Tritan Corp Pty Ltd v Black & Abaline Pty Ltd No. Scgrg-99-1515
[2000] SASC 401
•24 November 2000
TRITAN CORPORATION PTY LTD v BLACK & ABALINE PTY LTD
[2000] SASC 401
OLSSON J
Preliminary
In these proceedings, the plaintiff seeks declaratory relief against the defendants pursuant to s 31 of the Supreme Court Act 1935 (SA). It also seeks a consequential order for payment of moneys said to be due to it. In essence, the present claim is brought in extension of certain proceedings in the Family Court of Australia, in an endeavour to clarify the practical effect of orders made by that Court.
It is necessary to traverse some historical background details giving rise to these orders, to establish the context in which they were made; and so that the terms of them are comprehensible.
Some general background
The plaintiff has, at all relevant times, carried on business as a building contractor, property developer and trustee.
Commencing at about the end of 1992 the plaintiff entered into a commercial transaction whereby it became the purchaser of a property at 170 Stephen Terrace Gilberton (“Gilberton property”), as the trustee for the Osprey Trust No 2 and the Strathwyn Trust. A person named Gregory Steven Molfetas appears to have been a principal beneficiary of the former and a person named Ian Adair Black a principal beneficiary of the latter.
The undertaking envisaged that, with moneys supplied or raised on mortgage loan by Molfetas and Black, the Gilberton property would be subdivided. An existing house on it (“Gilberton house”) (which I take, at some stage, to have been occupied by Black) was to be refurbished and three new units were to be built on a rear allotment.
In the event Molfetas and Black contributed capital funds in unequal shares. A substantial amount of capital was borrowed on the security of a first mortgage over the property. The development of the site was completed in about mid 1994.
On 16 March 1995 one of the three units was sold, the proceeds being applied in reduction of loans.
By mid 1995 it became apparent that Black was not able to contribute the full amount of his proper share of the moneys required of him in relation to the venture. Molfetas had already contributed amounts vastly in excess of those put in by Black.
Shortly thereafter the arrangements between Molfetas and Black were renegotiated. The precise detail of what transpired is not important for present purposes. Suffice to say that the ultimate outcome was that, at about the end of August 1995, the whole development was refinanced on the footing that Black took over the two remaining units (subject to a mortgage liability), whilst Molfetas took the house property.
It is said that, in November 1995, Black moved out of the Gilberton house, taking a substantial amount of furniture with him. It was further asserted that a specific oral agreement was made between Black and Molfetas that certain other furniture and chattels (comprising a grand piano, large gilt overmantel mirror, a rifle collection and a valuable wine and port collection) would be left with Molfetas, on bailment by way of pledge, to secure a sum of almost $30,000 plus interest acknowledged to be owed, at that time, by Black to Molfetas. (I shall refer to the above furniture and chattels as “the subject items”.)
Although (as in the documentation before me) I have referred to Molfetas and Black personally, I infer, that the foregoing dealings actually took place within the scope of the plaintiff’s trusteeship, the two men acting through their respective trusts, Osprey Trust No 2 and the Strathwyn Trust.
So stood the situation as at 13 March 1998.
Proceedings in the Family Court of Australia
Black was married to Lindy Kaye Black in 1970. There were three children of the marriage, namely Simon Adair Black (born in 1972), Benjamin Adair Black (born in 1974) and James Adair Black (born in 1978).
At a time which does not readily appear from the material before me, Black and his wife separated. It is common ground that their marriage was subsequently dissolved.
In the course of proceedings between them in the Family Court of Australia (“the FCA”) related to that dissolution, disputes arose as to the matrimonial property and its disposition. In particular, issues arose as to the true ownership of the subject items and whether they had ever been lawfully the subject of a bailment to the plaintiff (as trustee) by way of pledge.
As a consequence, the plaintiff and Molfetas were joined as parties in the matrimonial proceedings and the three children of the marriage were granted leave to intervene.
Pleadings were exchanged between relevant parties in an endeavour to have the legal status of the subject items resolved, jurisdictional reliance, in that regard, being placed on the provisions of the Jurisdiction of Courts (Cross Vesting) Act 1987 (SA). In essence Molfetas and the plaintiff were dux litis in relation to that exercise.
What followed was, from a procedural aspect, somewhat extraordinary.
The issues initially came before a Judge of the FCA on 13 March 1998. At that time it was recorded that counsel appeared for Molfetas and the plaintiff and also for Linda Kaye Bowman (formerly Black), there being no appearances of either Black or the interveners.
