Smith and Dinci and Ors (No 2)

[2011] FamCA 467

FAMILY COURT OF AUSTRALIA

SMITH & DINCI AND ORS (NO 2) [2011] FamCA 467

FAMILY LAW – PROPERTY – Where the husband has lodged caveats over every property the wife holds either personally or through her corporate entities – Where the husband gave no notice to the wife prior to lodging caveats – Wife’s application to withdraw caveats – Where two companies in which the wife has an interest also seek removal of caveats – Companies joined as second and third respondents – Prejudicial to the wife to allow caveats to remain in place – Husband’s interests would be sufficiently protected by an undertaking by the wife – Draft undertaking – Submissions to be heard on cost of removing caveats.

APPLICANT: Ms Smith

FIRST RESPONDENT: Mr Dinci

SECOND RESPONDENT: D Pty Ltd

THIRD RESPONDENT: B Pty Ltd as trustee

FILE NUMBER: BRC 10762 of 2008

DATE DELIVERED: 15 June 2011

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Barry J

HEARING DATE: 9 June 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms McMillan of Senior Counsel appearing for the Applicant Wife

SOLICITORS FOR THE APPLICANT: Murdoch Lawyers

SOLICITOR FOR THE RESPONDENT: Mr Yianoulatos, Solicitor of James Harris lawyers appearing for the First Respondent Husband

SOLICITOR FOR THE SECOND AND

THIRD RESPONDENTS:

Mr Jenkinson, Solicitor of Warlow Scott Lawyers appearing for the Second and Third Respondents

Orders

1. Final form of Orders to issue from Chambers on 16 June 2011. 

IT IS NOTED that publication of this judgment under the pseudonym Smith and Dinci (No 2) is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC10762/2008

Ms Smith

Applicant

And

Mr Dinci

First Respondent

And

D Pty Ltd
Second Respondent

And

B Pty Ltd as trustee
Third Respondent

REASONS FOR JUDGMENT

1. On 25 November 2008 Ms Smith filed an application for property settlement orders in which she proposed that the assets of the parties be divided 90/10 in her favour.  The parties had only separated a week earlier.

2. Notwithstanding that the litigation has been in progress for some two and a half years it has been and still is proceeding very slowly. 

3. On the 23 June 2010 for reasons given at the time, I made orders for payment of an amount of spouse maintenance and a lump sum for security for costs to be paid by the Wife to the Husband.

4. The Wife appealed that decision and subsequently filed an application seeking a stay of the orders requiring her to make any payments.  The stay orders were made by consent.

5. The Wife complains that the Husband has failed to give full disclosure.  As I have understood the Husband’s position he says he has no assets and the companies that he previously operated have been wound up.  Any income he has is relatively modest. 

6. The Wife has an interest in more than 20 private companies and about 11 trusts.  All of these entities are set out in considerable detail in a report by a forensic accountant, Mr H.  Mr H has prepared two reports which are annexed to an affidavit sworn by him on the 17 May 2011. 

7. In the first report he valued the Wife’s interest at $1.045 million after taking into account loans owing by the Wife to 3 Pty Ltd of $900,000 (refer paragraph 3.1 of the first report under the heading “Summary of Opinions”).

8. At paragraph 3.1 of the second report dated the 8 February 2011, the Wife’s interests have been revalued at $949,000 but he brings into account a personal guarantee given by the Wife (refer schedule 35.1) in an amount of

   
   

   $1.153 million.  He thereby values the Wife’s financial position as having a negative value of $280,628.

9. The Husband had initially engaged Lehns Solicitors of Robina to act on his behalf.  Subsequently the Husband engaged Robin Slipper of Slipper Lawyers of Southport.  A notice of address for service was filed on the 15 October 2010.  On the 24 November 2010 a notice of ceasing to act was filed by this firm.

10. The matter was before the Court on the 9 June 2011.  At that time the Husband was represented by Mr Yianoulatos of the firm James Harris Lawyers of Melbourne.  A notice of address for service of James Harris Lawyers was filed on the 3 June 2011.

11. I infer that this firm had only recently been engaged by the Husband.

12. On the 26 May 2011 the Husband’s current solicitors lodged caveats on every block of land in which the Wife has a personal interest or in which one of her many companies has an interest.  The form of caveats appear to be uniform for each of the numerous ones lodged.  In section 3 of the caveat document under the heading “Interest Being Claimed” the caveator has noted:

    “An equitable interest in the fee simple.”

13. Under paragraph 4 under the heading “Grounds of Claim” it has been noted:

    “A beneficial interest pursuant to a constructive or resulting trust out of the financial contributions made to the property by the caveator during the course of the marriage between the caveator and a director and shareholder of the registered owner.”

14. The terms of the caveats lodged on the land personally owned by the Wife presumably have been amended to reflect personal ownership.

15. On the 1 June 2011 the Husband’s newly appointed solicitors wrote to the Wife’s solicitors, Murdoch Lawyers, which, inter alia, noted that the Wife had recently entered into a contract of sale of Property W.

