Storrer and Storrer

[2012] FamCA 448

FAMILY COURT OF AUSTRALIA

STORRER & STORRER [2012] FamCA 448

FAMILY LAW – PRACTICE AND PROCEDURE – First day of trial – Joinder by wife of seven new respondents – Effect of relief claimed by wife on respondents’ interests under a Shareholders’ Agreement – Seven new respondents seek their disjoinder as parties – Trial necessarily adjourned pending outcome of further procedural steps

Family Law Act 1975 (Cth) s 79, s 90AC(1)(b), s 90AE(1), s 90AE(3), s 90AE(4)

Family Law Rules 2004 Rules 6.03, 6.04, 11.10(1)

B Pty Ltd & K (2008) FLC 93-380
Hunt & Hunt (2007) 36 FamLR 64
Kennon & Spry (2008) 238 CLR 366
The State of QueenslandvJ L Holdings Pty Limited (1997) 189 CLR 146

APPLICANT: Mr Storrer

FIRST RESPONDENT: Ms Storrer

SECOND RESPONDENT: N Pty Ltd

THIRD RESPONDENT: Mr O

FOURTH RESPONDENT:

R Pty Ltd as trustee

for the Mr O Family

Trust

FIFTH RESPONDENT:

T Pty Ltd

as Trustee for the Z Family

Trust

SIXTH RESPONDENT:

A Pty Ltd as trustee for

the Storrer Family Trust

SEVENTH RESPONDENT:

M Pty Ltd as Trustee for the

S Family Trust

EIGHTH RESPONDENT:

B Pty

Ltd as trustee for the C

Family Trust

FILE NUMBER: BRC 7225 of 2009

DATE DELIVERED: 29 May 2012

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: O’Reilly J

HEARING DATE: 28 and 29 May 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT

AND THE SIXTH RESPONDENT:

Mr Page SC

SOLICITORS FOR THE APPLICANT

AND THE SIXTH RESPONDENT:

Neumann & Turnour Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Mr George

SOLICITORS FOR THE FIRST

RESPONDENT:

Parker Family Law

COUNSEL FOR THE REMAINING

RESPONDENTS:

Ms Carew

SOLICITORS FOR THE REMAINING

RESPONDENTS:

Peter J Sheehy

Orders

IT IS ORDERED

1. The wife has leave to further amend the amended further amended response filed 28 May 2012 by deleting existing paragraph 4B and substituting as new paragraph 4B the wording in exhibit 6.

2. The wife file and serve upon the husband and the other respondents a points of claim document in relation to paragraphs 4A and 4B of the amended further amended response filed 28 May 2012 (as further amended in accordance with order 1):

   a.in relation to paragraph 4A, the facts matters and circumstances relied upon to assert that the assets of the Storrer Family Trust, a discretionary trust, comprise property of the husband and/or the wife and

   b.in relation to paragraph 4B, addressing separately the relief sought against the director of N Pty Ltd, on the one hand, and the shareholders of N Pty Ltd, on the other hand, and referring to all necessary documents or statutory provisions relied upon in relation to that relief

   by 4.00pm on Tuesday 26 June 2012.  

3. The husband and the other respondents file and serve a points of defence document, to the extent relevant to their respective cases, by 4.00pm on Tuesday 17 July 2012.

4. Any application by the husband and/or the other respondents for the summary dismissal of paragraphs 4A and/or 4B of the amended further amended response of the wife filed 28 May 2012 (as further amended in accordance with order 1) and any material in support be filed and served by 4.00pm on Tuesday 24 July 2012.

5. The matter be listed before the Honourable Justice O’Reilly at 9.30am on Tuesday 7 August 2012 for mention including consideration of the following matters:

   a.whether notices under s 78B of the Judiciary Act 1903 (Cth) will be required to be given to the Attorneys-General in relation to s 90AC of the Family Law Act 1975 (Cth)

   b.whether any summary dismissal application filed be determined on the basis of the pleadings or affidavit evidence

   c.the fixing of dates as a short cause for the hearing of any summary dismissal application which may be filed

   d.directions in relation to the filing and exchange of written submissions in relation to any summary dismissal application which may be filed.

6. The trial of the matter set down for two days on 28 and 29 May 2012 is adjourned pending the development of the matters in the above orders.

