2013. Those orders are as set out in the Reasons of his Honour, Young AJ, in a document which will become Exhibit 6.

7. The First Intervenor was legally represented.  He did not file any response or affidavit. 

8. The application is neither opposed nor supported by the Second Intervenor.  The Second Intervenor is the Trustee in Bankruptcy of the husband’s bankrupt estate. The Second Intervenor was legally represented. No response or affidavit had been filed. Complaint is made by the wife about her perception of inactivity of the Second Intervenor. I will refer to that matter later in these Reasons. 

9. The application of the wife is opposed by the Third Intervenor. The Third Intervener is a group of five entities known in these proceedings as “the entities”. The group was legally represented by counsel and solicitor who have in the past represented the husband. The Third Intervenor did not file a response. It did file an Application in a Case on 12 July 2016. The orders sought in that application were for the entities to be joined as a party, for the application of the wife to be dismissed and costs; but directions which have become part of Exhibit 2 were also sought. That application for the entities to be joined was successfully made and an order was made by consent.  The entities have become the Third Intervener. 

10. Oddly, the husband was listed as a member of the entities. It may be a reflection of what counsel for the wife referred to as “community interest” between the husband and the Third Intervenor. In terms of legal and accounting advice, that appears to be the case.  In any event the husband is a party in his own right. 

11. The Application in a Case of the Third Intervenor was supported by five affidavits, two by Mr Y.  Mr Y is an accountant to both the wife and husband and the various entities in which they have an interest.  Mr Y has a personal interest in the entities sought to be received. 

12. There was one affidavit by Mr Z, a director of one of the companies within the entities, namely, D Pty Ltd, and there were two affidavits by members of staff of Mr Y’s accounting firm apparently related to disputes over disclosure, but not relevant to these proceedings.

The Issues  

1. The wife says, without challenge, that she is now the sole director of B.  B is the trustee of the Sadler Family Trust. The husband is the appointer of that Trust and yesterday, 20 July 2016, was restrained by order from exercising his power of appointment. That order was made by consent. B is also the trustee of the I Superannuation Fund of which the husband and the wife are the only members and the H Trust, a unit trust, in which the husband, the wife and many others have interests.

The Inactivity of the Trustee in Bankruptcy

1. The wife says that the husband’s Trustee in Bankruptcy, Mr AA of BB Accountants, who has become a Second Intervenor in these proceedings, does not intend to take any timely action to realise the interests that are held in these various structures and which the wife considers to be matrimonial assets. In relation to that, the husband became bankrupt, as stated, in 2015 and is therefore disqualified as a director of B or of any other company. 

2. The wife is an unsecured creditor in the husband’s bankrupt estate in relation to a costs order made in December 2013.  Accordingly, she receives reports to creditors.  There have been two – one in March and one in June 2015.  The solicitor for the Second Intervenor confirmed in this hearing that there had been no further report since June 2015.  There may be, although it is yet untested,   some substance in what the wife says. The Trustee in Bankruptcy, although legally represented, did not file a response to the wife’s application nor any affidavit and took a neutral stance both on the adjournment application and on the appointment of receivers. 

The Appointment of Receivers

1. The wife says that the parties’ accountant, Mr Y, is a business partner of the husband in some of the entities joined as the Third Intervenor today. She says also that Mr Y historically prepared financial returns for the entities. That is not apparently in dispute. The wife alleges that since separation of the husband and wife in April 2011, she has received very little information or co-operation from Mr Y, although accounts have regularly been sent by him for her to sign. 

2. Mr Y runs his accounting practice from a property owned by one of the entities. The stated purpose of the wife for the appointment of receivers is to realise the units in the unit trust in order to convert the entitlements of both the husband and the wife into cash so that they may be “protected and determined for the purpose of these proceedings.” This is a reference to the fact that the proceedings have been set down for final hearing commencing on

   
   

   21 November 2016. 

3. The proposed receiver identifies his task as follows, “to trigger the redemption provisions which are included in the trust deed of each unit trust in which the three Sadler entities have an interest so as to realise the units and convert them into cash.”  It is a carefully defined task.

4. In my view this is a proper purpose.  The primary benefit of this action being undertaken is that those interests will be valued by having been converted into a cash sum for final hearing and ultimately distribution in whatever way is ordered. 

5. I note that a direction sought by the Third Intervenor was for the final hearing dates to be vacated and for this application to be heard at that time.  This would represent a considerable delay and adds to concern about the willingness of all parties involved to co-operate in bringing the matter to conclusion.

6. The Third Intervenor opposes the appointment of receivers on several grounds.

7. The first being that the Court has no power to make Orders 3 and 4. Clearly the Court does have the power to make those Orders. 

8. It can be properly said that Order 3 is simply a statement of the law, that is, that any receiver that the court decides to appoint has all of the powers of

   
   

   s 420 of the Corporations Act as set out in the Act and such further powers or restrictions as the court might grant. The Court also has the power to authorise the receiver to take such actions as the director of B has the authority to take.  There has been a delicate piece of drafting to ensure that third party interests in entities are unaffected.

9. The purpose of the receivership is accordingly defined and spelt out carefully. In relation to the law by s 1337C(1) of the Corporations Act jurisdiction is conferred on the Family Court with respect to civil matters arising under the corporations legislation. The Corporations Act rules apply to an application to the Family Court under the Corporations Act. 