16. On page 2 of the letter it is noted:

    “It is reasonable to assume that disclosure of this sale and the disbursement of proceeds would have also been finalised without our client’s knowledge.

    We note that property located at [Property W] and [Property E], were included in your client’s financial statement deposed 11 December 2008.

    We are of the view that the lodgement of the caveat was done with reasonable cause.

    Under the circumstances it appears appropriate that our client be entitled to do all things necessary to protect the integrity of the matrimonial property pool until satisfactory arrangements are made for that purpose.

    Our instructions are that unless an undertaking is made that the net sale proceeds are retained in your solicitor’s trust account until the matter is finalised by mutual agreement or otherwise, our client has reasonable cause to refuse to release the caveat

    Should this be acceptable to your client, we request that you email the Release to this office for signature by our client.

    …”

17. It appears to be a textbook case of shooting first and asking questions later. 

18. On the 7 June 2011 the Wife filed an application seeking orders requiring the Husband to withdraw the numerous caveats which he caused to be lodged. 

19. Two further applications were filed by two companies seeking to be named as Second and Third Respondents in the litigation.  The first application was filed on behalf of D Pty Ltd seeking orders in similar terms for the Husband to be ordered to remove the caveats over the companies’ land.

20. A further application in a case in identical terms was lodged on behalf of B Pty Ltd.  I indicated that I would give leave for these applicant companies to be joined as Second and Third Respondents in the litigation.

21. I accept that if the companies had attempted to seek relief in the Supreme Court along the lines indicated in all likelihood they would have been directed to file proceedings in this jurisdiction.

22. The question of jurisdiction was not raised before me and I am more than satisfied the Court’s associated jurisdiction is wide enough to allow the Court to provide the relief sought if deemed appropriate.

23. The Wife’s material was as listed in an outline of submissions produced by Senior Counsel on her behalf.

24. The material for the Second and Third Respondents consisted of an affidavit of Mr L who is a director of D Pty Ltd.  He has a further company which holds one half of the entitlement of D Pty Ltd’s assets.  The Wife has the other half.  There is no evidence before the Court other then that the dealings between the Wife and Mr L are at arms length.

25. The other affidavit was by the Wife in her capacity as a director of B Pty Ltd.

26. Two further affidavits were relied on sworn by the legal representative for the Second and Third Respondents annexing correspondence between the parties’ lawyers and a copy of the costs agreement entered into with the two companies.

27. For the Husband submissions were made that the Husband was prepared to withdraw the caveats on condition an undertaking was provided by the Wife or if she failed to give such an undertaking an order was made requiring the Wife to give a minimum of 21 days notice to the Husband of an intention to enter into any contract of sale of any real estate in which she has an interest, directly or indirectly, and at the same time she was to supply full particulars of how the proceeds of sale were to be disbursed.

28. The Husband’s proposal was that the Husband would have a right of veto of any such sale, if the Husband was of the view the disbursement would result in a diminution of the property pool.  This would necessitate the Wife filing an application seeking a Court order to override the Husband’s veto.

29. For the Wife it was conceded that she would give an undertaking to provide 21 days notice of intention to sell with full particulars as to how she intended to deal with the proceeds.  If the Husband objected to her proposals for disbursement for any reason, the onus would be on him to bring an application to attempt to restrain the sale taking place. 

30. At paragraph 31 of her affidavit filed on the 7 June 2011 the Wife deposes that she has entered into a contract of sale for Property

    
    

    W on the 20 April 2011.  The Wife had no reason to conduct a title search on the property where she is the sole registered proprietor and she had not received any indication from the Husband or his legal representatives of an intention to lodge a caveat until she was notified to this effect on about the 27 May 2011.  Settlement on Property W is due on the 10 June 2011.

31. During the course of the hearing on the 9 June 2011 at the Court’s direction, the Husband signed a withdrawal of caveat document for the subject property and this document was produced to the Wife’s legal representatives.

32. The Husband’s legal representative indicated it was common practice for his firm to lodge caveats on properties the subject of property settlement claims and for this to be done without notice.

33. The legal representative for the Second and Third Respondents argued that to successfully lodge a caveat an individual must have an interest in the subject land tantamount to a caveatable interest (s 121 of the Land Title Act 1994). It was contended a litigant for property settlement orders in this Court has no such interest.

34. I agree.  In my experience the proper course is for a litigant to seek an undertaking from the other spouse not to dispose of property without proper notice, similar in terms to the ones particularised earlier in these reasons.

35. If no such undertaking is forthcoming it may be an appropriate case to seek either an injunction restraining the disposition of assets or an order requiring the giving of ample notice prior to entering into a contract to sell any asset.

36. The Wife deposes in paragraph 31 of her affidavit filed with her current application that she intends to apply the sale proceeds “to her business”.  When making orders on Wednesday 15 June 2011, I will be requesting the Wife to be more specific as to precisely how the proceeds are to be dealt with.

37. The Husband’s claim is pursuant to s 79 of the Family Law Act.  Nowhere in the material filed to date do I find any reference to a resulting or constructive trust.  Indeed if the evidence of the Wife be accepted, it would be very difficult indeed for the Husband to establish any such trust.