7. The costs of all parties of and incidental to the adjournment are reserved to the trial judge.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Storrer & Storrer and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 7225 of 2009

Mr Storrer

Applicant

And

Ms Storrer

First Respondent

And

Others

Second to Eighth Respondents

REASONS FOR JUDGMENT

EX TEMPORE

Application

1. This is an application by the wife, on the first day of a two day trial set down for 28 and 29 May 2012, being property proceedings between the husband and the wife for a just and equitable division of their property and assets pursuant to s 79 of the Family Law Act1975 (Cth) (the Act), for the wife to further amend her response to the husband’s initiating application by adding 7 parties and by amending par 4B of the relief the wife seeks.

2. The application is opposed by the husband and the 7 new parties.

3. Mr George of Counsel, for the wife, sought my leave to file read a document styled amended further amended response to initiating application dated 28 May 2012, naming the 7 new parties.  I gave Mr George leave to file that document and heard argument as to whether he could read and rely on it.

4. Mr Page SC, for the husband, announced his appearance also for the sixth respondent, limited to his (oral) application that it be removed as a party.

5. Ms Carew of Counsel announced an appearance for the remaining respondents, but limited to her (oral) application that they be removed as parties.

Background

1. So far the responses filed on behalf of the wife are:

   a.response filed 12 March 2010

   b.amended response filed 12 November 2010

   c.further amended response filed 24 June 2011

   d.amended further amended response filed 3 May 2012.

2. Mr Page SC, initially in his capacity as Counsel for the husband, referred to Rule 11.10(1)(a)(i) and (ii) of the Family Law Rules (2004) (the Rules): 

   RULE 11.10   AMENDMENT BY A PARTY OR COURT ORDER

   11.10(1) A party who has filed an application or response may amend the application or response:

   (a) for a case started by an Initiating Application (Family Law):

   (i) at any time before the procedural hearing at which the case is allocated the first day before the Judge; or

   (ii) if the court gives permission — at a later time. …

3. Mr Page submitted, initially, that by reason of Rule 11.10(1)(a)(ii) the wife is not able at this stage to further amend her response including as to the addition of new parties without permission, which is the term now used in the Rules rather than leave, but generally taken to be synonymous with leave. The wife’s amended further amended response filed 3 May 2012, on the coversheet, named as parties only the husband and the wife. That document sought that the s 79 order deal with the parties’ former matrimonial home, superannuation interests, taxation liability of the husband and other matters.

4. Relevantly, pars 4A and 4B provided: 

   4A The husband shall cause [A] Pty Ltd as trustee for the [Storrer] Family Trust to hold 60% of the [Storrer] Family Trust Shareholding in [N] Pty Ltd on trust for the wife until 22 November 2012 whereupon the husband shall then cause [A] Pty Ltd as trustee for the [Storrer] Family Trust to transfer 60% of the [Storrer] Family Trust Shareholding in [N] Pty Ltd to the wife.

   4BThe Directors of [N] Pty Ltd shall cause the company [N] Pty Ltd to register the transfer of shares transferred by [A] Pty Ltd as trustee for the [Storrer] Family Trust to the wife in accordance with paragraph 4A of this Order.

5. Initially, par 4B seemed to me to be merely a machinery order so that no joinder of N Pty Ltd would be necessary. 

6. However, it appears that pursuant to a Shareholders Agreement dated 22 November 2007 between and amongst the shareholders of N Pty Ltd, ex 3, clauses 9-11 provide a comprehensive and binding scheme for share disposal, including a “No Sale Period” to end upon the happening of a “Realisation Event” (clause 9.1); an exception to clause 9.1, for disposal of shares during the No Sale Period provided that the disposal occurs in accordance with clause 11 (clause 9.2); disposal of shares, or of the assets and undertaking of N Pty Ltd, at the end of the No Sale Period (clause 10); and disposal of shares during the No Sale Period (clause 11), constituting a pre-emptive rights clause.

7. Clause 11 thus requires that any shareholder, the “Transferring Shareholder”, who wishes to dispose of shares, must first offer them to the other shareholders on a pro-rata basis, but that if no existing shareholder accepts “the Offer Shares” after a particular required process, the Transferring Shareholder may offer his shares to a bona fide third party in accordance with clause 11.2, which I will set out:

   11.2          Offer to bona fide third party

   (a) If an offer made under Clause 11.1(c) is declined, the Transferring Shareholder may offer his Shares to a bone fide third party provided that the following conditions are satisfied:

   (i) he has first given a Transfer Notice to [N Pty Ltd] and the other Shareholders that he elects to transfer the Shares to a bona fide third party ; and

   (ii) the transfer of the Shares is approved by at least seventy-five per cent (75%) majority of the remaining Shareholders.

