Tandler and Cooper
[2004] FMCAfam 246
•25 March 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TANDLER & COOPER | [2004] FMCAfam 246 |
| FAMILY LAW – Injunction – husband’s solicitor agrees to hold proceeds of sale of the former matrimonial home on trust for both parties – sale proceeds partly distributed without notice to the wife – prima facie breach of trust obligation by respondent’s solicitor – injunction sought – solicitor ordered to file affidavit concerning disposition of trust money. |
Family Law Act 1975
Waugh & Waugh (2000) FLC 93-052
Blue Seas Investments Pty Limited v Mitchell & McGilvray (1999) FLC 92-856
| Applicant: | SAMANTHA TANDLER |
| Respondent: | BRETT COOPER |
| File No: | SYM693 of 2003 |
| Delivered on: | 25 March 2004 |
| Delivered at: | Wollongong |
| Hearing date: | 25 March 2004 |
| Judgment of: | Ryan FM |
REPRESENTATION
| Counsel for the Applicant: | Mr P. Chodat |
| Solicitors for the Applicant: | Kells The Lawyers |
| Counsel for the Respondent: | Mr P. Donnelly |
| Solicitors for the Respondent: | Donnelly Lawyers |
ORDERS
Pending further order:
that Donnelly and LBC Lawyers are restrained from authorising, withdrawing, disposing or encumbering the net proceeds of sale of
18 Kiarama Avenue, Kiama Downs, held in trust by them, other than in accordance with Orders of this Court for the consent of both parties in writing;that Donnelly and LBC Lawyers, together with Kells Lawyers, shall deposit the net proceeds of sale of 18 Kiarama Avenue, Kiama Downs, presently held in trust pursuant to O 1 into a controlled moneys account, the wife's solicitors to nominate the institution into which those moneys shall be paid;
thereafter the moneys shall be held on trust jointly by Kells Lawyers and Donnelly and LBC Lawyers and shall not be paid out other than in accordance with the written agreement of the parties or pursuant to an Order of this Court;
the applicant wife shall file an undertaking as to damages in the usual form by 4 pm, 31 March 2004;
in relation to the wife's application to restrain the husband from travelling overseas I refuse that application;
the Court notes that should the husband fail to return then the hearing will still proceed;
I direct that the husband's solicitor provide a statement verified by affidavit detailing the receipt and disposition of all moneys received by him from the sale of 18 Kiarama Avenue, Kiama Downs, which affidavit is to be filed by 4 pm, 31 March 2004;
I list the matter for mention for further interim hearing before me at
10 am, 1 April 2004;I order that the respondent husband pay the applicant's costs in the sum of $1000 of this application, which moneys are to be paid from the moneys held in trust, pursuant to O 1 of these orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT WOLLONGONG |
SYM693 of 2003
| SAMANTHA TANDLER |
Applicant
And
| BRETT COOPER |
Respondent
REASONS FOR JUDGMENT
These reasons were delivered orally.
Introduction
This is an application by Samantha Tandler (“the applicant”) filed yesterday. In it the applicant asked for a series of urgent ex parte injunctions restraining the further distribution of the proceeds of sale of the former matrimonial home at 18 Kiarama Avenue, Kiama Downs. The respondent’s solicitors, Donnelly and LBC Lawyers hold the sale proceeds. Although I declined to deal with the matter ex parte,
I granted the applicant leave to proceed on short notice. I made orders directing service upon the respondent’s solicitors and listed the matter for hearing at 3.00 pm today. At this hearing both parties are represented and the hearing has been by videolink between Parramatta and Wollongong.
The evidence
The only evidence is an affidavit sworn by the wife’s solicitor and filed with the urgent application. The respondent’s solicitor has made some short submissions, which have enhanced my understanding of the situation since he received the sale proceeds.
The net proceeds of sale appear to be in the vicinity of about $240,000. It was agreed between the parties that the sale proceeds would be held in trust by the respondent's solicitor. The terms of the trust, as understood by the respondent and his solicitor, are encapsulated in a letter of 10 December 2003 from Donnelly Lawyers to Kells Lawyers where it said, “We note the proceeds of sale are to be held in trust pending property settlement.”
For abundant caution the same day the applicant's solicitor responded to Mr Donnelly of Donnelly Lawyers “we are instructed our client does not consent to any sums of money being paid from the settlement funds other than the outstanding mortgage of the property.”
