Todd and Todd - [2016] FamCA 79

FAMILY COURT OF AUSTRALIA

TODD & TODD

[2016] FamCA 79

FAMILY LAW – Injunctions – insufficient evidence – application refused.
FAMILY LAW – Partial property distribution opposed – insufficient evidence – application refused.

Family Law Act 1975 (Cth)

Abella v Anderson [1987] 2 QdR 1
ABC v Lenah Game Meats Pty Ltd [2001] HCA 63; (2008) CLR 199
Castlemaine Tooheys Limited v South Australia [1986] HCA 58; (1986) 161 CLR 148
Jackson v Stirling (1987) 162 CLR 612
Strahan and Strahan (interim property orders) [2009] FamCAFC 166

APPLICANT:

Ms Todd

RESPONDENT:

Mr Todd

FILE NUMBER:

MLC

9179

2014

DATE DELIVERED:

17 February 2016

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Cronin J

HEARING DATE:

8, 9 And 12 February 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Geddes Qc with Ms Colla

SOLICITOR FOR THE APPLICANT:

Schembri & Co Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Sweeney

SOLICITOR FOR THE RESPONDENT:

Westminster Lawyers Pty Ltd

Orders

That the application in a case of the wife filed 11 February 2016 is dismissed.
That the response to the wife’s application filed by the husband on 12 February 2016 is dismissed.
That all extant applications for final orders relating to property are listed for final hearing to commence on Monday 1 August 2016.

IT IS CERTIFIED:

That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Todd & Todd has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9179 of 2014

Ms Todd

Applicant

And

Mr Todd

Respondent

REASONS FOR JUDGMENT

In this discrete application (application in a case filed 11 February 2016), Ms Todd (“the wife”) seeks a number of order as set out below. Mr Todd (“the husband”) opposes those orders and seeks orders of his own which are set out below.
Some context to this application is necessary.

Background

The wife is 43 years of age and engaged in home duties. The husband is aged 61 years and is, by profession, a pharmacist. He conducts his own pharmacy. The parties have a child B, who is 8 years old. Final parenting orders have been made about B.
The parties dispute the length of their relationship but it is either 2001 or 2005. They married in 2006 and separated in 2014.
The substantive proceedings from which these interlocutory proceedings spring were begun by the husband in October 2014. Those proceedings relate to a division of property.
There were interim proceedings between the parties in December 2014, April 2015, July 2015, three occasions in September 2015, two in October 2015 and one in December 2015. The substantive and anticipated final trial was set down by orders made in October 2015 yet further interlocutory disputes required a hearing about discovery, as late as early February 2016, just days before the trial was due to commence.
Both parties are represented by legal practitioners and have been throughout. The fact that both have been represented and there have been a large number of interlocutory disputes is a factor that is relevant to the nature of the injunctive relief sought by the wife to which I return below.
The final hearing had initially been about both parenting and property issues. The former was compromised and final orders were made on 9 February 2016. Having resolved that, the wife sought an adjournment on the basis of an assertion that the husband had not been candid in respect of the disclosure of his financial position; an allegation denied by the husband. Combined with that, the wife said she wanted to bring what is now the discrete application before the Court. Upon adjourning the trial, I gave the parties an opportunity to litigate the wife’s proposed discrete application and set the hearing for 9.00am on Friday 12 February. The timetable was tight and because of the parties’ respective problems with the Court’s portal, the filing of documents was delayed but neither party took issue with that.

Proposed orders

The wife proposed orders that can now be categorised as:
(a)An interim property settlement for:
(i)A payment of $100,000 from the husband; and
(ii)That the husband transfer to her 440,000 Qantas Frequent Flyer points;
(b)Injunctive orders against the husband in relation to:
(i)Not disposing or encumbering (further) one of two properties of the assets of the parties (and owned by the husband);
(ii)Not disposing of or encumbering (by increasing) liabilities of the husband to National Australia Bank including an overdraft facility;
(iii)Accessing a self-managed superannuation fund;
(iv)Disposing of or encumbering “points” associated with commercial credit providers; and
(v)Disposing of or encumbering any accounts held by the husband at Bendigo Bank.
Four other orders were sought but counsel for the wife said that discussion was to take place and it was unnecessary for the Court to be involved in any such determination. Those matters related to chattels.
The husband sought a dismissal of the wife’s application and in the alternative, that he transfer to her, free of encumbrance, the property referred to in paragraph 9(b)(i) above.
The wife rejected the husband’s alternative proposal relating to the transfer of a property in his name to her and accordingly, it is not necessary for me to contemplate that further.