An order was made that judgment be entered against Black in favour of the plaintiff in the sum of $37,879.21, apparently being the sum then due under the alleged bailment by way of pledge. Black was also ordered to pay $3,000 to Molfetas and the plaintiff for costs, “the question of the wife’s costs against the husband in relation to these proceedings concerning [Molfetas and the plaintiff]” being “reserved”. The order, as sealed and entered, further stipulated “That the question of claimed security over personal property be adjourned to a date to be fixed by the Listing Manager before ...” a nominated Judge of the FCA.
Somewhat oddly, the formal order then recites that, by consent, it is ordered further “That there be no order for costs”.
The matter again came before the same Judge of the FCA on 20 April 1998.
On this occasion Molfetas and the plaintiff were represented by Mr J Morcombe, Linda Kay Bowman was represented by Mr A L Jordan and the intervening children were represented by Mr P Harris. There was no appearance by or on behalf of Black, although it appears that the Court expressed itself as satisfied that he had duly been served by post “with all relevant proceedings”.
The Court thereupon proceeded to make the following orders “By Consent”:-
“1.... That for the better securing of the judgment debt and interest thereon due by the said IAN ADAIR BLACK to TRITAN CORPORATION PTY LTD the entitlement of the said IAN ADAIR BLACK to any order by way of settlement of property pursuant to Section 79 of the Family Law Act together with any interest of the said IAN ADAIR BLACK in the Strathwyn Family Trust whether by loan account or otherwise as shall be determined by this Honourable Court in the final determination of the proceedings remaining between the parties be charged with the payment of the sum sufficient to discharge the said judgment debt and accrued interest thereon.
2.That the Trustee(s) from time to time of the Strathwyn Family Trust be restrained until further order from in any way dealing with any credit loan account or interest of the said IAN ADAIR BLACK therein save and except to pay the same in reduction or discharge of the said judgment debt and interest accrued thereon.
3...... That the wife and the interveners or either of them be restrained until further order from paying any sum to the said IAN ADAIR BLACK due to him in satisfaction of any order for settlement of property or other entitlement of the husband arising out of these proceedings or at all whilst the said judgment debt and interest accrued thereon remains extant.
4.The other parties GREGORY STEVEN MOLFETAS and TRITAN CORPORATION PTY LTD do forego and abandon their claim to the chattels set out in the Schedule “A” annexed hereto (“the chattels”) and do forthwith deliver the chattels up to the wife.
5...... Liberty to the said Trustee(s), the wife, and the interveners to apply to vary or discharge paragraphs 2 and 3 hereof at short notice.
6.That the solicitor for the wife serve a sealed copy of this order on the husband by pre-paid post to his address for service.
7...... That the matter be adjourned for a date to be fixed for trial.”
The chattels set out in the Schedule “A” were the subject items. I take the “Strathwyn Family Trust” referred to, to be identical with the “Strathwyn Trust” earlier referred to.
It will, at once, be seen that there is some potential ambiguity in the expression of the above order, in particular, paragraph 1. However, it is convenient to dilate upon this at a later point, in dealing with the submissions advanced before me by counsel.
The wider issues as to property settlement as between Black, his former wife and the children of the marriage came before the Judge for final disposal on 7 September 1998.
At that time, the plaintiff sought to appear by counsel to protect its interests, both under the order of 20 April 1998 and generally. Remarkably, the learned Judge declined to entertain such an appearance. She proceeded to dispose of the matter absent representation of the plaintiff - in a manner which, prima facie, was potentially seriously to its disadvantage. As to this I need do no more than advert to the principles discussed in authorities such as In the marriage of Rowell, M R and Rowell, V A; Deputy Commissioner of Taxation (Intervener) (1989) FLC 92-026; and Ascot Investments Pty Ltd v Harper, M F and Harper, D G (1981) FLC 91-000.