Surprisingly, it appears that without the applicant’s knowledge or consent the respondent’s solicitor has made a series of undisclosed payments from the trust money. The respondent’s solicitor says that the monies are actually company funds and that acting on the instructions of the company accountant he has distributed part of the sale proceeds. It appears that the husband is the sole shareholder and director and that the company’s principal asset is the former matrimonial home. It seems clear that the company assets will form part of the matrimonial assets.
The respondent’s solicitor said that he has paid out about $50,000. The payments comprise about $20,000 to the Australian Tax Office, whether that be for personal or company tax, is unclear. About $12,000 in directors' fees paid to the respondent and approximately $18,000 in legal fees taken by Mr Donnelly. Prima facie it appears that there has been a breach of trust. It may also be at the end of this matter that it becomes regrettably clear that there has been a breach of professional obligations. It is trite law that a trustee who holds money on trust for more than one person is unable to distribute those trust moneys on the instructions of one party alone.
The law
Section 132 of the Legal Profession Regulation 2002 requires a legal practitioner who has reasonable grounds for suspecting that a solicitor has dealt with controlled or trust money that is dishonest or irregular to notify the president of the Law Society. This is known in the profession as the “pimp rule”.
In Waugh & Waugh (2000) FLC 93-052 the Full Court of the Family Court emphasised that one cannot seek an injunction pursuant to s.114(3) merely because one feels uneasy. There has to be a proper basis for doing so. In Waugh the Full Court examined the circumstances in which a court may grant an interlocutory injunction pursuant to s.114(3). Not only must the court consider issues of balance of convenience and hardship to the parties but also “… the fundamental question whether there was any evidence of any intention by the husband to dispose of any assets pursuant to any scheme to defeat any judgment which the wife might obtain in the substantive proceedings, or whether he merely wishes to continue to trade, as he always has done, prior to and since the separation of the parties” at 87, 810.
Applying the law to the facts
The basis for relief is that $50,000 of trust moneys held on behalf of both parties has been paid out by the trustee on the instructions or at the behest of one only of the parties. The applicant alleges that there is a substantial risk of disposal of some or all of the remaining proceeds. Having heard from the respondent’s solicitor this afternoon, regrettably that applicant is entitled feel more concerned that when she brought this action.
The orders sought by the applicant will maintain the status quo in relation to the balance of the sale proceeds. The evidence does not disclose any reason why the court would conclude that maintaining the status quo would cause hardship to the respondent.
In my opinion the circumstances amply attracts the principles for the granting of relief of the type sought.
The granting of the injunction requires that the applicant will need to file an undertaking as to damages. The applicant’s financial statement strongly suggests that she would have little prospect of meeting any damages that may be ordered subsequently by the court. I considered in those circumstances whether I should accept the undertaking as to damages and, if her application for injunctive relief should fail because of the risk that the undertaking as to damages could not be satisfied. In Blue Seas Investments Pty Limited v Mitchell & McGilvray (1999) FLC 92-856 the Full Court highlighted the differences between Family Law litigation compared to general civil litigation. After reviewing the common law their Honours make it clear that a court considering an application for injunctions under the Family Law Act 1975 must examine the situation in a different light to ordinary civil litigation. They hold “in our view it would be unconscionable to accept a broad principle that the impecuniosity of a party in Family Law proceedings would be given such weight as to prevent an injunction being granted where all the other requirements for the grant of such an injunction are present. Indeed, it may even be doubtful whether the impecuniosity of one of the parties to family law proceedings would usually be a factor militating against a ground of interim or interlocutory injunctions if the other tests of the grant of the same were otherwise satisfied”.
In the circumstances the applicant will be required to file an undertaking as to damages which shall be lodged by Wednesday next week. The applicant appears to have a good claim for an adjustment of property payable from the trust moneys. Thus although she may not be able to immediately abide any order for damages, at the conclusion of the proceedings she may well be able to.
The applicant has made out a case for the relief sought. The sale proceeds are sizeable and the parties should have the benefit of interest that can be earned from it. Thus the monies will be able to be invested into a controlled monies account nominated by the applicant’s solicitors.
The parties’ solicitors will need to exchange information so that if there has been a breach of fiduciary duty by the trustee remedial action can be taken and section 132 of the Legal Profession Regulations complied with. The respondent’s solicitor will be directed to file an affidavit setting out the receipt and disposition of all funds held from the sale proceeds.
During the adjournment the trustee should consider obtaining independent advice in relation to his position in these proceedings. On the next occasion the court will need to consider what action is appropriate to bring this matter to the attention of the President of the Law Society of NSW.
For these reasons I make the orders set out at the start of this judgment.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Ryan FM
Associate: S. Mashman
Date: 26 May 2004
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