Tsiklidis and Tsiklidis & Anor (Pleading Application)

[2014] FamCA 755

FAMILY COURT OF AUSTRALIA

TSIKLIDIS & TSIKLIDIS AND ANOR (PLEADING APPLICATION) [2014] FamCA 755

FAMILY LAW – PRACTICE AND PROCEDURE – application for removal of third party from proceedings or direction for wife to plead case against third party – notification to other third parties

FAMILY LAW – COSTS – application for security of costs – wife impecunious – wife has joined third party seeking orders against a company – prospects of success – whether an order for security for costs would stifle proceedings

Family Law Act 1975 (Cth)
APPLICANT:	Ms Tsiklidis

RESPONDENT: Mr Tsiklidis

INTERVENOR: J Pty Ltd (ACN …)

FILE NUMBER: HBC 391 of 2013

DATE DELIVERED: 11 September 2014

PLACE DELIVERED: Newcastle

PLACE HEARD: Melbourne

JUDGMENT OF: Benjamin J

HEARING DATE: 22 August 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Dixon SC

SOLICITOR FOR THE APPLICANT: Wallace Wilkinson & Webster

COUNSEL FOR THE FIRST RESPONDENT: Mr Sweeney

SOLICITOR FOR THE 

FIRST RESPONDENT:

Westminster Lawyers

COUNSEL FOR THE SECOND
RESPONDENT: Mr North SC

SOLICITOR FOR THE SECOND RESPONDENT: Mills Oakley Lawyers Pty Ltd

Orders

1. Subject to Order 8, the interlocutory application of the second respondent, to be removed as a party to these proceedings and in the alternative for security for costs, be adjourned for mention at Melbourne at 4.15 pm Monday 12 January 2015.

IT IS DIRECTED

1. A transcript of the submissions made to the Court on 22 August 2014 be taken out and placed on the Court file.

2. On or before 7 October 2014 the wife file and serve on the husband, the second respondent and other parties that have been joined, the following:-

   (a)A Statement of Claim setting out the precise nature of the wife’s claim or claims against the second respondent included but not limited to:-

   (i)     The orders that the wife seeks against or in relation to the second respondent;

   (ii)    The basis of such claim or claims, and whether they are made pursuant to accrued jurisdiction, the Corporations Act 2001 (Cth), s 78, s 79 or Part VIII of the Family Law Act1975 (Cth) or otherwise;

   (iii)     The precise legal basis and nature of the claim or claims and the relief sought in respect of each such claim or claims;

   (iv)   The propositions of law and fact asserted by the wife in respect of each such claim or claims and sufficient particulars to enable the husband and the second respondent to indemnify what the wife alleges against the second respondent, including the issues to be determined in respect of each claim.

   (b)Affidavits setting out the whole of the factual evidence upon which the wife relies in support of the contentions, pleadings and particulars contained in the Statement of Claim, or if such affidavits are already in existence, to identify those affidavits upon which the wife relies.

   (c)A further or consolidated Statement of Claim setting out the precise nature of the wife’s claim or claims against the shareholders of the second respondent (excluding the husband) including but not limited to:-

   (i)     The orders that the wife seeks against or in relation to the second respondent;

   (ii)    The basis of such claim or claims, and whether they are made pursuant to accrued jurisdiction, the Corporations Act 2001 (Cth), s 78, s 79 or Part VIII of the Family Law Act1975 (Cth) or otherwise;

   (iii)     The precise legal basis and nature of the claim or claims and the relief sought in respect of each such claim or claims;

   (iv)   The propositions of law and fact asserted by the wife in respect of each such claim or claims and sufficient particulars to enable the husband and the second respondent to indemnify what the wife alleges against the second respondent, including the issues to be determined in respect of each claim.

3. If pursuant to this direction the wife seeks to add another party or parties the wife shall, on or before 7 October 2014, comply with Rule 6.03 of the Family Law Rules 2004 (Cth) including adding the name of the other parties and filing an affidavit complying with Rule 6.03(3).

4. On or before 14 November 2014 the husband, second respondent and any other parties joined pursuant to these orders and directions shall serve on the other party pleadings by way of a Defence, so that the parties and the Court know precisely what matters are in dispute and/or in issue.

5. The wife is restrained from filing any further affidavit material and/or alternate or amended Statement of Claim against the second respondent or others, other than as provided in these directions, without leave of the Court.

6. The parties be given leave to have the matter relisted before the Court on the giving of seven (7) days notice to the other party and to the Court.

7. The Application in a Case filed on behalf of the second respondent on 22 July 2014 is otherwise stood over part-heard.

8. In the event that the wife does not file the Statement of Claim or statements of claim as is provided in this direction, on or before 7 October 2014, or as otherwise filed pursuant to leave granted in advance by this Court:-

   (a)The relief sought by the wife in terms of her amended application filed 6 May 2014 and contained in paragraph 2(d) is struck out;

   (b)The Court notes that in relation to the declaration order or otherwise sought by the wife in terms of paragraph 3 of her amended application filed 6 May 2014 is struck out;

   (c)In the event that this self-executing order takes effect, any costs application that may be made by the parties (including the second respondent) must be filed and served within twenty eight (28) days from 7 October 2014 and supported by affidavit.