   (b) The transfer must be at a transfer price per Share of not less than the price specified in the Transfer Notice.

   (c) Where the Transferring Shareholder wishes to transfer the Shares to a person who is not a party to this Agreement, the Transferring Shareholder must ensure that the transferee becomes a party to this Agreement or enters into an agreement substantially in the same form of this Agreement.

   (d) Nothing in this clause obliges the remaining Shareholders to act reasonably in refusing to accept the transfer of Shares nor to approve a transfer to a proposed transferee.

8. For the purpose of clause 9, a “Realisation Event” is defined in the Shareholders Agreement (clause 1) as: 

   “Realisation Event” means the happening of any of the following events:

   (a)the expiration of five (5) years from the Agreement Date; or

   (b)the time when the gross revenue of [N Pty Ltd] reaches fifty million dollars ($50,000,000.00); or

   (c)at any time during the Term, Shareholders who collectively hold not less than seventy-five per cent (75%) of the Shares in [N Pty Ltd] agree to sell [N Pty Ltd] or the assets and undertakings of [N Pty Ltd].

9. As mentioned, the date of the Shareholders Agreement is 22 November 2007, such that a Realisation Event will occur after 5 years, namely 22 November 2012. Hence, the reference in the wife’s par 4A to that date. By that date, it would appear that clause 11 would have no further application, it being clause 10 (too detailed to set out) which governs the sale of the shares, or of the assets and undertaking of N Pty Ltd, beyond 22 November 2012.

10. Ms Carew referred to evidence by Mr O, the sole director of N Pty Ltd, that N Pty Ltd is expected to have in excess of $50 million turnover in the 2012 calendar year.

11. The shareholders are listed in Recital B of the Shareholders Agreement as:

    a.[OFT]          52%

    b.[ZFT]  12%

    c.[SFT]          12%

    d.[CFT]          12%

    e.[Storrer FT]           12%.

12. I was told without demur that this 100% shareholding is of the ordinary shares in N Pty Ltd (there apparently being another class or other classes of shares not presently relevant). 

13. In the document styled amended further amended response to initiating application dated 28 May 2012, filed by leave yesterday, the coversheet names as parties: 

    §[N] Pty Ltd

    §[Mr O]

    §[R] Pty Ltd as trustee for the [Mr O] Family Trust

    §[T] Pty Ltd as trustee for the [Z] Family Trust

    §[A] Pty Ltd as trustee for the [Storrer] Family Trust

    §[M] Pty Ltd as trustee for the [S] Family Trust

    §[B] Pty Ltd as trustee for the [C] Family Trust.

14. In relation to these named parties it is seen by reference to the shareholders listed in Recital B to the Shareholders Agreement and other material that:

    a.N Pty Ltd is the company the subject of the Shareholders Agreement

    b.Mr O is the managing director of N Pty Ltd and its only director

    c.OFT is the defined abbreviation for the Mr O Family Trust

    d.ZFT is the defined abbreviation for the Z Family Trust

    e.Storrer FT is the defined abbreviation for the Storrer Family Trust

    f.SFT is the defined abbreviation for the S Family Trust

    g.CFT is the defined abbreviation for the C Family Trust.

15. The list of parties to the Shareholders Agreement (p 5) includes one natural person for each shareholder family trust, although those natural persons are not ordinary shareholders. 

The joinder rules

1. Usually, the joinder of parties is achieved by compliance with Rule 6.03 by naming a party in the relevant application or response, or adding the name of a party, and by complying with Rule 6.03(a) and (b), which require service on the named or added party of certain documents.

2. Rule 6.03, plainly enough, is predicated upon the need to amend for joinder after a case has started. This has effect that, for any adding of parties, Rule 11.10 is applicable, subject to Rule 1.12, or waiver by the parties.

