Smith and Harbell

[2009] FamCA 739

FAMILY COURT OF AUSTRALIA

SMITH & HARBELL [2009] FamCA 739

FAMILY LAW – ENFORCEMENT OF ORDERS – Appointment of trustee – realisation of value of shares and entities

Family Law Act 1975 (Cth)

APPLICANT: Ms Harbell

RESPONDENT: Mr Smith

FILE NUMBER: SYF 2918 of 2005

DATE DELIVERED: 12 August 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Justice Fowler

HEARING DATE: 24 July and 7 August 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Campton

RESPONDENT: Mr Smith

Orders

IT IS DECLARED THAT:

(A)The quantum of the liability of the husband pursuant to the Orders made

18 March 2008

(“the Orders”) is as follows:

(a)in respect of Order 2 the sum of $324,097.31 as at 24 March 2009 together with such further amount as may be required to be paid to obtain a discharge of any mortgage charged on the real estate known as C property in the State of New South Wales.

AND IT IS ORDERED THAT:

1. By way of enforcement of the Orders, Mr SP of …, Sydney in the State of New South Wales be appointed as trustee to take and hold the husband’s shareholding and any other interest or entitlement actual or beneficial of any nature whatsoever in M Investments Pty Limited (Liquidator appointed) or such of the proceeds of its liquidation to which the husband is entitled, T Finance Pty Limited and A Pty Limited and in that capacity do all such acts and things and sign all documents necessary to realise for value those shares and entitlements and thereafter apply the monies so received for those entitlements in satisfaction of the obligations of the husband pursuant to the orders and any order for costs made in these proceedings.

2. Mr SP is appointed receiver and manager of the property of the companies T Finance Pty Limited and A Pty Limited.

3. The trustee may in the exercise of his powers, do all such acts as it would but for his appointment as trustee of the husband’s property and entitlements the husband is empowered to exercise in the name of the husband and in addition to such power is expressly empowered, with all those powers of a Trustee granted by operation of the Trustee Act 1925 (NSW).

4. Mr SP shall be entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of his duties and the exercise of his power pursuant to the Orders at the various rates of charge for himself and his staff as set out in Annexure “B” to his affidavit filed 26 May 2009.  Such fees shall be a first charge on any monies realised pursuant to Order 1.

5. Mr SP shall deliver and account for all amounts drawn by him for his remuneration, costs and expenses to the Court each three months until the termination of his appointment or until further order and pay any balances as are due to him or by him in such manner as the Court may direct.

6. Mr SP and the parties have liberty to apply in relation to these Orders or otherwise generally.

7. Pending compliance with the Orders the husband is restrained from doing causing or permitting any act of thing to be done which might have effect of:

   (a)altering any of the rights of the existing shareholders in the companies and any other company in which the husband has an interest in the shareholding whether beneficially owned or otherwise (“the entities”);

   (b)altering the Memorandum of Articles of Association of any of the entities;

   (c)issuing any new shares in the capital of any of the entities;

   (d)appointing any directors of any of the entities (save as provided for in these orders);

   (e)approving the transfer of any shares in any of the entities to any person, company and/or trust;

   (f)altering the rights attaching to any shares in any of the entities;

   (g)altering the Deed of Establishment of The Smith Trust and any other trust of which the husband is a trustee, beneficiary and/or appointer and also any trust in which the husband is shareholder and/or director of the trustee company (“the trusts”);

   (h)issuing any new units in any of the trusts;

   (i)approving the transfer of any units in any of the trusts;

   (j)removing the trustee of any of the trusts;

   (k)appointing a new or additional trustee of any of the trusts;

   (l)transferring or borrowing any further money by any of the companies or the trusts;

   (m)loaning or advancing any money of any of the entities or the trusts to any person and/or entity;

   (n)further charging or encumbering the share capital of the entities or any asset (including but not limited to any real estate and/or business) of any of the entities and the trusts except in the ordinary course of business;

   (o)assigning, transferring and/or in any way dealing with any asset of any of the entities and the trusts;

   (p)removing the husband from any position and/or office held in any of the entities and/or trusts save resigning as a director of any entity as requested forthwith by Mr SP in writing, and in the event of such request being made, shall forthwith so resign such capacity as a director on receipt of that request; or

   (q)distributing any income or corpus of any of the trusts.

8. Pending compliance of the Orders made 18 March 2008 the husband is restrained from:

   (a)approaching, contacting or in any other way communicating with any selling agent appointed by Mr SP; and

   (b)interfering with the discharge by Mr SP of his appointment pursuant to these Orders.