Affidavits

The evidence upon which the wife relied was an affidavit filed 11 February 2016. The husband’s was an affidavit filed on 12 February 2016.
As I indicated in discussion, some of the matters raised by the wife particularly in relation to the injunctive relief, were factually contentious and the Court was not in a position to make any determination without that evidence being tested. The issues have to be determined on facts that are plausibly clear. It is difficult to make any findings here and a cautious approach is necessary. Inferences can often be drawn in cases but not so here because the versions of facts are diametrically opposed.

The evidence

The injunctive relief

The wife’s case is that the husband has to be restrained from disposing or encumbering assets even though the trial is now in August 2016 because she fears that he will dissipate the “pool” of assets. To support that assertion, the wife pointed to three specific events.
First, the wife said that the husband had disposed of C Ltd shares which, at the time of separation, numbered 555,000. This company is a private entity involved in research. She observed that in April 2014 (which was the time of separation), the husband transferred 500,000 C Ltd shares to an entity, a director of which was an acquaintance of his, for $100,000. Further transfers were alleged such that there are now no shares remaining.
The wife asserted that the husband had (as part of these total shares) held some of them on trust for her mother. The husband denied such a trust ever existed and there is no evidence from the wife’s mother to that effect.
The husband’s evidence is that some of the shares about which the wife is particularly suspicious, were acquired on trust for his parents. As part of some of these transfers, those shares were transferred to his parents. No independent evidence from the husband supported his assertion either. The suspicions of the wife seemed to have arisen because the husband did not or could not (from the wife’s perspective) produce documents to support the various transfers. Subpoenaed material apparently does not advance the issue. All of that is clearly a matter for the testing of the evidence wherein the truthfulness of each party and indeed, the depth of their knowledge, will be tested.
The wife alleged that C Ltd was endeavouring to float its shares and asserted that the value of the shares lost (as a result of the husband disposing of them) amounted to $1.55 per share. There are problems with that evidence. On my interpretation of the document relied upon by the wife, the $1.55 figure is that attributed by the company as a value of the share. The market will no doubt determine the value. As it turns out, counsel for the wife acknowledged that the float did not succeed for “administrative” problems at the anticipated time earlier this year. In any event, it seems common ground that the shares no longer exist and, there are no extant applications to have any of those transactions set aside.
There may be plausible explanations for the husband’s share transactions but the wife relied upon the fact that the transfers had taken place as a basis to grant the injunctive relief. However, it was not just that incident that she relied upon.
The second issue concerns another company D Ltd. Here, the wife said that shares were sold by the husband in June 2014 at $0.80 per share. She asserted that they are now valued at $1.85 per share according to the ASX. This disposal of shares was said to be unilateral but more importantly, they were part of the husband’s self-managed superannuation fund.
The husband’s response was that when sold, the price was “in the vicinity” of what they had remained at for some years. He asserted that a profit was made on them. To meet the accusation that he had acted unilaterally, he said that he was concerned that shares were tied up in circumstances where he needed cash (to implement an anticipated property settlement). What he then said was that the wife found out what he had done and arranged for the proceeds of the sale to be frozen. That situation still pertains. At the time that the shares were sold, he said he had a cash flow problem with his business and as result of them being frozen, he had to borrow funds which are now listed as part of the liabilities. Curiously, if the shares belonged to the superannuation fund, it is perplexing to work out the relevance of the borrowings. Despite a submission by counsel for the wife that the husband could access his superannuation (apparently based on his age) there is no suggestion in the evidence that he has retired or created the “trigger” for withdrawal of his superannuation benefits.
It is pertinent here to observe that the wife seeks orders to effectively stop any movement of funds by the husband but that seems predominantly in relation to the business. There was no suggestion by the wife that she would seek or agree to, an order for any conditional use of funds for trading purposes or for their use in the usual course of business. There was no suggestion of any undertaking as to damages bearing in mind that the lack of funding may cause liquidity difficulties if the husband is correct that he had to borrow funds for the business activities. An undertaking of damage may not be necessary in a case such as this if an adjustment can be made to take into account consequential losses as a result of orders.
It would appear to be a significant part of the wife’s case that she is seeking some form of adjustment against any interest of the husband in remaining assets based on the losses resulting from the C Ltd and D Ltd shares. Thus, it is important to know what is being divided and how the orders will affect each party.
Importantly, the wife used this second issue as an indication that the husband could not be trusted because he had acted unilaterally. Her position was that if he was permitted to deal with the assets and liabilities without any restriction, her entitlements may be prejudiced. The extent of that prejudice remains unclear for the reasons that follow.
A significant issue is whether any adjustment could be made if the assets are encumbered as the husband asserts. For example, the picture portrayed by the wife was that the matrimonial home is not encumbered or held as security for the significant National Bank borrowings. She proposed as part of her claim that the $1.5 million home be transferred to her unencumbered. When counsel for the husband said that it was already encumbered, the wife acknowledged to her counsel that the husband was correct. The wife does not say how it would be made unencumbered. For example, I raised the question of the sale of the business. Counsel for the wife said her client was not seeking that. The evidence about what would secure the business debt is unclear.
The third issue relied upon by the wife is equally perplexing. On 2 December 2014, a real property at E Town was ordered to be sold. The wife asserted that, without notice to her, the husband put his niece and another person into the property as tenants. I remain unsure what the legal consequence of that might be but in any event, it matters not. The husband’s evidence is that he and the wife had discussions about leasing out the property prior to its sale to meet mortgage obligations and agreement was reached. There was then, according to the husband, a dispute about signing documents. I am not in a position to say whose version is correct but the husband’s comprehensive explanation is not mentioned at all in the wife’s affidavit.