3. Rule 6.04 provides that a party may apply to be removed as a party.

4. Ms Carew of Counsel, for the new respondents except the sixth respondent, yesterday said that there was “no issue” as to service, understood as a waiver of the right to formal service. It is appropriate thus, as I said yesterday, that I regard the joinder as complete, that is, as if permission had been granted already, in order to advance the matter.

5. The application for the disjoinder of the parties for whom Ms Carew appeared was supported by affidavits sworn 24 May 2012 and filed by leave 28 May 2012 of Mr O (for himself, N Pty Ltd and OFT), Mr J (for SFT), Mr C (for CFT) and Ms Z (for ZFT).

6. Mr Page SC, for the sixth respondent, echoed Ms Carew’s position, so that similarly it is appropriate, as I said yesterday, that I regard its joinder as complete, as if permission had been granted already, in order to advance the matter. I note that the husband, being the sole director of the sixth respondent, was present in Court and instructed similarly that there was “no issue” as to service.

7. In the wife’s amended further amended response filed by leave 28 May 2012, pars 4A and 4B were identical with her amended further amended response filed 3 May 2012.

8. However, yesterday Mr George sought further to amend the amended further amended response filed by leave yesterday by substituting as new par 4B (ex 6):

   4B. That the Director and Shareholders of [N] Pty Ltd cause the said company to register the transfer of shares transferred by [A] Pty Ltd as trustee for the [Storrer] Family Trust to the wife in accordance with the Order of the Family Court of Australia. 

9. Readily, it is seen that the proposed amended par 4B recognises that there is only one director of N Pty Ltd (Mr O), and adds in, in the first line, the words “and Shareholders”.

First adjournment

1. The matter was first adjourned on 23 August 2011, in the Federal Magistrates Court. The wife had sought deferment under s 79(5) of the Act. That application was dismissed. On the same date however Cassidy FM transferred the proceedings to this Court. A notation requested that this Court give consideration to listing the matter with priority “given that trial affidavits have been prepared and the matter is ready to proceed”.

Second adjournment

1. In this Court, Registrar Stoneham made further trial directions and placed the matter on the callover list for 22 November 2011.  On that date Murphy J listed the matter before Forrest J for 7 March 2012, for 1 day. On that date however the matter was listed to Kent J, Forrest J being engaged in another matter. The matter did not proceed before Kent J, Counsel apparently stating that the matter could not finish in 1 day and the matter thus was adjourned back to the Registry for the allocation of 2 days for trial. My recollection is that before Kent J, both Mr Page SC and Mr George said they could not finish the matter in 1 day and requested 2 days.

The arguments

1. For convenience, I heard Mr Page SC and Ms Carew first, because at first blush it appeared to me that I should not allow the disjoinder of the 7 parties nor disallow the proposed amendment of par 4B, having regard to the principle in The State of QueenslandvJ L Holdings Pty Limited (1997) 189 CLR 146 to the effect that procedural rules of court ought not be given paramountcy to the necessity of justice in a case in respect of amendments that may be perceived as necessary to effect justice; and also for the reason that if the shareholders’ rights under the Shareholders Agreement potentially may be affected then they would be necessary parties.

Mr Page

1. Mr Page submitted that the basis of the joinder and the proposed further amendment to par 4B (ex 6) must be considered against the background of s 90AE(3)(a) of the Act to the effect that any proposed order under s 79 which would bind a third party must be an order that is “reasonably necessary” to effect a division of the property and assets of the husband and the wife, and that such does not obtain here because there is “nothing yet before the Court” to enable the relief proposed in new par 4B to be granted.

2. Mr Page relied on B Pty Ltd & K (2008) FLC 93-380, to the effect that as yet the wife has not sought to deliver a pleading against the sixth respondent (nor the other added parties) and that in a case such as this such reasonably is required. Mr Page relied in particular on [43] to [45]:

   43. In the usual run of applications for alteration of property interests or parenting orders, the fact of marriage or parenthood, accompanied, in respect of the former, by a history of contribution to and acquisition of, property and, in respect of the latter, evidence that relates to any aspect of a child’s interests, is sufficient to make the existence of a “cause of action” apparent. No pleading in the traditional sense is required to identify further facts material to the cause.

   44. However, the narrative or descriptive nature of evidence is often unsuited to formulate or particularise a cause of action against a third party. Something resembling a statement of claim will generally be necessary.