9. The husband pay the wife’s costs of an incidental to this application as agreed or assessed.  Mr SP is authorised to apply the proceeds of any realisation of the husband’s interest in payment of the obligation created by this Order.

10. Mr SP is permitted to publish these Orders to the extent necessary for the orderly conduct of his trusteeship or his receivership or management.

11. In the event the husband refuses or neglects to comply with any of the orders herein or execute any document or do any thing requested by the wife and/or Mr SP to facilitate compliance with any of the orders herein, the Registrar or Deputy Registrar of this Court at its Sydney Registry be appointed pursuant to Section 106A of the Family Law Act to execute in the name of the husband all deeds and instruments necessary to give effect to the Orders and do all acts and things necessary to give validity and operation to the said deed and instruments on an application made by letter addressed to the registry and supported by an affidavit.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2918 of 2005

MS HARBELL

Applicant

And

MR SMITH

Respondent

REASONS FOR JUDGMENT

Introduction

1. The proceedings before the Court arise out of default in compliance with the requirements of an Order made in these proceedings on 18 March 2008, inter alia, in the following terms:

   1.That the wife be declared as against the husband the sole legal and beneficial owner of the property situate at and known as [C property].

   2.The husband is to pay or cause to be paid all such sums and do and cause to be done all such acts and things as may be necessary to procure the discharge of any mortgage (the [C] mortgage) charged upon [C property] within twelve months of the date of these orders.

   3.The husband is, pending the discharge of the mortgage referred to in the preceding order, to indemnify and save harmless the wife from and against all claims, actions, suits and demands arising out of or in connection with the [C] mortgage.

   4.The husband shall further pay as and when the same become due and payable all instalments of principal and interest owing and accruing under the terms of the [C] mortgage, together with all levies for municipal rates and charges with respect to [C property] and all premiums of insurance with respect to the insurance of the building erected at [C property] for the current insured value thereof.

   5.The husband pending the discharge of the [C] mortgage referred to in Order 2 hereof is to charge all his right, title and interest in and to any of the issued share capital or otherwise his interest as a creditor of [M Investments] Pty Ltd, [T Finance] Pty Limited and [N Finance] Pty Ltd, with the due performance and observance of the obligations imposed on him by the operation of Order 2 and further is to do all such acts and things as may be required to be done to procure the grant in favour of the wife of an indemnity by [M Investments] Pty Limited with respect to all sums owing and accruing under the terms of the mortgage charged on [C property] and to better secure the said indemnity is to do all such acts and things as may be necessary to procure the execution by the company of a charge in favour of the wife over all its right title and interest in and to the following property namely:

   a.The [K] Investment Unit (“the Investment Unit”) being the home unit known as [K property]

   b.The [K] Waterfront Unit (“the Waterfront Unit”) being the home unit known as [K Waterfront property].

   6.The wife shall be entitled to lodge a caveat against the title to the Investment Unit and the Waterfront Unit to protect her rights under the provisions of the indemnity and charge but shall withdraw that caveat upon discharge of the mortgage charged on [C property].

   …

   10.The husband is to pay to the wife monthly and every month by way of maintenance the sum of $433.00.  The first of such payments to be made on 1 April 2008.

2. In the proceedings before me the husband conceded that he had failed to discharge the C mortgage although he denied the assertion that currently there were any arrears with respect to that mortgage or with respect to rates payable on the C property.

3. He nevertheless agreed with the assertion that the declaration sought by the wife in the document “Minute of Enforcement Orders Sought by Applicant Wife” was correct as at the date set forth therein and accordingly by consent I will make a declaration as follows:

   1.Declaration that quantum of the liability of the husband pursuant to Order made 18 March 2008 (“the Orders”) is as follows:

   1.1in respect of Order 2 the sum of $324,097.31 as at 24 March 2009 together with such further amount as may be required to be paid to obtain a discharge of any mortgage charged on the real estate known as [C property].

4. The wife seeks in view of that default enforcement orders in the following terms:

   2.Order that by way of implementation and enforcement of the Orders [Mr SP] of […], Sydney in the State of New South Wales be appointed as trustee of the husband of his shareholding and any other interest actual or beneficial of any nature whatsoever in:

   2.1      [M Investments] Pty Limited;

   2.2      [T Finance] Pty Limited; and

   2.3      [A] Pty Limited,

   (“the companies”) and in that capacity do all such acts and things and sign all documents necessary to realise for value any of the assets of the companies including but not limited to those set out in Schedule 1 and apply the monies so received through each of the companies to the husband and thereafter in satisfaction of the obligation of the husband in Orders 2 and 4 of the Orders made on 18 March 2008 together with any order for costs made in these proceedings.