   (d)Subject to the question of costs, the second respondent is removed as a party to these proceedings.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules it was reasonable to engage senior counsel and counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Tsiklidis & Tsiklidis and Anor (pleading application) 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: HBC 391  of 2013

Ms Tsiklidis

Applicant

And

Mr Tsiklidis

First Respondent

J Pty Ltd (ACN …)

REASONS FOR JUDGMENT

INTRODUCTION

1. In June 2013 Ms Tsiklidis (‘the wife’) commenced proceedings in the Family Court against Mr Tsiklidis (‘the husband’) seeking property orders pursuant to Part VIII of the Family Law Act1975 (Cth) (‘the Act’).

2. The husband filed a Response in August 2013. By the filing of an Amended Initiating Application on 6 May 2014, the wife joined J Pty Ltd (ACN …) (‘the second respondent’) as a party, presumably pursuant to Rule 6.03 of the Family Law Rules 2004 (Cth) (‘the Rules’). In that amended application, she sought no precise orders against the second respondent; however, in her affidavit filed at the same time, it was clear that she was seeking orders against the company.

3. On 22 July 2014 the second respondent filed an Application in a Case supported by an affidavit of Mr A Tsiklidis (‘the husband’s father’).  In this Application in a Case, the second respondent sought to be removed as a party to these proceedings, or in the alternative, that there be a form of pleading and a consequential order that the wife pay security for the second respondent’s costs of $100,000. 

4. The wife filed a Reply on 14 July 2014.

5. It was this, the second respondent’s Application in a Case, which was heard by me on 22 August 2014 in Melbourne.

ISSUES

1. The issues raised by the second respondent were:-

   (a)Whether the wife was seeking orders or declarations against or affecting the second respondent in terms of the amount of about $123,000.00, which was allegedly advanced by the second respondent to the husband;

   (b)Whether there was a lien, as was asserted by the wife, to have arisen by reason of that advance pursuant to the Articles of Association (‘Articles’) of the second respondent.  This lien was the subject of any application or declaration by the wife;

   (c)The wife was seeking orders in the alternative (as was implicit in order 2(d)) in her amended application), which may involve a transfer of shares other than in accordance with the Articles of the second respondent;

   (d)If the wife was not seeking any orders against or affecting the second respondent and/or its property, then the second respondent argued that it should be removed as a party.  On the other hand, if the wife was seeking orders against or affecting the second respondent and/or its property; then the wife ought to plead the basis underpinning those orders to enable the second respondent to understand the case brought against it;

   (e)If there was to be a challenge by the wife to the Articles of the second respondent (in terms of the pre-emptive rights of other shareholders) then the wife ought to plead that cause or those causes and join the shareholders (being members of the husband’s family) so that they could consider the claims against their proprietary rights; and

   (f)If the second respondent remained a party to the proceedings, it sought security for costs.

BACKGROUND

1. In terms of these proceedings senior counsel for the second respondent relied upon:-

   (a)The Application in a Case by the second respondent filed 22 July 2014;

   (b)Affidavit of the husband’s father filed 22 July 2014;

   (c)Affidavit of Mr F sworn 21 August 2014 and filed in court on 22 August 2014.

2. During the course of the argument, senior counsel for the second respondent referred to the financial statement of the wife filed 4 June 2013 and the financial statement of the husband filed 9 August 2013.  He also referred to some aspects of the wife’s affidavit filed 6 May 2014.  No objection was taken to this course.

3. It was an agreed fact that the wife had disclosed that she had incurred legal costs to date of $98,237 of which she had paid $500 and the balance had been paid by her father and her brother.  Further, it was an agreed fact that the husband had incurred legal costs to date (inclusive of GST) of about $89,000 which had been paid by the husband’s father.

4. The wife relied upon her amended application and affidavit filed 6 May 2014 and her financial statement of 4 June 2013.  Senior counsel for the wife referred to the affidavit of the husband’s father filed 22 July 2014 and the husband’s financial statement filed 9 August 2013.  The wife relied on an affidavit of a valuer, Mr G, filed 1 July 2014.

5. It does not appear contentious that the wife and the husband are aged 41 and 40 respectively and that they married in 1997.  Their relationship spanned a period of about fifteen years as they separated in November 2012.

6. There are three children of their marriage, B aged 15, C aged 13 and D aged 10. 

7. In her financial statement, the wife asserted that she has non-superannuation assets totalling $447,000, superannuation assets totalling $3,437.00 and liabilities of $434,378.