   45. In Gould v Gould; Swire Investments Ltd Fogarty J (with Nicholson CJ and Finn J agreeing) said (at 80,451):

   “I conclude, consistently with Buckeridge and Barro, that the correct procedure, where an applicant in proceedings under the Family Law Act seeks relief against a person who is a stranger to the marriage or relationship, is to name that person as an additional respondent in the proceeding and set out the nature of the claim and the basis of it in the ordinary way in the application”. (original emphasis)

3. Mr Page relied also on the discussion by O’Ryan J in Hunt & Hunt (2007) 36 FamLR 64, in particular [113] in O’Ryan J’s decision set out in B & K at [39]:

   113. When s 90AE(2) is read in conjunction with s 90AE(3), s 79, and Part VIIIAA generally, it is clear that what is contemplated is not some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage.

4. Mr Page submitted thus that the wife’s claim for relief against the director of N Pty Ltd and its shareholders in this particular case should be the subject of “something resembling a statement of claim”, so that by reference to the Shareholders Agreement the added parties be able to plead in response their reliance on various clauses of the Shareholders Agreement, in particular clauses 9, 10 and 11, and that absent a pleading, the disjoinder should be allowed because a paragraph such as the newly proposed par 4B is not sufficient.

1. In this regard Mr Page relied also on [52] in B & K:

   52. We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.

2. Thus the central plank of Mr Page’s submission was that because, as yet, there is no statement of claim or equivalent offered by the wife to support the joinder, and because proposed new 4B is insufficient, it is proper to refuse permission for the wife to amend in accordance with proposed new par 4B.

Ms Carew

1. Ms Carew helpfully provided written submissions.

2. Ms Carew submitted that by s 90AA, in Part VIII, the object is to allow the Court in relation to the property of a party to a marriage to alter the rights of third parties, such that in this case it is the rights of the shareholders under the Shareholders Agreement which the wife seeks to alter.

3. By way of link with section 90AE Ms Carew referred to ss 90AE(1)(d),  90AE(3)(c)  and 90AE(4)(f) and (g) which I will set out:

   SECTION 90AE COURT MAY MAKE AN ORDER UNDER SECTION 79 BINDING A THIRD PARTY

   90AE(1) In proceedings under section 79, the court may make any of the following orders:

   ….

   (d) an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.

   ….

   90AE(3)  The court may only make an order under subsection (1) or (2) if:

   ….

   (c) the third party has been accorded procedural fairness in relation to the making of the order; and

   …

   90AE(4)  The matters are as follows:

   …

   (f) the economic, legal or other capacity of the third party to comply with the order;

   Example: The legal capacity of the third party to comply with the order could be affected by the terms of a trust deed. However, after taking the third party’s legal capacity into account, the court may make the order despite the terms of the trust deed. If the court does so, the order will have effect despite those terms (see section 90AC).

   (g) if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters—those matters. …

4. Ms Carew submitted that N Pty Ltd is expected to have a $50 million turnover in the 2012 year. This is supported by the affidavit of Mr O, par 16:

   16.In 2012 calendar year [N Pty Ltd] is forecast to turnover >$50 million and employs approximately 150 staff at our [Australian] factory as well as subsidiary entities in [a country in South America], [a country in South America] and [a country in Europe].

5. Ms Carew submitted:

   9. The third party objects to the making of the proposed order for the following reasons:

   a. The order sought by the wife is that the ‘directors’ of [N Pty Ltd] cause the company to register the shares. There is only one director of [N Pty Ltd] and he does not have the legal capacity to comply with the order. The rights relating to share transfers are governed by the Shareholders’ Agreement which prevails over anything in the Constitution of the company unless prohibited by law.

   b. The shareholding about which the wife seeks orders are not owned by the parties to the marriage. The wife is in effect seeking to increase the pool of assets.

   c. Subsection 90AE(3) prohibits the Court from making an order unless it is just and equitable. It is submitted that the order sought would not be just or equitable because:

   i. To date the shares of [N Pty Ltd] have always been held by the employees. The proposed share transfer to the wife would be contrary to that history and as she is not a party to the shareholders’ agreement may empower the wife to take action that conflicts with the interest of other shareholders. In addition she would have rights at law that if exercised may be contrary to the best interests of the other shareholders.