On 27 February 2015, the wife sought orders to enforce the sale order of 2 December and it is obvious from her specific application that she then knew about the existence of the tenant. She sought orders that the tenants “vacate the property”. Leaving aside the power of the Court to make that order, on the return date, the parties compromised and no such order was pursued.
I think it is reasonable to conclude that the wife’s affidavit is not as comprehensive as it should be particularly where relief of this nature is sought. I conclude that the wife and the husband did make some arrangement on 1 April 2015 because no mention is made in the orders made that day relating to the tenancy.
It is important to recall that this is a situation in which the wife is seeking relief on the basis that the husband cannot be trusted. To obtain discretionary relief of that nature, it is important that evidence be comprehensive and frank. I not convinced that the evidence is as it should be.
What becomes clear from each of the three matters raised above, the wife knew about the existence of the assets. The wife has known about all of these problems for some considerable time. I was not told why she did not bring proceedings earlier. Lack of proper discovery is now the focus of the complaint against the husband yet nothing was drawn to my attention as to why that was done so late. The case was listed for trial directions in October 2015 and orders were then made about discovery indicating that the problems needed to be addressed. I am not in a position to determine whether the husband has been cavalier or recalcitrant in respect of his disclosure obligations.
Submissions were made by counsel for the wife as to the principles to be considered in an application for injunctive relief. The difficulty here is that the evidence does not support the inferences she wishes the Court to draw. As indicated, I am not confident that I can make the findings required to show that the husband did act unilaterally and to the detriment of the wife.
In respect of the law relating to injunctions, the power for an order of that nature and in particular, relating to asset preservation pending trial, is found in both ss 34(1) and 114(3) of the Family Law Act 1975 (Cth) (“the Act”).
Section 34(1) relevantly provides:
The court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds…as the court considers appropriate.
Section 114(3) relevantly provides:
A court…may grant an injunction, by interlocutory order or otherwise…in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.
In Abella v Anderson [1987] 2 QdR 1 at [2-3] McPherson J said that an interlocutory injunction of the nature that is sought in this case, is not to provide that party with security in advance for a judgment that the person hoped to obtain and that he feared might not be satisfied. McPherson J went on to say that it is also not designed to improve the position of the claimant in the event of the other party’s insolvency. Whilst acknowledging family law jurisdiction is different, there are distinct parallels between the two.
The decision in Abella was approved by the High Court of Australia in Jackson v Stirling (1987) 162 CLR 612 where Dawson and Wilson JJ said [at 168]:
The Mareva injunction represents a limited exception to the general rule that a plaintiff must obtain his judgment and then enforce it. He cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment. Nor can he be given a secured position against other creditors. The remedy is not to be used to circumvent the insolvency laws.
Significantly, Dawson and Wilson JJ said that injunctions did not create additional rights but were designed to enable a court to protect its process from abuse in relation to the enforcement of its orders.
Counsel for the wife relied upon Mullen and De Bry (2006) FLC 93-293 as authority supporting the claim for the injunction. However, the statements just referred to in Jackson were accepted by the Full Court of this Court as relevant in an application for injunctive relief under s 114(3) of the Act. (see Waugh and Waugh (2000) FLC 93-052).
Section 114(3) of the Act requires the court to be satisfied that it is just and convenient to make the order. Similar to the discussion just mentioned arising in Jackson, the underlying basis for an injunction was considered in ABC v Lenah Game Meats Pty Ltd [2001] HCA 63; (2008) CLR 199 where the focus was on the question of what was being protected. Gleeson CJ said that the purpose of an interlocutory injunction was to keep matters in status quo until the rights of the parties could be determined at the hearing of the suit. Whilst the Chief Justice indicated that the particular case was not concerned with the special statutory jurisdiction (as one could conclude s 114 of the Act is) the power to be exercised was to be done so according to principle and not by unguided discretion.
Gleeson CJ referred with apparent approval to the test in Castlemaine Tooheys Limited v South Australia [1986] HCA 58; (1986) 161 CLR 148 at [153]. It would seem that the court has to consider a number of things which might be distilled as follows:
(a)There must be an existing or potential claim under s 79 of the Act for the alteration of property interests;
(b)Any injunction ought be limited to that which is designed to reasonably protect the legal or equitable rights of a party but it is not the function of an injunction to provide security in advance or a judgment;
(c)The court is required to take into account the balance of convenience as well as hardship and in respect of matters connected to businesses, a court will not usually restrain a party unless there exists a substantial risk of dissipation of assets or some substantial reason justifying a restriction; and
(d)There must be an objective risk or danger that a claim for substantive rights may be prejudiced unless the injunction is granted.
It is also clear from authority that there is no threshold question but rather, the matter is an inquiry into the risk of disposal of assets and the indication of a party’s intention is but one of the number of factors relevant to the objective assessment of risk. That risk must be in relation to defeating an order.
In summary, the evidence here does not enable me to make findings and therefore determine the risk that the wife’s claim may be prejudiced unless the injunction is granted. There is no obvious substantial risk of dissipation of assets here such that the balance of convenience would require the injunction in favour of the wife. That is because for the reasons set out below, it is difficult to know exactly what the wife’s claim is (albeit that she pleaded generally that she wanted 80 per cent of the parties’ assets) having regard to the matters to which I shall turn below in relation to the property division issue.