Notwithstanding the fact that the learned Judge declined to entertain submissions on behalf of the plaintiff, she proceeded to pronounce an order the full terms of which require careful consideration. As sealed and entered, the order reads as under:-
“FAMILY LAW ACT 1975
IN THE FAMILY COURT
OF AUSTRALIA No AD 2463 of 1992
AT ADELAIDE
IAN ADAIR BLACK Husband
AND
LINDY KAYE BOWMAN Wife
AND SIMON ADAIR BLACK,
BENJAMIN ADAIR BLACK and
JAMES ADAIR BLACK Interveners
BEFORE THE HONOURABLE JUSTICE DAWE
ON 7th DAY OF SEPTEMBER 1998
* Amended Order 23rd September 1998
UPON APPLICATION by the abovenamed wife by Form 7 application filed on 6 July, 1995 seeking orders, inter alia, for settlement of property AND UPON CROSS APPLICATION by the abovenamed husband filed on 31 July 1995 AND UPON THE COURT NOTING:
FIRSTLY that the children of the marriage Simon Adair Black, Benjamin Adair Black and James Adair Black were given leave to intervene in these proceedings by Order of 16 June, 1997 and filed a Notice of Intervention on 20 June, 1997 and are parties to these proceedings;
SECONDLY that Tritan Corporation Pty Ltd and Mr G Molfetas were joined as parties to these proceedings by the said Order of 16 June, 1997.
THIRDLY that the said Order of 16 June, 1997 imposed upon the husband certain obligations which he has not met and that by Order of 30 July, 1997 full compliance by the husband was ordered failing which the Court directed that Orders may be made in his absence and directed the husband’s attendance at the Court on the adjourned hearing on 11 August 1997 and that the husband failed to appear on 11 August 1997 and that by Order of 11 August 1997 the Court directed that final orders me [sic] be made in the absence of the husband upon further hearing of all matters on 20 August 1997 and that by Order of 20 August 1997 the husband was directed to fully comply with paragraphs 6 and 8 of the said Order of 16 June 1997 and to pay the costs of the other parties and that by Order of 12 September 1997 the husband was ordered to file and serve further affidavit material and to comply with the said Order of 20 August 1997 and to pay further costs incurred by the other parties to these proceedings and that the husband has failed to file a defence to the statement of claim filed by Tritan Corporation Pty Ltd and Mr G Molfetas on 17 September 1997 and that the husband has failed to file a defence to the intervener’s statement of claim filed 30 October 1997 and that the husband has failed to file a defence to the wife’s counterclaim filed on or about 29 January, 1998;
FOURTHLY that by Order of 13 March 1998 default judgment was entered for Tritan Corporation Pty Ltd against the husband in the sum of $37,879.21 together with costs fixed in the sum of $3,000.00 in full and final settlement of all claims by Tritan Corporation Pty Ltd and Mr G Molfetas against the other parties to the proceedings and that further orders to secure the judgment sum were made on 20 April 1998 against any claim right or entitlement of the husband arising from these proceedings.
FIFTHLY in default of compliance by the husband with the various orders of the Court by Order of 9 February 1998 the Court directed that the claims of the wife and the interveners be heard undefended as regards the husband unless the husband obtained an order for leave to defend those claims by 3 April 1998 the husband being notified of the same by letter from the Registry dated 20 February 1998 and that the husband has neither sought nor obtained an order for leave;
SIXTHLY that the wife has filed affidavit material pursuant to Order 30 of the Family Court Rules in support of her claims before the Court;
SEVENTHLY that the wife and the interveners have pleaded before the Court their respective claims.
Mr A L Jordan appearing for the Wife and Mr P Harris appearing for the interveners BY CONSENT OF THE WIFE AND THE INTERVENERS AND IN DEFAULT OF THE HUSBAND’S APPEARANCE IT IS ORDERED:
1...... That all claims of the husband before the Court be and the same are hereby dismissed.
2.That Abaline Pty Ltd and Simon Adair Black are appointed the Trustees of The Strathwyn Family Trust.
3...... That the wife and Simon Adair Black be the Appointors in respect of The Strathwyn Family Trust and the husband be removed as an Appointor.
4.That the Deed of Trust establishing The Strathwyn Family Trust be varied by striking out paragraphs 1 (c) (iv) and 15 (c) (i) thereof.
5...... The Court declares that the following assets are the sole property of The Strathwyn Family Trust:-
(i)the land and improvements thereon situated at Lot 128 Black Point Drive Black Point in the State of South Australia and being the whole of the land comprised and described in Certificate of Title Register Book Volume 5294 Folio 867 together with all leasehold interests passing therewith (hereinafter called ‘the Black Point property’);
(ii)the vacant land situated at Maitland in the said State and being the whole of the land comprised in Certificate of Title Register Book Volume 2554 Folio 120(hereinafter called “the Maitland property’);
6...... That a Registrar of this Court for and on behalf or in lieu of the husband do execute a Withdrawal of Caveat No 7969413 over the Maitland property.
7.That Simon Adair Black do forthwith transfer to Abaline Pty Ltd and Simon Adair Black as trustees for the Strathwyn Family Trust all his estate and interest in the Maitland property.