   ii. The remaining shareholders do not want the wife to become a shareholder and will not voluntarily approve any proposed transfer of the shares to the wife. It would be a significant infringement on the rights of existing shareholders to make the order sought. Their intention to protect their rights as a shareholders is clearly evidenced by the restrictions contained in the shareholders’ agreement.

   iii. It will, in the opinion of the other shareholders have a “destabilizing and demotivation effect on the other shareholders.” It is in their opinion that the “continued stability of the company and the continued motivation of the founding shareholders to drive the company forward is critical to the success of the company”.

   iv. There are 150 employees of [N Pty Ltd] and if the existing shareholders resent the imposition of an unwanted shareholder it may impact upon the viability of the business and in turn the jobs of existing employees.

   d. Subsection 90AE(3)(a) also prohibits an order as proposed unless it is reasonably necessary or reasonably appropriate and adapted to effect a division of property between the parties to the marriage. It is submitted that as this Court has the power to make an order in personam against the husband an order affecting the shareholding is not necessary. Further is it submitted that the order is not appropriate for the reasons set out above. (footnotes omitted)

6. In relation to par 9a that the sole director, Mr O, does not have the “legal capacity” to comply with any order such as the wife seeks in new par 4B, Ms Carew referred to the Shareholders Agreement, par 2.3 which provides:

   2.3   Agreement to Prevail

   This Agreement is intended by the Shareholders to regulate their relationship as Shareholders in [N Pty Ltd]. It is the intention (and agreement) of the Shareholders that the terms of this Agreement are paramount and in the event of any inconsistency between the terms of this Agreement and Constitution, then this Agreement shall prevail to the extent of any inconsistency unless prohibited by law.

7. Further, Mr O said in his affidavit:

   9. The name [N Pty Ltd] is an acronym representing the four first letter of each founders first name […, …, …, …]. [Mr Storrer] was not a founder of N Pty Ltd.

   10. Each of the shareholders are employees of [N Pty Ltd] and have worked extremely hard since the inception of the business 10 years ago to create the successful company that exists today.

   11. [Mr Storrer] who holds a 12% shareholding equivalent to the other shareholders was not one of the original founders of the company.

   12. If a portion of his shareholding was transferred to someone who was not an employee of the company, has made no contribution to the business, and has never contributed any capital to the business, then this would have a destabilizing and demotivational effect on the other shareholders of the business. The continued stability of the company and the continued motivation of the founding shareholders to drive the company forward is critical to the success of the company.

   13. [Mr Storrer] began employment at [N Pty Ltd] approximately 2 years after the establishment of the business and was offered a 12% shareholding in the company in 2004 as a part of his employment package. The shares were free issued to [Mr Storrer].

   …

   18. The shareholders of N Pty Ltd executed a Shareholders Agreement to protect the commercial and personal investment interests of all shareholders which I say is not uncommon and not unreasonable for companies with private shareholders. The Shareholders Agreement governs the requirements for share transfers.

   19. There would be a severe infringement of the shareholders rights and their financial investment in the company for them to be required to agree for a transfer of the shares to a third party who is not employed in the business and does not contribute to the success of the business, when they are required to continue to do so to protect their investment and livelihood.

   20. An Order of the Court requiring the shareholders to register a transfer of shares to the Wife, would override the shareholders legal rights and obligations to each other currently regulated in their written agreement entered into freely by them, and would impose on them as a group, new obligations to an outside person as a new shareholder who would not be subject to the rights and obligations between current shareholders under their written agreement.

8. As to par 9b, last sentence, Ms Carew referred to B & K (above) at [23]:

   23.The orders sought by the wife against the trustees seek, not to divide, but to increase the present property of the parties. … (emphasis added)

9. At this early stage I am not sure that such would apply to the present case.  However, it does call into question whether the relief the wife claims in par 4A is in relation to “property”.  This would seem to invite consideration of whether the facts of the case are such as to attract the reasoning in Kennon & Spry (2008) 238 CLR 366, the Storrer Family Trust being a discretionary trust. Further, the matter calls into question whether the relief sought in par 4B, within the meaning of s 90AE(3)(a), is “reasonably necessary” to effect a division of property between the husband and the wife.