Finally, the proposed injunction is so wide ranging and without any offer of restriction that a court ought be very wary of the motivation for it. In my view, it would not be just or convenient to make the order of the nature sought by the wife. The application for that relief fails.

Interim property settlement

The Full Court of this Court in Strahan and Strahan (interim property orders) [2009] FamCAFC 166 discussed the various heads of power that could be used in such an application. This is not a litigation funding order but rather an interim application for division of property.
In Strahan the Full Court observed that there is only one exercise of power under s 79 of the Act and it was preferable that there only be one final order. The Court however said that there may be circumstances where the jurisdiction should be exercised outside of that principle. It held that there were two steps to be followed. The first step required consideration as to whether the jurisdiction should be entertained and if so, the applicant needed to satisfy the necessary requirements for the exercise of power under s 79 to make any such order.
Whilst it is not necessary for an application to show compelling circumstances for the making or an order, it is clear that division of property orders should sometimes be made where the entitlement is clear particularly having regard to the state of the respondent’s proposal. That is not the situation here where the parties are proverbially poles apart.
It is not possible on the evidence for this discrete application to determine why the Court should exercise its discretion. The wife’s position simply was that the husband had money and she wanted it. Even if the Court could be satisfied to exercise the jurisdiction, evidence must be given that would satisfy the requirements of s 79 and indeed, the very basis for the alteration of parties’ interests. None of that was given by the wife. That is important here because the wife was on notice by an unequivocal statement by counsel for the husband upon the adjournment of the substantive trial that her evidence would be challenged. Submissions by counsel for the wife on this particular hearing did nothing to advance the issue. She relied upon an aide memoir which set out a number of assets and liabilities from the wife’s perspective. She came to a conclusion that the total assets came to $4,038,065 but there were total debts of $2,221,268 and with superannuation added back in, there was a “grand total” of $2,727,695. The immediate flaw in that aide memoir was that it included $270,000 of monies that had been advances, some of which were still in the husband’s care, but apparently not in the wife’s control any longer having been spent on living expenses. Counsel for the husband observed that some of that money had been spent on dogs. The wife’s retort was that the dog belonged to B. These are factual issues that the Court cannot determine on an interim basis. Accordingly, the aide memoir was of little assistance.
What was of more assistance however was the parties’ respective approaches as indicated in the outlines for trial. Whilst neither party relied upon those documents for the purposes of this discrete application, they had been discussed at the trial and it was not suggested by counsel for the wife on this discrete application that her position had changed.