   3.Order that in addition to any powers otherwise conferred on

   
   

   [Mr SP] pursuant to his appointment also expressly be and is hereby empowered:

   3.1.with all those powers a Trustee is granted by the Trustee Act 1925 (NSW);

   3.2.to sell any asset of the companies including but not limited to those set out in Schedule 1; and

   3.3.to pay monies from the companies for the benefit of the husband to meet any obligation of the husband pursuant to the Orders.

   4.That [Mr SP], of […], Sydney in the State of New South Wales be additionally appointed as a receiver and manger [sic] of the property including that set out in Schedule 1 owned by:

   4.1[M Investments] Pty Limited; and

   4.2[T Finance] Pty Limited,

   (“the companies”) by way of enforcing the Orders of 18 March 2008 and in particular the obligation of the husband to pay monies pursuant to Orders 2 and 4 of the Orders made on 18 March 2008 and he be authorised to sell the property and after payment of the costs of sale shall apply the proceeds of sale in payment of the amount required to seek a full compliance by the husband with Orders 2 and 4 of the Orders of 18 March 2008 together with any order for costs made in these proceedings and the remainder to be remitted to the respective company.

   5.That [Mr SP] shall be entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of his duties and the exercise of his powers as pursuant to these orders to be calculated on the basis as to the time reasonably spent by him, his partners and staff in accordance with the schedule of hourly rates annexed to his affidavit sworn in these proceedings, such fees to be paid out of the assets of the companies as a first charge.

   6.That [Mr SP] shall deliver and account for all amounts drawn by him for his remuneration, costs and expenses to the Court every three months until the termination of his appointment or until further order and pay any balances as are due to him or by him in such manner as the Court may direct.

   7.That [Mr SP] and the parties have liberty to apply.

   8.Order that pending compliance by the husband with the Orders made 18 March 2008 the husband is restrained from doing, causing or permitting any act or thing to be done which might have the effect of:

   8.1altering any of the rights of the existing shareholders in the companies and any other company in which the husband has an interest in the shareholding whether beneficially or otherwise (“the entities”)

   8.2altering the Memorandum of Articles of Association of any of the entities;

   8.3issuing any new shares in the capital of any of the entities;

   8.4appointing any directors of any of the entities (save as provided for in these orders);

   8.5approving the transfer of any shares in any of the entities to any person, company and/or trust;

   8.6altering the rights attaching to any shares in any of the entities;

   8.7altering the Deed of establishment of The [Smith] Trust and any other trust of which the husband is a trustee, beneficiary and/or appointer and also any trust in which the husband is shareholder and/or director of the trustee company (“the trusts”);

   8.8issuing any new units in any of the trusts;

   8.9approving the transfer of any units in any of the trusts;

   8.10removing the trustee of any of the trusts;

   8.11appointing a new or additional trustee of any of the trusts;

   8.12transferring borrowing any further money by any of the companies or the trusts;

   8.13loaning or advancing any money of any of the entities or the trusts to any person and/or entity;

   8.14further mortgaging, charging or encumbering the share capital of the entities or any asset (including but not limited to any real estate and/or business) of any [sic] the entities and the trusts except in the ordinary course of business including but not limited to the real estate set out in Schedule 1.

   8.15assigning transferring, disposing and/or in any way dealing with any asset (including but not limited to any real estate and/or business) of any [sic] the entities and the trusts;

   8.16removing the husband from any position and/or office held in any of the entities and/or trusts save resigning as a director of any entity as requested forthwith by the [sic] [Mr SP] in writing, and in the event of such request being made, shall forthwith so resign such capacity as a director on receipt of that request;

   8.17distributing any income or corpus of any of the trusts;

   other than for the sole purpose of complying with Order 2 and 4 of the Orders provided that this order is [sic] no way limits the things which [Mr SP] could do but for the existence of this order.

   9.Order that pending compliance of the Orders made 18 March 2008 the husband is restrained from:

   9.1approaching, contacting or in any other way communicating with any selling agent appointed by [Mr SP]; and

   9.2interfering with the discharge by [Mr SP] of his appointment pursuant to these Orders.