10. The Family Court has the power to appoint a receiver of property of a corporation, provided of course that it is for a proper purpose. Section 80(1)(k) is the power within the Family Law Act 1975 (Cth) (“Family Law Act”) for making any order necessary to do justice, providing jurisdiction is available, and I have already said that the receivership appears to me to be for a proper purpose. The receiver has the power to do all things necessary or convenient to be done for, or in connection with, or incidental to the attainment of the objectives for which the appointment – the receiver was appointed

    
    

    (see s 420(1) of the Corporations Act).

11. If the Court does not impose any provision that limits the receiver’s powers, the receiver of property of a corporation has, in addition to the appointing orders, power for the purpose of attaining the objectives for which the receiver was appointed, as set out in s 420(2) of the Corporations Act.

12. The Third Intervenor says that the wife could appoint a single expert to value the interests of the parties, and that this would be a more expedient course.  The history of the file does not support this submission.  The first application of the wife was made almost exactly four years ago, and the husband’s response filed in January 2013, approximately six months later. Many questions arise in relation to the idea that there could be an appointment of the single expert; there are a raft of interconnected entities.  The question of who would pay the costs of such an exercise is a particularly real one when the husband is bankrupt.

13. So far, the costs of valuation and inquiry by way of the issue of subpoena have fallen on the wife.  There is no proposal from the husband to undertake such a course.  There would perhaps be issues of how to protect sensitive financial information of third party interests in such an exercise. Given the history, where there have been not less than 15 sets of orders made since July 2012, and there are probably many more, agreement on who a suitable expert would be, and the actual defined task, would be a legal exercise in itself.  During the course of the hearing, the Trustee in Bankruptcy indicated to the Court that he had been asked that day, and had agreed to get, instructions about the possibility of a single expert valuation.  That suggests that until that time there had been no move by the husband in that direction.

14. The Third Intervenor says that, “it cannot be suggested that there has been no disclosure”.  The wife sets out in her affidavit the extent to which she alleges that there has been no disclosure, and there has been no affidavit in response by the husband.  As stated, there is some affidavit material by members of staff of Mr Y, the parties’ accountant, but that information comes very late in the proceedings, and there is no basis for me to assume that it is endorsed by the husband.  There is also the issue of Mr Y advising the parties, including the wife, and also being a party to these proceedings.

15. The Third Intervenor says that the husband cannot participate in these proceedings, referring to the decision in Guirguis & Guirguis and Official Trustee in Bankruptcy (1997) FLC 92-726. That decision related to the independent right of appeal of a party represented by the Trustee in Bankruptcy. In any event, there is superannuation in this case which is arguably, although not certainly, an exempt asset. The husband has, at all times, an obligation to disclose.

1. The Third Intervenor says that the financial position and interests of some or all of the parties would be adversely affected by receivers being appointed.  The Court was taken to documents relating to finance that in particular, said this:

   If you are a corporation, you must not allow a receiver or similar entity to be appointed to any of your property unless the mortgagee agrees in writing.

2. It is an unsurprising inclusion in a finance document, with many parties involved in a commercial operation.  There is no basis to assume that receivers would not act diligently, would not seek the approval of a mortgagee.  They are officers of the Court, to whom they report.  They have not been appointed in respect of all property of the various entities, but for particular entities for a defined purpose.  In his affidavit, Mr Y asserts that should the Court appoint a receiver, each mortgage would be in default, that there would be default interest, and the mortgagee could take possession.

3. In my view, this statement is not an inevitable outcome, but something of an overstatement.  The receiver is not seeking to receive all of the assets of B.  The receivers are able to seek directions from the Court in the event of uncertainty.  There is no evidence before me of what position the mortgagee would actually take, rather than the theoretical possibilities that arise from sensible provisions in the mortgage document. 

4. Of note, Exhibit 3 refers to Mr CC, a unit holder in H Trust, who supports and consents to receivers being appointed.

5. It is at this stage simply evidence of there not being an entirely common position about the course which the wife wishes to take.  There is also, it is said, provision in the deed for redeeming units.  Tab 16 of the folder of exhibited documents to Mr Y’s affidavit sets out the means by which unit holders can realise their interest and trigger transfers.  The wife readily concedes that she could take this course herself, in theory, but says that there may well be practical difficulties.  In my view, it would be beneficial to all unit holders potentially to have the relevant matrimonial interests excised.

6. The Third Intervenor would then have no need to participate in the final hearing.  It is at least arguable, on the evidence before me, that Mr Y would not be readily available to assist the wife to trigger the redemption provisions.  Likewise, the receivers are likely to be much more effective as independent agents in this role.  It will certainly represent a benefit to all parties to have the matter in a position of being ready to be heard with meaningful joint balance sheet by November 2016.

Other Orders

1. There are orders sought in respect of chattels. There has been no material filed in response, and I am prepared to make those Orders accordingly. 

2. In relation to the electricity bill, I accept the submission from counsel for the Third Intervenor that the Court does not have the power to compel the husband to pay a third party in this way.  Orders have been made for a payment to the wife, with a notation that the wife intends to pay that outstanding bill and an Order for the removal of the wife from the relevant account.

3. Finally, there is an order under s 106A of the Family Law Act, to the extent that such an application to a Registrar of this Court needs to be made.

4. Orders are made accordingly.

Costs

1. I will grant leave to the wife, and any other party seeking a costs order, to file such an application within 28 days.

I certify that the preceding forty three (43) paragraphs are a true copy of the

ex tempore reasons for judgment of the Honourable Justice Cleary delivered on

21 July 2016.

Associate: 

Date:  26 July 2016