What are the parties’ current positions?

It will be evident from what follows that there is a huge dispute about just exactly what there is to divide and how it should be divided.
The husband proposes that the wife receive 35 per cent but of a net equity of $1.08 million. If she was to receive 35 per cent of that sum (therefore ignoring superannuation) she would receive $378,000. The husband is offering her $600,000 in the F Street, Suburb G property which the wife has rejected. It seems from the same aide memoir that the wife is retaining $150,000 worth of chattels (from the husband’s perspective).
It is self-evident therefore that the husband’s position needs to be tested and clarified.
On the other hand, the wife’s outline shows that she seeks 80 per cent of all of the equity of the parties or either of them including in superannuation. She has included superannuation in her total list of assets. How that can be done remains to be argued. She did however indicate that she was seeking 80 per cent but reserving her right to change that depending on how the evidence unfolded.
The wife’s same outline indicated that excluding superannuation, there was a net $1.6 million. It would seem that the difference between the husband and the wife lies in the value of the husband’s pharmacy. The husband says $1.5 million and the wife apparently has a shadow expert who has increased that by $300,000. If the superannuation was added in at $1.02 million or $920,000 on the wife’s calculation, there is $2.5 million to be divided. Eighty per cent of that is about $2 million.
It is clear from the asset position that there is not $2 million in net non-superannuation assets even factoring in the dispute about the pharmacy. The wife does not seek a superannuation splitting order.
Accordingly, I am not able to say what there is to be divided and even if I could, what evidence there is to satisfy the relevant criteria in s 79.
It is not simply a question of indicating that if the $100,000 in the husband’s bank account was subsequently found to be an entitlement that the wife did not have, an adjustment could be made. I am not sure where that adjustment could come from having regard to the very rough analysis that I have just done. The $1.5 million home is encumbered as security for all of the borrowings and therefore if the wife was to receive 80 per cent, there would have to be significant sales of assets to satisfy the banks’ requirements. There is no other real property other than the matrimonial home and the F Street property against which security could be taken. It is easy therefore to talk about percentages but for the purposes of an interim property division, the parties have to show to the Court how the orders would ultimately be implemented and why it is important that the jurisdiction be exercised in such a vacuum.
I stress again that it was not suggested that this application was brought for litigation funding purposes. At its highest, the wife’s case as outlined in the discrete affidavit was that the child B is about to undergo a significant operation and she did not have the funds necessary to pay for it. In my view that is not a sufficient basis to justify exercising the power in s 79.

The credit card points

The wife also sought 440,000 Qantas points apparently on the basis that the husband had disposed of a number of points to people and indeed, used them for himself for holidays. That too is not a basis to justify an exercise of the power in s 79. There is the question of whether the points are property. I am not sure who owns the points and whether it is a propriety right to convert them into something and whether they arise out of some form of contractual arrangement with a company such as Qantas. As the evidence did not address any of the issues, I am not in a position to make a finding as to who owns the legal and/or equitable rights to what arising out of the accrued points and indeed whether the s 79 power extends to their alteration.

Conclusion

On the basis of all of those matters, the wife’s application fails and must be dismissed. As the husband’s application was rejected by the wife, I need do no more than dismiss his response as well. There will be orders as set out at the commencement of these reasons which include the setting down of the matter for trial.

I certify that the preceding Sixty (60) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 17 February 2016.

Associate: statu

Date: 17 February 2016