38. By the conclusion of submissions on the 9 June 2011 it seemed common ground the caveats would all be withdrawn.  The only remaining questions are:

    ·Who is to be responsible for the costs of same?

    ·Is the Wife prepared to provide an undertaking?

39. I understood her position to be so long as the undertaking required by the Court placed the onus on the Husband to return to Court seeking to restrain the disposal of assets, she would be agreeable to providing such undertaking.

40. I note the litigation commenced 2 and a half years ago.  The Wife has had ample opportunity to dispose of assets without any restriction being sought by the Husband’s two previous lawyers.  There is evidence upon which a Court could be satisfied the Wife has given adequate disclosure to date. 

41. No adequate reason has been advanced by the Husband why he should be given an automatic right to veto sales which would then require the Wife to litigate further if he elects to refuse his consent.

42. The undertaking proposed by the Wife was in the following terms:

    “I, [Ms Smith]:

    1.In my own capacity and as director of the companies specified in Annexures 6 – 10, 18, 21 and 22 to the affidavit of [Mr H] sworn 12 May 2011, in which she or those entities own a propreital [sic] interest in any real properly [sic], undertake not to sell, mortgage, lease or otherwise deal with any property without giving 21 days notice in writing in advance to the Husband [Mr Dinci] of such intention to do so.

    2.Other than as stated above, I will advise as soon as practicable in writing of any dealings in relation to real property by [B Unit Trust] operated and or developed by or [D Pty Ltd].”

43. I am minded to require the Wife to give undertakings in the following terms.  I will hear submissions as to whether there is any objection to such an undertaking being proffered:

    Draft Undertaking

    “1.In the event notice of intention is given in my own capacity and as director of the companies specified in annexures 6 – 10, 18, 21 and 22 to the affidavit of [Mr H] sworn 12 May 2011, in which I or those entities own a registered interest in any real property, undertake not to sell, mortgage, lease or otherwise deal with any such property without giving 21 days notice in writing in advance to the Husband, [Mr Dinci] of such intention to do so.

    2.In the event notice of intention is given pursuant to paragraph (1) of this undertaking I will simultaneously advise in writing how it is intended to disburse the proceeds of any such sale.

    3.Other than as stated above I will advise in writing as soon as practicable of any dealings in real estate of which the companies, [D Pty Ltd] and [B Pty Ltd] are the registered proprietors.”

Cost of Removal of Caveats

1. Before taking submissions on this issue it was first necessary for a determination to be made whether an order should be made for the caveats to be withdrawn.  I will take submissions on this issue on the adjourned date.

Submissions on behalf of the Applicant Wife

1. I accept the force of the written submissions produced by Senior Counsel for the Wife that to allow the caveats to remain in place on properties under the sole control of her client, is to place an unnecessary restriction on her in her business dealings as a property investor.

2. The prejudice to her far outweighs any benefit to the Husband in allowing the caveats to remain.  The Husband’s position can be adequately protected by the undertaking proffered.

3. I note that the two properties in joint names of the parties do not appear to be the subject of any caveat by the Husband.  I anticipate being informed there can be no draw down on the mortgages securing these properties without the approval of each party.  If that is not correct then the Court would require an undertaking from each party not to deal in any fashion with the jointly held properties.

4. I accept the submission there is no evidence the Husband has made any payments in relation to outgoings on any of the parcels of land which have been caveated.

Applications by Second and Third Respondents

1. The case for the removal of the caveats on the applications of the Second and Third Respondents is even more compelling than in the case of the Wife.  This Court has no business unnecessarily involving third parties who are dealing in business transactions at arms length with the Wife.  I accept the interests of the third parties may be adversely affected by the lodgement of the caveats.

2. It is submitted on behalf of the Second and Third Respondents that the lodgement of the caveat of itself could trigger a breach of the terms of the mortgages given by those entities.

3. It is additionally submitted that the registered owners are endeavouring to sell some of the subject land and a caveat on the land could be interpreted by potential purchasers that the vendors are in financial difficulty.

4. If either of these submissions was established they would be compelling reasons to order the withdrawal of the caveats.

5. I find it is not necessary to rule on these submissions.  As I understand the Husband’s position there is no contest but that the caveats should be removed, once an undertaking by the Wife has been given. 

Form of Orders

1. The form of orders provide that the caveats are to be removed at the Husband’s expense.  I will hear submissions on this aspect.  In the application the draft orders provide for a Registrar’s clause to be inserted pursuant to paragraph 106A.  I would have thought it follows as night follows day that this would be a standard form of order to allow immediate enforcement of the Court’s orders in the event for any reason the Husband was unable or unwilling to withdraw the caveats.

2. Paragraph (6) of the application filed on behalf of the companies seeks an order restraining the Husband from further encumbering or lodging any dealings against the properties without leave or order of the Court.

3. In the Wife’s application she seeks an order in similar terms.  I am not entirely sure that such an order is necessary but I will hear submissions before ruling on same.

4. Final form of orders to issue from Chambers on Thursday 16 June 2011.

I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry delivered on 15 June 2011.

Associate: 

Date:  15 June 2011