   10.That the husband shall pay the wife’s costs of and incidental to this Application on an indemnity basis and the trustee and/or the receiver and manager be authorised to meet the husband’s compliance with this Order by payment from the proceeds of sale of the property specified in Schedule 1.

   11.That [Mr SP] be permitted to publish any Orders made as a consequence of this Application as is necessary for the orderly conduct of his capacity as trustee and/or the management and receivership.

   12.That the husband pay the wife’s costs of and incidental to this Application and the enforcement of Orders made 18 March 2008 on an indemnity basis.

   13.That in the event the husband refuses or neglects to comply with any of the orders herein or execute any document or do any thing requested by the wife and/or [Mr SP] to facilitate compliance with any of the orders herein, the Registrar or Deputy Registrar of this Court at its Sydney Registry be appointed pursuant to Section 106A of the Family Law Act to execute in the name of the husband all deed and instruments necessary to give effect to the orders and do all acts and thing [sic] necessary to give validity and operation to the said deed and instruments on an ex parte application made by letter addressed to the registry and supported by an affidavit.

   SCHEDULE 1

   1.The [K] Investment Unit being the home unit known as [K property] and owned by [M Investments] Pty Limited. Folio Identifier […].

   2.The Waterfront Unit being the unit known as [K Waterfront property] and owned by [M Investments] Pty Limited. Folio Identifier […].

   3.The loan book of [T Finance] Pty Limited.

   4.The loan book of [M Investments] Pty Limited.

5. The husband opposed the making of those orders and sought instead an extension of time for compliance with the orders of 18 March 2008 of up to a year from the date of the proceedings before me.

6. In support of his application he filed an affidavit dated 22 July 2009, a significant portion of which took issue with the findings of fact at trial, part of which dealt with compliance concerning a motor vehicle which a company of which he was a shareholder had recovered from the wife in damaged condition, and some statements of the cost of repairing that motor vehicle.  The husband also said that he had, as the sole shareholder and director of M Investments Pty Limited (“M Investments”) listed the property owned by that company for sale but had withdrawn the property from sale when no contracts had been sought by any prospective purchaser.

7. He said that he would, if the stay were granted, continue to pay interest on the mortgages which he was required to discharge and he would be bound to continue to pay an order for maintenance made in the proceedings.

8. He said in relation to the delay in sale that he proposed it would give rise to a number of matters, namely:

   a)the general climate for the sale of properties would improve and the likelihood of a sale at a higher price would increase, given some delay;

   b)

   he was involved with a company, M Investments, the owner of one of the properties namely the property known as “the Waterfront unit” at

   
   

   K Waterfront and the property at K.

1. The company M Investments is the subject of an application by one

   
   

   Ms KR.  She was at the time of the hearing seeking an order for the winding up of the company, M Investments.  The husband said he was defending those proceedings.  He informed the Court that his defence is based upon claims to be made under the Property (Relationships) Act 1984 although it is not immediately apparent how claims of such a personal nature would be able to be offset against a claim against the company of which he is a shareholder by a creditor.

2. Indeed following the reservation of the judgment herein application was made by the applicant to reopen which was not opposed by the husband and the Court was informed that shortly after the hearing a liquidator was appointed to the company M Investments.

3. It did not seem to me in any event that the happening of that particular result should necessarily divert the Court from a course which would give real meaning to the judgment and order that it had made.  It seems to me that the Court can make orders requiring the transfer of property owned by the husband to trustees and to give the trustee in those circumstances power to do all acts and things which the husband might be able to do.  It further has the power to order that the husband co-operate with such trustee in giving effect to its orders.

4. No right which is presently that of Ms KR can be taken away nor added to by this Court.  She is not a participant in the proceedings before it.

5. The question of whether her claim as creditor has priority over that of the wife or whether it is subordinate to it is a matter to be determined perhaps in some other place at another time.

6. For the moment I am minded to make orders in the enforcement of the orders in default.

7. Evidence is before the Court by Mr SP, whom the wife seeks to have appointed as a trustee, as to his qualifications in relation to the undertaking on a task of a trustee and I am satisfied that he is a fit and proper person to be appointed.

8. It was suggested by the husband that Mr SP had a conflict of interest by reason of the fact that his partner or that a member of his firm was a creditor of the husband.  I did not consider that such a conflict exists or that these facts if true in any way prevent the appointment of Mr SP.

9. I accordingly make orders set out above.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Fowler.

Associate: 

Date:  12 August 2009