8...... That a Registrar of this Court for and on behalf or in lieu of the husband do execute a Memorandum of Transfer of the interest of the husband in the Black Point property to Abaline Pty Ltd and Simon Adair Black as trustees of the Strathwyn Family Trust.
9.That Simon Adair Black and the wife do forthwith transfer to Abaline Pty Ltd and Simon Adair Black all their estate and interest in the Black Point property as trustees of the Strathwyn Family Trust.
10.... That the current registered proprietor of the property situated at Younghusband in the said State and being the whole of the land comprised and described in Certificate of Title Register Book Volume 5339 Folio 750 (appearing as ‘Adair Black’) be deemed to be Ian Adair Black and the husband do have the same for his sole use and benefit absolutely.
11.The wife do have as her sole property free from any claim right or entitlement of the husband and the interveners the following property:-
(i)any interest of the husband of whatsoever nature in The Strathwyn Family Trust;
(ii)the chattels delivered up to the wife by Tritan Corporation and Mr G Molfetas and referred to in the Schedule ‘A’ to the Order of this Court made on 20 April, 1998;
(iii)the chattels referred to in paragraphs 1 (a) (b) (c)(e) (f) (g) (h) (i) (j) and (k) of the Order of this Court made on 3 June, 1998;
(iv)all items of furniture, household effects and other chattels in the possession of the wife;
(v)the wife’s savings;
(vi)the contents of the Black Point property;
(vii)any entitlement of the wife to long service leave, holiday pay, superannuation or any other entitlement arising as a consequence of her employment.
12.... The Court declares that Abaline Pty Ltd is the absolute beneficial owner of the restaurant business known as ‘Pavillion on the Park’ including but not limited to:
(i)the leasehold of the restaurant premises;
(ii)stock;
(iii)plant and equipment;
(iv)debtors;
(v)goodwill.
13.... The husband do pay the costs of the wife and the interveners of and incidental to these proceedings to be taxed.
14.That the order for costs made herein be satisfied by payment from the husband’s credit loan account with the Strathwyn Family Trust.
AND IT IS NOTED that the new Trustees on behalf of the Strathwyn Family Trust acknowledge the following loan accounts:
(i)Ian Adair Black - $27,000.00;
(ii)Lindy Kaye Bowman - $90,000.00;
(iii)to each of Simon Adair Black, Benjamin Adair Black and James Adair Black the sum of $10,000.00;
(iv)Abaline Pty Ltd $8,000.00.”
The issues arising between the parties
A dispute has arisen between the plaintiff, on the one hand, and Simon Adair Black and Abaline Pty Ltd (as the present trustees of the Strathwyn Family Trust) (“the Trustees”) on the other as to the meaning and effect of the orders of 20 April 1998 and 7 September 1998 respectively made by the FCA. The present proceedings are brought in an attempt to resolve that dispute.
For their part, the Trustees assert that the clear intention and effect of paragraphs 11 and 14 of the order of 7 September 1998 is to vest the whole of Black’s interest in the Strathwyn Family Trust (including the credit of $27,000 to his loan account with it) in his former wife, unencumbered by any claim of the plaintiff; and that the costs of the former wife and the children are to be paid out of that loan account in priority to any other claim. It is common ground that such costs are likely to absorb the whole, or at least most, of any credit in the loan account.
Mr Lindsay, of counsel for the former wife and the children, points to what, he says, are the unqualified provisions of paragraphs 11 and 14. He further argues that, in terms, paragraph 1 of the order of 20 April 1998 had only a contingent operation. The charge created was to be subject to any ultimate order as to property settlement made by the FCA.
I agree with Mr Milazzo, of counsel for the plaintiff, that such an interpretation of the orders is not a reasonable reflection of the intendment or a proper construction of them, given the circumstances in which they were made.
It seems to me, unthinkable that, had the learned Judge of the FCA contemplated the making of an order on 7 September 1998 which would have the practical effect of acting in defeasance of the charge which she had earlier created in favour of the plaintiff, she would have denied audience to the plaintiff’s counsel at that time - on the ground, as I am now informed, that the plaintiff had no legitimate interest in the details of the property settlement ordered. Such a blatant denial of natural justice and ignoring of the authorities above referred to, is not to be imputed to her.
I have no hesitation in concluding that, in directing that the former wife be entitled to the beneficial ownership of Black in the Strathwyn Family Trust, including the relevant loan account, the learned Judge intended that these be vested in the former wife subject to any pre-existing rights in them already created by order and existing in favour of third parties.