Mr George

1. Mr George sought to distinguish B & K (above) on its facts, pointing to the circumstance that it dealt with the question whether orders could be made against trustees in relation to distributions from trusts in which the husband was a beneficiary, so that summary dismissal, as was sought in that case, was granted; and that there is nothing in that case establishing any precedent to the effect that a statement of claim is mandatory or necessary whenever third parties are involved, B & K at [44] referring only to the circumstance that where there are third parties involved something “resembling a statement of claim” will “generally” be necessary.

2. Mr George submitted that in this case there is nothing to be pleaded beyond what is in ex 6 as proposed new par 4B, so that “nothing more could or should” be required.

3. Mr George submitted further that the husband is the sole appointor and controller of CFT (through the sixth respondent, the husband being the sole director of and shareholder in it) and seeks to have the whole CFT for himself, and further that there is no difficulty with par 4A as sought because the parties, through their experts, have sought valuation of the CFT interests for the very purpose of the division of their “property”.

4. Mr George referred to the circumstance that Mr Page’s primary objection is to the lack of a pleading, and submitted that such is not a requirement of the Rules of Court, such that in seeking to amend in accordance with ex 6 the wife in reality sought no more indulgence than allowed by the Note to Rule 11.10(1), which provides:

   Note:  An amendment of an application may be necessary to ensure that the Court determines the real issues between the parties or to avoid multiple cases.

5. The nature of the case in pars 4A and 4B, submitted Mr George, is so “clear” that no further pleading is required or indeed could be made, so that permission should be given for the amendment to par 4B and for the trial to proceed.

6. As to Ms Carew’s par 9c, Mr George pointed to section 90AC(1)(b), which I will set out:

   SECTION 90AC THIS PART OVERRIDES OTHER LAWS, TRUST DEEDS ETC

   90AC(1) This Part has effect despite anything to the contrary in any of the following (whether made before or after the commencement of this Part):

   ….

   (b) anything in a trust deed or other instrument. (emphasis added)

Conclusions

1. The Shareholders Agreement is a private contract concerning a private company. I would doubt that section 90AC(1)(b), whatever else it means, and if constitutionally valid, could possibly be used, in effect, to set aside a contract which gives third parties specific rights, particularly the rights in the nature of those in the Shareholders Agreement, clauses 2.3 and 9-11. The Recital to the Shareholders Agreement, indeed, records:

   C.The Shareholders wish to ensure that their relationship as Shareholders of [N Pty Ltd] is clarified.

   D.The Shareholders wish also set out their expectations that they will develop the business of [N Pty Ltd] to a mutually agreed exit strategy.

2. Moreover, courts traditionally do not interfere with personal relations of the type described by Mr O in his affidavit, and indeed, as set out in the Shareholders Agreement.

3. It seems to me that there is a significant difference between par 4B as it was in the 3 May 2012 response, and par 4B as it is now reshaped, by the addition of the words “and shareholders”, such now being relief specifically that they and each of them do something, and that the wife thus should be required to plead the facts matters circumstances relied upon for that relief, including reference to all documents and statutory provisions relied upon or by which she says the Court could grant the relief sought in par 4B against the director and shareholders, particularly in light of par 9a of Ms Carew’s submissions.

4. In my view, this cannot be argued satisfactorily unless and until such a pleading be delivered, and I confine those remarks to this particular case, not by way of any precedent.

5. I suspect that the second to eighth respondents, as canvassed yesterday, possibly then might apply for summary dismissal rather than for their removal as parties, on the basis that there is no reasonable likelihood of success shown against the director and the shareholders, as a matter of law. 

6. It must be argued fully and properly, however, after the wife has the chance to set out in the pleading, by reference to the Shareholders Agreement, the relief she seeks. That could involve the wife pleading s 90AC(1)(b), which, if pleaded by the wife, necessarily would require reference during argument to the extrinsic materials as to what Parliament intended by that provision and may even involve, as I said yesterday, a challenge to its constitutional validity insofar as it purports to affect private contract law and the private contracts of third parties.

7. Experience teaches that proper procedural steps in matters such as these proceedings are vital for proper elucidation of the legal matters in issue, and that if proper procedural steps are skipped over, early attention is unable to be given properly to legal issues arising in a case.

8. I will, therefore, allow the amendment in par 4B, ex 6, and allow the wife to read the amended further amended response filed yesterday, but will direct pleadings, and a further listing of the matter.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice O’Reilly delivered on 29 May 2012.

Associate:     

Date:              13 June 2012