8. From that statement, the wife asserted that her overall financial position is about $13,000 or $14,000.

9. In his statement of financial circumstances, the husband claimed that he has non-superannuation property of about $450,000, superannuation of about $40,000 and liabilities of $830,300.  He says that his liabilities are primarily made up of the housing loan of about $93,500, an income tax liability of about $113,000, a liability to the second respondent of $153,400 and a liability to the Commonwealth Bank of Australia for a business debt of about $570,000.

10. Without his interest in the second respondent, there is little or no non-superannuation property to deal with under the Act.

11. The wife claims that there is property of the husband, being his legal and equitable interest in the 18,071 ‘H’ class shares allocated to him in the second respondent. 

DISCUSSION

1. It is not in dispute that the husband was a director of the second respondent for some years until about 2012 and that he no longer holds that office.

2. The majority and controlling shareholders in the second respondent are the husband’s father and the husband’s mother. The shareholding is:

   a)The husband’s father holds 3000 ‘A’ class shares, 1870 ‘B’ class shares, 50 ‘C’ class shares and 54,766 ‘E’ class shares; 

   b)The husband’s mother holds 18,021 ‘F’ class shares; and

   c)The husband and his two sisters each hold 1,871 shares; the husband ‘H’ class, one sister ‘G’ class and the other sister ‘I’ class. 

3. Article 33 of the second respondent provides that the company has a lien over the shares of any shareholder who is indebted to it.  Article 47 provides that other members of the company have pre-emptive rights to purchase shares in the company from a member who is seeking to dispose of his or her shares.

4. The ‘A’ class shares (namely those owned by the husband’s father) enable that person to exercise far greater voting rights than those individuals holding the other classes of shares.

5. The wife asserted in her affidavit that the loan of $153,500 allegedly made by the second respondent to the husband is a sham.  The wife does not make it clear whether she seeks that simply in terms of the issues between the husband and wife or whether she is endeavouring to have that loan set aside as against the second respondent.

6. The second respondent is entitled to know precisely what orders or declarations the wife seeks against it (if at all) in relation to that alleged asset of the second respondent.  Senior counsel for the wife made submissions as to the history of the matter but was not persuasive on this point.  The second respondent is entitled to know the nature of the claims that the wife makes against it, if it is asserted that such claim would affect some right or entitlement of the second respondent.

7. There was argument in relation to the lien.  Senior counsel for the wife said that there would be no challenge to the existence of the lien if the liability was accepted.  Accordingly, I accept that submission and the lien issue is not one which needs to be determined.

8. Another question is whether the wife is seeking orders against the husband or the second respondent in relation to the transfer of the husband’s shares (or some of them) to the wife, or some other orders which may have the effect of impeaching pre-emptive rights of other shareholders under the Articles.  Senior counsel for the wife submitted that in the absence of the husband paying money to her and extinguishing some liabilities, she would be seeking orders for the transfer of the shares owned by the husband in the second respondent to her, thus impeaching pre-emptive rights of other shareholders under the Articles.

9. If there are any such claims in that respect, those other shareholders are entitled to be parties in these proceedings and be provided with the detail of the claims which would affect their rights. It is not just for them to guess the basis of such a claim. The wife should be obliged to set out what her case is, bearing in mind that the other shareholders are otherwise strangers to the marriage which empowers the Family Court to consider and determine these proceedings under the Act.

10. If those orders are pursued (and senior counsel for the wife made it clear that at least some would be pursued) then precise details of those ought to be provided by way of pleading and affidavits in support of that material.  If the wife is relying on existing affidavits she can provide details of the affidavit material upon which she relies in substitution or addition to that filed in accordance with these orders.

11. If the wife does not file the Statement of Claim or statements of claim in accordance with the directions which I propose to make within the time allocated (or such longer time if an application is made to the Court in advance), I will have in place self-executing orders to dismiss her claims insofar as they affect the second respondent and its shareholders (other than the husband) and remove the second respondent as a party in these proceedings.

12. If no claims are pleaded against the second respondent then I will note that the issue regarding the liability which the husband may or may not have for $153,500 in respect of the second respondent as an inter party issue and does not seek to disturb the legal and equitable relationship between the husband and the second respondent.

13. Further, I will strike out the order no. 2(d) sought by the wife in her amended application and note that that contention or claim cannot stand in the absence of compliance with these directions.

14. If that occurs, consequently I will remove the second respondent as a party to the proceedings subject to any costs application which the second respondent may or may not make.  If a Statement of Claim and affidavit is not filed, then the question of security for costs becomes moot.

15. If a Statement of Claim is filed, with accompanying affidavits, setting out the claims, then the question of security for costs would need to be considered in light of that material.  Accordingly, I have ordered a transcript of the submissions made to me on 22 August 2014 be placed on the Court file and I will take further submissions from each party in relation to the question of security for costs.  I anticipate that further submissions could be made in writing rather than the cost of counsel attending before me.

16. However, that question can be the subject of submission when the matter comes back before me on 12 January 2015 for mention and for directions for hearing.

I certify that the preceding thirty three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on      11 September 2014.

Associate:     

Date:              11 September 2014