Indeed it is impossible to perceive how the FCA could have acquired jurisdiction to set aside or ignore rights vested in third parties who were not even then represented, or permitted to be represented, before it.
In my opinion, there is nothing in the order of 20 April 1998, properly construed, which runs counter to such a conclusion.
It must firmly be borne in mind that the lastmentioned order was expressly pronounced to give effect to a compromise arrived at, at the date when it was made, in settlement of clear disputes as to the beneficial ownership of the subject items; and in circumstances in which the right of Black, lawfully, to create a bailment by way of pledge in relation to them was under challenge.
The structure of the order clearly reflects that compromise and the concession made by the plaintiff in return for the security given it. It is scarcely to be supposed that the plaintiff would have made such a concession in return for a purported security which was so ephemeral that it could be rendered nugatory by an order made in its absence.
Properly construed, paragraph 1 of that order attaches the charge erected by it to two separate items of actual or future property of Black, namely:-
the subject matter of “any order by way of settlement of property pursuant to Section 79 of the Family Law Act”; together with
“any interest of the said IAN ADAIR BLACK in the Strathwyn Family Trust,
(a) whether by loan account; or
(b)otherwise as shall be determined by this Honourable Court in the final determination of the proceedings remaining between the parties ... ”
(The subparagraphing has been added by me.)
I do not read the verbiage set out in (2)(b) above as qualifying the reference to the existing loan account. It is plainly intended to relate to any other interest in the Trust later stipulated by the FCA.
It is to be remembered that the charge conferred by subparagraph (b) is supported by other provisions designed to render the security created a real and effective practical security. The Trustees of the Strathwyn Family Trust were injuncted not to deal with any credit loan account or interest of Ian Adair Black, save and except to pay it in reduction or discharge of the secured debt. His former wife was injuncted not to pay any money due to Black by way of property settlement whilst the secured judgment debt and interest remained extant.
In return for those provisions, Molfetas and the plaintiff abandoned any further claim to the subject items and agreed to forthwith deliver them up to the former wife.
It is significant that the order made on 7 September 1998 did not, in terms, purport to set aside or vary any of the express terms of the order of 20 April 1998. On the contrary, it recites the order for security of the debt due to the plaintiff and proceeds on the implied basis that such order is to remain in full force and effect. The recitals to the order unequivocally recognise such a situation. In this regard it is to be noted that the vesting by paragraph 11 of the order of 7 September 1998 in the former wife, inter alia, of the “interest [of Black] of whatsoever nature in The Strathwyn Family Trust” is expressly said to be “free from any claim right or entitlement of [Black]” and the intervening children. It is not said to be free of any security by way of charge in favour of the plaintiff. That already existed and was vested in the plaintiff.
I unhesitatingly conclude that the two orders were intended to complement one another and be read in harmony; and that the order of 20 April as to the charge created was not intended to be read down and qualified by the later order.
To express the situation in blunt terms, it seems to me that the present contentions of the defendants are a thinly veiled attempt to circumvent and render nugatory the compromise evidenced by the order of 20 April 1998.
Having regard to the construction which I place on the orders of the FCA I see no point in discussing the points raised by Mr Lindsay in relation to the effect of the decision of the High Court in Re Wakim; ex parte McNally [1999] HCA 27.
Nor do I see any force in the contention that “no binding declaration of right can be made as against the Defendants herein or the Strathwyn Family Trust neither of whose interests or entitlements were charged with the payment of monies owing to the Plaintiff by Black”.
Such a contention ignores the fact that it is the defendants who seek to contend that they are entitled to deal with the relevant assets free of any charge in favour of the plaintiff. They claim adversely to the interest and security asserted by the plaintiff. The plaintiff is therefore entitled, as against them, to seek declaratory and other relief establishing and upholding interest as a secured creditor in relation to the loan account credit.
In all of the circumstances there must be a declaration to the effect that, by virtue of the order made by the Family Court of Australia on 20 April 1998 in Matter No AD 2463 of 1992, the plaintiff has and is entitled to enforce a charge by way of security, inter alia, over the amount standing to the credit of the loan account, as at that date, of Ian Adair Black in the Strathwyn Family Trust, in respect of the judgment debt and interest referred to in paragraph 1 of that order. The order of 7 September 1998 operated to vest Black’s net beneficial interest in the Trust, as it then stood, (ie subject to the charge) in the wife. It did and could not operate to extinguish a right already vested in the plaintiff by virtue of the order of 20 April 1998.
I will hear counsel as to what other consequential orders are appropriate. There will also be leave to speak to the minutes.
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